ARTA Asks ARC to Reconsider Excise Tax
 Refund Options


(c) 2011 Association of Retail Travel Agents

The battle over excise tax refund processing - one result of last week's FAA partial shutdown - deepened as the Association of Retail Travel Agents (ARTA) convened a special meeting of its board of directors to prepare a response to a letter from Airline Reporting Corporation (ARC) President and CEO Michael Premo. Premo's letter responded to ARTA's concerns with processing refunds. ARTA questioned ARC's  reasons for putting off ARTA's request to provide U.S. excise tax refunds via the Area Settlement Plan (ASP).

ARTA said it had requested a conference call to discuss this matter, but instead, received a reply from ARC's Premo with "less than comprehensive technical reasons why ARC may not be able to provide agency participants with a solution to refunding the overpaid U.S. excise taxes already submitted to and settled with ARC, as well as conveying 'limited potential' which he suggests might be possible based on ARC’s existing processes."

ARTA  said in a follow up statement that it wants to "assure that agencies benefit from less paperwork, faster refunds, and less burden imposed on travel agencies which would result in time-consuming ticket research and related handling."

Part of ARC's resistance to ARTA's requests are due to supporting the Air Transport Association's (ATA) preference for travelers to go directly to the IRS for refunds, ARTA said.

"Over the weekend, Congressman Mike Thompson (D-CA), a senior member of the House Committee on Ways and Means, circulated a copy of a letter on the floor of the U.S. House of Representatives and secured 91 co-signers to address concerns to Richard Anderson, CEO of Delta Air Lines and Chair of the ATA. The letter, in part, asks ATA and its member airlines to immediately provide refunds to those passengers who overpaid the excise taxes during the FAA lapse," ARTA said.

"We asked ARC for a discussion, but only got reasons which were discouraging and seemed to take sides with the ATA. ARC has a clear obligation to all of its customers to discuss issues such as these, not just on behalf for its owner airlines. There are far more airlines which participate in the Area Settlement Plan (ASP) than ATA members, not to mention the needs of 15,000 agency ticketing locations", said John Faulds, ARTA's Vice Chairman and liaison with ARC.

ARTA estimates that, in a given month, ARC processes approximately $419 million of U.S. excise taxes, $368 million of which is paid by credit card.

"However, most perplexing of all is why ARC carriers would not want to process these refunds through the ASP so that they may recover the amount of credit card discount fees paid at the time the tickets were settled." ARTA said.

ARTA also said it further estimates, "assuming a conservative 1.5 percent discount fee paid to the credit card companies by airlines, that ARC participating carriers stand to collectively recover some $184 thousand a day, or $1.3 million per week in credit card fee reimbursement."

"If travelers went directly to the IRS with claims, airlines would recover nothing. In addition, there would be no guarantee that the actual purchaser of the transportation received the refund. Travelers, who did not purchase the transportation, may be tempted to obtain refunds for themselves, something which agencies managing corporate travel would find highly objectionable and disruptive," ARTA said

ARTA goes on to state that it is for this very reason that the ARC Industry Agents’ Handbook, Section 6, stipulates:

"… you, the Agent, may refund ARC traffic documents that you issued. You may refund only to the person authorized to receive the refund (usually the purchaser); and all refunds must be made to the original form of payment."

ARTA also said that "no ASP carrier to date has provided any different instructions for refunds other than those normally handled in accordance with Section X of the Agent Reporting Agreement. Accordingly, even if ARC were to build a refund solution 'from scratch,' notwithstanding the massive amount of relevant data already in its possession, the cost/benefit to airlines alone, purely on the basis of credit card fee recovery, clearly shows that the revenue return far outweighs the reasonable development costs to recover it."

ARTA has asked ARC to accurately revise ARTA's estimates by several actions, including:

1. Providing consolidated data for the month of June 2011 for all taxes collected with the tax code US and ZP, broken down by total credit card and total cash forms of payment.

2. Also providing, when July 2011 data is available, the data in (1) above for July 2011, and additionally for July 2011 but for tickets issued on/before 22 July 2011 for travel with a first coupon flight date on/after 23 July 2011.

3. Providing the data in (1) and (2) above for transactions processed by ARC outside the 50 United States/DC for U.S. agency locations using any other settlement plan ARC may operate.

In addition, ARTA said it wishes to convene the conference call it originally proposed to ARC so that ARTA may discuss the various aspects of its tax refund concerns and its ASP processing request.


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