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Department of Finance Responds to FAA Rule on Aviation Fuel Sold at Airports

December 2, 2015
The California Department of Finance (DOF) this week responded to a Federal Aviation Administration (FAA) policy concerning the use of airport revenue.
 
Local governments with tax revenue from aircraft (jet) fuel may need to provide a spending plan to the FAA by Dec. 8. DOF offers responding guidance to local agencies. Cities and counties that impose taxes on jet fuel adopted after 1987 should study carefully the background and guidance prepared by CaliforniaCityFinance.com.

A recently adopted amendment to a federal regulation by FAA clarifies the rule that the proceeds of state and local taxes on jet fuel at an airport must be used for airport-related purposes, including capital and operations, state aviation programs and airport noise mitigation. The FAA is allowing a three-year period through Dec. 8, 2017, during which FAA will withhold enforcement actions and state and local agencies must develop compliance plans. 
 
In California, motor vehicle fuel — other than jet fuel — is exempt from sales and use tax. However, proceeds of some taxes on jet fuel are affected by the FAA rule. The rule does not apply to taxes in effect on Dec. 31, 1987 including the local Bradley Burns 1.25 percent rate or the 4.75 percent state general fund rate in effect at the time. However, several other state rates may be affected, as well as most local transactions and use tax rates.
 
Additional information is available from CaliforniaCityFinance.com.


 
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