The Minnesota Tax Court ruled that the federal Anti-Head Tax Act (AHTA) preempts using Alaska Airlines’ gross receipts when calculating the Minnesota Franchise Tax Minimum Fee. The AHTA prohibits states from taxing gross receipts from air commerce or transportation. Minnesota’s Minimum Fee, imposed on taxpayers exercising a corporate franchise in the state, is calculated based on the taxpayer’s total Minnesota property, payrolls and “sales or receipts.” The court agreed with Alaska that the inclusion of its gross receipts from air commerce and transportation, which were included in “sales or receipts” when computing the Minimum Tax, is preempted by the AHTA. But, the court rejected Alaska’s other argument that including wages of certain non-resident employees in Minnesota “payroll” is preempted by the AHTA. Finally, the court declined to strike down the entire Minimum Tax statute, finding that the preempted portions mandating use of receipts or sales are severable from the remainder of the statute.

Alaska Airlines, Inc. v. Comm’r of Revenue, Dkt. No. 9433-R (Minn. Tax Ct., Mar. 16, 2022).