Rev. Rul. 57-255

Advice has been requested whether the exemption from communications tax afforded common carriers by section 4253(f) of the Internal Revenue Code of 1954 applies to amounts paid for teletypewriter services or facilities under the circumstances described below.

M corporation is engaged in the business of performing services for steamship companies. These services include the booking of cargo and passengers, entering and clearance of vessels, inward and outward pilotage and towage, arranging for dockage space, loading and unloading of cargo, purchasing supplies for vessels, arranging for repairs, and other miscellaneous services. In the performance of these services, M corporation utilizes a teletypewriter service furnished by a local telephone company. Such service is subscribed to by M corporation in its own name. Each message transmitted over the teletypewriter concerns the business of one of the steamship companies and, when M corporation receives its bill for the service, the charge for each message is billed, in turn, by M corporation to the particular steamship company for whom the message was transmitted.

Section 4251 of the Code imposes a tax on amounts paid for certain communication services or facilities, including teletypewriter service.

Section 4253(f) of the Code provides that no tax shall be imposed on the amount paid for so much of leased wire, teletypewriter or talking circuit special service, or wire and equipment service, as is utilized in the conduct, by a common carrier or a telephone or telegraph company or a radio broadcasting station or network, of its business as such.

The steamship companies for whom M corporation performs services are common carriers and, within their own right, would be entitled to the benefits of the exemption afforded by section 4253(f) of the Code. However, M corporation is not a common carrier. The teletypewriter service is furnished by the telephone company to M corporation, and M corporation uses the service primarily in furtherance of its own business purposes. The fact that the steamship companies reimburse M corporation for the specific charges for the service is immaterial.

Accordingly, it is held that, since M corporation is not a common carrier, it is not entitled to the exemption provided by section 4253(f) of the Code. Therefore, amounts paid by M corporation for teletypewriter services or facilities are subject to the tax imposed by section 4251 of the Code.