Rev. Rul. 58-300

Advice has been requested concerning the penalties and interest which are applicable in cases where a `taxpayer' refuses to pay any of the so-called `collected' excise taxes to a collecting agency and the tax is to be assessed directly against such `taxpayer.' They Internal Revenue Service has also been asked to explain the procedure to be followed in making an assessment directly against such `taxpayer' in the examples described below.

Example 1. A shipper refused to pay the excise tax on the payments made for transportation of property and the carrier, being unable to collect the tax, reports such information to the Director of Internal Revenue for the district in which its returns are filed.

Example 2. A sporting club is unable to collect the tax on all amounts paid as dues and initiation fees from its members inasmuch as some members refuse to pay the tax. The club informs the District Director that it has been unable to collect the full amount of the tax.

The term `collected' excise taxes refers to those miscellaneous excise taxes imposed on the person making the taxable payment for certain facilities and services and which are collectible by the person receiving such payment. This classification includes the excise taxes on communications, admissions, club dues and initiation fees, leases of safe deposit boxes, and the transportation of persons and of property.

Section 4291 of the Internal Revenue Code of 1954 provides, with a certain exception not here in issue, that every person receiving any payment for facilities or services on which a tax is imposed upon the payor thereof under Chapter 33 of the Code, shall collect the amount of the tax from the person making such payment. The collecting agency is then required by regulations to file returns and pay the tax to the government. Section 6601(a) of the Code provides that if any amount of tax imposed by the Code (whether required to be shown on a return, or to be paid by stamp or by some other method) is not paid on or before the last date prescribed for payment, interest on such amount at the rate of six percent per annum shall be paid for the period from such last date to the date paid. Section 6601(c)(4) of the Code provides that in the case of taxes payable by stamp and in all other cases in which the last date for payment is not otherwise prescribed, the last date for payment shall be deemed to be the date the liability for tax arises. Section 6651 of the Code imposes a penalty for failure to file certain tax returns required by the Code or regulations, including those returns required to be filed to report the `collected' excise taxes.

It is held that the date the liability for a `collected' tax arises is the date on which the taxpayer makes payment to the collecting agency for the services rendered. Accordingly, where a direct assessment is made against a taxpayer of such a tax incurred on and after January 1, 1955 (the effective date of the 1954 Code with respect to excise taxes), interest on the amount assessed is due from the date the tax should have been paid to the collecting agency until payment of the tax is made. Since it is the collecting agency which must file the tax returns, the `taxpayer' is under no duty to file a return. Therefore, it is further held that in nonpayment cases where the tax is to be assessed directly against the `taxpayer,' there will be no basis for assertion of a delinquent filing penalty.

In accordance with section 601.403(c)(2) of the Statement of Procedural Rules, C.B. 1955-2, 921, if the person from whom the tax is required to be collected refuses to pay it, or if for any reason it is impossible for the collecting agency to collect the tax from such person, the collecting agency is required to report to the District Director of Internal Revenue for the district in which its returns are required to be filed the name and address of such person, the nature of the service or facility provided, the amount paid therefor, and the date on which paid. This section further provides that upon receipt of the above information, the tax due will be assessed against the person for whom the facilities were provided or the services rendered.

In any case involving `collected' excise taxes where the person liable for paying the tax has refused to make payment to the collecting agency, the District Director will proceed against such person by following generally the prescribed procedures applicable to other excise tax cases, but usually utilizing office audit methods. Before a direct assessment is made, the taxpayer will be accorded all of the privileges to which other excise taxpayers are entitled, such as the right to execute an agreement form, the right to an informal conference, the right of protest, and the opportunity for consideration of the case before the Regional Appellate Division, unless the tax is in jeopardy.

Thus, in the first example described above, the District Director, if he determines the tax to be due, will proceed pursuant to established procedures to make a direct assessment against the shipper for the amount of the unpaid transportation tax, plus applicable interest accruing from the date the payment was made by the shipper to the carrier for the services rendered. Likewise, in the second example, the District Director will follow established procedures in making direct assessments against the individual club members for the amounts of unpaid tax on club dues and initiation fees, plus interest accruing from the dates the respective payments of dues or fees were made by the members to the club. The procedures followed by the Service prior to entering a direct assessment in these cases is applicable with respect to all `collected' excise taxes and applies equally in cases arising as a result of examinations of collecting agencies by internal revenue agents.