Are Hawaii helicopter tours subject to tax under Form 720?

Are you accidentally skipping your federal excise tax because you think sightseeing isn't transportation?

It is a common question for tour operators in Hawaii. You are flying people over volcanoes and waterfalls, not taking them from Point A to Point B. You might think that means you are exempt from the heavy lifting of Form 720.

The reality is different. The IRS generally views any flight for a fee as taxable transportation under IRS No. 26. If you aren't collecting that 7.5% from your passengers, you could be paying it out of your own pocket during an audit.

In 2026, the rules are getting even tighter. With new segment fees and a push for digital filing, the cost of a manual error has never been higher. Let us look at the math behind your tours and how you can protect your margins.

Are Hawaii Helicopter Tours Subject to Form 720 Tax?

The answer is usually yes. If you are charging passengers for a flight over Hawaii, the IRS expects a piece of that revenue. There is a common belief that since you are showing people the sights and not acting like a bus or a plane to a specific city, you don't owe transportation tax.

This is where many tour operators get in trouble. The IRS does not care if the flight is for fun or for travel. Under IRS No. 26, any flight for a fee is considered taxable transportation.

There are two main parts to what you owe in 2026:

• The Percentage Tax: You must collect 7.5% of the total ticket price from every passenger.

• The Hawaii Segment Fee: For 2026, the standard domestic segment fee is $5.30. However, for flights departing from Hawaii, you may be looking at the international facilities rate of $11.70.

The 7.5% tax is the core of your federal excise obligation. It applies to the "amount paid" for the flight. If you sell a ticket for $300, the IRS expects $22.50 from that sale.

What many operators miss is that the tax applies to more than just the seat. If you charge extra for a front-seat upgrade, a fuel surcharge, or a specialized photography package included in the flight, those are usually taxable too. Any amount the customer pays to get in the air counts toward that 7.5% total.

For Hawaii tours, this is a "pay-as-you-go" cost. You collect it from the customer at the time of booking and hold it for your quarterly filing. Because this percentage does not change with inflation, it is easy to forget until audit season.

The 7.5% percentage tax is only half of the calculation. In 2026, the IRS also requires a flat fee for every domestic segment of the flight. A segment is defined as one takeoff and one landing.

For 2026, the standard domestic segment fee has increased to $5.30 per passenger.

However, Hawaii has a special rule. For flights that begin or end in Hawaii, the IRS applies a specific rate for departures. For 2026, this Hawaii-specific fee is $11.70 per passenger.

• Why the difference? This fee replaces the standard international facilities tax for flights in and out of the islands.

• Who pays? If you take a group of four people on a tour, you owe that flat fee four times, plus the 7.5% percentage tax on the total sale.

Keeping track of which fee applies to which departure can get confusing, especially as rates adjust for inflation every January. 

Refer to the Aircraft Data and Statistics in the below Site

A lot of operators think they have a get out of jail free card because of the 6,000-pound rule. The logic usually goes like this: My helicopter is small, and I don't fly a fixed schedule, so I don't owe the tax. It is a dangerous way to run a business. 

The IRS Section 4281 says small aircraft are exempt if they aren't on an established line. In the past, people argued over what the established line meant. But the law was updated to clarify that sightseeing is not an established line.

So, does that mean you are safe? Not necessarily.

The exemption has a massive trap: it does not apply to jet aircraft. While a traditional piston helicopter might qualify, most modern tour helicopters use turbine engines. Even if your turbine-powered helicopter weighs less than 6,000 pounds, the IRS still considers it a jet for tax purposes. This means you are still on the hook for that 7.5% tax and the segment fees.

Simple720 is built to handle the heavy lifting for Hawaii tour operators. It is an IRS-authorized, cloud-based platform that turns a complex filing into a two-minute task.

• Automated Hawaii Rates: You don't have to look up the 2026 inflation adjustments. The system automatically applies the correct segment and facility fees for Hawaii departures.

• Smart Error Checks: The platform acts like a second set of eyes. It reviews your data for typos or missing info before you submit, which keeps you safe from rejected forms.

• IRS-Approved Security: As an IRS Authorized 720 efile provider, Simple720 sends your data directly to the IRS using encrypted channels. You get an instant digital receipt the moment your filing is accepted.

• Audit-Ready Records: Every return you file is stored securely in your dashboard. If you ever need to prove your compliance, your 2026 records are available in a few clicks.

The Bottom Line.

Running a helicopter tour in Hawaii means more than great views. It means staying compliant with IRS rules. If you fly passengers for a fee, the 7.5% federal excise tax and segment fees likely apply. Relying on paper filing or the “small aircraft” myth can lead to costly audits. Simple720 helps you e-file Form 720 quickly, securely, and accurately in minutes.