Rev. Rul. 62-105

The Internal Revenue Service has been asked whether, under the circumstances described below, the travel agencies are required to file returns and pay to the Government the excise tax on transportation of persons, imposed under section 4261 of the Internal Revenue Code of 1954, collected on amounts paid to the travel agencies for guided tours.

A carrier, which owns and operates buses, has interstate and local franchise rights to operate its vehicles over certain routes. The company has contractual arrangements to furnish special bus service to two types of travel agencies which sell guided tours. Under these arrangements, the carrier controls, operates, and maintains the buses, supplies the fuel and oil, and furnishes the drivers.

Travel agencies of the first type are independent brokers which are licensed by the Interstate Commerce Commission. They sell guided tours to individuals and to groups. They charter buses for such tours from any bus company which has the required franchise rights to operate the buses. These travel agencies are not under the supervision or control of any bus company or operator.

Travel agencies of the second type are not licensed as brokers by the Interstate Commerce Commission. They represent the bus companies and are under their supervision and control. They sell guided tours, and they remit all monies to the bus company, after retaining a commission.

Section 4261(a) of the Code imposes a tax upon the amount paid within the United States for taxable transportation of any person by rail, motor vehicle, water, or air. This tax is imposed upon the person making the payment subject to the tax.

Under the provisions of section 4291 of the Code, every person receiving any payment for facilities or services on which a tax is imposed upon the payor by section 4261 of the Code must collect the amount of the tax from the person making such payment.

The question in the instant case is whether the travel agencies, which collect the transportation tax from the persons who are liable therefor, should file returns and pay the tax to the Government or remit the tax to the bus company for payment to the Government. That depends upon whether, in selling the taxable transportation, the travel agencies are acting as principals or are acting as the agents of the bus company.

Where independent travel agencies, such as the independent broker type first described above, sell taxable guided tours to be taken on buses chartered from a carrier, the travel agencies are acting as principals in such transactions. Therefore, it is held that these travel agencies are required to collect the transportation tax, file tax returns, and pay the tax to the Government.

However, where travel agencies, such as the second type described above, sell taxable guided tours as representatives of the bus company, such travel agencies are acting as agents of the bus company. Although required to collect the transportation tax, such travel agencies should remit the tax to the bus company, which is required to file returns and pay the tax to the Government.