Rev. Rul. 71-398

Advice has been requested whether amounts paid under the circumstances described below are subject to the tax on the transportation of property by air imposed by section 4271 of the Internal Revenue Code of 1954.

Certain carriers engaged in the business of transporting property by air for hire provide the following services in connection with such transportation for which an additional charge is made and separately stated:

(1) "C.O.D. (Collect on Delivery) Shipments," is a service provided by carriers whereby the carriers will collect C.O.D. amounts from the consignee and forward payment to shippers. (2) "R.F.C. (Remittance Following Collection) Shipments," is a service basically similar to the C.O.D. service described in (1) but provides for the extension of credit to the consignee for the amounts due on R.F.C. shipments and for remittance following collection by the carrier.

(3) "Stopping in Transit," is a service that provides for shipments to be stopped in transit to complete the loading or for partial unloading. The service is subject to specific conditions, such as minimum weight per shipment, etc.

(4) "Assembly or Distribution Service," are two distinct services. In providing the assembly service the carrier will accept two or more parts of a shipment from one or more shippers at a point of origin and will provide special assembling of such parts for shipment. At a destination point, the carrier will provide distribution service that involves separating parts of a shipper's shipment and delivery of such parts to different consignees.

(5) "Containers for Live Animals." This is a service whereby containers are rented or sold by carriers for use in air transportation of animals.

(6) "Attendants Accompanying Shipments," is a service whereby attendants, armed guards, or couriers (and their luggage) are transported on all-cargo aircraft for the purpose of accompanying specific shipments. Charges for these attendants are assessed at 200 percent of the carrier's general commodity rate or in accordance with the applicable passenger tariffs.

(7) "Signature Service," is a service providing for a person to person receipt by individuals involved in the handling of specific freight shipments.

(8) "Charge For the Use of an Insulated Container," is a service whereby a carrier furnishes insulated containers for carriage of special air freight shipments.

(9) "Terminal Service Charges," is a service whereby the carrier prepares export and entry documents and processes customs clearance.

(10) "Proof of Delivery Request," is a form of "terminal service charge" assessed by carriers when proof of delivery is requested by the shipper. The carrier furnishes to the shipper a photocopy of the airbill or manifest signed by the consignee, or his agent.

(11) "Charge for Packing Shipments," is a service whereby the carrier, using special packaging materials, packages electronic machines and office machines for the shipper.

(12) "Charge for the Use of a Container," is a service whereby the carrier furnishes multiple-use containers or single-use containers, including containers that are designed as "fish-pack" containers for fin fish and shell fish. (13) "Excess Valuation Charge," is a charge made by carriers when a shipper declares a value for his shipment that is in excess of the standard tariff valuation for the particular type of shipment. When the shipper declares a value in excess of the value specified in the tariff, the carrier makes an additional charge at a stated rate for each $100 or fraction thereof by which the declared actual value exceeds the value specified in the tariff. In some tariffs, the excess value charge is classified as a transportation charge, while in other tariffs it is not so classified.

Section 4271 of the Code imposes a tax on the amount paid within or without the United States for the taxable transportation (as defined in section 4272) of property, if such transportation begins and ends in the United States. The tax imposed by section 4271 shall apply only to amounts paid to a person engaged in the business of transporting property by air for hire.

The Senate Finance Committee Report to accompany the Airport and Airway Revenue Act of 1970 (Senate Report No. 91-706, 91st Cong., 2nd Sess., C.B. 1970-1, 386, at 395) states that amounts paid for accessorial services provided by the air carrier (either directly or through an independent contractor) with respect to the property transported by air are taxable under the Act if such service can only be provided by the airline and if the charge is applicable to all those using it. The committee report further states that, on the other hand, if the service could also be provided by another party, such as a freight forwarder, the amounts paid for the service performed by the air carrier are not considered to be amounts paid for the transportation of property by air, and are therefore not subject to the tax, if the charges for such services are separately stated.

The amounts paid for the accessorial services performed by the air carrier in (1), (2), (4), (5), (7), (8), (9), (11), and (12), above are services which by their nature could be performed by a party other than the air carrier. Accordingly, it is held that amounts paid for these services are not subject to the tax imposed by section 4271 of the Code, if stated separately. The service described in (10) is performed after delivery of the cargo and is not directly related to the actual transportation movement. Therefore, such service is neither a part of a transportation service nor accessorial to the service. Accordingly, it is held that amounts paid for the service described in (10) are not subject to the tax imposed by section 4271 of the Code, if stated separately.

On the other hand, the service described in (3) is one that is directly related to the transportation and can only be provided by the carrier rendering the transportation service. Accordingly, it is held that amounts paid for the service described in (3) are subject to the tax imposed by section 4271 of the Code.

With respect to (6), above, the amounts paid for the transportation of attendants, guards, or couriers under either method of assessment used by the carrier are amounts paid for the transportation of persons, and it is held that such amounts are subject to the tax imposed by section 4261 of the Code on the transportation of persons, rather than the tax imposed by section 4271.

With respect to the excess valuation charges described in (13), such amounts are required to be paid for transportation of articles of a stated value. Accordingly, the excess charges are paid for the transportation of property, and it is held that they are subject to the tax imposed by section 4271 of the Code, regardless of whether the charge for the excess value is classified as a transportation charge or otherwise.