Aloha Airlines, Inc. v. Director of Taxation of Hawaii

PETITIONER: Aloha Airlines, Inc.
RESPONDENT: Director of Taxation of Hawaii
LOCATION: Franklin County Sheriff

DOCKET NO.: 82-585
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: Supreme Court of Hawaii

CITATION: 464 US 7 (1983)
ARGUED: Oct 04, 1983
DECIDED: Nov 01, 1983

Richard L. Griffith - on behalf of the Appellants
William David Dexter - on behalf of Appellee

Facts of the case


Media for Aloha Airlines, Inc. v. Director of Taxation of Hawaii

Audio Transcription for Oral Argument - October 04, 1983 in Aloha Airlines, Inc. v. Director of Taxation of Hawaii

Warren E. Burger:

Mr. Griffith, I think you may proceed whenever you are ready.

Richard L. Griffith:

Mr. Chief Justice, and may it please the Court:

These consolidated cases are on appeal from the Supreme Court of Hawaii.

They present a single issue, whether a Hawaii tax of 3 percent of the gross income of airlines from the airline business is exempt from the section of the Federal Aviation Act, 49 U.S.C., Section 1513, which forbids a state from levying a tax on the gross receipts derived from the carriage of passengers or the sale of air transportation.

The Hawaii Supreme Court upheld the Hawaii tax.

Its decision thus conflicts with the holdings of the other state courts which have considered the same issue, namely, the highest court of the State of New York, the Court of Appeals of Arizona, and the Superior Court of Alaska, all of which have struck down similar state taxes because of this federal statute.

Also, in the State of Ohio, the Attorney General rendered an opinion that the Ohio tax was invalid in view of the federal statute, and the Ohio legislature then repealed the tax.

Appellants Aloha Airlines and Hawaiian Airlines are commercial airlines flying in federal airways between the six major islands of Hawaii.

I will make three points on oral argument, and only three.

First, the plain language of the federal statute, 49 U.S.C. 1513, prohibits this tax.

Second, the Hawaii tax can't be saved under subsection (b) of that federal statute because subsection (b) is consistent with subsection (a).

And finally, the legislative history of this statute requires a decision in favor of the airlines in this case because Congress meant exactly what it said in Section 1513, and it meant to forbid precisely this kind of state tax.

With regard to my first point, that the federal statute expressly prohibits the Hawaii tax, we need examine only the gist of the Hawaii tax statute and the key sentence of the federal statute.

First, the Hawaii statute says there shall be levied and assessed upon each airline a tax of 4 percent of its gross income each year from the airline business.

That language conflicts directly with the federal statute which provides no state... this is the federal statute... no state shall levy or collect a tax, fee, head charge or other charge directly or indirectly on persons traveling in air commerce or on the carriage of persons traveling in air commerce, or on the sale of air transportation, or on the gross receipts derived therefrom.

This federal statute thus expressly prohibits every conceivable method by which a state could tax the carriage of passengers by air or the sale of air transportation or the gross receipts derived therefrom.

William H. Rehnquist:

How about a next income tax, Mr. Griffith?

Richard L. Griffith:

Subsection (b) expressly permits a net income tax, Your Honor.

William H. Rehnquist:

Is there all that much difference between a gross income tax and a net income tax?

Richard L. Griffith:

I think there definitely is.

A gross income tax is a tax at the immediate point of transaction between a passenger and the airline, or between a customer and the provider of a service, and that is a tax which can easily be passed on dollar for dollar to the customer.

William H. Rehnquist:

Well, you say that a gross income tax is necessarily one on the passenger?

I wouldn't have thought so, or perhaps I misunderstood you.

The statute is defined four different ways, to hit a tax directly on the passenger or a tax on the carriage of that passenger, or a tax on the sale of air transportation, or a tax on the gross receipts realized by the airline.

Yes, but what I am try... what I want to ask you is whether a gross income tax or gross receipts tax on the airline that is collected at the head office of the airline, it isn't imposed on passengers individually at all--

Richard L. Griffith:


William H. Rehnquist:

--Is that appreciably different from a net income tax similarly reflected?

Richard L. Griffith:

Very definitely different in concept and theory, Your Honor.

William H. Rehnquist:


Richard L. Griffith:

Because a net income tax depends on many other factors besides the price of a ticket.