Bottom Line Up Front:
The annual $29.8 million TTF dedication for airports has likely been oversized.
Assuming taxes are being remitted, $21.4 million is a more appropriate FY25 figure.

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REC-Adopted Estimates:

• REC estimated $29.8 million in annual taxes paid in all years 2010-2021.

EIA Data:

• EIA reports a range of total LA aviation fuels expenditures between $142 - $551 million over the period.

• These unadjusted figures imply $23.9 million in sales taxes owed for 2021, and for 2010-2021, a maximum in 2012 of $24.5 million.

LFO Estimate adjusts for:

• An estimated 13.5% of total expenditures are made by various untaxable government agencies.

• A portion of jet fuels (assumed 2%) may be being sold at higher prices to general aviation customers (assumed 200% of commercial prices).

• Result: $21.4 million in sales taxed owed for 2022, and a 2010-2021 maximum of $21.6 million (in 2012).

• Note: Estimates under this methodology would assume perfect taxpayer compliance, or that taxes owed exactly equals taxes paid. Any adjustment for actual compliance effects would result in lower estimates for any given year.

• Update: 2022 data demonstrates a notable boost in fuel prices and in volumes consumed, resulting in a sharp increase in 2022 taxed owed, reflected in the chart at left.

Background:
The annual estimate of sales taxes paid on aviation-related fuels provides a minimum Transportation Trust Fund amount to be directed to airports.

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EIA estimates of Louisiana jet fuel and aviation gasoline expenditures since 2010 are displayed at left, in millions of $US annually. In general, expenditures in the state have declined over time, and jet fuel dominates the total volume of purchases.

• Estimated annual Louisiana sales taxes paid for aviation gasoline and jet fuels is dedicated to a Transportation Trust Fund sub-fund to airports.

• Unlike other fuels, these are not subject to state motor vehicle fuels taxes, and are not taxed at the rack. Also, specifically reporting taxes paid on these purchases to the state is not mandatory.

• Determining the amount of the associated dedication thus requires an estimate of annual sales taxes paid on these transactions.

• Publicly available information provides basis for a reasonable estimate of taxes owed. Published Energy Information Administration (EIA) data includes comprehensive estimates of consumption, reported prices paid, and total reported expenditures on aviation gasoline and jet fuel, by state, annually.

• Update: 2022 data demonstrates a notable boost in fuel prices and in volumes consumed.

Issue:
No authoritative figure for taxes paid or owed, or taxable transactions, exists.
Accurately estimating taxes paid presents challenges.

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• The Louisiana Legislative Auditor issued the opinion that the methodology utilized by REC (resulting in an annual estimate of $29.8 million) was insufficiently compliant with Louisiana law.

(1) Estimation challenge:
DOD and other government agency purchases are not taxable.

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(image: Screenshot of EIA projected air transportation total and military expenditures, emphasis added by LFO)

Some estimates of DoD purchases are available, at the national level. These can inform a reasonable estimate of untaxable transactions within the state.

• Military use of jet fuel and aviation gasoline account for approximately 12% of US air transportation fuel usage.
• Louisiana has two significant bases that house multiple squadrons of military aircraft.
• Purchases by other federal, state, and local agencies, which are included under EIA figures, will also be untaxable. However DOD purchases are assumed to constitute the large majority of agency purchases.

LFO estimates 12-15% of reported consumption to be exempt from sales tax, due to purchases made by various levels of government agencies.

(2) Estimation challenge:
General Aviation users tend to pay significantly higher prices.

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(image: Taken from EIA Annual Energy Outlook 2021, emphasis on general aviation added by LFO)

• EIA data implies that aviation gasoline prices tend be approximately 150-200% of commercial jet fuel prices, and that aviation gasoline typically accounts for approximately 2% of total aviation fuels consumption in the state.

• EIA information at the national level implies that the contribution of general aviation to total air transportation fuel expenditures is approximately 1-3%.

LFO assumes that all aviation gasoline purchases are at general aviation gasoline prices, as reflected in EIA data. LFO further assumes that an additional 2% of jet fuel purchases are at elevated general aviation prices.

(3) Estimation challenge:
Full taxpayer compliance is likely an untenable assumption.

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(photo credit: internationalbanker.com)

• The assumption of full taxpayer compliance, in a situation where tax reporting requirements may be lightly applied, is likely unrealistic.

• A very reasonable estimate of taxes owed may differ materially from taxes actually paid.

LFO has no basis for estimating compliance. Our estimates follow from an assumption of full reporting and payment of all taxes owed.

Additional Background:
Dollar per gallon average price estimates by year

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• 2022 prices displayed a notable boost, in addition to increased 2022 volumes.

• BTS = Bureau of Transportation Statistics, nationwide average data on commercial prices paid.

• EIA = Energy Information Administration. Louisiana-specific data is pulled from EIA’s State Energy Data System (SIDS).