Rev. Rul. 56-258

Advice has been requested whether the tax on the transportation of property applies to amounts billed separately by a carrier to a shipper or consignee to cover bridge and tunnel tolls and ferry charges paid by the carrier in connection with a taxable transportation movement.

Section 4271 of the Internal Revenue Code of 1954 imposes a tax upon the amount paid for the transportation of property by rail, motor vehicle, water, or air, from one point in the United States to another. The tax is payable by the person making the taxable transportation payment and is collectible by the person receiving such payment.

Section 143.1 of Regulations 113, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, defines the term `transportation' as the movement of property by a person engaged in the business of transporting property for hire, including interstate, intrastate, and intracity or other local movements, as well as towing, ferrying, switching, etc. However, under the provisions of section 143.13 of such regulations, the tax does not apply to an amount paid by a carrier, a freight forwarder, express company, or similar person for transportation with respect to which the tax is payable to such person.

M.T. 26, C.B. 1948-1, 141, holds that transportation of vehicles by ferry constitutes transportation by water within the meaning of the statute and that amounts paid to the operator of a ferry for the transportation of vehicles are subject to tax. M.T. 26 further holds, however, that amounts paid by a carrier for the transportation of vehicles by ferry are not subject to the tax when such transportation service is part of a continuous transportation movement with respect to which tax has been paid by the shipper or is payable by the consignee at destination. It is to be noted that the reason ferry charges paid by a carrier under such circumstances are not taxable is that such charges are reflected in the total transportation charges upon which the carrier collects the tax from the shipper or consignee. The Internal Revenue Service has consistently held that amounts billed by a carrier to a shipper or consignee to cover ferry charges incurred by the carrier are properly subject to tax, whether billed separately by the carrier or included in his total transportation charge.

It is held that amounts billed by a carrier to a shipper or consignee to cover charges incurred by the carrier as part of his costs of operation, including bridge and tunnel tolls as well as ferry charges, constitute a part of the total transportation charges and are subject to tax even though they may be billed separately by the carrier.

Earlier unpublished rulings of the Service relating to charges for bridge and tunnel tolls have not been consistent with the position set forth herein; therefore, under the authority contained in section 7805(b) of the 1954 Code, this ruling, insofar as it relates to bridge and tunnel tolls, will be applied without retroactive effect as to payments made prior to July 1, 1956, except that any tax that has been paid on such payments will not be refunded.