The CARES Act suspended federal excise taxes (FET) on air transportation from March 28 to Dec. 31, 2020. Based on recent guidance from the IRS many charter, jet card and jet membership companies are offering FET free travel into 2021 and beyond. SherpaReport has talked to many of the providers and also touched based with a legal expert to discuss all the offers.

The Tax Background

Under the CARES Act, private jet charter flights booked and paid for by Dec. 31, 2020, are exempt from the 7.5% federal excise tax. This exemption also includes flights in 2021 or later, as long as the flight was booked and paid for before the end of 2020.

SherpaReport spoke to John Hoover, a Partner at Holland & Knight and chair of the National Business Aviation Association (NBAA) tax committee, to discuss the CARES Act and its implications for prepaid private aircraft travel.

John pointed out that the IRS FAQ simply says if you pay in 2020 for travel after the excise tax holiday, then “no tax is imposed on the purchase of the ticket because the purchase occurred during the excise tax holiday.” 

While the FAQ on the current CARES Act doesn’t offer much detail, John refers back to IRS Chief Counsel Advice from 2015, and says there are three items that need to be followed to help ensure that no FET is charged for these future flights. These items are:

1. Any prepaid agreement should say that any funds are being paid for a set number of hours on a particular size aircraft. The agreement can also include a conversion chart for other aircraft types or sizes, so that you could fly on a variety of planes. But if the agreement just accepts a general deposit payment for future flights there could be a problem. “Selling air transportation is key” says John.

2. It would also be a good idea to have a time limit on this agreement, he adds. For instance, having the ability to fly in 2 years would be reasonable, but it looks odd if someone is buying a future right that goes on forever and does not expire.

3. Refundability is an issue, since if the money is refundable it makes it look like a deposit and less like an advance payment for future air transportation.

If these three guidelines are followed, then the Chief Counsel Advice indicates that the purchase of the jet card or charter flight in December 2020 would qualify for the tax holiday.

Having a charter broker in the middle of the relationship adds a few extra considerations. This would be the case for instance if a broker is paid in 2020 and the broker pays the actual air carrier in 2021.

Under current IRS rulings and guidance, a charter broker can be considered i) an agent for the air carrier, ii) an agent for the customer, iii) a reseller, or iv) a mere conduit. John notes that there are references to all four of these relationships in the guidance.

John suggests that as long as the charter broker is bargaining separately with the customer and the air carrier, the charter broker ought to be a reseller for tax purposes. As a reseller for tax purposes, the sale of the flight, and therefore the payment for the flight, in December 2020 would be the relevant transaction. In that case, the tax holiday would apply to the payment in 2020.

Another issue that may arise, under this area, is that air carriers are ultimately liable for uncollected FET (under Internal Revenue Code 4263(c)) . So, if a broker goes to an air carrier and says payment was made in 2020, and no FET is due, the carrier could ultimately be liable for the FET if the IRS decides it was due. As a result of this, John notes that some air carriers are saying they will not sell a FET free flight in 2021, for payments that were made to brokers in 2020.

Jet Card, Membership & Charter Companies

SherpaReport reached out to a wide variety of charter operators, jet card and membership providers. Many of the card and membership companies are promoting this FET free travel into 2021and beyond.

It does make for an interesting consideration of how much do you want to deposit or how many hours do you want to buy, versus having too large a sum on deposit. You could save 7.5%, but some programs limit the future time period you can fly, and how comfortable are you with having a large sum on deposit.

The various providers had the following comments and quotes:

Air Partner

Charter broker and jet card provider Air Partner reiterated the comment that as part of the Cares Act, all federal excise taxes were temporarily suspended through December 31st, 2020. This applies to all flights purchased by this date, even if the flights take place in 2021.

They added “In response to this opportunity, Air Partner now offers a JetCard option enabling customers to take advantage of this FET suspension.”


John Owen, President and CEO of Airshare said “For our FET-based products, we’re taking a similar approach to the market for any programs purchased prior to December 31st. The program fee will be free of FET, even if flights occur after the expiration of the FET holiday. Airshare customers now have two years to utilize their jet card allocation. And since we don’t limit hours to 25 per jet card like most of our competitors, we don’t charge you up front for those hours. You pay as you fly. We do this because we often have customers that fly as many as 40 hours on our EMBARK jet cards. However, in order to receive a break on FET for hours accrued after the end of the year, we do allow customers to prepay for hours to receive the benefit of the FET holiday.”

Clay Lacy Aviation

Scott Cutshall, SVP Business Operations at Clay Lacy noted “customers can take advantage of the FET tax holiday for flying into 2022.”

The program details include “Save 7.5% FET on all U.S. flights, including Alaska and Hawaii, as well as destinations in Canada and Mexico within 225 miles. Purchase must be completed by December 31, 2020. Funds are non refundable, non transferable and must be used by December 31, 2022.”

Dumont Aviation

Doug Dvorak, Vice President Sales at Dumont Aviation, said “Our advice to clients has been that there is a distinct possibility that FET will be waived for hours purchased in 2020 for 2021 travel. Our typical Jet Card Contract states that the hours are fully refundable and that the hours do not expire. Based upon the interpretations we have received, to qualify for the ongoing FET exemption, the hours would need to be non-refundable. So, we are providing an addendum to our contract for those interested in pre-buying hours for next year. In either case we are advising clients the IRS has the ability to change this decision and there could be an FET adjustment necessary for any billable flight hours next year. We can either deduct the amount of FET due from the hours on account or invoice the client for that amount.”


Flexjet told us “The 7.5% Federal Excise Tax holiday on jet cards is driving demand for that product. Clients who buy jet cards from Flexjet before the end of 2020 will enjoy the tax holiday on flights through the end of 2021. Flexjet has found this attractive to existing owners who add hours through jet cards and new clients who start with a jet card and transition to a lease or fractional share.”


Brad Blettner SVP at flyExclusive told SherpaReport that they have worked with their legal team and with third party aviation CPA firms and done a lot of due diligence around the FET savings. Brad added a customer must “prefund under a non-refundable card program,” and noted flights will be “free of FET regardless of when you fly.”

Jet Linx

“As we approach the end of 2020, our new and existing Jet Card members have the ability to save 7.5% on any Jet Linx hours flown through the end of year and 2021 through our Flight Funds program,” said Jamie Walker, President & CEO of Jet Linx.

Magellan Jets

Referring to their various programs, Magellan Jets told us “For those that pre-purchase jet card and membership services during the tax holiday, they will also benefit from the tax exemption for the entirety of that purchase. Jet card owners and members who purchase jet time by Dec. 31, 2020 will receive the tax exemption, even if they don’t fly until 2021 or beyond.”

“We’re so grateful that the government is offering travel benefits that our clients can take advantage of, because they want people to start flying again for business. With interest rates so low, now is a good opportunity to invest in your future and your business by traveling again and saving 7.5% on your private aviation needs.” said Joshua Hebert, CEO of Magellan Jets.

“This stimulus incentivizes companies, many of whom were not using business aviation pre-COVID, to get back to business with a safe, secure, and healthy solution,” says Magellan Jets President Anthony Tivnan.


Patrick Gallagher, President, NetJets Sales, Marketing & Service told us “Our 25-hour NetJets Marquis Card Program includes a two-year term. Any card purchased by December 31, 2020 will be exempt from FET for the full two-year term. We are hearing from many customers right now who wish to pre-pay for their next two years’ worth of hours and are encouraging them to take advantage of the tax holiday. It is viewed as a guaranteed 7.5% return on your investment if you know you’re going to buy next year anyway.”

Nicholas Air

At Nicholas Air “Members who purchase a program with us will not pay the FET on that program for the life of the card, even if that extends into 2021 and beyond.”

“We have approached Federal Excise Tax with whatever the current tax code is. Right now, the code states that for a company like ours that owns and operates its fleet, we are able to honor that FET exemption into the future for cards purchased in 2020. I am very comfortable with that and that’s how we will continue,” said Peder von Harten, Vice President, Sales & Marketing.

Sentient Jet

Sentient told us "based upon the CARES Act any jet card purchased now through the end of the year will not be required to pay Federal Excise Taxes. As such, Sentient Jet is pleased to expand this opportunity - a purchase of a jet card during this period will reduce the overall purchase price by 7.5% and no Federal Excise Tax will be paid for the life of the card, allowing cardholders to gain more value from their flight hours into 2021 and beyond.

Overall, the consensus is pretty clear. There are a lot of options to save the 7.5% FET for future flights, provided you pay in 2020. The big question is to plan your trips, to help decide how many you would be comfortable pre-paying.