Rev. Rul. 54-321

A corporation owns and operates a shipyard. In the course of, and incidental to, the construction of vessels built at the shipyard, it is necessary to launch the uncompleted vessels from the building ways and maneuver them by towboats to the outfitting basin in the shipyard. Occasionally, in the course of, and incidental to further construction, the uncompleted vessels must be shifted by towboats to other locations in the outfitting basin. Held, towboat services which are rendered in launching and in shifting uncompleted vessels from one location to another in the builder's shipyard, and which are essential to and an integral part of the construction of the vessels, do not constitute transportation of property within the meaning of section 3475 of the Internal Revenue Code. The amounts paid for the towboat services are not subject to the tax imposed by that section. Cf. M.T. 35, C.B. 1949-1, 250.