BIA fears crippling effect of possible fuel tax

BANGOR – The proposed repeal of a state use tax could cost the city’s airport one of its largest revenue makers – international flights and fuel-ups.

Airport officials are concerned that state lawmakers might consider a new tax on fuel bought locally by international carriers to make up for the loss of state revenues caused by a repeal of the controversial aviation sales and use tax.

BIA makes roughly $5 million to $6 million annually from international flights, despite tremendous competition from Canada and other Eastern states, City Manager Edward Barrett told councilors at Tuesday night’s meeting of the transportation and infrastructure committee. Any new fuel tax would threaten the airport’s bottom line, he said.

The state has a use tax, which applies to goods bought out of state and not subject to Maine’s sales tax. The tax gained significant media coverage when nonresident airplane owners began receiving tax bills. By law, the state can collect a 5 percent use tax from people who didn’t pay sales tax when purchasing an airplane and who spent more than 20 days annually in the state, Barrett said. A proposal to repeal the law, LD 1976, was presented by the Maine Business Aviation Association and Aircraft Owners and Pilots Association. The proposal will go before the Legislature’s taxation committee at the end of February, said BIA Director Rebecca Hupp.

But a 31/2-cent fuel tax on international flights has been floated as a way to recoup the lost revenue from the aviation use tax, Hupp said.

International jet fuel sales are now tax-exempt. BIA sold 21 million gallons of jet fuel to both domestic and international carriers in 2007, Hupp said.

Hupp said that the fuel tax idea was discussed briefly but is not likely to be implemented. Right now it does not appear to be an issue, she said, but still she sought the committee’s permission to oppose the international fuel tax if it is raised again. The seven councilors present unanimously supported her request.

“The theory behind the proposal is flawed and certainly it would cause a serious issue at the airport,” Hupp said.

The airport services 12 to 18 international flights a week, mostly chartered military flights, Barrett said after the meeting. Portsmouth International Airport in Portsmouth, N.H., and Gander International Airport in the Canadian province of Newfoundland and Labrador, are BIA’s closest competitors for international customers, Barrett said.

Three-and-a-half cents on thousands of gallons of fuel is significant and could force international carriers to land and refuel at other airports, Barrett said. In addition to the lost fuel revenue, the airport could lose jobs with fewer flights coming through, while concessions and hotel stays would drop, he said.

“We are in direct competition with Canada now,” said Councilor Patricia Blanchette. “We stand to lose a lot if they go through with this tax. … These [travelers] have money to spend and they are here to spend it.”

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