This site is being developed by Ron Broderick /Friendship Hot Air Balloon Co. in Maryland to assist each balloon pilot in the country when their state tax auditor knocks on their door and states that a sales tax or an amusement tax will be assessed on gross receipts of that hot air balloon business. Such a tax is in violation of Federal Law.
Read our tax story and see how my state would bully and keep pushing me into paying the 7.5%-10% A&A tax all the while hoping that I would give up fight first. See how my defense was solid but the State "elected not to get into a preemption case at that time". Further they stated that a hot air balloon was an amusement ride and they did not believe that any federal law would apply in this case. It took 27 months, a tax lawyer and an aviation lawyer for me to prove the state to be wrong and in violation of federal law. Just prior to going to Tax Court, the State of Maryland withdrew the assessment. No other pilot needs to go through this ordeal.
All details of our case and our win against the State are provided here for your use -- Free of charge.
We are developing a database of all states showing those that are compliant and those that are not. We ask you to support our work by becoming a tax matter partner and paying a one time $10.00 fee. Click on the Paypal icon to make your payment to help. The benefits of a Partner Membership are listed here. This site is for all pilots(hot air balloon, fixed wing and helicopter). Tell us what is going on in your state. Email Us
My frustration in dealing with the people in Comptroller's Dept is not that they initially thought that a balloon flight was an amusement ride - I understand how one could initially believe that. My frustration is that after being presented with case law early on, they refused to accept it and then took 26 months to decide that the state really is preempted by federal law! WOW. My take on their delaying strategy and after reading the Supremacy Clause of the United States Constitution (See Pre-trial Brief), they kept pushing their case, denying federal preemption until the time the case would go before a state judge. It took months to finally get our day in an impartial tax court and then just weeks before presenting their case to the Tax court and a state judge, the state withdrew their case. The state had all of the facts early on in this case and nothing new was presented to them, yet they waited and delayed and delayed again. Their strategy is to be a bully and see who gives up first! Does my story sound just like your story??? You may be next!!
Maryland Admissions and Amusement Tax Case
Friendship Hot Air Balloon Co. (PRETRIAL BRIEF)
Up Up and Away Hot Air Balloon Co. (PRETRIAL BRIEF)
Maryland State Comptroller
Read on about our case:
All documents are available for copy/download.
On July 22, 2010 (27 months after it all began), Comptroller of the Treasury notified us that they have withdrawn the Admissions and Amusement Tas Assessment levied against us.
Read Comptroller of the Treasury's Withdrawal of Admissions and Amusement Tax Assessment
August 27, 2010
Read Columbia Flier story
Notice to every hot air balloon pilot in the country:
-->> To those of you that have been watching our (ordeal)progress and providing support, we thant you.
-->> To the next pilot that receives a knock on your door by a state auditor telling you that you should be paying any kind of tax (sales or amusement) on gross receipts for your passenger ride business, read on and talk to Ron 410-442-5566.
-->> To the pilots that are already paying a tax on your gross receipts, you need to open an appeal case. Your state is in violation of Federal Law by collecting such a tax(sales tax or amusement tax).
Read Ron Broderick's PRETRIAL BRIEF.
Read Matt Lidinsky's PRETRIAL BRIEF
Each brief prepared by us by different aviation lawyer's for our day in tax court is your single source document for use in your case. It summarizes our defense and is what Comptroller's really could no longer argue against. While all of these arguments have been made available to Maryland Comptroller and the Maryland Attorney General over the past two years, they elected to ignore facts up until one month before Tax Court and push us as far as they could, thinking we would give up.
Pilots are welcome to use this one document to defend in their case. We want to identify these states that are in compliance with federal law and those that are not. We need your input!!
Read on for supporting case law:
Material gathered by Ron Broderick and Matt Lidinsky:
In support of position that Maryland Comptroller's Dept cannot collect an admissions and amusement tax(7.5%-10%) on gross receipts of hot air balloons flying in air commerce (federal air space)in Maryland.
Maryland Comptroller insisted that a balloon flight is an amusement ride- and the Admissions and Amusement tax applied. We were audited and assessed four years back taxes and future gross receipts taxes on balloon flights in Maryland.
Definition of Amusement ride under Maryland Code-Business Regulation-
Title 3 Amusement Attractions:
--(e) “Amusement ride” means a device that is intended to give amusement, excitement, pleasure, or thrills to passengers whom the device carries:
----(1) along or around a fixed or restricted course, or
----(2) within a defined area.
>>Jan 29, 2010 -- US DOT(Department of Transportation) rendered general guidance letter in support of our case. Thanks to Matt Lidinsky's determination and persistance in working with the Office of the Secretary of Transportation General Council. The Office of General Councel sent a copy of this letter to the Maryland State Comptroller.
Friendship Hot Air Balloon Co's Position:
1. Three states tried to impose the tax but court rulings overruled and the balloonist won.
2. Federal Law supports our position.
3. US Supreme Court ruling supports our position.
4 Federal Law states that a balloon flight is transportation goverend by the FAA and federal law, not state law.
5. In contradiction to the state law, a hot air balloon flight does not fit into the two subsets of this definition of amusement ride. It does not follow ‘along or around a fixed or restricted course” and it does not “fly within a defined area” As a result, hot air balloon flights are not an amusement ride and should not be assessed an A&A tax. A hot air balloon does take off from one location and will fly in federal airspace in any direction to wherever the wind will take it. This could be within the state or outside the state. A hot air balloon will not land in the same spot twice and will not return in flight back where we took off. The people in the compliance division made their case on a foolish notion that my transporting the passengers to the launch site and transporting them from the landing site was also part of the ride just to make it fit into their definition of an amusement ride.
Supporting documents listed here:
>>2008 Read Friendship Hot Air Balloon Co lawyer's legal opinion including Arizona ruling and the Aloha Airlines US Supreme Court ruling. Opinion
>>Read US Supreme Court decision on Aloha Airlines case 1983.
State cannot charge a local tax on gross receipts.
Aloha Airlines preemption case
Supreme Court Summary:
JUSTICE MARSHALL delivered the opinion of the Court
'These appeals present the question whether 49 U.S.C. 1513(a) pre-empts a Hawaii statute that imposes a tax on the gross income of airlines operating within the State. We conclude that the Hawaii tax is pre-empted'.
Supreme Court Summary
In conclusion, we join with state courts of Alaska and New York 11 in the view that 1513(a) proscribes the imposition of [464 U.S. 7, 15] state and local taxes on gross receipts derived from air transportation or the carriage of persons in air commerce. The judgment of the Supreme Court of the State of Hawaii is reversed, and the cases are remanded for further proceedings not inconsistent with this opinion.
Read footnote 6--
[ Footnote 6 ] The Hawaii Supreme Court professed confusion over the "paradox" between 1513(a)'s prohibition on certain state taxes on air transportation and 1513(b)'s reservation of the States' primary sources of revenue, such as property taxes, net income taxes, franchise taxes, and sales or use taxes. In re Aloha Airlines, Inc., supra, at 16, 647 P.2d, at 273. We find no paradox between 1513(a) and 1513(b). Section 1513(a) pre-empts a limited number of state taxes, including gross receipts taxes imposed on the sale of air transportation or the carriage of persons traveling in air commerce. Section 1513(b) clarifies Congress' view that the States are still free to impose on airlines and air carriers "taxes other than those enumerated in subsection (a)," such as property taxes, net income taxes, and franchise taxes. While neither the statute nor its legislative history explains exactly why Congress chose to distinguish between gross receipts taxes imposed on airlines and the taxes reserved in 1513(b), the statute is quite clear that Congress chose to make the distinction, and the courts are obliged to honor this congressional choice.
Read Columbia Flier story
2-5-2009 -Howard County Times Story -
Balloonist's plight spurs action
2-11-2009 AOPA story: -
AOPA helps balloon operator hit with $8,000 tax bill
>>Favorable Rulings in other states:
>>2008 -New Mexico tax ruling in favor of hot air balloonists (State is preempted by federal statute). Opinion
>>1992 Arizona -
TRANSACTION PRIVILEGE TAX RULING
>>1985 Alaska Town of Sitka Alaska was denied the imposition of a 4% sales tax on air taxi service originating in Sitka. Opinion by The US Department of Transportation.
Note their definition of "air commerce" is in contrast to the term "air transportation", which means only "interstate, overseas, or foreign air transportation, or the transportation of mail by aircraft."
>>1985 -Iowa sales tax on balloon rides overturned