Rev. Rul. 57-439

The Internal Revenue Service has been asked to define the term `commutation tickets' for purposes of exemption from the excise tax on the transportation of persons.

Section 4261(a) of the Internal Revenue Code of 1954 imposes a tax upon the amount paid within the United States for taxable transportation of any person by rail, motor vehicle, water, or air.

Section 4263(a) of the Code provides that the tax imposed by section 4261 shall not apply to amounts paid for commutation or season tickets for single trips of less than 30 miles, or to amounts paid for commutation tickets for one month or less.

Section 42.4263(a)-1(a) of the Facilities and Services Excise Tax Regulations provides that amounts paid for commutation or season tickets or books for single trips of less than 30 miles are exempt from the tax imposed by section 4261, regardless of the length of time for which such tickets or books are valid. This section defines the phrase `less than 30 miles' to mean less than 30 constructive miles in instances where the charge is based on constructive mileage. Section 42.4263(a)-1(b) of the regulations provides that amounts paid for commutation tickets or books for one month or less are exempt from the tax regardless of the distance of a single trip.

The term `commutation tickets' as used in section 4263(a) of the Code has reference to those types of tickets which are used for transportation between two specified points where the carrier customarily provides service for persons who make regular daily trips, ordinarily Monday through Friday, in both directions. The term implies that the persons served customarily travel between such points with such frequency and regularity that they are thereby entitled to a fare lower than the basic or standard fare and that they obtain this reduction by purchasing in advance their transportation requirements for a given period.

Accordingly, it is held that in order for a ticket or book to qualify as a `commutation ticket' within the meaning of section 4263(a) of the Code, such ticket or book must be (a) good for ten or more single trips, (b) valid for use by the purchaser or bearer only, (c) sold at a reduced rate, (d) issued for transportation between two points where service is customarily furnished by the carrier for persons who make regular daily trips between those points, and (e) intended to be used primarily by the class of passenger specified in (d).

Under the authority contained in section 7805(b) of the Code, this Revenue Ruling will be applied only to payments made on or after October 1, 1957.