104 Fed. Cl. 1
Fed. Cl.2012Background
- IRS audited Sundance for Air Transportation Excise Tax (2004–2005); tax assessment $2,970,494 plus $742,623 penalties; Sundance paid a portion and seeks a refund.
- Sundance operates helicopter tours including Grand Canyon, Lake Mead, and Vegas Strip flights; distinguishes charter flights from standardized tours; charter flights are not taxed.
- The government contends Sundance operates on an established line subject to tax; Sundance contends its tours are chartered or not regularly scheduled.
- Sundance uses a “preferred model” to schedule flights to maximize helicopter utilization, with control over departure times and routes.
- FAA Part 135 operations require pre-approved routes; deviations allowed only with safety concerns and usually require charter conditions; Sundance retains significant operational control.
- Congress later amended to exempt sight-seeing flights from the tax after Sept. 30, 2005, but the dispute covers the pre-amendment period.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sundance operates on an established line under 4281 | Sundance argues tours are chartered and lack a regular line. | Sundance’s fixed routes and control over times/routes show an established line. | Yes; Sundance operates on an established line and is subject to the tax. |
| Who bears legal obligation to pay the tax | If not collected at sale, liability rests on customers; they seek offset against fuel tax. | IRS §4263(e) imposes carrier liability where tax is not collected. | Carrier bears payment obligation under §4263(e) despite collection by third parties. |
| Whether regulations are a precondition to §4263(c) | Regulations not required to apply §4263(c). | Regulations not required; statute self-executes. | Regulations not a precondition; §4263(c) applies regardless. |
| Whether there are genuine disputes on the amount owed | Non-air-transportation charges and offsets could reduce tax. | Tax computation requires separability and precise records; issues unresolved. | Genuine disputes exist; summary judgment on amount not appropriate. |
Key Cases Cited
- Schuman Aviation Co., Ltd. v. United States, 816 F.Supp.2d 941 (D. Haw. 2011) (established line satisfied by regularity, definite points, and control)
- Lake Mead Air, Inc. v. United States, 991 F.Supp.1209 (D. Nev. 1997) (regularity and control; tax applies to circular tours; carrier duties discussed)
- Temsco Helicopters, Inc. v. United States, 409 Fed.Appx. 64 (9th Cir. 2010) (established line with regularity; defense and control elements met)
- NorthStar Trekking LLC v. United States, 637 F.Supp.2d 676 (D. Alaska 2009) (customer-controlled tours; implications for established line)