Charter Flights and the Excise Tax
A chartered flight is usually taxed much like an airline ticket, with one big difference: the segment tax is multiplied by everyone on board. In 2026 that means 7.5% of the charter payment, plus $5.30 x passengers x segments. The charter service collects it from the customer and reports it on Form 720.
The IRS gives this example in the Form 720 instructions. A business pays $1,149.20 to carry seven employees from Washington to Detroit with a stopover in Pittsburgh. That covers the $1,000 charter payment and $149.20 of tax: ($1,000 x 7.5%) + (2 x $5.30 x 7 passengers).
Is this charter taxable? Work through it in order
Whether a small aircraft is taxed turns on the small aircraft rule in Publication 510. Apply these questions in sequence.
- Is the aircraft jet-powered? If yes, the taxes apply regardless of its maximum certificated takeoff weight, and whether or not it is on an established line.
- Is the maximum certificated takeoff weight over 6,000 pounds? If yes, the small aircraft rule does not help you.
- At 6,000 pounds or less, is it operated on an established line? If no, the taxes do not apply to that transportation. If yes, they do.
What is an established line?
"Operated on an established line" means the aircraft operates with some degree of regularity between definite points. Two details make this practical for charter businesses:
- A charter counts as being on an established line if it runs between two cities also served by that carrier on a regularly scheduled basis. A company with both scheduled and charter work has to look at the city pair.
- A flight solely for sightseeing is not treated as being on an established line, even if it runs regularly.
These invented examples show how the rule sorts real situations. Each assumes no other exemption applies.
| Flight | Taxed? | Reason |
|---|---|---|
| 5,800-lb turboprop, one-off charter between cities the operator does not serve on a schedule | No | 6,000 lbs or less, no established line |
| The same turboprop, chartered between two cities the operator also serves on a schedule | Yes | Treated as on an established line |
| 5,500-lb piston aircraft running a daily sightseeing loop | No | 6,000 lbs or less; sightseeing is not an established line |
| 5,500-lb light jet, one-off charter | Yes | Jet-powered aircraft are taxed at any weight |
| 12,000-lb turboprop, one-off charter | Yes | Over 6,000 lbs |
Publication 510 words this rule for "the taxes" under the air transportation section, so the small aircraft exception covers the tax on carrying people and on carrying property. The answer does not depend on the airport either. Using private strips has no effect.
How do you figure the tax on a taxable charter?
The percentage tax runs on the amount paid, and amounts paid include layover or waiting time and movement of the aircraft in deadhead service. The segment tax is per segment and per passenger, but it does not apply to a segment to or from a rural airport.
| Invented charter | Percentage tax | Segment tax | Total tax |
|---|---|---|---|
| $8,400; 4 passengers; 1 segment | $630.00 | 1 x $5.30 x 4 = $21.20 | $651.20 |
| $8,400; 4 passengers; 1 segment to a rural airport | $630.00 | $0.00 | $630.00 |
| $8,400 plus $1,200 repositioning charge; 4 passengers; 1 segment | $9,600 x 7.5% = $720.00 | $21.20 | $741.20 |
| $14,000; 9 passengers; round trip, nonstop each way (2 segments) | $1,050.00 | 2 x $5.30 x 9 = $95.40 | $1,145.40 |
If the same payment covers people and freight, it must be split between the tax on persons and the tax on property (6.25%). The allocation has to be reasonable and supported by adequate records. Try your own figures in the air transportation tax calculator.
Who collects when a broker is involved?
The usual rule applies: the person receiving the payment collects, submits, and files. Brokers are where people get it wrong.
| Seller | What Pub. 510 says |
|---|---|
| Travel agency that is an independent broker, selling tours on aircraft it charters | Must collect the tax, file the returns, and pay it over. |
| Travel agency selling tours as the airline's agent | Must collect the tax and remit it to the airline for filing and payment. |
| Independent third party not under the airline's control, acting for and paid by a passenger | Not required to collect the tax and pay it over. |
Publication 510 sends readers to Revenue Ruling 2006-52 for more on resellers of air transportation.
Other exceptions a charter operator should know
- Affiliated groups. Payments between members of an affiliated group of corporations, connected through 80% or more stock ownership, for an aircraft owned or leased by a member. The aircraft cannot be available for hire by a nonmember, tested flight by flight.
- Aircraft management services. Certain amounts paid by an aircraft owner, including someone leasing an aircraft for 31 days or more.
- Fractional ownership. If the surtax on fuel used in a fractional ownership program aircraft is imposed, the transportation taxes do not apply to that flight.
- Specific missions. Certain helicopter and fixed-wing uses, skydiving, and some seaplane segments. See air transportation tax exemptions.
Reporting charter tax on Form 720
Taxable passenger charters go on IRS No. 26, with percentage and segment tax added together. Enter the amount collected or considered collected for the quarter. A single large charter can push net Part I liability over $2,500, the point at which semimonthly deposits are generally required, so watch your total early in the quarter. Our air transportation tax guide sets out the other air lines.
Charter operators can file IRS No. 26 online with EasyFile720, an IRS-authorized e-file provider for Form 720. You decide whether a flight is taxable and enter your figures. The rates for the return are built in and the math is calculated for you. An account is free to create, and you pay $39.95 when you file.
FAQ
Does the size of the charter party change the 7.5%?▼
No. The 7.5% is figured on the amount paid. Only the segment tax changes with the headcount, because it is multiplied by the number of passengers transported.
Is a positioning or empty leg billed to my customer taxable?▼
Publication 510 lists movement of aircraft in deadhead service among the amounts paid for transportation, so the charge counts toward the 7.5% tax base.
I own the aircraft and pay a management company. Is that taxed?▼
Amounts an aircraft owner pays for certain management services are exempt, even if the owner is not on the flight. Flights on a substitute aircraft may be taxed, and the owner must allocate if one payment covers both.
Does the tax apply if we land at a private strip?▼
Yes. Publication 510 says the fact that an aircraft does not use public or commercial airports in taking off and landing has no effect on the tax.
File air transportation tax online
Create a free account with no credit card and build your return. You pay $39.95 only when you file. EasyFile720 is an IRS-authorized e-file provider, and you get an acknowledgment when the IRS accepts your return.
Sources: Instructions for Form 720 (Rev. June 2026); IRS Publication 510 (Rev. December 2025). General information, not tax advice. Confirm how the rules apply to you with a qualified advisor or the IRS.
