NEW YORK—NetJets, a unit of Warren Buffett's Berkshire Hathaway Inc., this week sued the Internal Revenue Service over what it called an "illegal" $643 million tax assessment.

The IRS had determined that NetJets had failed to collect a "ticket tax" from its customers—the same tax that's paid by passengers every time they fly on a commercial flight.

NetJets, a division of billionaire Warren Buffett's Berkshire Hathaway, failed to collect a 'ticket tax' from customers, the IRS claims.

But NetJets argued in the lawsuit, filed in a federal court in Ohio on Monday, that the tax was meant to be paid only by commercial or charter passengers. NetJets, in contrast, primarily sells or leases shares in planes to wealthy flyers. It calls its clients "owners" of a fraction of a plane.

"The IRS's assessments in this case improperly extend application of the ticket tax beyond commercial airline and charter passengers, to persons who own the aircraft on which they fly," the company said in the suit.
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NetJets also claimed that the IRS hadn't attempted to assess such taxes on rival fractional-jet businesses, placing the company "at a significant disadvantage."

The IRS has assessed NetJets for the unpaid ticket tax on both the hours when the planes were in use, and also for management fees and fuel surcharges that NetJets collects from its customers, according to the suit.

An IRS representative said the agency can't comment on pending litigation.

The lawsuit was previously reported by Bloomberg News.

Berkshire's NetJets Sues IRS Over Tax Bill - WSJ.com