NetJets, a susidiary of Warren Buffet’s Berkshire Hathaway (BRK-A), (BRK-B), was sued by the United States government on Thursday last. The suit says NetJets is liable for unpaid taxes to the tune of $366.3 million. This is a counter suit related to a filing the company had made last November against the government claiming $642.7 million in a dispute over mistakenly applied taxes. The government alleges that four of the companies in the NetJets group had “failed, neglected or refused to pay its federal tax liabilities … in full”. The suit named four NetJets subsidiaries: NetJets Large Aircraft, Executive Jet Management, NetJets International and NetJets Aviation and claims liabilities $1.19 million, $10 million, $53 million, and $302 million respectively.
The November suit had claimed for reimbursement of a “ticket tax” which NetJets had contended was not applicable under their business model. They claimed that with their shared ownership platform each customer in effect transports themselves and so the company was not liable for the transport taxes. Ticket Taxes are an excise duty paid on airline tickets. It is collected by airlines and remitted to congress on a per ticket basis. The dispute arises out of the claim that passengers with NetJets actually own the aeroplanes they travel on.
The Federal Government’s suit relates to taxes unpaid between 2003 and 2009. The suit was filed in Columbus Ohio where the company is based and plans to open a new headquarters next month. Their spokesperson said that NetJets did not comment on upcoming suits. Berkshire Hathaway acquired NetJets in 1998 after Buffet had used the service as a customer for three years.
NetJets is an aviation company that operates on a shared ownership model. They offer a service allowing individuals to purchase a part ownership in a private aircraft. Customers share access to the aircraft for certain number of flight hours per year depending on their share size. The company had struggled during the financial crisis but had recovered by last year. In 2011 NetJets posted pretax earnings of $227 million.