Rev. Rul. 72-309

Advice has been requested as to the applicability of the $3 "head tax" imposed on the use of international air travel facilities by section 4261(c) of the Internal Revenue Code of 1954, in the situation described below.

The air transportation involved begins but does not end in the United States or the 225-mile zone referred to in section 4262(a) of the Code. Any portion of the air transportation that is between one port or station in the United States and another port or station in the United States is a part of uninterrupted international air transportation.

A branch of the armed forces of the United States charters aircraft from a commercial airline for the purpose of providing air transportation for active duty military personnel traveling under official military orders. The commercial airline receives a charter fee to operate the aircraft over such routes and at such times as the contract provides. No adjustment to the charter fee is made if the seating capacity of the aircraft is not fully utilized on the flight.

When the seating capacity of the aircraft is not fully utilized by personnel on official duty, the remaining seats are made available to military personnel engaged in personal travel.

The specific question presented is whether the $3 head tax imposed by section 4261(c) of the Code is incurred with respect to such additional passengers engaged in personal travel, as well as to those passengers traveling under official military orders.

Section 4261(c) of the Code imposes a tax of $3 upon any amount paid (whether within or without the United States) for any transportation of any person by air, if such transportation begins in the United States. This tax does not apply if the air transportation is fully taxable under section 4261(a) of the Code.

Section 4261(a) of the Code imposes a tax of 8 percent upon the amount paid for taxable transportation (as defined in section 4262) of any person. In the case of amounts paid outside of the United States for taxable transportation, this tax applies only if such transportation begins and ends in the United States.

Section 4262(a) of the Code defines "taxable transportation" as (1) transportation by air which begins in the United States or in the 225-mile zone (that portion of Canada and Mexico which is not more than 225 miles from the nearest point in the United States) and ends in the United States or in the 225-mile zone, and (2) in the case of transportation other than transportation described in (1), that portion of such transportation which is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if such portion is not a part of uninterrupted international transportation.

Since the transportation involved does not end in the United States or the 225-mile zone, and since any portion of the transportation that is directly or indirectly between ports or stations in the United States is a part of uninterrupted international air transportation, the tax imposed by section 4261(a) of the Code is not applicable.

The $3 tax imposed by section 4261(c) of the Code applies with respect to each passenger for whom an amount is paid for international air transportation. Since the charter fee paid by the Branch of the Armed Forces entitles it to the exclusive use of all of the passenger space on the aircraft, implicit in the charter fee is an amount paid for the transportation of each passenger actually on the flight.

Accordingly, it is held that the $3 tax imposed by section 4261(c) of the Code applies with respect to each passenger on the flight, whether or not such passenger is travelling under official military orders.