Maryland Admissions and Amusement Tax Case
Friendship Hot Air Balloon Co &
Up Up and Away Hot Air Balloon Co.
vs Maryland State Comptroller

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.

Background Summary:
Maryland Comptroller insists that a balloon flight is an amusement ride- and the Admissions and Amusement tax applies. 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.

Late Breaking News--
>>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, we have a very strong supporting document now for our use as we still await a tax court day in Maryland. The Office of General Councel sent a copy of this letter to the Maryland State Comptroller.

Friendship Hot Air Balloon Co's Position:
1. No other state in the country collects such a state tax on gross receipts of balloon flights.
2. Three states tried to impose the tax but court rulings overruled and the balloonist won.
3. Federal Law supports our position.
4. US Supreme Court ruling supports our position.
5. Federal Law states that a balloon flight is transportation goverend by the FAA and federal law, not state law.
6. 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.

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 the Federal law that prohibits states from imposing a tax on gross receipts from air commerce or transportation. Note that code section changed from 1513 to 40116
Title 49 U.S. Code section 40116 State taxation. Copy provided by Cornell University Law School

>>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.

>>Current stories
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 Transpostation.
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

Miscellaneous Readings:
Re-Max Realty Hot Air Balloon – Bay Days - read about the extreme difficulty one Remax pilot had in trying to plan a 3 hour tether -

You are visitor #488