Appeal from the District Court of the Virgin Islands; Division of St. Croix, Appellate Division; D.C. Civil Action No. 88-264.
Sloviter, Stapleton and Hutchinson, Circuit Judges.
HUTCHINSON, Circuit Judge.
In this appeal we decide whether 49 U.S.C.A. § 1513(a) (West 1976) preempts a Virgin Islands' gross receipts tax on the commissions earned by travel agents for the sale of airline tickets. For the reasons stated below, we hold that § 1513(a) does not preempt such a tax.
Appellant, Travel Services, Inc. (Travel Services), operates a travel agency in the United States Virgin Islands. Among its activities is the sale of airline tickets, as agent for various airlines, to persons wishing to fly to and from the Virgin Islands. It sells those tickets at the same price the airlines would charge and receives from them a commission. When it sells an airline ticket, Travel Services is required to deposit the fares into a special account that it holds in trust for the airlines. The airlines draw funds from this account for the total fares less the commissions owed to Travel Services. Travel Services is then entitled to the commissions. The price of the airline ticket is established by the airlines and cannot be increased or decreased by Travel Services. The amount paid by a passenger is the same whether he or she purchases a ticket from Travel Services or directly from the air carrier.
The Virgin Islands gross receipts tax, set forth at V.I.Code Ann. tit. 33, § 43(a) (Supp. 1989-90), provides in relevant part:
Every individual and every firm, corporation, and other association doing business in the Virgin Islands shall report their gross receipts and pay a tax of four percent (4%) on the gross receipts of such business.
The United States Congress has enacted a statute concerning taxes levied on airline travel. That statute, set forth at 49 U.S.C.A. § 1513 (West 1976 & Supp. 1990),*fn1 reads in relevant part:
(a) No State (or political subdivision thereof, including . . . the Virgin Islands . . .) 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. . . .
(b) . . . [Nothing] in this section shall prohibit a State (or political subdivision thereof, including . . . the Virgin Islands . . .) from the levy or collection of taxes other than those enumerated in subsection (a) of this section, including property taxes, net income taxes, franchise taxes, and sales or use taxes on the sale of goods or services. . . .
Travel Services filed tax returns for the period of June 1983 through April 1986, as required under the Virgin Islands statute, but did not include in its reported gross receipts the commissions it had earned on the sale of airline tickets. The Virgin Islands taxing authorities assessed gross receipts taxes and interest on Travel Services' commissions from the sale of airline tickets for the period of June 1983 through April 1986. Travel Services then brought an action in the Territorial Court of the Virgin Islands contending that the Virgin Islands' assessment of tax on the commissions it had earned from the sale of airline tickets was prohibited by 49 U.S.C.A. § 1513(a).
The parties filed stipulated facts and, on cross-motions for summary judgment, the territorial court denied Travel Services' motion and granted summary judgment to the government. The territorial court held that the tax imposed by the Virgin Islands statute was not a tax on gross receipts derived from the sale of air transportation preempted by 49 U.S.C.A. § 1513(a), but instead was a tax on services permitted by § 1513(b). The Appellate Division of the ...