Rev. Rul. 58-427

Advice has been requested whether, under the circumstances described below, the shifting of cargo by a terminal and dock company constitutes transportation of property within the meaning of section 4271 of the Internal Revenue Code of 1954.

A terminal and dock company located near a major city handles large quantities of iron and steel products, some of which are stored on the company's premises until orders are received to load them on rail cars for reshipment. These products are transported to the dock by steamships and are unloaded from the ships by means of overhead cranes which operate along the face of the dock. If an open storage pile can be reached by a crane, the cargo to be stored is unloaded from the vessel directly onto the storage pile. If an open storage pile cannot be reached by the crane, the cargo to be stored is unloaded onto railroad cars and shifted by the dock company's locomotive to a storage pile on its premises where it is unloaded and stored. The average distance of the shifting movement from the face of the dock to the storage point is 150 feet. In all cases, the storage site and the means of transporting the material to that site are chosen by the dock company. The charges for unloading and/or reloading and for storage facilities are the same, regardless of the location of the storage site.

Section 4271 of the Code, prior to its repeal by P.L. 85-475, 72 Stat 259, C.B. 1958-3, 73, imposed a tax, with certain exceptions not here applicable, upon the amount paid for the transportation of property by rail, motor vehicle, water, or air from one point in the United States to another. Section 4272 of the Code provided that the tax imposed under section 4271 of the Code shall apply only 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 tax has previously been paid under this section.

Section 143.1(d) of Regulations 43, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, defines the term `transportation' to mean the movement of property by a person engaged in the business of transporting property for hire, including interstate, intrastate, and inter-city 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 and facilities.

It is held that where, as under the circumstances described above, the shifting of cargo by a terminal and dock company to or from a storage point on the dock premises, is wholly at the discretion of and for the convenience of the dock company in furnishing storage facilities and performing loading and unloading services, such shifting does not in itself constitute taxable transportation of property, within the meaning of the Code, even though the shifting is performed by switching the cargo in railroad cars. Accordingly, except in cases where the dock company performs the handling of the iron and steel products in connection with a taxable transportation movement of such products to an outside point, the tax does not apply to amounts paid directly to the dock company by the shipper or consignee for handling cargo to or from the storage points, regardless of the means used to perform such handling.