Rev. Rul. 81-155

ISSUE

Are the taxicabs operated as described below engaged exclusively in furnishing qualified taxicab services for purposes of the credit or refund provided by section 6427(e)(1) of the Internal Revenue Code?

FACTS

A operates a fleet of taxicabs in the city of M. These taxicabs carry a maximum of five passengers plus driver and are available throughout M. Each taxicab in the fleet is equipped with a taximeter and is licensed by O, the local authority having jurisdiction in M for all taxicab service therein.

Among the rules and regulations promulgated by O are the following:

(1) A driver, once his vehicle is hired, is prohibited from soliciting other passengers, or from suggesting to anyone that additional passengers be accepted.

(2) The first person or persons hiring a vehicle have exclusive right to it. The driver may take on no additional passengers. However, the person or persons who first hired the vehicle may pick up friends or acquaintances, from whom no additional fare may be collected or accepted. This is the only situation in which a driver may pick up passengers at more than one location.

The taxicabs operated by A are not gas-guzzling taxicabs as defined in section 6427(e)(2)(C) of the Code.

LAW AND ANALYSIS

Under section 6427(e)(1) of the Code, if any gasoline on which tax is imposed by section 4081, or any fuel on which tax is imposed by section 4041, is used in a qualified taxicab while engaged exclusively in furnishing qualified taxicab service, a credit or refund of an amount equal to the aggregate amount of tax imposed is available to the ultimate purchaser of such gasoline or fuel.

Section 6427(e)(2)(A) of the Code defines "qualified taxicab services" to mean the furnishing of non-scheduled passenger land transportation for a fixed fare by a taxicab that is operated by a person who--

(1) is licensed to engage in the trade or business of furnishing such transportation by a federal, state, or local authority having jurisdiction over a substantial portion of such transportation furnished by such person, and

(2) is not prohibited under the laws, regulations, or procedures of such federal, state, or local authority, and is not prohibited by company policy, from furnishing (with consent of the passengers) shared transportation.

Section 6427(e)(2)(B) of the Code defines "qualified taxicab" to mean a land vehicle having a passenger capacity of less than ten adults, including the driver. Section 6427(e)(2)(C) excludes from this definition certain gas-guzzling taxicabs, described as any vehicle that is acquired by the operator after 1978, that has a model year of 1978 or later, and that fails to meet the fleet average fuel economy standard applicable under section 502(a) of the Motor Vehicle Information and Cost Savings Act as to the model year of the vehicle.

O's rules and regulations give the first person or persons hiring a taxicab the exclusive right to it. Once a taxicab is hired, the driver may not even suggest that additional passengers be accepted. While the initial passenger(s) may direct that friends or acquaintances be picked up, the driver is prohibited even under these circumstances from collecting or accepting additional fare. This is not shared transportation within the meaning of section 6427(e)(2)(A).

HOLDING

A's taxicabs, operating under the rules and regulations of O, are not engaged exclusively in furnishing qualified taxicab services for purposes of the credit or refund provided by section 6427(e)(1) of the Code.