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American Airlines Gets Sued Over Jet Fuel Sales Tax

Mar 12, 2014 3:00 pm

Skift Take

Is American Airlines Group guilty of illegal sales tax practices or is this a smart accounting move? The courts are going to decide this one.

— Dennis Schaal

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Mike Stone  / Reuters

American Airlines faces a lawsuit about its fuel sale practices in the Chicago area. Picture, the tail sections of American Airlines (L) and US Airways aircraft are on the ramp at Dallas-Ft Worth International Airport February 14, 2013. Mike Stone / Reuters


American Airlines Group Inc., the world’s largest air carrier, was sued by the Chicago-area Regional Transportation Authority for allegedly evading Illinois sales taxes on jet fuel.

American sells fuel through its American Aviation Supply unit for use in planes at O’Hare International Airport and other local airfields, while improperly reporting the city of Sycamore, Illinois, about 50 miles (80 kilometers) away, as the sales point, according to a complaint filed yesterday in Cook County Circuit Court.

Sycamore and the American unit have an agreement under which Sycamore returns almost all of the sales tax it collects to the company, RTA said in a statement today. The Fort Worth, Texas-based airline reports the fuel sales at Sycamore “in an attempt to avoid paying millions of dollars in Illinois sales taxes,” RTA said in the complaint, which seeks restitution.

The “unlawful scheme” cost Chicago and Cook County an estimated $15.3 million last year, the RTA said in the statement.

“We believe that we are still paying the proper amount of retailer’s occupation tax and that we are in compliance with the law,” Mary Frances Fagan, an airline spokeswoman, said in an e- mail.

The case is Regional Transportation Authority v. American Airlines Group, 2014CH04240, Circuit Court of Cook County, Illinois County Department, Chancery Division (Chicago).

–With assistance from Mary Schlangenstein in Dallas.

To contact the reporter on this story: Phil Milford in Wilmington, Delaware at pmilford@bloomberg.net To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Andrew Dunn, Stephen Farr

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