While the rarefied world of private jet charters resonates with luxury, comfort, and flying high above everyday concerns, it benefits passengers to be aware of the hidden costs that come with chartering a jet. Of particular interest to clients flying within or from the United States should be the country’s most widely applied domestic tax on charter jets, the Federal Excise Tax (FET).
This charge is levied on almost all aircraft operations within the US at a rate of 7.5 percent for passenger flights and 6.25 percent for cargo flights, a level that has remained constant for several years without being adjusted for inflation. With average charter jet costs running into the tens of thousands of dollars, these percentages represent not insignificant totals. While the US Consolidated Appropriations Act 2021 ensured continuing waivers and reductions of the FET for the renewable energy, beer, wine and other industries, air travel was not included and the levy remains in place.
The three other (relatively minor) taxes that can be levied on domestic and international flights are the Domestic Segment Tax (USD 4.30 per passenger), International Head Tax (USD 19.10 per passenger), and a special Alaska & Hawaii Head Tax (USD 9.60 per passenger).
In addition, the FET’s remit extends to jet charters for flights with a US originating airport and a destination in Canada or Mexico within 225 miles of the US border. Therefore, while a charter flight from Los Angeles to Tijuana on the Mexican border would be subject to an FET charge, Los Angeles to Mexico City in the centre of the country would not.
Passengers should also bear in mind that the FET covers everything paid for air transportation, regardless of that paid for property or passengers. Based on total charter cost, it includes items like repositioning time, landing fees, local taxes, and crew expenses. However, passenger convenience services such as catering costs and ground transportation are exempt.
FET Exclusions
While there is no escaping paying FET on most jet charters in the US, there are certain situations in which clients are exempt from paying. The first is the small aircraft exemption, for non-turbo-jet aircraft with a certificated take-off weight of 6,000 pounds or below.
The second is the Uninterrupted International Transportation Exemption, which applies to flights originating in the USA that make a temporary stop before continuing to an international destination. However, this only applies if there is no change in the passenger list at the refuelling stop.
A third exemption is for Flights Over International Waters & Land. For example, flights originating in the mainland US that travel to Hawaii or Alaska need to cross over international territory; a portion of the journey that is not subject to FET. Technically speaking, the exemption starts when the international border is crossed or from three nautical miles from the low tide point on the coastline.
Finally, so-called ‘Open Jaw Flights’ where a passenger flies from one city to another but returns to the original city from a different place are exempt from FET. Depending on the distances between the three airports involved, the flight may either be deemed to be a single domestic flight, to which FET applies, or two international flights, to which it does not.
Summary
Post-pandemic, with more and more travellers seeking once-in-a-lifetime trips with privacy and personalization as top concerns, private jet chartering looks set for a boom. However, savvy travellers would do well to be aware of the full costs of this form of travel – especially the FET – to avoid a nasty surprise when the bill arrives!
