Rev. Rul. 67-120

Advice has been requested whether aircraft used by military flying clubs come within the scope of the term `vessels of war of the United States' for purposes of the exemption from the manufacturers excise tax on gasoline provided by section 4221(a)(3) of the Internal Revenue Code of 1954.

Certain military flying clubs are organized under the provisions of the regulations of the various branches of the Armed Forces of the United States as one of a number of programs to promote and provide for the morale, welfare, and recreation of military personnel. Membership is on a voluntary basis and is also extended to certain civilians. The aircraft used by the flying clubs are on loan from the respective branches of the Armed Forces and title remains in the United States. The clubs are operated on a self-supporting basis and maintain the aircraft in their possession.

Section 4081(a) of the Code imposes a tax on gasoline sold by the producer or importer thereof, or by any producer of gasoline.

Section 4221(a)(3) of the Code provides that no tax shall be imposed on the sale by the manufacturer of an article for use by the purchaser as supplies for vessels or aircraft. Section 4221(d)(3) of the Code provides, in part, that the term `supplies for vessels or aircraft' means fuel supplies, ships' stores, sea stores, or legitimate equipment on vessels of war of the United States or of any foreign nation. Furthermore, the term `vessels of war of the United States or of any foreign nation' includes aircraft owned by the United States or by any foreign nation and constituting a part of the Armed Forces thereof.

Since military aircraft on loan to flying clubs do not come within the definition of `vessels of war of the United States,' they are not `part of the Armed Forces' within the meaning of section 4221(d)(3) of the Code. Accordingly, it is held that sales of gasoline to the flying clubs are subject to the manufacturers excise tax imposed by section 4081 of the Code.