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Haslam wants to cap fuel tax FedEx pays for its planes in Tennessee

By   /   April 15, 2015  /   News  /   No Comments

By Chris Butler | Tennessee Watchdog

NASHVILLE — Republican Gov. Bill Haslam is pushing for legislation that would put a $10.5 million cap on how much tax FedEx pays on aviation fuel to keep the company from doing more business out of state.

FedEx spokesman Jack Pfeiffer told Tennessee Watchdog this week the company has no plans to leave Tennessee. Pfeiffer said company officials will work with legislators to make sure the state has the most competitive business environment possible.

Tennessee charges a higher tax on aviation fuel than most surrounding states, 14 cents a gallon compared to less than a penny for others.

Last year, Memphis-based FedEx paid $32 million of the $48 million in aviation fuel taxes the state received.

Photo courtesy of Flickr.

UP AND AWAY: FedEx, based in Memphis, is paying Tennessee’s high aviation fuel tax.

Haslam’s spokesman Dave Smith did not respond to direct questions about the proposed cap.

Instead, Smith sent an audio clip of Haslam talking about how FedEx pilots could fly to company offices in other states, like Indiana, to avoid Tennessee’s fuel tax.

Tennessee Department of Transportation spokeswoman B.J. Doughty said Tennessee’s aviation fuel taxes pay for airport projects.

That tax benefits 79 airports in the state, said Tennessee Department of Economic and Community Development spokesman Clint Brewer.

“Indiana doesn’t have any kind of tax on airline fuel,” Brewer said. “We are competing with states that have a fraction of the fee level that we have and a much lower cap or no tax at all. It’s an area we found where, frankly, the state just wasn’t competitive.”

FedEx and all airlines are exempt from paying Indiana’s aviation fuel tax, said Amanda Stanley, spokeswoman for the Indiana Department of Revenue.

“People who have sightseeing planes, planes for personal use and hobby planes are subject to the tax,” Stanley said.

Indiana collected $1.1 million in fuel taxes after charging 10 cents per gallon. Mississippi, meanwhile, took in $6 million after charging a 0.053 cents-per-gallon tax. Kentucky took in $10 million after charging 0.034 cents per gallon.

Tennessee charges the 12th highest in fuel tax rates in the country, according to information Brewer sent to Tennessee Watchdog on Tuesday. Tennessee has charged the tax since 1987.

Under legislation that State Rep. Mark White, R-Memphis, is sponsoring, state officials would eventually place the $10.5 million cap on the aviation fuel FedEx pays every year.

White said officials with the state’s departments of revenue and transportation also want the cap.

“FedEx employs about 36,000 people in Memphis,” White said. “Anytime you have a tax that’s unnecessarily burdensome on one entity or corporation then we need to take a look at that. We are in a competitive world. We want corporations growing here.”

Photo courtesy of the Tennessee General Assembly's website.

State Rep. Mark White, R-Memphis

White said the legislation, if passed, would create a task force to decide how the state’s airports would work with less money coming in.

“Most states either have a $1 million cap or a $2.5 million cap on fuel taxes,” White said, mentioning North Carolina and Kentucky, home of UPS, as states that can better compete with Tennessee.

“In my opinion, in the years to come, this may entice more airlines to come to the state.”

White said his legislation has survived the House and Senate transportation committees and is about to go to a finance committee.

“I think the bill will pass,” White said.

Contact Christopher Butler at [email protected] 

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Chris formerly served as staff reporter for Watchdog.org.