Rev. Rul. 68-464

The purpose of this Revenue Ruling is to update and restate the positions set forth in M.T. 42, C.B. 1951-2, 218, under the current statute and regulations. This ruling is concerned with whether the excise tax on transportation of persons by air, imposed by section 4261 of the Internal Revenue Code of 1954, is applicable to amounts paid for the transportation of members of the Armed Forces of the United States.

The questions presented for consideration are as follows:

Question 1 .-Does the tax apply to an amount paid for transportation by a member of the Armed Forces of the United States traveling at his own expense when on official leave, furlough, or pass?

Question 2 .-Does the tax apply where transportation is procured by a member of the Armed Forces of the United States by the use of a United States Government Transportation Request or to an amount paid by a member of the Armed Forces traveling under official orders which provide for reimbursement by the United States of travel expenses on a mileage or other basis?

Section 4261 of the Code imposes a tax upon amounts paid within the United States for taxable transportation (or without the United States if the taxable transportation begins and ends in the United States) and upon amounts paid for seating or sleeping accommodations in connection with such transportation. The tax imposed by this section, except in certain cases not here relevant, is to be paid by the person making payment for the service.

Section 4263(c) of the Code provides an exemption from the tax imposed by section 4261 when there is a payment for transportation or facilities furnished under special tariffs providing for fares of not more than 2.5 cents per mile applicable to round-trip tickets sold to personnel of the United States Army, Air Force, Navy, Marine Corps, and Coast Guard traveling in uniform of the United States at their own expense when on official leave, furlough, or pass, including authorized cadets and midshipmen, issued on presentation of properly executed certificate.

Under the provisions of section 49.4263-4 of the Facilities and Services Excise Tax Regulations, a person claiming exemption under this section will be required to exhibit to the agent of the carrier a properly executed certificate to show that he is traveling on official leave, furlough, or pass, but the submission of an exemption certificate on Form 731 is not necessary in such case.

Section 4293 of the Code authorizes the Secretary of the Treasury to exempt from the excise taxes imposed by chapters 31 and 32 and subchapters B and C of chapter 33 of the Code certain articles and services purchased for the exclusive use of the United States.

Section 42.4293-1 of the regulations provides that the tax imposed by section 4261 of the Code does not apply to any payments for transportation of persons or for seating or sleeping accommodations in connection therewith furnished to the United States upon a United States of America Transportation Request.

Answer to Question 1 .-The tax imposed by section 4261 of the Code does not apply to an amount paid for the described transportation provided all conditions of section 4263(c) of the Code and section 49.4263-4 of the regulations are met. If any of the factors are absent, the exemption provided by section 4263(c) of the Code is not applicable, and exemption from the tax cannot be obtained by the use of an exemption certificate, Form 731.

Answer to Question 2 .-In accordance with section 42.4293-1 of the regulations, the tax on the transportation of persons by air does not apply where members of the Armed Forces secure air transportation by use of the United States of America Transportation Requests. However, the tax applies to an amount paid for transportation by a member of the Armed Forces traveling under official orders which provide for reimbursement by the United States of travel expenses on a mileage or other basis, and exemption from the tax cannot be obtained by the use of an exemption certificate.

M.T. 42 is hereby superseded since the position set forth therein is restated under current law in this Revenue Ruling.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.