Rev. Rul. 72-40

A research center owned by the Federal Government is operated by a nonprofit organization under a cost-reimbursement contract with the Government. Communication services furnished the center are for the official use of the United States and exempt from the tax imposed by section 4251 of the Internal Revenue Code of 1954 under the Secretary of the Treasury's authorization provided by section 4293 of the Code. See Rev. Rul. 68-276, C.B. 1968-1, 493.

When employees of the center use official telephones for making private calls, the center charges them for the cost of the calls and the applicable excise tax, and (in accordance with Revenue Ruling 68-276) reports and pays the tax directly to the District Director of Internal Revenue. In addition to the amounts charged for the calls, the center charges an additional amount to cover the administrative expense of handling such calls. This amount is treated as a revenue and applied against the cost of operating the center under the Government contract.

Held, the administrative charge made by the research center to its employees for handling their private telephone calls is not an amount paid for communication services within the meaning of section 4251 of the Code and, accordingly, is not subject to the tax imposed by that section.