Rev. Rul. 55-55

Advice has been requested whether the tax on the transportation of property imposed by section 3475 of the Internal Revenue Code of 1939 applies to amounts paid to a port terminal operator for the towing of logs from the places of storage to the dock where they are loaded onto rail cars.

In the instant case M corporation operates a port terminal for inbound and outbound ocean cargo and rail shipments. One of its operations is a log reload which involves the loading of logs from rafts in the water to railroad log flats and gondola cars for shipment to lumber yeards and pulp mills. The rafts of logs are delivered from logging companies by tugboats to the port and are moored at various tie-up places in the river where they are stored until the reload can place them on the cars. When the logs are brought from the storage places to the dock, M corporation orders a tugboat to move the rafts from the tie-up places to the reload boom and pays the tugboat operator for the towing services. The M corporation bills the various logging companies for the amount of the towage charges plus 20 percent of such charges.

Under the provisions of section 3475 of the Code the tax applies to amounts paid to a person engaged in the business of transporting property for hire, including amounts paid to a freight forwarder, express company, or similar person, but not including amounts paid by a freight forwarder, express company, or similar person for transportation with respect to which a tax has previously been paid under this section.

Section 143.1(d) of Regulations 113 provides that the term `transportation' means the movement of property by a person engaged in the business of transporting property for hire, including interstate, intrastate, and intracity or other local movements, as well as towing, ferrying, switching, etc. In general, it includes accessorial services furnished in connection with a transportation movement such as loading, unloading, and similar services.

The term `person engaged in the business of transporting property for hire,' for the purpose of the tax imposed by section 3475(a) of the Code, includes not only a carrier who actually transports the property but also a person who holds himself out to the public as one who for compensation sells, provides, procures, furnishes, or arranges for the transportation of property. See Rev. Rul. 54-54, C.B. 1954-1, 273.

It is held that to the extent M corporation furnishes the reload service which includes towing of the logs, M corporation is a person engaged in the business of transporting property for hire within the meaning of section 3475(a) of the Code. Accordingly, the tax applies to amounts paid to M corporation by the logging companies for the towing of the logs and for any accessorial services, such as loading and unloading, furnished in connection therewith. However, the tax does not apply to the amounts paid by M corporation to the tugboat operators for towing with respect to which the tax is payable to such corporation