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

Background

Aloha Airlines and Hawaiian Airlines are commercial carriers that fly passengers, freight, and mail between the Hawaiian islands. Hawaii imposed a 4% public service company tax measured by airlines’ gross income under Haw. Rev. Stat. §239-6. The airlines sought refunds, arguing that Congress’s Airport Development Acceleration Act provision, now codified at 49 U.S.C. §1513(a), pre-empted such state taxes on air transportation.

Reasoning

The Court asked whether the federal statute bars States from levying taxes on gross receipts from air transportation. It concluded that the plain language of §1513(a) expressly pre-empts state taxes directly or indirectly on gross receipts from the sale or carriage of air transportation. The Court explained that when Congress unambiguously forbids a tax, courts need not look beyond the statute’s text. It also relied on legislative history, including sponsors’ floor statements, showing Congress intended §1513 to reach gross receipts taxes, not just passenger head taxes. Finally, the Court rejected Hawaii’s attempt to avoid preemption by labeling the levy a property tax.

Real world impact

The decision invalidates Hawaii’s 4% tax as applied to air transportation and sends the cases back to lower courts for proceedings consistent with this ruling. The opinion notes other States have similar taxes and acknowledges possible disruption to state revenue systems, but holds courts must follow the statute’s clear terms. The Court also observed that Congress could amend the law if it wants a different outcome.

Dissents or concurrances

The Hawaii Supreme Court divided, with one justice dissenting; that court treated the tax as imposed on carriers, not passengers, and read §1513 narrowly. The U.S. Supreme Court rejected that narrower reading.