Rev. Rul. 57-268

Advice has been requested concerning the nature of the evidence the contractor must furnish to the supplier to take advantage of the exemption from payment of the tax on transportation of property as set forth in Revenue Ruling 55-162, C.B. 1955-1, 541. Further advice has been requested whether a letter issued by a State constitutes authority for the contractor to claim exemption from payment of the tax on transportation of property, where the letter is not issued in connection with a specific contract, or in relation to a particular project.

A State highway department issued a letter to an association of road building contractors, authorizing any member to arrange for all construction materials which are to be incorporated into a State project to be consigned to the State, in care of himself. However, the authorization as set forth in the letter was not issued in connection with a specific contract, or in relation to a particular State project.

Section 4292 of the Internal Revenue Code of 1954 provides, in part, that the tax on the transportation of property shall not be imposed upon amounts paid for the transportation of property to or from the Government of any State, Territory of the United States, or any political subdivision of the foregoing, or the District of Columbia. In Revenue Ruling 55-162, it was held that the exemption provided by section 4292 of the Code applies to amounts paid for the transportation of construction materials to be incorporated into a State project, where such materials are consigned to a State or political subdivision, in care of a contractor. However, it was further held that before a contractor may take advantage of this exemption and have construction materials consigned to a State or political subdivision, in care of himself, it will be necessary for the particular State or political subdivision to issue appropriate instructions authorizing such procedure.

It is held that the contractor who has been authorized by a State or political subdivision to take advantage of the exemption from payment of the tax on the transportation of property may do so by submitting to the supplier a statement certifying that he has been authorized to claim the exemption, identifying the contract or other document in which such authorization was given, and instructing the supplier to make the shipment involved free of tax. Such statement should accompany the contract of order given by the contractor to the supplier. It is not necessary that this statement be notarized or that it be signed, or countersigned by an official of the State or political subdivision.

It is further held that where the invitation to bid for the construction of a State project, the contract for such project, or related document issued to the contractor by an official of the State or political subdivision, contains a provision authorizing the contractor to have the construction materials to be incorporated in that particular project consigned to the State or political subdivision, in care of the contractor, such provision constitutes `appropriate instructions' within the meaning of Revenue Ruling 55-162. However, since the letter to the association of road building contractors, described above, was no issued in connection with a specific contract, or in relation to a particular State project, it does not constitute `appropriate instructions' within the meaning of Revenue Ruling 55-162.

Rev. Rul. 55-162, amplified.