Rev. Rul. 72-585

Advice has been requested as to the application of the excise tax on the transportation of persons by air imposed by section 4261 of the Internal Revenue Code of 1954, and the excise tax on the transportation of property by air imposed by section 4271, under the circumstances described below.

A company furnishes a charter service for transporting persons and property by air. Payment for the service is based upon a flat rate per mile, or on an hourly rate. The charge for a flight load is the same whether the load included both freight and passengers, freight only, or passengers only.

Section 4261(a) of the Code imposes a tax (presently at the rate of 8 percent) on amount paid for taxable transportation by air (as defined in section 4262) of any person.

Section 4271 of the Code imposes a tax (presently at the rate of 5 percent) on amount paid for taxable transportation by air (as defined in section 4272) of property. The specific question presented is whether the tax on transportation of persons imposed by section 4261 of the Code, or the tax on transportation of property imposed by section 4271, or both taxes, apply, if a single amount is paid for transportation of a mixed load (persons and property).

Held, if a single amount is paid for air transportation of a mixed load of persons and property, tax must be paid under section 4261 of the Code on that part of the payment that represents the amount charged for transportation of persons, and tax must also be paid under section 4271 on that part of the charge that represents a payment for transportation of property. An allocation of the single charge must be made on a fair and reasonable basis, and must be supportable by adequate records.

An example of the type of allocation referred to above would be one based on a ratio between regular local tariffs for comparable passenger and freight services. The tariffs used may be those regularly charged by the carrier, or if such tariffs are not available, tariffs charged by other local carriers. See also Revenue Ruling 71-398, C.B. 1971-2, 374, regarding the treatment of amounts paid for the transportation of attendants, armed guards, or couriers on all-cargo aircraft for the purpose of accompanying specific shipments.

Revenue Ruling 60-63, C.B. 1960-1, 548, relating to transportation taxes applicable to mixed loads under prior law, is hereby superseded with respect to amounts paid for transportation on and after July 1, 1970, the effective date of the taxes currently imposed by sections 4261 and 4271 of the Code.