Missouri recently released a letter ruling addressing the taxation of hot-air balloon rides. The taxpayer was a Missouri corporation that offered tethered and un-tethered rides. In a tethered ride the hot-air balloon is attached to an object on the ground by three strong ropes. The ropes are long enough to allow the hot-air balloon to rise into the air 50-80 feet off the ground.
The Missouri Director of Revenue found that un-tethered hot-air balloon rides are not taxable because the balloons fall within the definition of "air commerce." The Federal Aviation Administration (FAA) regulates un-tethered balloons due to their potential to endanger safety in interstate commerce. Missouri is prohibited from taxing an individual traveling in air commerce or the sale of air transportation to an individual.
In contrast, Missouri does tax the sale of tethered rides as a charge for admission to a place of amusement. A tethered ride does not fall within the definition of "air commerce" because the balloon does not travel high enough to enter a federal airway. As a result, a tethered ride is amusement and is subject to sales tax.