If you travel by air, I’m sure you’ve been there: At a kiosk in the airport, fuming about the astronomical fees that airlines are charging. They started by charging for checked baggage, but now there are $25 carry-on baggage fees (Frontier Airlines), $200 ticket change fees (Delta, American, United), and a recent new low: the $10 pillow fee (Virgin America).
What you may not know is there’s a simple explanation why airlines embraced their inner meter maid in the last 10 years: The money they make from fees isn’t taxable.
In January 2010 the Internal Revenue Service ruled that baggage fees (and priority seating fees, headset fees, premium airport lounge fees and many others from the creative minds at the airline companies) aren’t considered under the umbrella of “transportation of persons by air.”
“Airline baggage fees are not taxable, the Internal Revenue Service said, a victory for carriers trying to protect a growing revenue stream,” the New York Times reported then, later quoting an analyst who said the ruling meant airlines will no longer “have to share with the government.”