Why does AMEX charge an Excise fee/tax?

[Anonymous]

AFAIK they are the only ones that do this when you go to transfer your miles. 

I just transferred 4,000 miles to Delta and they charged me $2.90. 

When I transfer miles from Citi to Jet Blue, no such fee exists. Does Chase charge an Excise fee? 

[bz386]

No, Chase does not charge fees to transfer points to miles, I think Amex is the only one that does. They do not charge fees if you transfer to international airlines, only for domestic. One more reason I don’t use Amex...

[Anonymous]

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@bz386 wrote:
No, Chase does not charge fees to transfer points to miles, I think Amex is the only one that does. They do not charge fees if you transfer to international airlines, only for domestic. One more reason I don’t use Amex...

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So in other words, you're saving $99 when using Chase to transfer 200,000 miles to, let's say, Southwest instead of using AMEX to transfer 200,000 points to Delta. I don't know what it is with AMEX and their ridiculous points/cash redemption policies.  

[wasCB14]

From IRS Publication 510, revised March 2018:

Percentage tax.

A tax of 7.5% applies to amounts paid for taxable transportation of persons by air. Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service.

Mileage awards.

The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses.

Generally, the percentage tax doesn't apply to amounts paid for mileage awards where the mileage awards can't, under any circumstances, be redeemed for air transportation that is subject to the tax. Until regulations are issued, the following rules apply to mileage awards.

• Amounts paid for mileage awards that can't be redeemed for taxable transportation beginning and ending in the United States aren’t subject to the tax. For this rule, mileage awards issued by a foreign air carrier are considered to be usable only on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States. Therefore, amounts paid to a foreign air carrier for mileage awards aren’t subject to the tax.

• Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation aren’t subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation.

• Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are subject to the tax to the extent those miles won’t be awarded in connection with the purchase of taxable transportation.

Chase (and, I suppose, Citi for Jet Blue) pay this tax, too. Amex is just the only one to pass the fee on to customers.

And Amex doesn't charge customers for the exact fee Amex paid...just a rough approximation of it.

If the excise tax is a problem for someone, then probably another award currency is appropriate. If you can get good value with MRs, especially with transfer bonuses, it's not that big a burden.

[FinStar]

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@wasCB14 wrote:

From IRS Publication 510, revised March 2018:

Percentage tax.

A tax of 7.5% applies to amounts paid for taxable transportation of persons by air. Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service.

Mileage awards.

The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses.

Generally, the percentage tax doesn't apply to amounts paid for mileage awards where the mileage awards can't, under any circumstances, be redeemed for air transportation that is subject to the tax. Until regulations are issued, the following rules apply to mileage awards.

• Amounts paid for mileage awards that can't be redeemed for taxable transportation beginning and ending in the United States aren’t subject to the tax. For this rule, mileage awards issued by a foreign air carrier are considered to be usable only on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States. Therefore, amounts paid to a foreign air carrier for mileage awards aren’t subject to the tax.

• Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation aren’t subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation.

• Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are subject to the tax to the extent those miles won’t be awarded in connection with the purchase of taxable transportation.

Chase (and, I suppose, Citi for Jet Blue) pay this tax, too. Amex is just the only one to pass the fee on to customers.

And Amex doesn't charge customers for the exact fee Amex paid...just a rough approximation of it.

If the excise tax is a problem for someone, then probably another award currency is appropriate. If you can get good value with MRs, especially with transfer bonuses, it's not that big a burden.

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This exactly.

It may seem "ridiculous" to some, but this is their policy.

[Anonymous]

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@wasCB14 wrote:

From IRS Publication 510, revised March 2018:

Percentage tax.

A tax of 7.5% applies to amounts paid for taxable transportation of persons by air. Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service.

Mileage awards.

The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses.

Generally, the percentage tax doesn't apply to amounts paid for mileage awards where the mileage awards can't, under any circumstances, be redeemed for air transportation that is subject to the tax. Until regulations are issued, the following rules apply to mileage awards.

• Amounts paid for mileage awards that can't be redeemed for taxable transportation beginning and ending in the United States aren’t subject to the tax. For this rule, mileage awards issued by a foreign air carrier are considered to be usable only on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States. Therefore, amounts paid to a foreign air carrier for mileage awards aren’t subject to the tax.

• Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation aren’t subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation.

• Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are subject to the tax to the extent those miles won’t be awarded in connection with the purchase of taxable transportation.

Chase (and, I suppose, Citi for Jet Blue) pay this tax, too. Amex is just the only one to pass the fee on to customers.

And Amex doesn't charge customers for the exact fee Amex paid...just a rough approximation of it.

If the excise tax is a problem for someone, then probably another award currency is appropriate. If you can get good value with MRs, especially with transfer bonuses, it's not that big a burden.

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Right, but why be different than everyone else in a negative way once again? Seems like bad customer service. 

[wasCB14]

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@Anonymous wrote:

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@wasCB14 wrote:

From IRS Publication 510, revised March 2018:

Percentage tax.

A tax of 7.5% applies to amounts paid for taxable transportation of persons by air. Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service.

Mileage awards.

The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses.

Generally, the percentage tax doesn't apply to amounts paid for mileage awards where the mileage awards can't, under any circumstances, be redeemed for air transportation that is subject to the tax. Until regulations are issued, the following rules apply to mileage awards.

• Amounts paid for mileage awards that can't be redeemed for taxable transportation beginning and ending in the United States aren’t subject to the tax. For this rule, mileage awards issued by a foreign air carrier are considered to be usable only on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States. Therefore, amounts paid to a foreign air carrier for mileage awards aren’t subject to the tax.

• Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation aren’t subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation.

• Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are subject to the tax to the extent those miles won’t be awarded in connection with the purchase of taxable transportation.

Chase (and, I suppose, Citi for Jet Blue) pay this tax, too. Amex is just the only one to pass the fee on to customers.

And Amex doesn't charge customers for the exact fee Amex paid...just a rough approximation of it.

If the excise tax is a problem for someone, then probably another award currency is appropriate. If you can get good value with MRs, especially with transfer bonuses, it's not that big a burden.

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Right, but why be different than everyone else in a negative way once again? Seems like bad customer service. 

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Chase, as far as I know, doesn't offer transfer bonuses. Citi and Amex do. In that sense, Chase is different than everyone else in a negative way.

Does that mean Chase customer service is bad, or that the whole UR program should be avoided? I certainly don't think so. Different programs just have their pros and cons.

[Anonymous]

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@wasCB14 wrote:

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@Anonymous 

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Chase, as far as I know, doesn't offer transfer bonuses. Citi and Amex do. In that sense, Chase is different than everyone else in a negative way.

Does that mean Chase customer service is bad, or that the whole UR program should be avoided? I certainly don't think so. Different programs just have their pros and cons.

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Instead they have 1:1 transfers to valuable programs and cards that pool together to earn 5x the UR point per dollar. The other companies need to give out bonuses just to match what Chase allows as a standard procedure. 

[wasCB14]

Did you close Costco already? Or are waiting until the card arrives to add it to your signature?

[wasCB14]

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@Anonymous wrote:

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@wasCB14 wrote:

Chase, as far as I know, doesn't offer transfer bonuses. Citi and Amex do. In that sense, Chase is different than everyone else in a negative way.

Does that mean Chase customer service is bad, or that the whole UR program should be avoided? I certainly don't think so. Different programs just have their pros and cons.

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Instead they have 1:1 transfers to valuable programs and cards that pool together to earn 5x the UR point per dollar. The other companies need to give out bonuses just to match what Chase allows as a standard procedure. 

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The UR program does have its strengths. There's no base 2x like with MR, but the 1.5x is uncapped. 5x is capped but is still 5x. 3x opportunities are plentiful.

But I believe you are well over 5/24, so it's probably not an available option. Unless you're going to garden for a year, I'm not sure it's a relevant comparison to TY and MR programs.