Rev. Rul. 55-632

The allowance made by a vendor to a carrier for the transportation of property purchased by the carrier for its own use and transported by such carrier over its own lines from point of origin or from a junction to destination, is not subject to the tax on the transportation of property imposed by section 3475 of the Internal Revenue Code of 1939, provided title to the property vests in the purchasing carrier at the time the property reaches its lines. In such a case the freight allowance made by the vendor to the purchasing carrier constitutes an adjustment in the purchase price of the property rather than a payment for the transportation of the property. Thus, where the property purchased is transported entirely over the lines of the purchasing carrier and such carrier holds title to the property, no liability for transportation tax is incurred. However, where the property is transported by a connecting carrier from the point of origin to a junction point on the lines of the purchasing carrier, the purchasing carrier is liable for payment of the tax on the amount it pays to the connecting carrier for transporting the property to the junction point.

Revenue Ruling 284, C.B. 1953-2, 436, which holds that amounts paid or allowed to a carrier for transporting property purchased for its own use are subject to the tax on the transportation of property, applies only in cases where the purchasing carrier does not hold title to the property at the time such carrier transports the property over its own lines