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ACCESS AIR EXECUTIVE ON THE HOOK FOR $1.3 MILLION IN UNPAID TAX

May 07, 2004

The IRS is about the worst creditor to have when "trust fund" taxes are involved. The US Southern District Court of Iowa reminds us of that lesson with an order holding a former executive of defunct Access Air liable for unpaid airline ticket excise taxes of up to $1,300,552.09.

There is a federal tax on each ariline ticket sold. Airlines are required to collect and remit these taxes. Like payroll taxes, they are held "in trust" for the government. Also like payroll taxes, any person "responsible" for remitting the taxes can be penalized for 100% of the unremitted tax amount if the underpayment was "willful."

Des Moines-based Access Air failed to remit the ticket taxes for the second, third and fourth quarters of 1999, when the airline was in its death throes; it ceased operations in the fourth quarter of 1999.

The district court granted an IRS motion for summary judgement that Richard Musal, who served at different times as President and Chief Financial Officer of the airline, was a "responsible person who acted willfully" in failing to remit the taxes. The court denied another summary judgement motion against a former controller of the airline; this means more evidence is required to determine whether the controller will also be subject to the "100% penalty" for the unremitted taxes.

A pdf file of the court order is here.