American Airlines caught a tax break on November 18, 2014, when the Oklahoma Supreme Court ruled that the company was entitled to a refund of taxes it had paid on its natural gas and electricity usage at the Tulsa American Airlines facility in 2006.
American Airlines argued that the provision of utilities qualified as the sale of “services employed in the repair, modification and replacement” of aircrafts under Paragraph 28 of the Tax Exemption Code. 68 O.S. Supp. 2006, § 1357 (28).
The company requested $1,092,269.32 in tax refunds pursuant to Paragraph 28.
The Oklahoma Tax Commission sought to withhold the refund, arguing that utilities were not services, but personal property. The Commission also argued that, if utilities were services, that American Airlines had not shown that the utilities were used for the repair, modification or replacement of airplanes.
American Airlines argued that the provision of utilities was a “service” within the meaning of the statute.
Representatives also testified that 76.9% of the electricity and 99.9% of the natural gas used at the Tulsa American Airlines Facility was related to aircraft repair and maintenance activities.
The Oklahoma Supreme Court agreed with American Airlines and held that “the Services Exemption provides an exemption for electricity and natural gas utility services used by AA (Tulsa American Airlines) during 2006 in aircraft repair and maintenance activities.”
The Court declined to determine how the refund should be calculated, however, and directed the Oklahoma Tax Commission to determine the refund’s amount.
To read the full decision regarding Tulsa American Airlines and its utility costs, click here.
