26 CFR Ch. I (4–1–19 Edition) § 49.4253–3

§ 48.6715–1 26 CFR Ch. I (4–1–19 Edition)

not filed unless it contains all the in- PART 49—FACILITIES AND SERVICES formation required by paragraph (e) of EXCISE TAXES this section and is filed at the place required by the form. Subpart A—Introduction (g) Effective date. This section is applicable after March 30, 2000. Sec. 49.0–1 Introduction. [T.D. 8879, 65 FR 17162, Mar. 31, 2000, as 49.0–2 General definitions and use of terms. amended by T.D. 8879, 65 FR 26489, May 8, 2000] Subpart B [Reserved] Subpart C—Communications § 48.6715–1 Penalty for misuse of dyed fuel. 49.4251–1 Imposition of tax. (a) In general. If any person willfully 49.4251–2 Rate and application of tax. 49.4251–3 [Reserved] alters, or attempts to alter, the 49.4251–4 Prepaid telephone cards. strength or composition of any dye or 49.4252–1 [Reserved] marking done pursuant to § 48.4082–1 in 49.4252–2 Toll telephone service. any dyed fuel, then section 6715(a)(3) 49.4252–3 [Reserved] provides that such person shall pay a 49.4252–4 Provisions common to telephone and telegraph services. penalty in addition to any tax. The 49.4252–5 Teletypewriter exchange service. penalty imposed by section 6715(a)(3) 49.4253–1 Exemption for certain coin-oper- will not apply in the following cases: ated service. (1) Diesel fuel or kerosene that satis- 49.4253–2 Exemption for news services. fies the dyeing and marking require- 49.4253–3 Exemption for certain organizations. ments of § 48.4082–1 (b) and (c) is blend- 49.4253–4 Exemption for servicemen in com- ed with any undyed liquid and the re- bat zone. sulting product satisfies the dyeing and 49.4253–5 Exemption for items otherwise marking requirements of § 48.4082–1 (b) taxed. and (c). 49.4253–6 Exemption for common carriers and communications companies. (2) Diesel fuel or kerosene that satis- 49.4253–7 Exemption for installation fies the dyeing and marking require- charges. ments of § 48.4082–1 (b) and (c) is blend- 49.4253–8—49.4253–9 [Reserved] ed with any other liquid (other than 49.4253–10 Exemption for certain private diesel fuel or kerosene) that contains communications services. 49.4253–11 Use and retention of exemption the type and amount of dye and mark- certificates. er required for diesel fuel or kerosene 49.4253–12 Cross reference. dyed and marked in accordance with 49.4254–1 Computation of tax. § 48.4082–1 (b) and (c). 49.4254–2 Payment for toll telephone service (3) The alteration or attempted alter- or telegraph service in coin-operated telephones. ation occurs in an exempt area of Alas- ka after September 30, 1996. Subpart D—Transportation of Persons (4) Diesel fuel or kerosene that does not satisfy the dyeing and marking re- 49.4261–1 Imposition of tax; in general. 49.4261–2 Application of tax. quirements of § 48.4082–1 (b) and (c) is 49.4261–3 Payments made within the United blended with diesel fuel or kerosene States. that satisfies the dyeing and marking 49.4261–4 Payments made within the United requirements of § 48.4082–1 (b) and (c) States; evidence of nontaxability. and the blending occurs as part of a use 49.4261–5 Payments made outside the United described in § 48.4082–4(c) or § 48.6427– States. 49.4261–6 Payments made outside the United 8(b)(1)(vii)(C) or (D). States; evidence of nontaxability. (b) Effective date. This section is ef- 49.4261–7 Examples of payments subject to fective January 1, 1994. tax. 49.4261–8 Examples of payments not subject [T.D. 8659, 61 FR 10465, Mar. 14, 1996, as to tax. amended by T.D. 8685, 61 FR 58007, Nov. 12, 49.4261–9 Seats and berths; rate and applica- 1996; T.D. 8748, 63 FR 26, Jan. 2, 1998; T.D. tion of tax. 8879, 65 FR 17163, Mar. 31, 2000] 49.4261–10 By whom paid. 49.4262(a)–1 Taxable transportation.

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49.4262(b)–1 Exclusion of certain travel. tions in this part shall have the mean- 49.4262(c)–1 Definitions. ings so assigned to them. 49.4263–1—49.4263–4 [Reserved] (b) The Internal Revenue Code of 1954 49.4263–5 Small aircraft on nonestablished means the Act approved August 16, 1954 lines. (68A Stat.), entitled ‘‘An Act to revise 49.4264(a)–1 Duty to collect the tax; pay- the internal revenue laws of the United ments made outside the United States. States’’, as amended. 49.4264(b)–1 Duty to collect the tax in the case of certain refunds. (c) District director means district 49.4264(c)–1 Special rule for the payment of director of internal revenue. The term tax. also includes the Director of Inter- 49.4264(d)–1 Cross reference. national Operations in all cases where 49.4264(e)–1 Round trips. the authority to perform the functions 49.4264(f)–1 Transportation outside the which may be performed by a district northern portion of the Western Hemi- director has been delegated to the Di- sphere. rector of International Operations. (d) Calendar quarter means a period Subpart E—Transportation of Property of 3 calendar months ending on March 49.4271–1 Tax on transportation of property 31, June 30, September 30, or December by air. 31. Subpart F—Collection of Tax by Persons Subpart B [Reserved] Receiving Payment 49.4291–1 Persons receiving payment must Subpart C—Communications collect tax. SOURCE: T.D. 6664, 28 FR 7252, July 16, 1963, Subpart G—Indoor Tanning Services unless otherwise noted.

49.5000B–1 Indoor tanning services. § 49.4251–1 Imposition of tax. AUTHORITY: 26 U.S.C. 7805. (a) In general. Section 4251 imposes a Section 49.4251–4 also issued under 26 U.S.C. tax on amounts paid for general tele- 4251(d). phone service; toll telephone service; telegraph service; teletypewriter ex- Subpart A—Introduction change service; wire mileage service; and wire and equipment service. See SOURCE: T.D. 6430, 24 FR 9664, Dec. 3, 1959, § 49.4251–2 for rate and application of unless otherwise noted. tax. (b) Termination of tax on general tele- § 49.0–1 Introduction. phone service. (1) Except as otherwise The regulations in this part 49 are provided in subparagraph (2) of this designated ‘‘Facilities and Services Ex- paragraph, no tax is imposed on cise Tax Regulations.’’ The regulations amounts paid on or after July 1, 1965, relate to the taxes on communications for general telephone service rendered and transportation by air imposed by on or after such date. chapter 33 of the Internal Revenue (2) In the case of amounts paid pursu- Code and the taxes on indoor tanning ant to bills rendered on or after July 1, services imposed by section 5000B. See 1965, for general telephone service for part 40 of this chapter for regulations which no previous bill was rendered, no relating to returns, payments, and de- tax is imposed on that portion of the posits of these taxes. amount paid pursuant to such bill or bills as is attributable to general tele- [T.D. 9621, 78 FR 34876, June 11, 2013] phone service rendered subsequent to April 30, 1965. However, the tax applies § 49.0–2 General definitions and use of to that portion of the amount paid pur- terms. suant to any such bill or bills as is at- As used in the regulations in this tributable to general telephone service part, unless otherwise expressly indi- rendered prior to May 1, 1965. The tax cated: also applies to amounts paid for gen- (a) The terms defined in the provi- eral telephone service pursuant to bills sions of law contained in the regula- rendered before July 1, 1965, without

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regard to when the payment is made or Carrier means a telecommunications the service is rendered. carrier as defined in 47 U.S.C. 153. Comparable PTC means a currently [T.D. 6664, 28 FR 7252, July 16, 1963, as amended by T.D. 6694, 28 FR 12929, Dec. 5, 1963; T.D. available dollar card or tariffed unit 6753, 29 FR 12718, Sept. 9, 1964] card (other than a PTC transferred in bulk or under special circumstances, § 49.4251–2 Rate and application of such as for promotional purposes) that tax. provides the same type and amount of (a) Rate of tax. Tax is imposed on communications services as the PTC to amounts paid for each of the following which it is being compared. services rendered at the rate specified Dollar card means a PTC the value of below: which is designated by the carrier in dollars (even if also designated in units Taxable service Rate of tax of service), provided that the des- (percent) ignated value is not less than the General telephone service ...... 10 amount for which the PTC is expected Toll telephone service ...... 10 to be sold to a holder. Telegraph service ...... 10 Holder means a person that purchases Teletypewriter exchange service ...... 10 Wire mileage service ...... 10 other than for resale. Wire and equipment service ...... 8 Prepaid telephone card (PTC) means a card or similar arrangement that per- (b) Amounts paid. The term ‘‘amounts mits its holder to obtain a fixed paid’’ means the amounts collected for amount of communications services by the communication services specified means of a code (such as a personal in paragraph (a) of this section, with- identification number (PIN)) or other out regard to whether the charge access device provided by the carrier therefor is paid or satisfied in money, and to pay for those services in ad- service, or other valuable consider- vance. ation. For additional provisions relat- Tariff means a schedule of rates and ing to the term ‘‘amounts paid’’ see the regulations filed by a carrier with the section of the regulations relating to Federal Communications Commission. the particular taxable service listed in Tariffed unit card means a unit card paragraph (a) of this section. that is transferred by a carrier— (c) Liability for, and return of, tax. The (1) To a holder at a price that does taxes imposed by section 4251 are pay- not exceed the designated number of able by the person paying for the serv- units on the PTC multiplied by the car- ices rendered, and must be paid to the rier’s tariffed price per unit; or person rendering the services who is re- (2) To a transferee reseller subject to quired to collect the tax and return a contractual or other arrangement and pay over the tax. under which the price at which the [T.D. 6664, 28 FR 7252, July 16, 1963, as amend- PTC is sold to a holder will not exceed ed by T.D. 8442, 57 FR 48186, Oct. 22, 1992] the designated number of units on the PTC multiplied by the carrier’s tariffed § 49.4251–3 [Reserved] price per unit. Transferee means the first person § 49.4251–4 Prepaid telephone cards. that is not a carrier to whom a PTC is (a) In general. In the case of commu- transferred by a carrier. nications services acquired by means of Transferee reseller means a transferee a prepaid telephone card (PTC), the that purchases a PTC for resale. face amount of the PTC is treated as Unit card means a PTC other than a an amount paid for communications dollar card. services and that amount is treated as Untariffed unit card means a unit card paid when the PTC is transferred by other than a tariffed unit card. any carrier to any person that is not a (c) Determination of face amount—(1) carrier. This section provides rules for Dollar card. The face amount of a dollar the application of the section 4251 tax card is the designated dollar value. to PTCs. (2) Tariffed unit card. The face (b) Definitions. The following defini- amount of a tariffed unit card is the tions apply to this section: designated number of units on the PTC

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multiplied by the tariffed price per bill or on the face of the PTC and the unit. amount of any section 4251 tax sepa- (3) Untariffed unit card—(i) Transfer to rately stated in the bill or on the face holder. The face amount of an of the PTC are disregarded in deter- untariffed unit card transferred by a mining, for purposes of this paragraph carrier to a holder is the amount for (c), the amount for which a PTC is which the carrier sells the PTC to the sold. holder. (d) Liability for tax—(1) In general. (ii) Transfer to transferee reseller—(A) Under section 4251(d), the section In general. The face amount of an 4251(a) tax is imposed on the transfer of untariffed unit card transferred by a a PTC by a carrier to a transferee. The carrier to a transferee reseller is at the person liable for the tax is the trans- option of the carrier— feree. Except as provided in paragraph (1) The highest amount for which the (d)(2) of this section, the person respon- carrier sells a PTC that provides the sible for collecting the tax is the car- same type and amount of communica- rier transferring the PTC to the trans- tions services to a holder that ordi- feree. If a holder purchases a PTC from narily would not be expected to buy a transferee reseller, the amount the more than one such PTC at a time (if holder pays for the PTC is not treated the carrier makes such sales on a reg- as an amount paid for communications ular and arm’s-length basis) or the face services and thus tax is not imposed on amount of a comparable PTC (if the that payment. carrier does not make such sales on a (2) Effect of statement that purchaser is regular and arm’s-length basis); a carrier—(i) On transferor. A carrier (2) 135 percent of the amount for that transfers a PTC to a purchaser is which the carrier sells the PTC to the not responsible for collecting the tax transferee reseller (including in that if, at the time of transfer, the trans- amount, in addition to any sum certain feror carrier has received written noti- fixed at the time of the sale, any con- fication from the purchaser that the tingent amount per unit multiplied by purchaser is a carrier, and the trans- the designated number of units on the feror has no reason to believe other- PTC); or wise. The notification to be provided (3) If the PTC is of a type that ordi- by the purchaser is a statement, signed narily is used entirely for domestic under penalties of perjury by a person communications service, the maximum with authority to bind the purchaser, number of minutes of domestic com- that the purchaser is a carrier (as de- munications service on the PTC multi- fined in paragraph (b) of this section). plied by the applicable rate. The statement is not required to take (B) Applicable rate. The applicable any particular form. rate under paragraph (c)(3)(ii)(A)(3) of (ii) On purchaser. If a purchaser that this section with respect to a PTC is is not a carrier provides the notifica- $0.30 reduced (but not below $0.20) by tion described in paragraph (d)(2)(i) of $0.01 for each full 20 minutes by which this section to the carrier that trans- the maximum number of minutes of do- fers a PTC, the purchaser remains lia- mestic communications service on the ble for the tax imposed on the transfer PTC exceeds 40 minutes. of the PTC. (C) Sales not at arm’s length. In the case of a transfer of an untariffed unit (3) Exemptions. Any exemptions avail- card by a carrier to a transferee re- able under section 4253 apply to the seller otherwise than through an transfer of a PTC from a carrier to a arm’s-length transaction, the fair mar- holder. Section 4253 does not apply to ket retail value of the PTC shall be the transfer of a PTC from a carrier to substituted for the amount determined a transferee reseller. in paragraph (c)(3)(ii)(A)(2) of this sec- (e) Examples. The following examples tion. illustrate the provisions of this sec- (4) Exclusion. The amount of any tion: state or local tax imposed on the fur- Example 1. Unit card; sold to individual. (i) nishing or sale of communications On May 1, 2000, A, a carrier, sells a card it services that is separately stated in the calls a prepaid telephone card at A’s retail

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store to P, an individual, for P’s use in mak- Because it is transferred by the carrier to ing telephone calls. A provides P with a PIN. the holder, the face amount is the sales price The value of the card is not denominated in ($9). dollars, but the face of the card is marked 30 (iii) The arrangement is a PTC; thus, under minutes. The sales price is $9. A tariff has section 4251(d), the face amount is treated as not been filed for the minutes on the card. an amount paid for communications services The toll telephone service acquired by pur- and that amount is treated as paid when the chasing the card will be obtained by entering PTC is transferred from A to P. Accordingly, the PIN and the telephone number to be at the time of transfer, P is liable for the 3 called. percent tax imposed by section 4251(a). The (ii) Because P purchased from a carrier amount of the tax is $0.27 (3% × the $9 face other than for resale, P is a holder. The card amount). Thus, the total paid by P is $9.27, provides its holder, P, with a fixed amount of the $9 sales price plus $0.27 tax. A is respon- communications services (30 minutes of toll sible for collecting the tax from P. telephone service) to be obtained by means Example 4. Dollar card; sold other than for re- of a PIN, for which P pays in advance of ob- sale. (i) On May 1, 2000, B, a carrier, sells taining service; therefore, the card is a PTC. 100,000 cards it calls prepaid telephone cards Because the value of the PTC is not des- to Q, an auto dealer, for $50,000. Q will give ignated in dollars and a tariff has not been away a card to each person that visits Q’s filed for the minutes on the PTC, the PTC is dealership. B provides Q with a PIN for each an untariffed unit card. Because it is trans- card. The face of each card is marked $3. The ferred by the carrier to the holder, the face toll telephone service acquired by pur- amount is the sales price ($9). chasing the card will be obtained by entering (iii) The card is a PTC; thus, under section the PIN and the telephone number to be 4251(d), the face amount is treated as an called. amount paid for communications services (ii) Because Q purchased from a carrier and that amount is treated as paid when the other than for resale, Q is a holder. Each PTC is transferred from A to P. Accordingly, card provides its holder, Q, with a fixed at the time of transfer, P is liable for the 3 amount of communications services ($3 of percent tax imposed by section 4251(a). The toll telephone service) to be obtained by amount of the tax is $0.27 (3% × the $9 face means of a PIN, for which Q pays in advance amount). Thus, the total paid by P is $9.27, of obtaining service; therefore, each card is a the $9 sales price plus $0.27 tax. A is respon- PTC even though Q’s visitors do not pay for sible for collecting the tax from P. the cards. The value of each PTC is des- Example 2. Unit card; given to individual. (i) ignated in dollars; therefore, each PTC is a The facts are the same as in Example 1, ex- dollar card. Because the PTC is a dollar card, cept that instead of selling a card, A gives a the face amount is the designated dollar 30 minute card to P. value ($3). (ii) Although the card provides P with a (iii) The cards are PTCs; thus, under sec- fixed amount of communications services (30 tion 4251(d), the face amount is treated as an minutes of toll telephone service) to be ob- amount paid for communications services tained by means of a PIN, P does not pay for and that amount is treated as paid when the the service. Therefore, the card is not a PTC, PTCs are transferred from B to Q. Accord- even though it is called a prepaid telephone ingly, at the time of transfer, Q is liable for card by A. the 3 percent tax imposed by section 4251(a). (iii) Because the card is not a PTC, section The amount of the tax is $9,000 (3% × the $3 4251(d) does not apply. Furthermore, no tax face amount × 100,000 PTCs). Thus, the total is imposed by section 4251(a) because no paid by Q is $59,000, the $50,000 sales price amount is paid for the communications serv- plus $9,000 tax. B is responsible for collecting ices. the tax from Q. Example 3. Unit card; adding value. (i) After Example 5. Tariffed unit card; sold to trans- using the card described in Example 2, P ar- feree reseller. (i) On May 1, 2000, C, a carrier, ranges with A by telephone to have 30 min- sells 1,000 cards it calls prepaid telephone utes of toll telephone service added to the cards to R, a convenience store owner, for card. The sales price is $9. P is told to con- $7,000. C provides R with a PIN for each card. tinue using the PIN provided with the card. The value of the cards is not denominated in (ii) Because P purchased from a carrier dollars, but the face of each card is marked other than for resale, P is a holder. The ar- 30 minutes and a tariff of $0.33 per minute rangement provides its holder, P, with a has been filed for the minutes on each card. fixed amount of communications services (30 R agrees that it will sell the cards to individ- minutes of toll telephone service) to be ob- uals for their own use and at a price that tained by means of a PIN, for which P pays does not exceed $0.33 per minute. R actually in advance of obtaining service; therefore, sells the cards for $9 each (that is, at a price the arrangement is a PTC. Because the value equivalent to $0.30 per minute). The toll tele- of the PTC is not designated in dollars and a phone service acquired by purchasing the tariff has not been filed for the minutes on card will be obtained by entering the PIN the PTC, the PTC is an untariffed unit card. and the telephone number to be called.

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(ii) Because R purchased from a carrier for seller. Thus, the face amount is determined resale, R is a transferee reseller. Because R’s under paragraph (c)(3)(ii) of this section, customers will purchase other than for re- which permits D to choose from three alter- sale, they will be holders. Each card sold by native methods. Under paragraph R provides its holder, R’s customer, with a (c)(3)(ii)(A)(1) of this section, the face fixed amount of communications services (30 amount of each PTC would be $9, the highest minutes of toll telephone service) to be ob- amount for which D sells to holders pur- tained by means of a PIN provided by the chasing a single PTC. Alternatively, under carrier, for which R’s customer pays in ad- paragraph (c)(3)(ii)(A)(2) of this section, the vance of obtaining service; therefore, each face amount of each PTC would be $8.10, card is a PTC. Because the value of each PTC computed as follows: 135% × the $60,000 sales is not designated in dollars and C sells the price ÷ 10,000 PTC’s. Finally, under para- PTCs to R subject to an arrangement under graph (c)(3)(ii)(A)(3) of this section (assum- which the price at which the PTCs are sold ing the PTCs are of a type that ordinarily is to holders will not exceed the designated used entirely for domestic communications number of minutes on the PTC multiplied by services), the face amount of each PTC would C’s tariffed price per minute, each PTC is a be $9 ($0.30 × 30 minutes). tariffed unit card. Because the PTCs are (iv) The cards are PTCs; thus, under sec- tariffed unit cards, the face amount of each tion 4251(d), the face amount is treated as an PTC is $9.90, the designated number of min- amount paid for communications services utes on the PTC multiplied by the tariffed and that amount is treated as paid when the price per minute (30 × $0.33), even though the PTCs are transferred from D to S. Accord- retail sale price of each card is $9. ingly, at the time of transfer, S is liable for (iii) The cards are PTCs; thus, under sec- the 3 percent tax imposed by section 4251(a). tion 4251(d), the face amount is treated as an Assuming that D chooses to determine the amount paid for communications services face amount as provided in paragraph and that amount is treated as paid when the (c)(3)(ii)(A)(2) of this section, the amount of PTC is transferred from C to R. Accordingly, the tax is $2,430 (3% × the $8.10 face amount at the time of transfer, R is liable for the 3 × 10,000 PTCs). Thus, the total paid by S is percent tax imposed by section 4251(a). The $62,430, the $60,000 sales price plus $2,430 tax. amount of the tax is $297 (3% × the $9.90 face D is responsible for collecting the tax from amount × 1,000 PTCs). Thus, the total paid by S. R is $7,297, the $7,000 sales price plus $297 tax. Example 7. Transfer of card that is not a PTC. C is responsible for collecting the tax from (i) On May 1, 2000, E, a carrier, provides a R. telephone card to T, an individual, for T’s Example 6. Unit card; sold to transferee re- use in making telephone calls. E provides T seller. (i) On May 1, 2000, D, a carrier, sells with a PIN. The card provides access to an 10,000 cards it calls prepaid telephone cards unlimited amount of communications serv- to S, a convenience store owner, for $60,000. ices. E charges T $0.25 per minute of service, D provides S with a PIN for each card. The and bills T monthly for services used. The value of the cards is not denominated in dol- communications services acquired by using lars, but the face of each card is marked 30 the card will be obtained by entering the PIN minutes. A tariff has not been filed for the and the telephone number to be called. minutes on each card. S will sell the cards to (ii) Although the communications services individuals for their own use for $9 each. D will be obtained by means of a PIN, T does also sells a card that provides 30 minutes of not receive a fixed amount of communica- the same type of communications service at tions services. Also, T cannot pay in advance its retail store for $9. The toll telephone since the amount of T’s payment obligation service acquired by purchasing the card will depends upon the number of minutes used. be obtained by entering the PIN and the tele- Therefore, the card is not a PTC. phone number to be called. (iii) Because the card is not a PTC, section (ii) Because S purchased from a carrier for 4251(d) does not apply. However, the 3 per- resale, S is a transferee reseller. Because S’s cent tax imposed by section 4251(a) applies to customers will purchase other than for re- the amounts paid by T to E for the commu- sale, they will be holders. Each card sold by nications services. Accordingly, at the time S provides its holder, S’s customer, with a an amount is paid for communications serv- fixed amount of communications services (30 ices, T is liable for tax. E is responsible for minutes of toll telephone service) to be ob- collecting the tax from T. tained by means of a PIN provided by the carrier, for which S’s customer pays in ad- (f) Effective date. This section is ap- vance of obtaining service; therefore, each plicable with respect to PTCs trans- card is a PTC. Because the value of each PTC ferred by a carrier on or after the first is not designated in dollars and a tariff has day of the first calendar quarter begin- not been filed for the minutes on the PTC, ning after January 7, 2000. each PTC is an untariffed unit card. (iii) The PTCs are untariffed unit cards [T.D. 8855, 64 FR 1057, Jan. 7, 2000; 65 FR transferred by the carrier to a transferee re- 10153, Feb. 25, 2000]

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§ 49.4252–1 [Reserved] the payment. If a message, dispatch, or conversation is transmitted ‘‘collect’’, § 49.4252–2 Toll telephone service. the person who pays the charge there- (a) In general. The term ‘‘toll tele- for is liable for the tax. All telephone phone service’’ means any telephone or and telegraph transmission services radio telephone message or conversa- when rendered for hire are subject to tion for which there is a toll charge, tax whether or not the agency fur- and the charge is paid within the nishing such services is a common car- United States. A toll charge is a charge rier. For provisions relating to the made for such a message or conversa- computation of tax with respect to tion to a place beyond the local service charges for telephone and telegraph area. For the meaning of the term services, see section 4254 and §§ 49.4254– ‘‘United States’’, see paragraph (d) of 1 and 49.4254–2. § 49.4252–4. (b) When transmission begins and ends. (b) Amounts paid. (1) The tax in re- Transmission begins when the message spect of toll telephone service is im- is delivered by the sender to the car- posed on the total amount paid for the rier, or its agent, and continues until service, including any charge, in addi- receipt by the addressee or his agent. tion to the basic toll charge, made for Thus, an amount paid to a telephone, ‘‘overtime’’ in connection with a tele- telegraph, radio, or cable company for phone or radio telephone message or messenger service in bringing the re- conversation. cipient of a message to the telephone, (2) The tax attaches to the total or in delivering a dispatch or message, charge made to a hotel or similar sub- must be included in determining the scriber for toll telephone service fur- total amount subject to tax. However, nished to the hotel or its guests, but no an amount paid for messenger service tax attaches to any charge made by the rendered by a hotel or similar estab- hotel for service rendered in placing lishment is not to be included in the the calls for its guests. total charge on which the tax is com- (c) Cross reference. For provisions re- puted. lating to toll telephone messages com- (c) Services rendered under contract. (1) municated through the use of coin-op- Except as an exemption may otherwise erated telephones, see section 4253(a) be specifically provided for in this part, and § 49.4253–1. For other provisions re- where, under the provisions of a con- lating to toll telephone service, see tract, dispatches, messages, or con- § 49.4252–4. versations are transmitted by tele- § 49.4252–3 [Reserved] phone, radio telephone, telegraph, cable, or radio in consideration of the § 49.4252–4 Provisions common to tele- payment of a lump sum of money or phone and telegraph services. the performance of services, the (a) In general. The tax applies to all amounts paid for such transmissions amounts paid for services rendered are subject to tax regardless of whether which are incidental to the trans- such dispatches, messages, or conversa- mission of a message or conversation. tions relate to the operation of the Where dispatches, messages, or con- business of a common carrier and versations are transmitted by tele- whether they are ‘‘on line’’ or ‘‘off phone, radio telephone, telegraph, line’’. cable, or radio free of any charge what- (2) Where a telegraph company agrees soever, no tax attaches, but where the to transmit over its wires dispatches or carrier in fact makes some charge for messages relating to the business of a the transmission, either in money, carrier free or at reduced rates in con- service, or other valuable consider- sideration of services to be performed ation, such charge is subject to the tax by the carrier in transporting men or upon the basis of the amount of the materials of the telegraph company, charge computed in money or money’s all such dispatches or messages are worth. The tax is payable by the person subject to tax. paying the transmission charge and is (d) Meaning of the term ‘‘United to be collected by the person receiving States’’. For purpose of section 4252 (b)

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and (c), the term ‘‘United States’’ in- equipment, and other facilities con- cludes the States and the District of stitute amounts paid for teletypewriter Columbia. Such term also includes in- exchange service, notwithstanding the land waters (such as rivers, lakes, bays, fact that the lines or channels, equip- etc.) lying wholly within the United ment, and other facilities used in con- States, and, where an international junction with such service are supplied boundary line divides inland waters, by different persons or in part by the such parts of such inland waters as lie user of such service. within the boundary of the United (c) Exemptions. For exemptions from States, and also the waters known as a the tax imposed on amounts paid for marine league from low tide on the teletypewriter exchange service, see coast line. Ships within these limits sections 4253, 4292, 4293, and 4294, and whether of foreign or domestic registry the regulations thereunder contained are considered to be within the United in this part. States. (e) Exemptions. For exemptions from § 49.4253–1 Exemption for certain coin- the taxes imposed on amounts paid for operated service. telephone and telegraph services, see (a) In general. Except as provided in sections 4253, 4292, 4293, and 4294, and paragraph (b) of this section, the tax the regulations thereunder contained imposed on amounts paid for general in this part. telephone service is not applicable to a single telephone conversation paid for § 49.4252–5 Teletypewriter exchange by inserting coins in a public coin-op- service. erated telephone. The tax imposed on (a) In general. The term ‘‘teletype- amounts paid for toll telephone service writer exchange service’’ means any or telegraph service is not applicable service where a teletypewriter (or simi- to a single telephone conversation for lar device) may be connected, directly which a tool charge is made (see para- or indirectly, to an exchange operated graph (a) of § 49.4252–2), or to a tele- by a person engaged in the business of graph message, if the charge for such furnishing communication service, if toll telephone service (including any by means of such connection commu- additional charge for overtime) or tele- nication may be established with any graph service is less than 25 cents and other teletypewriter (or similar de- is paid for by inserting coins in a pub- vice). If the teletypewriter or similar lic coin-operated telephone. device used in conjunction with such (b) Exception where service furnished service may be connected to such an for a guaranteed amount. Where a coin- exchange, the service constitutes tele- operated telephone service is furnished typewriter exchange service whether or for a guaranteed amount, the amount not it is the practice of the subscriber paid under such guarantee plus any to the service to make such connec- fixed monthly or other periodic charge tion, and whether or not the person en- is subject to the tax imposed on gaged in the business of furnishing amounts paid for general telephone communication service permits the service. The tax applies to the full subscriber to make such connection. amount of the guarantee whether such (b) Amounts paid. In determining the amount is paid out of receipts from the amount of tax due, the amount paid for coin-box of the telephone or from funds the service shall include all charges of the subscriber. made in connection with the furnishing of any teletypewriter exchange service, § 49.4253–2 Exemption for news serv- such as salaries of operators, if in the ices. employ of the person furnishing such (a) In general. The exemption for service, charges for equipment, instru- news services provided by section ments, and other apparatus. In cases 4253(b) is applicable to payments for where a person leases lines or channels, services of the kind listed in section equipment, and other facilities used in 4251, except general telephone service. conjunction with teletypewriter ex- The exemption will apply only with re- change service, the amounts paid by spect to payments for services which such person for such lines or channels, are utilized exclusively:

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(1) In the collection of news for the (b) International organizations. The public press or radio or television taxes imposed by section 4251 do not broadcasting or in the dissemination of apply to amounts paid for services fur- news through the public press or by nished to an international organiza- means of radio or television broad- tion. See section 7701(a) (18) for the def- casting; or inition of ‘‘international organiza- (2) In the collection or dissemination tion’’. An international organization is of news by a news ticker service fur- designated as such by the President of nishing a general news service similar the United States through an Execu- to that of the public press. tive order or orders. When an organiza- For the exemption to apply, the charge tion has been designated by the Presi- for the services must be billed in writ- dent as entitled to enjoy the privileges, ing to the person paying for the serv- exemptions, and immunities conferred ices and such person must certify in by the International Organizations Im- writing that the services are so uti- munities Act, or part thereof, includ- lized. ing exemption from tax, the exemption (b) Scope of the exemption. (1) The ex- applies to the taxes imposed by section emption applies to amounts charged 4251 on amounts paid for services un- for messages from any newspaper, press less the President otherwise provides. association, radio or television news The exemptions is subject to with- broadcasting agency, or news ticker drawal or revocation by the President. service, to any other newspaper, press In case of withdrawal or revocation, association, radio or television news unless otherwise provided by the Presi- broadcasting agency, or news ticker dent, the exemption is inapplicable to service or to or from their bona fide payments made on or after the date of correspondents, which messages deal issuance of the order of withdrawal or exclusively with the collection of news the date of revocation. items for, or the dissemination of news (c) Exemption certificate. (1) No exemp- items through, the public press, radio tion certificate is required under this or television broadcasting, or a news section where the payment for the ticker service furnishing a general services furnished is made by the news service similar to that of the pub- American National Red Cross direct to lic press. The exemption does not ex- the person furnishing the services. In tend to messages of an administrative all other cases the right to exemption nature such as messages transmitting under section 4253(c) shall be evidenced funds to correspondents, messages to by properly executed exemption certifi- correspondents relating to assignments cates in substantially the following or hotel accommodations, etc. form: (2) The exemption does not extend to the collection and dissemination of in- EXEMPTION OF CERTIFICATE formation or matters for publication in (Date) lllllllllllll 19ll magazines, periodicals, and trade and I certify that lllllllllll scientific publications issued to supply (Name of service) information on certain subjects of in- have been furnished by lllllllllll terest to particular groups; or to (Telephone, telegraph company, etc.) amounts paid by newspapers, press as- sociations, radio or television news to llllllllll (International Organi- broadcasting agencies or networks, or zation, etc.); that the charges of $lll will news ticker services, for general tele- be paid from llllllllll (Inter- national Organization, etc.) funds; and that phone service taxable under section the charges are exempt from tax under sec- 4251. tion 4253(c) of the Internal Revenue Code. llllllllllllllllllllllll § 49.4253–3 Exemption for certain or- (Signature of officer or employee) ganizations. llllllllllllllllllllllll (a) The American National Red Cross. (Address) The taxes imposed by section 4251 do llllllllllllllllllllllll not apply to amounts paid for services (Title) furnished to the American National NOTE: Penalty for fraudulent use, $10,000 or Red Cross. imprisonment or both.

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§ 49.4253–4 Exemption for servicemen (2) See § 49.4253–11 for further provi- in combat zone. sions relating to exemption certifi- (a) In general. The exemption pro- cates. vided by section 4253(d) is applicable to any payment received for any tele- § 49.4253–5 Exemption for items otherwise taxed. phone or radio telephone message or call which originates within a combat A dispatch, message, or conversation zone, as defined in section 112, from a transmitted by toll telephone, tele- member of the Armed Forces of the graph, or teletypewriter exchange over United States performing service in the combined facilities of several lines such combat zone, if a properly exe- or stations of one or more persons is cuted certificate of exemption substan- considered to be one dispatch, message, tially in the form shown in paragraph or conversation, and is subject to only (c) of this section is furnished to the one payment of tax under section 4251. person receiving such payment. (b) Service in combat zone. Service is § 49.4253–6 Exemption for common performed in a combat zone only if it is carriers and communications com- performed in an area which the Presi- panies. dent of the United States has des- (a) In general. (1) The taxes imposed ignated by Executive order, for the by section 4251 on amounts paid for purpose of section 112, as an area in wire mileage service and wire and which Armed Forces of the United equipment service do not apply to States are or have engaged in combat, amounts paid for any such services to and only if it is performed on or after the extent that the amounts paid are the date designated by the President for services utilized by a common car- by Executive order as the date of the rier, telephone or telegraph company, commencing of combatant activities in or television or radio broadcasting sta- such zone and on or before the date tion or network in the conduct of its designated by the President by Execu- business as such. tive order as the date of the termi- (2) The tax imposed by section 4251 nation of combatant activities in such on amounts paid for general telephone zone. service does not apply to amounts paid (c) Exemption certificate. (1) The ex- for the use of a continuous telephone emption certificate shall be in substan- or radio telephone line or channel to tially the following form: the extent that the amounts paid are for use by a common carrier, telephone EXEMPTION CERTIFICATE or telegraph company, or television or (Overseas Telephone Calls) radio broadcasting station or network (Date) llllllllllllll 19ll in the conduct of its business as such, if such line or channel connects sta- I certify that the toll charges of $lllll tions between any two of which there are for telephone or radio telephone mes- would otherwise be a toll charge. A line sages originating at lllllllllllll or channel connects stations between (Point of origin) which there would otherwise be a toll within a combat zone from lllllllll charge if the telephone company (Name) makes a toll charge for a single mes- a member of the Armed Forces of the United sage transmitted between the two sta- States performing service in such combat tions in the case of the ordinary resi- zone; that the transmission facilities were furnished by llllllllll (Name of dential and business or commercial carrier); and that the charges are exempt telephone service. A line or channel from tax under section 4253(d) of the Internal connecting two stations is considered a Revenue Code. continuous line or channel if such line llllllllllllllllllllllll or channel does not connect with any (Signature of subscriber) switchboard interposed between the llllllllllllllllllllllll two stations, which makes it possible (Address) to carry on two or more independent NOTE: Penalty for fraudulent use, $10,000 or conversations simultaneously. Where a imprisonment or both. line or channel connects with such a

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switchboard, the exemption is inappli- when the line or channel connects cable to so much of the amount paid as preselected points without the use of is attributable to the portion of the switching functions performed by a line or channel which extends from a communications company exchange. station to a switchboard located in the Where an amount is paid which in- same local service area. cludes a charge for such a line or chan- (b) Exemption inapplicable. This par- nel and also a charge for the service ticular exemption is not applicable in provided by means of switching func- the case of the taxes imposed on tions performed by a communications amounts paid for other services by sec- company exchange, the exemption is tion 4251, even though such services are applicable only to that portion of the utilized by the companies described in amount so paid as is attributable to the conduct of their business as such. such a line or channel. The preselected points must be located in different § 49.4253–7 Exemption for installation States or in different counties or mu- charges. nicipalities of the same State. If the (a) In general. The taxes imposed by preselected points are located in a section 4251 do not apply to any State in which the political subdivi- amount paid as is properly attributable sions are not denominated as counties to the installation of any instrument, or municipalities, then the preselected wire, pole, switchboard, apparatus, or points must be in different political equipment. subdivisions of such State which cor- (b) Maintenance charges subject to tax. respond to counties or municipalities. The exemption provided by section For purposes of this paragraph the 4253(g) and paragraph (a) of this section term ‘‘municipality’’ means the largest is applicable only to amounts paid for political subdivision of a State below installation. Amounts paid for the re- the level of county or similar subdivi- pair or replacement of instruments, sion. For the exemption to apply, the wires, poles, switchboards, apparatus, charge for the service must be billed in or equipment, incidental to ordinary writing to the person paying for the maintenance, are subject to tax. service and such person must certify in writing that the service is for use in §§ 49.4253–8—49.4253–9 [Reserved] the conduct of a trade or business. (b) Exemption inapplicable. This par- § 49.4253–10 Exemption for certain pri- ticular exemption is not applicable in vate communications services. the case of taxes imposed on amounts (a) In general. The tax imposed by paid for other services by section 4251, section 4251 on amounts paid for gen- even though such services are utilized eral telephone service does not apply to in the conduct of a trade or business. amounts paid for any such service furnished on or after January 1, 1963, to § 49.4253–11 Use and retention of ex- the extent that the amounts paid are emption certificates. for use of any telephone or radio tele- A separate exemption certificate (as phone line or channel (including equip- required by §§ 49.4253–3 and 49.4253–4) ment, instruments, and other appa- shall be furnished for each message ratus furnished exclusively for use in paid for as a separate item, but where connection with the line or channel) in periodic payments are made, a blanket the conduct of a trade or business when certificate (for a period not to exceed such line or channel is furnished be- four calendar quarters) may be accept- tween specified locations in different ed as evidence of the right to exemp- States or between specified locations tion. An agent of a telegraph, tele- in different counties, municipalities, or phone, radio, or cable company should similar political subdivisions of a not accept an exemption certificate un- State. The term ‘‘trade or business’’ as less satisfied, on the basis of proper used in this section includes activities credentials or otherwise, that the per- of organizations which are conducted son who signed it is the person whom with no purpose of gain or profit. A he represents himself to be and that line or channel is considered to be fur- the exemption claimed is allowable nished between specified locations only under the law. Exemption certificates

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should be retained with the record of fraction of 5 cents shall be treated as 5 the services rendered for inspection by cents and a smaller fraction shall be ig- internal revenue officers as provided in nored. section 6001 and the regulations in Sub- part G of this part. Subpart D—Transportation of § 49.4253–12 Cross reference. Persons For exemptions applicable to amounts received as payment for serv- SOURCE: T.D. 6430, 24 FR 9665, Dec. 3, 1959, ices furnished to the government of unless otherwise noted. any State or political subdivision of a NOTE: For exemption from tax on transpor- State, to the District of Columbia, to tation of persons by air of amounts paid by the government of the United States, the Department of the Interior for fire pre- vention and control activities, see 32 FR or to certain nonprofit educational or- 5457, April 1, 1967. ganizations, see sections 4292, 4293, and 4294, and the regulations thereunder § 49.4261–1 Imposition of tax; in gen- contained in Subpart F of this part. eral. § 49.4254–1 Computation of tax. (a) Transportation beginning before No- (a) General rule. Except as provided in vember 16, 1962. Section 4261 imposes a paragraph (b) of this section, when a tax equal to 10 percent of the amount bill is rendered to the taxpayer cov- paid for taxable transportation of per- ering charges for general telephone sons by rail, motor vehicle, water, or service, toll telephone service, or tele- air which begins before November 16, graph service, with respect to which a 1962. For the definition of the term tax is imposed by section 4251, the ‘‘taxable transportation’’, see section amount upon which the tax with re- 4262 and §§ 49.4262(a)–1 and 49.4262 (b)–1. spect to such services shall be based The tax accrues at the time payment is shall be the sum of all such charges for made for the transportation, irrespec- such services included in the bill. tive of when the transportation is fur- (b) Special rule in certain cases. When nished if the transportation actually a bill is rendered to the taxpayer cov- begins before November 16, 1962. ering charges for general telephone (b) Transportation beginning after No- service, toll telephone service, or tele- vember 15, 1962. Section 4261 imposes a graph service, with respect to which a tax equal to 5 percent of the amount tax is imposed by section 4251, by a per- paid for the air portion of taxable son who groups individual items for transportation of persons which begins purposes of rendering the bill and com- after November 15, 1962, and before puting the tax, then the amount on July 1, 1965. For definition of the term which the tax with respect to each such group shall be based shall be the ‘‘taxable transportation’’, see section sum of all items within that group, and 4262 and §§ 49.4262(a)–1 and 49.4262 (b)–1. the tax on remaining items not in- The tax accrues at the time payment is cluded in any such group shall be based made for the transportation, irrespec- on the charge for each item separately. tive of when the transportation is furnished if the transportation actually § 49.4254–2 Payment for toll telephone begins after November 15, 1962, and be- service or telegraph service in coin- fore July 1, 1965. operated telephones. (c) In general. The purpose of the Where the tax on a toll telephone or transportation, whether business or radio telephone message or conversa- pleasure, is immaterial. It is not nec- tion, or a telegraph, cable, or radio dis- essary that the transportation be be- patch or message is paid by inserting tween two definite points. If not other- coins in a coin-operated telephone, the wise exempt, a payment for continuous tax shall be computed to the nearest transportation beginning and ending at multiple of 5 cents, and where the tax the same point is subject to the tax. is midway between multiples of 5 cents, For the rate of tax with respect to the next highest multiple shall apply. amounts paid for seating and sleeping In other words, one-half or a greater

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accommodations in connection with in the United States for transportation taxable transportation, see § 49.4261–9. which begins in the United States or in the 225-mile zone and ends in the [T.D. 6618, 27 FR 11222, Nov. 14, 1962, as amended by T.D. 6753, 29 FR 12718, Sept. 9, United States or in the 225-mile zone. 1964] For example, an amount paid within the United States for transportation § 49.4261–2 Application of tax. between New York and Montreal, Can- (a) Tax on total amount paid. The tax ada; between Vancouver, Canada, and is measured by the total amount paid, Windsor, Canada; or between Nogales, whether paid at one time or collected Mexico, and Hermosillo, Mexico, would at intervals during the course of a con- be fully taxable. See section 4262(c) (2) tinuous transportation, as in the case and paragraph (b) of § 49.4262(c)–1 for of a carrier operating under the zone the definition of the term ‘‘225-mile system. For the application of the tax zone’’. with respect to amount paid for seating (b) Other transportation—(1) Transpor- or sleeping accommodations in connec- tation beginning before November 16, 1962. tion with taxable transportation, see In the case of transportation beginning § 49.4261–9. before November 15, 1962, (other than (b) Tax on transportation of each per- that described in paragraph (a) of this son. The tax is determined by the section), for which payment is made in amount paid for transportation with the United States, the tax applies with respect to each person. Thus, where a respect to the amount paid for that single payment is made for the trans- portion of such transportation which is portation of two or more persons, the directly or indirectly from one port or taxability of the payment and the station in the United States to another amount of the tax, if any, payable with port or station in the United States. respect thereto, must be determined on Transportation that (i) begins in the the basis of the portion of the total United States or in the 225-mile zone payment properly allocable to each and ends outside such area, (ii) begins person transported. outside the United States or the 225- (c) Charges for nontransportation serv- mile zone and ends inside such area, or ices. Where a payment covers charges (iii) begins outside the United States for nontransportation services as well and ends outside such area is taxable as for transportation of a person, such only with respect to such portion of as charges for meals, hotel accom- the transportation which is directly or modations, etc., the charges for the indirectly from one port or station in nontransportation services may be ex- the United States to another such port cluded in computing the tax payable or station. Thus, on a trip from Chi- with respect to such payment, provided cago to London, England, with a stop- such charges are separable and are over at New York, for which payment shown in the exact amounts thereof in is made in the United States, the tax the records pertaining to the transpor- would apply to the part of the payment tation charge. If the charges for non- which is applicable to the transpor- transportation services are not sepa- tation from Chicago to New York. rable from the charge for (2) Transportation beginning after No- transportatinon of the person, the tax vember 15, 1962. In the case of transpor- must be computed upon the full tation beginning after November 15, amount of the payment. 1962 (other than that described in para- [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amend- graph (a) of this section), for which ed by T.D. 6518, 25 FR 13134, Dec. 21, 1960, as payment is made in the United States, amended by T.D. 6618, 27 FR 11222, Nov. 14, the tax applies with respect to the 1962] amount paid for that portion of such transportation by air which is directly § 49.4261–3 Payments made within the or indirectly from one port or station United States. in the United States to another port or (a) Transportation beginning and end- station in the United States, but only ing in the United States or the 225-mile if such portion is not a part of ‘‘unin- zone. The tax imposed by section terrupted international air transpor- 4261(a) applies to payments made with- tation’’ within the meaning of section

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4262(c) (3) and paragraph (c) of paragraph, the tax must be determined § 49.4262(c)–1. Transportation that in accordance with subparagraph (1) of (i) Begins in the United States or the this paragraph. If an international trip 225-mile zone and ends outside such includes a leg between coastal gateway area, points of embarkation for which no ad- (ii) Begins outside the United States ditional fare is charged, no tax shall be or the 225-mile zone and ends inside applicable to such leg of the transpor- such area, or tation. (iii) Begins outside the United States (d) Cross reference. See section 4262 (b) and ends outside such area. and § 49.4262(b)–1 for a partial exclusion is taxable only with respect to such with respect to amounts paid for cer- portion of the transportation by air tain transportation. which is directly or indirectly from one [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amend- port or station in the United States to ed by T.D. 6618, 27 FR 11222, Nov. 14, 1962] another port or station in the United States, but only if such portion is not § 49.4261–4 Payments made within the a part of ‘‘uninterrupted international United States; evidence of nontax- air transportation’’ within the mean- ability. ing of section 4262(c) (3) and paragraph (a) Presumption of taxability. The tax (c) of § 49.4262(c)–1. Thus, on a trip by imposed by section 4261(a) shall apply air from Chicago to London, England, to any amount paid within the United with a stopover at New York, for which States for the transportation of any payment is made in the United States, person, unless the taxpayer establishes if the portion from Chicago to New in accordance with the provisions of York is not a part of ‘‘uninterrupted this section that at the time of pay- international air transportation’’ with- ment the transportation is not trans- in the meaning of section 4262(c)(3) and portation in respect of which tax is im- paragraph (c) of § 49.4262(c)–1, the tax posed by section 4261(a) (see section would apply to the part of the payment 4264(d)). which is applicable to the transpor- (b) Through tickets. In the case of tation from Chicago to New York. transportation which is wholly or in However, if the portion from Chicago part not taxable transportation, the to New York is a part of ‘‘uninter- issuance of one ticket (commonly rupted international air transpor- known as a ‘‘through ticket’’) covering tation’’ within the meaning of section such transportation will be sufficient 4262(c) (3) and paragraph (c) of to establish that the amount paid for § 49.4262(c)–1, the tax would not apply. such transportation is wholly or in (c) Method of computing tax on taxable part not subject to tax. Thus, if A pur- portion. Where a payment is made for chases a through ticket in the United transportation which is partially tax- States for transportation by air which able under paragraph (b) of this sec- begins before November 16, 1962, from tion: Chicago to Edmonton, Canada, with a (1) The tax may be computed on that stopover in Minneapolis, no further proportin of the total amount paid evidence will be required to establish which the mileage of the taxable por- that no tax applies with respect to the tion of the transportation bears to the amount paid for the portion of trans- mileage of the entire trip, or portation between Minneapolis and Ed- (2) The tax may be computed on the monton. A similar result will be basis of the applicable local fare for reached if a through ticket is pur- transportation of a like class between chased for the same air transportation the ports or stations referred to in which begins after November 15, 1962, paragraph (b) of this section. Where a and the trip is not ‘‘uninterrupted uniform fare is charge for transpor- international air transportation’’ with- tation between a station and any in the meaning of section 4262(c) (3) and coastal gateway point of embarkation paragraph (c) of § 49.4262(c)–1. See para- on a trip to the same international des- graph (d) of this section for the infor- tination, the tax may be computed on mation to be inscribed on all tickets the basis of such uniform fare. In the issued for uninterrupted international absence of a fare described in this sub- air transportation.

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(c) Separate tickets. Where a separate ficient information from which may be ticket or order is issued for taxable ascertained the scheduled arrival and transportation as defined in section departure time at each stopover to 4262 (a) (1) (referred to in this subpart which the six-hour scheduled interval as the ‘‘domestic ticket or order’’), but requirement of section 4262(c)(3) ap- the domestic ticket or order is to be plies. It will be sufficient, for example, used in conjunction with a ticket or if the airline ticket or tickets show the order for additional transportation (re- trip number and the date and time of ferred to in this subpart as the ‘‘inter- departure of the aircraft from each national ticket or order’’) which such stopover point, provided the pub- changes the tax consequences, unless lished airline schedules show the sched- the domestic ticket or order and the uled time of arrival at each such stop- international ticket or order are pur- over point. chased from a single agency or carrier at the same time, the person making [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amend- payment for the domestic ticket or ed by T.D. 6618, 27 FR 11223, Nov. 14, 1962] order shall at the time of payment ex- § 49.4261–5 Payments made outside the hibit the international ticket or order United States. to the agency or carrier receiving such payment. The agency or carrier which (a) In general. The tax imposed by receives the payment for the domestic section 4261(b) applies to amounts paid ticket or order shall inscribe the tick- outside the United States for the tax- ets or orders for the entire journey in able transportation of persons, but the following manner: only if such transportation begins and (1) The international ticket or order ends in the United States. Thus, in ad- shall be inscribed or stamped with an dition to the exclusion provided for appropriate legend (for example, ‘‘Can- certain travel under section 4262(b), the not be reused to obtain any tax exemp- tax imposed by section 4261(b), shall tion on a domestic ticket or order’’) to not apply unless the transportation show that a domestic ticket or order both begins and ends within the United has been purchased wholly or partially States. Accordingly, the tax does not tax free for use in conjunction there- apply to a payment made outside the with. United States for one-way or round- (2) The domestic ticket or order shall trip transportation between a point be inscribed to show (i) the identity of within the United States and a point the agency or carrier which received outside the United States. payment therefor (unless otherwise (b) Transportation between two or more shown on the ticket or order), (ii) the points in the United States. (1) For pur- origin and destination of the additional poses of this section, a payment made transportation, (iii) the identify of the outside the United States for transpor- carrier furnishing the additional trans- tation between two or more points in portation, and (iv) the serial number of the United States is a payment for the ticket or order covering such addi- transportation which begins and ends tional transportation. If the domestic in the United States, even though addi- ticket or order is not large enough to tional transportation to or from a accommodate the prescribed inscrip- point outside the United States is in- tion, a statement setting forth the re- volved in the entire journey, if at the quired information shall be attached to time of making payment for the trans- such ticket or order. portation between two or more points (d) Tickets issued for uninterrupted in the United States it is not definitely international air transportation. All tick- established, under the rules set forth in ets issued for ‘‘uninterrupted inter- § 49.4261–6, that such transportation is national air transportation’’ within the purchased for use in making the jour- meaning of section 4262(c) (3) and para- ney from or to a point outside the graph (c) of § 49.4262(c)–1, whether United States. The fact that the entire through tickets or separate tickets, journey includes transportation from must have inscribed thereon, in addi- or to a point outside the United States tion to the other information required is not in itself determinative of the li- in the regulations in this subpart, suf- ability for tax.

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(2) The following examples illustrate from or to a point outside the United the application of this paragraph: States. The nontaxable character of the payment made outside the United Example (1). W travels from Havana, Cuba to New York by way of Miami. He purchases States for the United States portion in Havana a steamship ticket for his trans- shall be established under the rules set portation from Havana to Miami and an ex- forth in paragraphs (b) through (e) of change order for air transportation from this section. Miami to New York. The ticket for the con- (b) Through tickets. Where one ticket necting transportation from Havana to (commonly known as a ‘‘through tick- Miami, and the order for the transportation et’’) is issued to cover all of the United from Miami to New York were not appropriately inscribed by the agency or carrier States portion of a journey which be- which received the payment for the air gins or ends outside the United States transportation involved at the time such and to cover also the connecting trans- payment was received so as to clearly show portation from or to a point outside that the ticket and order were purchased for the United States, no further evidence use in conjunction with each other. There- of the nontaxable character of the fore, the agency or carrier which accepts the transportation covered by such ticket exchange order and issues the ticket for the will be required. transportation from Miami to New York is required to collect the tax which applies to (c) Separate tickets. Where separate the amount paid outside the United States tickets or orders are issued for the for such transportation. United States portion of a journey Example (2). X travels on a round trip from which begins or ends outside the Montreal, Canada, to Los Angeles by way of United States, the agency or carrier New York. He purchases in Montreal air which receives payment for such tick- transportation for the round trip between ets or orders shall definitely determine New York and Los Angeles, and uses a private automobile for transportation from at the time of receiving the payment Montreal to New York and return to Mon- that the United States portion is being treal. The amount paid in Montreal for the purchased for use in conjunction with round-trip transportation between New York connecting transportation from or to a and Los Angeles is a payment for transpor- point outside the United States, and tation which begins and ends in the United shall appropriately inscribe the tickets States and is therefore subject to tax. or orders issued outside the United (c) Cross reference. See section 4262(b) States for the United States portion and § 49.4262(b)–1 for a partial exclusion and for the connecting transportation with respect to amounts paid for cer- from or to a point outside the United tain transportation. States to show clearly that such tickets or orders are purchased for use in § 49.4261–6 Payments made outside the conjunction with each other. Such United States; evidence of nontax- tickets or orders shall be inscribed in ability. the following manner: (a) In general. The tax does not apply (1) The ticket or order for the con- to a payment made outside the United necting transportation from or to a States for transportation which begins point outside the United States shall or ends outside the United States. For be inscribed or stamped with an appro- purposes of the preceding sentence, a priate legend (for example, ‘‘Not to be payment made outside the United used again for purchase of tax-free States for transportation between two United States transportation’’) to show or more points within the United that the United States portion has States (such transportation being re- been purchased tax free for use in conferred to hereinafter in this section as junction therewith. ‘‘the United States portion’’), which is (2) Where the ticket for the United part of transportation from or to a States portion is issued outside the point outside the United States is a United States, it shall be inscribed to payment for transportation which be- show (i) the identity of the agency or gins or ends outside the United States, carrier which received payment there- where it is definitely established at the for (unless otherwise shown on the time of making payment for the United ticket), (ii) the origin and destination States portion that such portion is pur- of the connecting transportation, (iii) chased for use in making the journey the identity of the carrier furnishing

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the connecting transportation, and (iv) transportation in question is being pur- the serial number of the ticket or order chased for use in conjunction with the con- covering such connecting transpor- necting transportation from London to New tation. If the ticket is not large enough York and it appropriately inscribes both of the tickets for the journey. to accommodate the prescribed inscrip- Example (2). Z travels from Havana, Cuba, tion, a statement setting forth the re- to New York by way of Miami. He purchases quired information shall be attached to in Havana a ticket for his transportation by such ticket. water from Havana to Miami, and later pur- (3) Where an order for the United chases from a travel agency in Havana air States portion is issued outside the transportation from Miami to New York for United States, it shall be inscribed to which the travel agency issues an exchange show (i) the origin and destination of order. To establish the nontaxable character the connecting transportation, (ii) the of the payment for Z’s transportation from identity of the carrier furnishing the Miami to New York the travel agency shall determine at the time payment is received connecting transportation, and (iii) the by it that the transportation is being pur- serial number of the ticket or order chased for use in conjunction with the con- covering such connecting transpor- necting transportation from Havana to tation. Miami, and shall make the appropriate in- (d) Ticket issued pursuant to inscribed scription on the ticket and the order. The order. Where the ticket for the United carrier which accepts the exchange order and States portion is issued in the United issues the ticket for the transportation from States pursuant to an order which was Miami to New York will not be required to purchased and properly inscribed out- collect tax with respect to the ticket so issued if it appropriately inscribes the ticket side the United States under the rules as provided in paragraph (d) of this section. set forth in paragraph (c)(3) of this section, liability for payment or collec- § 49.4261–7 Examples of payments sub- tion of tax will not be incurred upon ject to tax. the issuance of the ticket provided the agency or carrier issuing such ticket The following are examples of pay- stamps or inscribes thereon an appro- ments for transportation which, unless priate legend, for example, ‘‘Tax not otherwise exempt under section 4263, paid—furnished on order’’, or ‘‘Ex- 4292, 4293, or 4294 are subject to tax: empt—order’’. (a) Cash fares. The tax applies to pay- (e) Maintenance of records. In any case ments of so-called ‘‘cash fares’’ where where a payment for the United States no ticket or other evidence of the right portion is not subject to tax under the to transportation is issued to the pas- rules set forth in this section, the car- senger. rier furnishing transportation for the (b) Script books. The tax applies to the United States portion shall procure amounts paid for scrip books. The tax and maintain appropriate evidence shall be collected from the purchaser which will clearly show that the tick- at the time the scrip book is sold, and ets or orders for such transportation not when and as the scrip is used for were purchased for use in conjunction transportation. with connecting transportation from or (c) Additional charges. Amounts paid to a point outside the United States. as additional charges for changing the (f) Examples. The following are exam- class of accommodations, changing the ples of nontaxable transportation: destination or route, extending the time limit of a ticket, as ‘‘extra fare’’, Example (1). Y travels from London, Eng- land, to San Francisco by way of New York. or for exclusive occupancy of a section, He purchases from an agency or carrier in etc., are subject to the tax. England all of the transportation involved in (d) Round-trip tickets. An amount of 61 such journey, which includes air transpor- cents or more paid for a round-trip tation from London to New York and from ticket is taxable (1) if the one-way fare New York to San Francisco, for which sepa- of like class is 61 cents or more, or (2) rate tickets are issued. The agency or carrier if there is no established one-way fare which receives the payment for Y’s transpor- of like class. tation from New York to San Francisco will not be required to collect tax with respect to (e) Commutation or season tickets. (1) the payment, provided it determines at the Amounts paid for commutation or sea- time such payment is received that the son tickets good for more than one

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month are subject to tax where the sin- sons must collect and account for the gle trip is 30 miles or more. For this tax with respect to all amounts paid to purpose the term ‘‘30 miles’’ means 30 him for transportation which are in ex- constructive miles where the rate for cess of 60 cents. In such case, no tax transportation is fixed on the construc- will be due on the amount paid for the tive mileage. The tax shall be collected charter of the conveyance but it shall from the purchaser at the time of pay- be the duty of the owner of the convey- ment for the commutation or season ance to advise the charterer of his li- ticket, and not when and as the ticket ability for collecting and accounting is used for transportation. for the tax. (2) In the event that a partly used ex- (i) All-expense tours. Amounts paid for empt commutation or season ticket is all-expense tours are subject to tax redeemed and the carrier, in deter- with respect to that portion rep- mining the amount of the refund, resenting transportation which is sub- makes a charge at regular rates for the ject to tax. See paragraph (c) of used portion of the ticket, the tax ap- § 49.4261–2 and paragraph (f) (4) of plies to such charge, if the one-way § 49.4261–8. fare is more than 60 cents. (j) Payments remitted to foreign coun- (f) Prepaid orders, exchange orders, or tries by persons in the United States. Pay- similar orders. The tax applies to the ments for transportation tickets, pre- amounts paid for prepaid orders, ex- paid orders, exchange orders, or similar change orders, or similar orders for orders are subject to the tax where the transportation. Additional amounts payment for such tickets or orders is paid in procuring transportation in accomplished by the purchaser either connection with the use of prepaid or- (1) by transmission from within the ders, exchange orders, or similar or- United States via telegraph or mail of ders, are likewise subject to tax. cash, checks, postal or telegraphic (g) Combinations of rail, motor vehicle, money orders, and similar drafts to water, or air transportation. The tax ap- ticket offices or travel agencies, etc., plies to the total amount paid for located in any place without the transportation over the lines of a num- United States, or (2) by the delivery of ber of connecting carriers; and also the funds to an agency located in the with respect to transportation begin- United States for transmission to tick- ning before November 16, 1962, to the et offices, or travel agencies, etc., total amount paid for any combination without the United States. Such pay- of rail, motor vehicle, water, or air ments are considered to be payments transportation, such as rail-air line, air made within the United States. line-motor bus, or motor bus-steamship, etc. For transportation beginning [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amend- after November 15, 1962, the tax will ed by T.D. 6618, 27 FR 11223, Nov. 14, 1962] apply only to the amount paid for any portion of such transportation that is § 49.4261–8 Examples of payments not subject to tax. by air. (h) Chartered conveyances (1) An In addition to a payment specifically amount paid for the charter. exempt under section 4263, 4292, 4293, or (i) Of a special car, train, motor vehi- 4294 the following are examples of pay- cle, aircraft, or boat for transportation ments not subject to tax: which begins before November 16, 1962, (a) Exchange of prepaid order, scrip, or etc., for tickets. A ticket issued pursu- (ii) Of an aircraft for transportation ant to an exchange order, prepaid which begins after November 15, 1962, order, airline pilot order, or scrip, is provided no charge is made by the not subject to tax where the tax is paid charterer to the persons transported, is at the time of payment for the order or subject to tax if the amount paid for scrip. the charter represents a per capita (b) Caretakers and messengers accom- charge of more than 60 cents for each panying freight shipments. The tax on person actually transported. the transportation of persons does not (2) The charterer of a conveyance apply to amounts paid for transpor- who sells transportation to other per- tation of freight that includes also the

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transportation of caretakers or mes- of operation, such as bridge tolls, road sengers for which no specific charge as tolls, or ferry charges, paid by the car- such is made. rier on account of the bus and driver, (c) Special baggage transportation cannot be deducted from the charge equipment. An amount paid for special made to the passenger in determining baggage transportation equipment is the taxable charges for transportation. not subject to the tax on the transpor- (4) Charges for admissions, guides, tation of persons if separable from the meals, hotel accommodations, and payment for transportation of persons other nontransportation services, for and if shown in the exact amount of example, where such items are in- the charge on the records covering the cluded in a lump sum payment for an taxable transportation payment. all-expense tour. (d) Circus or show conveyances. The (5) Charges in connection with the amount paid pursuant to a contract for charter of a land, water, or air convey- the movement of a circus or show con- ance for the transportation of persons veyance where the amount covers only beginning before November 16, 1962, or the transportation of the performers, an air conveyance for transportation of laborers, animals, equipment, etc., by persons which begins after November such conveyances is not subject to the 15, 1962, such as for parking, icing, tax on the transportation of persons sanitation, ‘‘layover’’ or ‘‘waiting imposed by section 4261. However, if time’’, movement of equipment in the contract payment also covers the deadhead service, dockage, or wharf- issuance to advance agents, bill post- age, etc. ers, etc., of circus or show scrip books, or other evidence of the right to trans- [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6618, 27 FR 11223, Nov. 14, 1962] portation, for use on regular passenger conveyances, that portion of the con- § 49.4261–9 Seats and berths; rate and tract payment properly allocable to application of tax. such scrip books or other evidence is (a) Imposition of tax. Section 4261 (c) subject to the tax on the transpor- imposes a tax at a prescribed rate upon tation of persons. payments of any amounts for seating (e) Corpses. The tax on the transpor- or sleeping accommodations in connec- tation of persons does not apply to the tion with transportation with respect amount paid for the transportation of a to which a tax is imposed by section corpse, but does apply to the amount 4261 (a) or (b). paid for the transportation of any per- (b) Rate of tax. The tax is imposed son accompanying the corpse. under section 4261(c) upon the amount (f) Miscellaneous charges. Where the paid for seating or sleeping accom- charge is separable from the payment modations at the following rates: for the transportation of a person and is shown in the exact amount thereof (1) 10 percent with respect to on the records pertaining to the trans- amounts paid in connection with tax- portation payment, the tax on the able transportation by rail, motor ve- transportation of persons does not hicle, water, or air which begins before apply to the following and similar November 16, 1962. charges: (2) 5 percent with respect to amounts (1) Charges for transportation of bag- paid in connection with the air portion gage, including incidental charges such of any transportation which begins as excess value, storage, transfer, par- after November 15, 1962. cel checking, special delivery, etc. (c) Application of other rules to seats (2) Charges for transportation of an and berths. The rules and provisions of automobile in connection with the §§ 49.4261–1 to 49.4261–6, inclusive, with transportation of a person. respect to the tax on payments for (3) Charges for bridge or road toll, or transportation imposed by section 4261 a ferry charge of 60 cents or less, made (a) or (b) are also applicable to the tax in connection with the transportation on payments for seating or sleeping ac- beginning before November 16, 1962, of commodations. a person by bus. Charges incurred by [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amend- the carrier which are part of its costs ed by T.D. 6618, 27 FR 11223, Nov. 14, 1962]

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§ 49.4261–10 By whom paid. States for such transportation is subject to the tax: The tax imposed by section 4261 is (1) New York to Seattle; payable by the person making the tax- (2) New York to Vancouver, Canada, able payment for transportation or for with a stop at Jasper, Canada; seats, berths, etc., and is collectible by (3) Chicago to Monterrey, Mexico; the person receiving such payments. (4) Montreal, Canada, to Toronto, See section 4264 (a) and (c) for special Canada; and rules relating to payment and collec- (5) Miami to Los Angeles via Pan- tion of tax. ama. If in the examples in subparagraphs (1) and (5) of this paragraph, § 49.4262(a)–1 Taxable transportation. payment for the transportation had (a) In general. Unless excluded under been made outside the United States, section 4262(b) (see § 49.4262(b)–1), tax- such payment would nevertheless have able transportation means: been subject to tax since in each case (1) Transportation which begins in the transportation begins and ends in the United States or in that portion of the United States. Canada or Mexico which is not more (c) Illustrations of taxable transpor- than 225 miles from the nearest point tation under section 4262(a) (2) beginning in the continental United States (the before November 16, 1962. The following ‘‘225-mile zone’’) and ends in the United examples will illustrate the application States or in the 225-mile zone; and of section 4262(a) (2) with respect to (2) In the case of any other transpor- transportation beginning before No- tation, that portion of such transpor- vember 16, 1962: tation which is directly or indirectly Example (1). A purchases in New York a from one port or station in the United round-trip ticket for transportation by air States to another port or station in the from New York to Havana, Cuba, with a stop United States, but, with respect to at Miami. The amount paid for that part of transportation which begins after No- the transportation between New York and Miami on both going and return trips is sub- vember 15, 1962, only if such portion is ject to tax, since such transportation is from not part of ‘‘uninterrupted inter- one station in the United States to another national air transportation’’ within the station in the United States. meaning of section 4262(c) (3) and para- Example (2). B purchases a ticket in San graph (c) of § 49.4262(c)–1. Transpor- Francisco for combination rail and water tation from one port or station in the transportation from San Francisco to New United States to another port or sta- York to Halifax, Canada, to London, Eng- land. The amount paid for that part of the tion in the United States occurs when- transportation between San Francisco and ever a carrier, after leaving any port or New York is subject to tax, since such trans- station in the United States, makes a portation is from one station in the United regularly scheduled stop at another States to another station in the United port or station in the United States ir- States. Although Halifax is in the 225–mile respective of whether stopovers are zone, the transportation between New York permitted or whether passengers dis- and Halifax is not taxable because it is not transportation from one port in the United embark. States to another port in the United States. The provisions of this paragraph are Example (3). C purchases a ticket in Seattle applicable whether the transportation for transportation from Seattle to Lisbon, is by rail, motor vehicle, water, or air, Portugal, with stops at Vancouver, Edmon- or any combination thereof, except ton, and Montreal, Canada, and New York. The amount paid for that part of the trans- that with respect to transportation portation from Seattle to New York is sub- which begins after November 15, 1962, ject to tax, since it is indirectly from one the tax, if applicable, applies only to station in the United States to another sta- the amount paid for that portion of the tion in the United States. transportation which is by air. Example (4). E purchases in Chicago a tick- (b) Illustrations of taxable transpor- et for transportation by air from Chicago to New York to Gander, Newfoundland, to Lon- tation under section 4262(a) (1). In each don, England. Only the amount paid for that of the following examples the transpor- part of the transportation between Chicago tation is taxable transportation and and New York is subject to tax. If, while on the amount paid within the United the New York-Gander leg of the journey the

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aircraft is forced to land at Boston, because terval in Philadelphia is extended for more of weather or other emergency, no tax is im- than 6 hours by the carrier solely for its own posed by reason of such emergency stop. convenience such as making repairs to the Example (5). G charters a plane in New aircraft, the domestic portion of A’s trip will York for transportation to Bogota, Colom- not become taxable, provided A continues his bia, and pays the charter charges in New international air transportation no later York. The plane stops at an airport in Miami than on the first available flight offered by for refueling in accordance with its flight the carrier. plan. The tax attaches with respect to that Example (4). A purchases a through ticket part of the transportation which is between for transportation by air from Los Angeles New York and Miami. to Barbados with stopovers at Houston, Mex- ico City, Mexico, and Miami. At each stop- (d) Illustrations of taxable transpor- over, except Mexico City, A’s scheduled time tation under section 4262(a) (2) beginning of arrival and departure is within six hours. after November 15, 1962. The following At Mexico City, A’s scheduled time of arrival examples will illustrate the application and departure exceeds six hours. The total of section 4262(a) (2) with respect to amount paid by A for his transportation transportation beginning after Novem- from Los Angeles to Miami, including that ber 15, 1962: part of the transportation to and from Mex- ico City, is subject to tax since the transpor- Example (1). A purchases in New York a tation includes a portion which is indirectly round-trip ticket for transportation by air from one port or station in the United States from New York to Nassau with a scheduled to another port or station in the United stopover of 10 hours in Miami on both the States (Houston to Miami via Mexico City) going and return trip. The amount paid for and the scheduled interval in Mexico City that part of the transportation from New between two segments of such portion ex- York to Miami on the going trip is subject to ceeds six hours. If A’s scheduled arrival and tax, since such transportation is from one departure at each stopover of his transpor- station in the United States to another sta- tation which is directly or indirectly be- tion in the United States and the trip is not tween ports or stations in the United States, uninterrupted international air transpor- including that at Mexico City, had been tation because the scheduled stopover inter- within a six hour interval and A had arrived val in Miami is greater than six hours. The and departed at each such stopover within amount paid for the return trip from Miami that period, the transportation would have to New York is subject to tax for the same qualified as uninterrupted international air reason. transportation and no part of the amount Example (2). A purchases a ticket in San paid for the transportation by air from Los Francisco for transportation to London with Angeles to Barbados would be subject to tax. a stopover in New York. He is to travel by air from San Francisco to New York and (e) Illustrations of transportation which from New York to London by water. He is is not taxable transportation. The fol- scheduled to stopover in New York for 4 lowing examples will illustrate trans- hours. That portion of the total amount paid portation which is not taxable trans- by A for his transportation applicable to the portation: air transportation between San Francisco (1) New York to Trinidad with no in- and New York is subject to tax since such transportation is from one station in the tervening stops; United States to another station in the (2) Minneapolis to Edmonton, Can- United States, and is not a part of uninter- ada, with a stop at Winnipeg, Canada; rupted international air transportation since (3) Los Angeles to Mexico City, Mex- the complete trip from San Francisco to ico, with stops at Tia Juana and Gua- London is not entirely by air. dalajara, Mexico; Example (3). A purchases a through ticket (4) New York to Whitehorse, Yukon for air transportation from San Francisco to Territory, Canada, after November 15, London with stopovers at Denver, Chicago, 1962, by air with a scheduled stopover Philadelphia, and New York. At each stopover the air carrier has scheduled his arrival in Chicago of five hours. and departure within 6 hours. After arriving Amounts paid for the transportation in Philadelphia, A, for his own convenience, referred to in examples set forth in decides to stopover for more than 6 hours. subparagraphs (1), (2), and (3) of this The total amount paid by A for his transpor- paragraph are not subject to the tax re- tation from San Francisco to New York is gardless of where payment is made, subject to tax since the scheduled interval between the beginning or end and the end or since none of the trips (i) begin in the beginning of any two segments of the domes- United States or in the 225–mile zone tic portion of international air transpor- and end in the United States or in the tation exceeded 6 hours. If the stopover in- 225–mile zone, nor (ii) contain a portion

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of transportation which is directly or the international boundary line be- indirectly from one port or station in tween any part of the United States the United States to another port or and a contiguous foreign country, or station in the United States. The (ii) a point three nautical miles (3.45 amount paid within the United States statute miles) from low tide on the for the transportation referred to in coast line. the example set forth in subparagraph (b) Transportation to or from Alaska or (4) of this paragraph is not subject to Hawaii. (1) Under the provisions of sec- tax since the entire trip (including the tion 4262(b) transportation between the domestic portion thereof) is ‘‘uninter- continental United States or the 225– rupted international air transpor- mile zone and Alaska or Hawaii will be tation’’ within the meaning of section partially exempt from the tax. The por- 4262(c) (3) and paragraph (c) of tion of such transportation which (i) is § 49.4262(c)–1. In the event the transpor- outside the United States, (ii) is not tation is paid for outside the United transportation between ports or sta- States, no tax is due since the trans- tions within the continental United portation does not begin and end in the States or the 225–mile zone, and (iii) is United States. not transportation between ports or [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amend- stations within Alaska or Hawaii, ed by T.D. 6618, 27 FR 11223, Nov. 14, 1962] meets all the requirements set forth in section 4262(b) and is excluded from § 49.4262(b)–1 Exclusion of certain taxable transportation. travel. (2) The provisions of subparagraph (1) (a) In general. Under section 4262(b) of this paragraph may be illustrated by taxable transportation does not include the following examples: that portion of any transportation Example (1). A buys a ticket for transpor- which meets all four of the following tation by air from Seattle to Fairbanks, requirements: Alaska, via Ketchikan and Juneau, Alaska, (1) Such portion is outside the United and Whitehorse, Yukon Territory, Canada. States; The portion of the transportation between (2) Neither such portion nor any seg- the point where the route of the transpor- ment thereof is directly or indirectly: tation leaves the continental United States (i) Between (a) a point where the and the point where it first enters Alaska route of the transportation leaves or (the three-mile limit or the international boundary) is not subject to tax. enters the continental United States, Example (2). B purchased combination rail- or (b) a port or station in the 225–mile water transportation beginning before No- zone, and vember 16, 1962, from Chicago to Juneau, (ii) A port or station in the 225-mile Alaska, by way of Vancouver, Canada. The zone; portion of the transportation from Van- (3) Such portion: couver to the point where the route of the (i) Begins at either (a) the point transportation enters the three-mile limit where the route of the transportation off the coast of Alaska is not subject to tax. leaves the United States, or (b) a port Example (3). C purchases a ticket in the United States for transportation by air from or station in the 225–mile zone, and Vancouver, Canada, to Honolulu, Hawaii. No (ii) Ends at either (a) the point where part of the route followed by the carrier the route of the transportation enters passes through or over any part of the conti- the United States, or (b) a port or sta- nental United States. The only part of the tion in the 225–mile zone; and payment made by C for this transportation (4) A direct line from the point (or which is subject to the tax is that applicable the port or station) specified in sub- to the portion of the transportation between paragraph (3) (i) of this paragraph, to the three-mile limit off the coast of Hawaii and the airport in Honolulu. the point (or the port or station) specified in subparagraph (3) (ii) of this (c) Method of computing tax on travel paragraph, passes through or over a not excluded. (1) Where a payment is point which is not within 225 miles of made for transportation which includes the United States. For purposes of this transportation excluded under the pro- section, the route of the transportation visions of section 4262(b): shall be deemed to leave or enter the (i) The tax may be computed on that United States when it passes over (i) proportion of the total amount paid

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which the mileage of the taxable por- Mileage of entire trip (San Francisco airport to tion of the transportation bears to the Honolulu airport) (miles) ...... 2,400 mileage of the entire trip, or Mileage in continental United States (miles) ...... 15 Mileage in Hawaii (miles) ...... 5 (ii) If the taxable portion of the transportation includes transportation 20 Fare from San Francisco to Honolulu ...... $168.00 from one port or station to another Payment for taxable portion (20/2400 × $168) ... $1.40 port or station for which an applicable Tax due (10% (rate in effect on date of pay- local fare of a like class is available, ment) × $1.40) ...... $0.14 the tax may be computed on the (All distances and fares assumed for purposes amount of such local fare, plus an of this example. If transportation begins amount equivalent to that proportion after November 15, 1962, the tax applies only of the remainder of the total amount to the amount paid for transportation by air paid which the mileage of the remain- and should be computed at the rate of 5 per- der of the taxable portion of the trans- cent.) portation bears to the remainder of the [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amend- mileage of the entire trip. If the taxed by T.D. 6618, 27 FR 11224, Nov. 14, 1962] able transportation includes a leg from a station to a coastal gateway point of § 49.4262(c)–1 Definitions. embarkation for which a uniform fare (a) The continental United States. For is charged regardless of the gateway purposes of the regulations in this sub- point actually used, the tax on such a part, the term ‘‘continental United leg may be computed on the basis of States’’ includes only the 48 States ex- such uniform fare. In the absence of a isting on July 25, 1956 (the date of the fare described in this subparagraph, the enactment of the Act of July 25, 1956 tax must be determined in accordance (Pub. L. 796, 84th Cong., 70 Stat. 644)) with subdivision (i) of this subpara- and the District of Columbia, including graph. If the taxable portion of the inland waters (such as rivers, lakes, transportation includes a leg between bays, etc.) lying wholly therein, and, coastal gateway points of embarkation where an international boundary line for which no additional fare is charged divides inland waters, such parts of no tax shall be applicable to such leg of such inland waters as lie within the the transportation. boundary of the United States, and (2) The basis for determining the pro- also the waters 3 nautical miles (3.45 portions described in subdivisions (i) statute miles) from low tide on the and (ii) of subparagraph (1) of this coast line. For purposes of the regula- paragraph shall be the average mileage tions in this subpart, the term ‘‘conti- of the established route traveled by the nental United States’’ does not include carrier between given points under nor- Alaska or Hawaii for any period either mal circumstances. prior or subsequent to their admission (d) Illustration. The application of into the Union as States. paragraph (c) of this section may be il- (b) The 225-mile zone. For purposes of lustrated by the following example: the regulations in this subpart, the term ‘‘225-mile zone’’ means that por- Example. On October 10, 1959, A purchases tion of Canada and Mexico which is not in San Francisco a ticket for transportation more than 225 miles from the nearest by air to Honolulu, Hawaii. The portion of point in the continental United States. the transportation which is outside the con- Whether any point in Canada or Mexico tinental United States and is outside Hawaii is excluded from taxable transportation. The is more than 225 miles from the conti- tax applies to that part of the payment made nental United States is to be deter- by A which is applicable to the portion of the mined by measuring the distance from transportation between the airport in San such point to the nearest point on the Francisco and the three-mile limit off the boundary of the continental United coast of California (a distance of 15 miles) States. and between the three-mile limit off the (c) Uninterrupted International air coast of Hawaii and the airport in Honolulu transportation. (1) For the purpose of (a distance of 5 miles). The part of the payment made by A which is applicable to the the regulations in this subpart, the taxable portion of his transportation and the term ‘‘uninterrupted international air tax due thereon are computed in accordance transportation’’ means transportation with paragraph (c)(1) as follows: entirely by air which does not begin in

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the United States or in the 225-mile any stopover is increased to more than zone and end in the United States or in 6 hours, the transportation will lose its the 225-mile zone provided that: classification of uninterrupted inter- (i) Where the transportation within national air transportation. The tax the United States involves one stop, applicable in such case shall be paid as the scheduled interval between the be- provided in paragraph (a) (2) of ginning or end of the United States § 49.4264(c)–1. The transportation from portion of such air transportation and the point of orgin in the United States the end or beginning of the remainder to a port or station outside the United of the air transportation, and States and the 225–mile zone, with a (ii) Where the United States portion stopover in the United States, must be of such transportation involves two or scheduled before the time the initial more stops, the scheduled interval be- transportation commences in order for tween the beginning or end of one seg- the United States portion of such ment and the end or beginning of the transportation to qualify as uninter- continuing segment of such portion rupted international air transpor- does not exceed six hours. The trans- tation. For example, where transpor- portation is considered to be entirely tation by air from Chicago to New by air even though the passenger may York only is scheduled in Chicago and use other means of transportation be- transportation by air from New York tween two airports provided the sched- to London, England, is scheduled by uled six-hour limitation for his con- the passenger after his arrival in New tinuing air transportation is complied York, the Chicago to New York trip with. Transportation which otherwise does not qualify as uninterrupted is uninterrupted international air international air transportation even transportation does not cease to be though the passenger may depart on such because of the use of non-air the London flight within six hours transportation between ports or sta- after arrival in New York. tions which are outside the United States, provided the non-air transpor- [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amend- tation is not part of transportation ed by T.D. 6618, 27 FR 11225, Nov. 14, 1962; 27 which is indirectly from one port or FR 11691, Nov. 28, 1962] station in the United States to another §§ 49.4263–1—49.4263–4 [Reserved] port or station in the United States. (2) Where the interval between ar- § 49.4263–5 Small aircraft on nonestab- rival and departure time at any stop- lished lines. over point in the United States exceeds six hours, such transportation is not (a) In general. Amounts paid for the uninterrupted international air trans- transportation of persons on a small portation even though the schedules of aircraft of the type sometimes referred the air lines do not make possible a to as ‘‘air taxis’’ shall be exempt from scheduling within the six-hour limit. the tax imposed under section 4261 pro- Where any interval scheduled for six vided the aircraft (1) has a gross take- hours or less is increased to exceed six off weight of less than 12,500 pounds de- hours, the transportation will continue termined as provided in paragraph (b) to be uninterrupted international air of this section and (2) has a passenger transportation if the increase in time seating capacity of less than 10 adult is attributable to delays in the arrival passengers, including the pilot. The ex- or departure of the scheduled air trans- emption does not apply, however, if the portation. In such case the transpor- aircraft is operated on an established tation shall continue to be uninter- line. rupted international air transportation (b) Determination of gross take-off if the passenger continues his transpor- weight. The term ‘‘gross take-off tation no later than on the first avail- weight of less than 12,500 pounds’’ able flight offered by the continuing means a maximum certificated take-off carrier which affords the passenger weight of less than 12,500 pounds. This substantially the same accommoda- shall be based on the maximum certifi- tions as originally purchased. However, cated take-off weight shown in the air- if for any other reason such interval at craft operating record or aircraft flight

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manual which is part of the air worthi- (or portion thereof) shall make no re- ness certificate issued by the Federal fund but shall apply the entire amount Aviation Administration. against the tax due and shall collect (c) Established line. The term ‘‘oper- any additional tax due or, within 90 ated on an established line’’ means op- days, shall make a report of the erated with some degree of regularity amount of the tax remaining uncol- between definite points. It does not lected, together with the name and ad- necessarily mean that strict regularity dress of the person who sought the re- of schedule is maintained; that the full fund. The report shall be made to the run is always made; that a particular office of the district director of inter- route is followed; or that intermediate nal revenue for the district in which stops are restricted. The term implies the person making such report is lo- that the person rendering the service cated, and a copy of the report shall be maintains and exercises control over furnished to the person presenting the the direction, route, time, number of unused ticket or order for redemption. passengers carried, etc. (b) Return of tax. Any person who has [T.D. 6430, 24 FR 9665, Dec. 3, 1959. Redesig- made a collection of tax in accordance nated by T.D. 6618, 27 FR 11226, Nov. 14, 1962] with the preceding paragraph shall include such amount in his regular re- § 49.4264(a)–1 Duty to collect the tax; payments made outside the United turn of taxes required to be collected States. under section 4291. (c) A carrier receives for Where payment is made outside the Illustration. United States for a prepaid order, ex- redemption a ticket purchased in the change order, or similar order for United States for transportation from transportation which begins and ends Calgary, Canada, to Edmonton, Can- in the United States or for seating or ada, which the purchaser bought for sleeping accommodations in connec- use in conjunction with a ticket for tion therewith, the person furnishing nonstop transportation from Seattle to the initial transportation pursuant to Calgary. The person applying for the such order shall collect all the tax ap- refund does not establish to the satis- plicable to such transportation or ac- faction of the carrier that the tax on commodations. See section 4291 and the the Seattle-Calgary ticket has been regulation thereunder for cases where paid or that the Seattle-Calgary ticket persons receiving payment must col- has been redeemed. The carrier, before lect the tax. making any refund for the unused ticket, is required to deduct from the § 49.4264(b)–1 Duty to collect the tax in amount otherwise refundable the tax the case of certain refunds. applicable to the amount paid by the (a) Special rule for collection of tax. purchaser for the transportation from Section 4264(b) provides a special rule Seattle to Calgary and to report the for the collection of the tax where an tax so collected in its quarterly return unused ticket or order (or portion of Form 720. In the event that the re- thereof) purchased without payment of demption value of the unused Calgary tax is presented for refund and, as a re- to Edmonton ticket is less than the sult of the use of only a portion of the amount of the tax due on the amount transportation purchased in connection paid for the transportation from Se- with such ticket or order, liability for attle to Calgary, the carrier should not payment of tax has been incurred. In make any refund but should apply such a case, the person making the re- against the outstanding tax the entire fund shall deduct the amount of the amount refundable and should either tax due, to the extent available, from collect the balance of the tax due or the amount which would otherwise be make a report, within 90 days, to the refundable. If the redemption value of office of the district director of inter- the unused ticket or order (or portion nal revenue for the district in which thereof) is less than the amount of the the carrier is located, setting forth the tax due on the amount paid for the name and address of the person seeking travel actually performed, the person the refund and the amount of the tax redeeming the unused ticket or order remaining uncollected.

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§ 49.4264(c)–1 Special rule for the pay- furnishing the continuing transpor- ment of tax. tation to the passenger, whichever is (a) Rule—(1) In general. Except as pro- earlier, unless the carrier has evidence, vided in subparagraph (2) of this para- in writing, that the tax has already graph, when any tax imposed by sec- been paid to (i) a district director, or tion 4261 is not paid at the time pay- (ii) the person to whom the payment ment for the transportation is made, for the international air transportation then to the extent that such tax is not was originally made, or (iii) any person collected under any other provision of furnishing any portion of such trans- law, such tax shall be paid by the per- portation. The provisions of this sub- son paying for the transportation or by paragraph with respect to the responsi- the person using the transportation. bility of the continuing carrier to col- The provisions of section 4264(c) apply lect the tax due are applicable only if where the amount paid for transpor- the passenger uses his original ticket tation is (i) subject to tax at the time or is issued a substitute therefor for such payment is made, but no tax is the purpose of continuing his transpor- paid at that time, or (ii) not subject to tation. Such provisions are not applica- tax at the time such payment is made, ble if the passenger purchases a new but because of some subsequent event ticket to continue his transportation. the payment becomes subject to tax. (b) Relationship to other sections. Sec- The payment of tax shall be made to tion 4264(c) and this section are not in- the district director of internal rev- tended in any way to relieve the person enue for the district in which the tax- receiving the payment for taxable payer resides, or to the person from transportation of persons from his duty whom the transportation was pur- under section 4291 of collecting the tax chased, within 30 days after whichever at the time such payment is received of the following first occurs: (a) The by him. The provisions of section rights to the transportation expire, or 4264(c) and this section also do not (b) the transportation becomes subject apply in any case where the tax is col- to tax. Such payment shall be accom- lected in the manner provided in sec- panied with an explanation that it is tion 4264 (a) or (b) or in other provi- being made in accordance with section sions of law. 4264(c). (c) Illustrations. The provisions of this (2) Transportation no longer qualifying section may be illustrated by the fol- as uninterrupted international air trans- lowing examples: portation. In the case of a payment for transportation beginning after Novem- Example (1). A purchases in New York a ber 15, 1962, which qualifies as ‘‘unin- round-trip ticket for transportation between New York and London, England, with a stop- terrupted international air transpor- over in Montreal, Canada. After arriving in tation’’ within the meaning of section Montreal A decides not to continue his trip 4262(c)(3) and paragraph (c) of to London and returns to New York. A is lia- § 49.4262(c)–1 on the date such payment ble for tax with respect to the amount paid was made and which because of some for his transportation from New York to subsequent event ceases to be uninter- Montreal and return. The amount paid for rupted international air transpor- A’s transportation became subject to tax at tation, to the extent that the tax due is the time he began his return trip to New York, and within 30 days thereafter A must not collected under any other provision pay the tax to either the person from whom of law, such tax shall be paid by the he purchased the ticket or his district direc- person paying for the transportation or tor of internal revenue. by the person using the transportation. Example (2). A purchases in Chicago a tick- The payment of the tax shall be made et for air transportation to begin after No- to the air carrier which provides the vember 15, 1962, from Chicago to London next continuing portion of the trans- with a stopover in New York. A is scheduled portation following the occurrence of to arrive in New York at 4:30 p.m. and depart the event which caused the transpor- from New York on the international portion at 7:30 p.m. A arrives in New York on sched- tation to cease to be uninterrupted ule but for his own convenience reschedules international air transportation and his departure on a flight departing at 11:00 such carrier shall collect the tax at the p.m. Since A lengthened the interval be- time the flight is rescheduled or before tween the end of the United States portion

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and the beginning of the international por- the specified destination to a point tion beyond the 6-hour limitation, that por- other than the original point of depar- tion of his international air transportation ture, or (2) transportation from the between Chicago and New York became subject to tax. The carrier furnishing A’s trans- point of departure to a specified des- portation from New York to London shall, tination and return from a point other before furnishing him with any transpor- than the specified destination to the tation or at the time he reschedules the re- original point of departure, provided maining portion of his trip, whichever is ear- that where the points of the open jaw lier, collect the tax due on the Chicago to are within the continental United New York portion from A unless the carrier States or the 225-mile zone, the dis- has written evidence that such tax has been tance between the points of the open paid to (i) a district director of internal revenue, or (ii) the person to whom the payment jaw does not exceed the distance of the for the international air transportation was shorter segment traveled. For example, originally made, or (iii) any person fur- a trip from New York to New Orleans nishing any other portion of the inter- via Panama would be considered as one national air transportation. trip from New York to Panama and [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amend- separate trip from Panama to New Or- ed by T.D. 6618, 27 FR 11226, Nov. 14, 1962] leans, since the distance between the points of the open jaw (i.e., New York § 49.4264(d)–1 Cross reference. and New Orleans) is shorter than the For the rules applicable under sec- distance between Panama and New Or- tion 4264(d) see § 49.4261–4 relating to leans (the shorter of the two segments payments made within the United traveled). Both trips would be non- States. taxable. On the other hand, transportation from New York to Miami via § 49.4264(e)–1 Round trips. Bermuda does not qualify as ‘‘open (a) In general. For purposes of the jaw’’ transportation (since the points regulations in this subpart, a round of the open jaw are in the United trip shall be considered to consist of States and the distance between them two separate trips, i.e., one trip from is greater than the shorter segment the point of departure to the destina- traveled) and therefore would be con- tion and a second trip in returning sidered a single trip from New York to from the destination. A round trip in- Miami and would be taxable. cludes certain journeys in which the same routing is not followed on the re- § 49.4264(f)–1 Transportation outside the northern portion of the Western turn trip from the destination to the Hemisphere. point of departure as was taken on the going trip (sometimes referred to as (a) Transportation which leaves and re- ‘‘circle trips’’). In the case of a cruise enters the northern portion of the Western or tour (i.e., transportation to no set Hemisphere. For purposes of the regula- destination but with one or more inter- tions in this subpart, transportation, mediate stops en route) the point far- any part of which is outside the north- thest from the point of departure will ern portion of the Western Hemisphere be regarded as the destination for pur- (as defined in paragraph (c) of this sec- poses of applying the term ‘‘round tion) shall, if the route of the transpor- trip’’. If a cruise or tour ends at a point tation leaves and re-enters the north- other than the one at which it began, ern portion of the Western Hemisphere, the rules of ‘‘open jaw’’ transportation be considered to consist of transpor- set forth in paragraph (b) of this sec- tation to the point outside such north- tion apply. ern portion and of separate transpor- (b) Open jaw transportation. Transpor- tation thereafter. The amount paid for tation which qualifies under this para- such transportation will be considered graph as ‘‘open jaw’’ transportation to be a payment made for two trips and will be treated in the same manner as the taxability of the payment will be a round trip. For purposes of the regu- determined accordingly. Thus, an lations in this subpart, ‘‘open jaw’’ amount paid for transportation from transportation means (1) transpor- New York to San Francisco with a stop tation from the point of departure to a at Caracas, Venezuela, will be consid- specified destination and return from ered an amount paid for a trip from

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New York to Caracas and for a separate stop in Honolulu, the portion of the trans- trip from Caracas to San Francisco, portation between San Francisco and Hawaii neither of which is taxable transpor- not excluded under section 4262(b) (i.e., the tation. portion of such transportation between the (b) Transportation beginning before No- pier in San Francisco and the three-mile vember 16, 1962, by water on a vessel—(1) limit off the coast of California and between the three-mile limit off the coast of Hawaii Special rule. Section 4264(f)(2) prior to and the pier in Honolulu) is taxable under its amendment by section 5(b) of the section 4262(a)(2) as transportation from one Tax Rate Extension Act of 1962 pro- port in the United States to another port in vided a special rule in the case of the United States. transportation which begins before No- vember 16, 1962, any part of which is (c) Northern portion of the Western outside the northern portion of the Hemisphere. For purposes of the regula- Western Hemisphere, by water on a tions in this subpart, the term ‘‘north- vessel which makes one or more inter- ern portion of the Western Hemi- mediate stops at ports within the sphere’’ means the area lying west of United States on a voyage which (i) be- the 30th meridian west of Greenwich, gins or ends in the United States, and east of the International Date Line, (ii) ends or begins outside the northern and north of the equator, but not in- portion of the Western Hemisphere. In cluding any country of South America. such a case, a stop at an intermediate port within the United States at which [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amend- such vessel is not authorized both to ed by T.D. 6618, 27 FR 11227, Nov. 14, 1962] discharge and to take on passengers shall not be considered to be a stop at Subpart E—Transportation of a port within the United States. A ves- Property sel is considered to be authorized both to discharge and to take on passengers § 49.4271–1 Tax on transportation of at an intermediate port unless there is property by air. a legal or other authoritative prohibi- (a) Purpose of this section. In general, tion of such traffic. For purposes of the section 4271 of the Internal Revenue preceding sentence, an order issued by Code of 1954, as added by the Airport the owner or operator of a vessel pro- and Airway Revenue Act of 1970, im- hibiting such vessel from either dis- poses a tax equal to 5 percent of the charging or taking on passengers at amount paid within or without the the intermediate port is not a legal or United States for the transportation of other authoritative prohibition of such property by air which begins after June traffic. (2) Illustrations. The provisions of this 30, 1970, if such transportation begins paragraph may be illustrated by the and ends in the United States. This following examples: section sets forth rules as to the general applicability of the tax. This sec- Example (1). A purchases a steamship tick- tion also sets forth rules as authorized et in New York for transportation from New by section 4272(b)(2) which exempt from York to Southampton, England. The vessel on which A sails makes an intermediate stop tax payments for the transportation of during the course of such voyage at Boston property by air in the course of expor- to take on passengers. The vessel is not, tation (including shipment to a posses- however, authorized to discharge passengers sion of the United States) by contin- at such port. No tax applies to the portion of uous movement, and in due course so the transportation between New York and exported. Boston since under section 4264(f)(2) the vessel is not considered to have made a stop at (b) Imposition of tax. (1) The tax im- Boston. posed by section 4271 applies only to Example (2). B purchases a steamship ticket amounts paid to persons engaged in the in San Francisco for a voyage from San business of transporting property by Francisco to Tokyo, Japan. The vessel on air for hire. which B travels makes a stop at Honolulu, Hawaii, to discharge passengers. The vessel (2) The tax imposed by section 4271 is also permitted to take on passengers in does not apply to amounts paid for the Honolulu. Since the vessel is permitted both transportation of property by air if to discharge and take on passengers at the such transportation is furnished on an

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aircraft having a maximum certifi- point and ending point of the air trans- cated takeoff weight (as defined in sec- portation. tion 4492(b)) of 6,000 pounds or less, un- (3) If a through airwaybill has been less such aircraft is operated on an es- issued covering air transportation to a tablished line. The tax imposed by sec- foreign destination, but the transpor- tion 4271 also does not apply to any tation nevertheless ends in the United payment made by one member of an af- States (for example, because the for- filiated group (as defined in section eign consignee cancels the order before 4282(b)) to another member of such the shipment leaves a gateway city), group for services furnished in connec- then the amount paid for air transpor- tion with the use of an aircraft if such tation is taxable. In such a case the air aircraft is owned or leased by a mem- carrier must collect the tax from the ber of the affiliated group and is not shipper or other person who paid for available for hire by persons who are the air transportation. not members of such group. (4) Any transportation of property by (3) Since the tax imposed by section air shipped by the Department of De- 4271 applies only to amounts paid to fense through an aerial port of embar- persons engaged in the business of kation and debarkation on a U.S. Gov- transporting property by air for hire, ernment bill of lading shall be consid- the tax applies to amounts paid to an ered to: air carrier by a freight forwarder or ex- (i) Begin in the United States and press company for the transportation end outside the United States if the of property by air. The tax does not bill of lading states that the shipment apply to amounts paid by a shipper to is ‘‘For Export’’, or a freight forwarder or express com- (ii) Begin outside the United States pany. and end in the United States if the bill (c) Property exported or imported en- of lading states that the shipment is tirely by air. (1) The tax does not apply ‘‘Imported by Air’’. to amounts paid for transportation en- If a U.S. Government bill of lading tirely by air which begins in the United stating that a shipment is ‘‘For Ex- States and ends outside the United port’’ has been issued but the shipment States, or which begins outside the nevertheless ends in the United States, United States and ends in the United then the amount paid for air transpor- States. Transportation of property by tation is taxable. In such a case the De- air will be considered to begin and end partment of Defense shall notify the at the points of origin and destination air carrier that the shipment is taxable shown on a through airwaybill cov- and shall pay the tax to such carrier. ering shipment of the property, even (d) Exportation involving two or more though there may be stopovers in the modes of transportation. (1) Even though United States (such as, for example, to transportation of property by air be- consolidate cargo at a ‘‘gateway’’ city). gins and ends in the United States, the If a through airwaybill is issued by a tax does not apply if the property is person other than a person engaged in being transported in the course of ex- the business of transporting property portation by continuous movement and by air for hire (for example, by a in due course is so exported, provided freight forwarder), the air carrier may the requirements of this paragraph are accept an air freight manifest listing satisfied. For example, the tax does not the article to be shipped by weight and apply to air transportation from Chi- destination as evidence of the exist- cago to New York if the property is in ence of a through airwaybill. the course of exportation, by contin- (2) If a through airwaybill covering uous movement, by boat from New air transportation from its beginning York to Europe and in due course is so in the United States to a foreign des- exported. Delays caused by cir- tination, or from its beginning abroad cumstances beyond the control of the to a U.S. destination, has not been shipper (such as labor disputes or nat- issued, then the export or import char- ural disasters) will not interrupt con- acter of the shipment must be evi- tinuous movement. Property arriving denced by a contract or other written at a gateway city by air may be re- evidence clearly showing the beginning packed or consolidated with other

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property without interrupting contin- original certificate together with all uous movement. documents showing payment of the (2)(i) Continuous movement in the transportation charges. Permission to course of exportation shall be evi- execute a blanket exemption certifi- denced by (a) the execution of the Ex- cate if granted, shall remain in force port Exemption Certificate, Form 1363, until withdrawn by the person who re- and (b) proof that exportation has actu- quested such permission or until with- ally occurred. drawn by the district director who (ii) Form 1363 may be used in connec- granted such permission. Each person tion with a separate payment other- shall retain the certificate for at least wise subject to tax or it may be used, 3 years after the last day of the month with the permission of the district di- during which the final shipment cov- rector, as a blanket exemption certifi- ered by the certificate was made from cate by a person who expects to make the point of origin. Each person shall payments for numerous export ship- retain the shipping and payment documents over an indefinite period of ments for at least 3 years after the last time. If used in connection with a sepa- day of the month during which the rate payment, the certificate shall be shipment was made from the point of executed, in duplicate, by the shipper origin. or other person making the payment (3) The filing of a properly executed subject to tax. Such person shall retain Form 1363 with the carrier suspends li- the duplicate with the shipping papers ability for the payment of the tax for a for at least 3 years from the last day of period of 6 months from the date of the month during which the shipment shipment from the point of origin. If was made from the point of origin, and the person who is liable for the tax has shall file the original with the carrier not provided evidence to the carrier of at the time of payment of the transpor- the actual exportation of a shipment tation charge. The carrier receiving within such period, then the temporary the original certificate shall retain it suspension of the liability for the pay- along with the document showing payment of the tax ceases and the carrier ment of the transportation charge, for shall collect the tax from the person a period of at least 3 years from the who paid the carrier for the transpor- last day of the month during which the tation charge. If, after collection of the shipment was made from the point of tax by the carrier, proof of exportation origin. is subsequently received by the carrier, (iii) Form 1363 may be used as a blan- credit or refund of the tax may be ob- ket exemption certificate by a person tained under the terms set forth in sec- who demonstrates to the satisfaction tion 6415 of the Internal Revenue Code of the district director that it is im- of 1954. practicable to execute a separate Form (4) Documentary evidence of the ex- 1363 for each payment. Permission to portation of the property may consist execute a blanket exemption certifi- of a copy of export bill of lading, cate shall be requested, in writing, memorandum from the captain of the from the district director for the dis- vessel, customs official, or a foreign trict in which is located the principal consignee, shipper’s export declaration, place of business or principal office or or other evidence sufficient to estab- agency of the shipper or other person lish that the property has actually seeking permission. If permission is been exported. The person making the granted a separate certificate shall be payment subject to tax shall furnish executed in duplicate, by the shipper or the appropriate documentary evidence other person making the payments, for to the carrier, or a statement that he each air carrier to be used in making holds such documentary evidence. In export shipments. Such person shall re- the latter case, the statement must: (i) tain the duplicate together with all Certify that the property covered by shipping papers, and shall file the the Export Exemption Certificate, original with the air carrier with or be- Form 1363 was exported; (ii) identify fore payment of the first transpor- the evidence of exportation; (iii) speci- tation charge to be covered by the cer- fy the foreign destination or the pos- tificate. The air carrier shall retain the session of the United States to which

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the property was shipped; and (iv) show directly by such Service as if it were a the place where such evidence will be collecting agent. available for inspection by internal [T.D. 7054, 35 FR 12117, July 29, 1970, as revenue officers. Any documentary evi- amended by T.D. 7190, 37 FR 12794, June 29, dence or statement, as the case may 1972; T.D. 7316, 39 FR 21126, June 19, 1974; T.D. be, shall be retained by the carrier and 7517, 42 FR 58935, Nov. 14, 1977; T.D. 7953, Re- the person making the payment sub- designated and amended by T.D. 8328, 56 FR ject to tax for a period of three years 190, Jan. 3, 1991; T.D. 8442, 57 FR 48186, Oct. 22, 1992] from the last day of the month during which the shipment was made from the point of origin. If the person making Subpart F—Collection of Tax By the payment subject to tax is not the Persons Receiving Payment actual exporter and is unable to obtain § 49.4291–1 Persons receiving payment documentary evidence of exportation, must collect tax. such person shall obtain from the per- Except as otherwise provided in sec- son having custody of the documentary tion 4263(a), every person receiving any evidence a statement containing the payment for facilities or services on same facts as listed above for a state- which a tax is imposed upon the payor ment furnished to the carrier by the thereof under chapter 33 shall collect person liable for the tax. The person the amount of the tax from the person making the payment subject to tax making that payment. Under section shall furnish the original of such state- 7501, all taxes collected in this manner ment to the carrier and shall retain a are held by the collecting agent in copy in his records. The statement trust for the United States. If the per- shall be retained for the same three son from whom the tax is required to year period as the evidence of expor- be collected refuses to pay it or if for tation is to be retained. any reason it is impossible for the col- (e) Definitions—(1) Property. The term lecting agent to collect the tax from ‘‘property’’ does not include excess that person, the collecting agent is re- baggage accompanying a passenger quired to report to the Commissioner traveling on an aircraft operated on an the name and address of that person, established line. the nature of the facility provided or service rendered, the amount paid (2) Transportation. The term ‘‘trans- therefore, and the date on which paid. portation’’ includes layover or waiting Applicable October 1, 2004, this report time and movement of the aircraft in must be made on or before the report deadhead service. due date. Upon receipt of this report (3) Taxable transportation. The term the Commissioner will proceed against ‘‘taxable transportation’’ is defined in the person to whom the facilities were section 4272. provided or the services rendered to as- (f) Collection of tax. The tax imposed sert the amount of tax due, affording by section 4271 shall be paid by the per- that person the same conference, pro- son making the payment subject to tax test, and appellate rights as are avail- and shall be collected by the person en- able to other excise taxpayers. In addi- gaged in the business of transporting tion, when a field or office audit of a property by air for hire who receives collecting agent’s records, or of a tax- such payment, except that in the case payer’s records, discloses that the col- of amounts subject to tax which are lecting agent failed during prior re- paid by the U.S. Postal Service, the tax porting periods to collect taxes due, shall not be collected by the person en- the Commissioner may assert those gaged in the business of transporting taxes directly against the person to property by air for hire who receives whom the facilities were provided or such payment, but instead shall be paid the services rendered, whether or not the collecting agent had attempted collection or the person liable for the tax had refused payment thereof. For purposes of this section, the report due date is—

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(a) In the case of a person using the vidual to specific wavelengths of light alternative method of making deposits for the treatment of— described in § 40.6302(c)–3 of this chap- (i) Dermatological conditions (such ter, the due date of the return on which as acne, psoriasis, and eczema); the item of adjustment relating to the (ii) Sleep disorders; uncollected tax would be reflected if (iii) Seasonal affective disorder or items of adjustment were determined other psychiatric disorder; without regard to the limitation in (iv) Neonatal jaundice; § 40.6302(c)–3 of this chapter; and (v) Wound healing; or (b) In any other case, the due date of (vi) Other medical condition deter- the return on which the tax would have mined by a licensed medical profes- been reported but for the refusal to pay sional to be treatable by exposing the or inability to collect. individual to specific wavelengths of [T.D. 8685, 61 FR 58007, Nov. 12, 1996, as light. amended by T.D. 9051, 68 FR 15942, Apr. 2, (4) The term provider means a person 2003; T.D. 9149, 69 FR 48394, Aug. 10, 2004; T.D. that provides an indoor tanning service 9221, 70 FR 49870, Aug. 25, 2005] as defined in paragraph (c)(1) of this section. Subpart G—Indoor Tanning (5) The term qualified physical fitness Services facility means a facility— (i) In which the predominant business § 49.5000B–1 Indoor tanning services. or activity is providing equipment and (a) Overview. This section provides services to its members for purposes of rules for the tax imposed by section exercise and physical fitness (deter- 5000B on any indoor tanning service. mined by taking into consideration all (b) Imposition of tax—(1) General rule. of the facts and circumstances, such as Tax is imposed by section 5000B at the the cost of the equipment, variety of time of payment for any indoor tan- services offered, actual usage of serv- ning service. ices by customers, revenue generated (2) Undesignated payment cards—In by different services, and how the enti- general. Payment for indoor tanning ty holds itself out to the public services is made when an undesignated through advertising or other means); payment card is redeemed, in whole or (ii) In which providing indoor tan- in part, to pay for indoor tanning serv- ning services is not a substantial part ices (and not when a payment is made of the business or activity; and to purchase the undesignated payment (iii) That does not sell indoor tanning card). services for a fee to the public or other- (c) Definitions—(1) The term indoor wise offer different pricing options to tanning service means a service employ- its members based in whole or in part ing any electronic product designed to on access to indoor tanning services. incorporate one or more ultraviolet (6) The term undesignated payment lamps and intended for the irradiation card means a gift certificate, gift card, of an individual by ultraviolet radi- or similar item that can be redeemed ation, with wavelengths in air between for goods or services that may, but do 200 and 400 nanometers, to induce skin not necessarily, include indoor tanning tanning. The term does not include services. phototherapy service performed by, (d) Application of tax—(1) Tax on total and on the premises of, a licensed med- amount paid for indoor tanning services— ical professional (such as a dermatolo- (i) In general. The tax is imposed on the gist, psychologist, or registered nurse). total amount paid for indoor tanning (2) The term other goods and services services, including any amount paid by includes, but is not limited to, protec- insurance. The total amount paid is tive eyewear, footwear, towels, and presumed to include the tax if the tax tanning lotions; manicures, pedicures, is not separately stated. and other cosmetic or spa treatments; (ii) Free services and reduced rates. The and access to sport or exercise facili- tax does not apply to indoor tanning ties. services that are provided free of (3) The term phototherapy service charge. Indoor tanning services are means a service that exposes an indi- provided free of charge if no one pays

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anything of value to the provider of the paid for indoor tanning services. The service for the indoor tanning service. tax applies to that portion of the Thus, for example, tax is not imposed amount paid to the provider that is on the redemption of a promotional reasonably attributable to indoor tan- coupon for indoor tanning services if ning services. The amount reasonably the coupon is provided at no cost and attributable to indoor tanning services at no obligation to purchase anything. may be determined by— If indoor tanning services are provided (i) Applying to the total amount paid at a reduced rate, the tax applies to the a ratio determined by comparing— amount actually paid for the services. (A) The provider’s charge for indoor (iii) Bonus points. The redemption of tanning services not in bundled serv- benefits such as ‘‘bonus points’’ under ices or, if the provider only charges for a loyalty program or similar program indoor tanning services as part of bun- or promotion is not a payment for in- dled services, the fair market value of door tanning services. Thus, for exam- similar indoor tanning services (based ple, in a promotion that entitles a cus- on the amount charged by comparable tomer to a ‘‘free’’ tan with the pur- providers in the same geographic area); chase of four tans, tax is not imposed to on the redemption of the fifth tan be- (B) The charge determined in para- cause the amount paid for the four tans graph (d)(3)(i)(A) of this section plus included a reduced price for the fifth the provider’s charge for the other tan. goods and services in the bundled serv- (iv) Other fees. Fees for starting, join- ices or, if the provider only charges for ing, registering, enrolling, and similar other goods and services as part of bun- fees paid to a provider to join a month- dled services, the fair market value of ly (or other periodic) membership pro- similar goods and services (based on gram that provides indoor tanning the amount charged by comparable services are amounts paid for indoor providers in the same geographic area); tanning services. Similarly, amounts or paid to a provider that temporarily (ii) Any other method allowed in suspend a periodic membership pro- guidance published in the Internal Rev- gram are amounts paid for indoor tan- enue Bulletin. ning services. (4) Exemption; qualified physical fitness (2) Charges for other goods and services; facilities. No portion of a payment to a tanning services separately stated. If a qualified physical fitness facility payment covers charges for indoor tan- (within the meaning of paragraph (c)(5) ning services as well as other goods and of this section) that includes access to services, the charges for other goods indoor tanning services is treated as a and services may be excluded in com- payment for indoor tanning services. puting the tax payable on the amount (e) Person liable for the tax—(1) Gen- paid, if the charges— eral rule. The person who pays for the (i) Are separable (regardless of the indoor tanning service is deemed to be manner of invoicing the charges); the person on whom the service is per- (ii) Do not exceed the fair market formed for purposes of collecting the value of such other goods and services; tax. Thus, the person paying for the in- and door tanning service is liable for the (iii) Are shown in the exact amounts tax at the time of payment. in the provider’s records pertaining to (2) Undesignated payment cards—(i) In the indoor tanning services charge. general. In the case of a payment made (3) Charges for other goods and services; with an undesignated payment card (as tanning services bundled. This paragraph defined in paragraph (c)(6) of this sec- (d)(3) applies if paragraph (d)(2) of this tion), the person who redeems the card, section does not apply. If a provider of- in whole or in part, to pay specifically fers indoor tanning services (whether for indoor tanning services is the per- of a specified or unlimited amount, in- son who pays for the indoor tanning cluding ‘‘free’’ or reduced-rate indoor services. Thus, the person who redeems tanning services) bundled with other an undesignated payment card, in goods and services, the payment for the whole or in part, to pay specifically for bundled services includes an amount indoor tanning services is liable for the

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tax at the time such payment is made calculates the section 5000B tax on $15.00 as (as described in paragraph (b)(2) of this provided by paragraph (d)(2) of this section. section). A is liable for the tax when A pays for the (ii) Alternative treatment. The Treas- services. If P does not collect the tax from A at the time A pays for the services, P is lia- ury Department and IRS may provide ble for the tax. additional options for the treatment of Example 3: Charges for other goods and serv- undesignated payment cards in guid- ices; tanning services bundled. P provides in- ance published in the Internal Revenue door tanning services and other goods and Bulletin. services and offers bundled services. On July (3) Tax not collected at time of payment. 1, 2013, A, an individual, buys bundled service If the person paying for the indoor tan- from P that includes 10 swimming lessons, ning services does not pay the tax to the use of towels while on P’s premises, one pair of protective eyewear, and 2 ‘‘free’’ 10- the person receiving the payment for minute indoor tanning services. P charges the services at the time of payment for $252.00 (exclusive of the tax imposed by sec- the services, the person receiving the tion 5000B) for the bundled services. If these payment is liable for the tax. services are purchased separately, P charges (f) Persons receiving payment must col- (exclusive of the tax imposed by section lect tax. Every person receiving a pay- 5000B) $25.00 per swimming lesson, $15.00 for a ment for indoor tanning services on 10-minute indoor tanning service, $2.00 for which a tax is imposed under this sec- the protective eyewear, and does not charge for the use of towels while on P’s premises. tion must collect the amount of the As determined under paragraph (d)(3) of this tax from the person making that pay- section, the section 5000B tax applies to the ment. amount reasonably attributable to the in- (g) Examples. The following examples door tanning service, which is $26.81 (($30.00/ illustrate the application of section $282.00) × $252.00). 5000B and this section. Example 4: Person liable for the tax. On July 1, 2013, A buys bundled services (described in Example 1: Imposition of tax; general rule. (i) Example 3) from P as a gift for B. Under para- P is a nail salon that also provides indoor graph (e)(1) of this section, A is deemed to be tanning service incidental to its primary the person on whom the indoor tanning serv- business of providing nail salon services. P ices are performed for purposes of collecting advertises a price of $15.00 (exclusive of the the tax. Therefore, under paragraph (b)(1) of tax imposed by section 5000B) for one 10- this section, A is liable for the tax when A minute indoor tanning service. During a pe- pays for the services. The tax will be com- riod when the tax is 10 percent of the amount puted under the rules of paragraph (d)(3) of paid, P calculates the section 5000B tax on this section. If A does not pay the tax at the $15.00 as provided by paragraph (d)(1) of this time A pays for the services, P is liable for section. Thus, the tax is $1.50 ($15.00 × 10%). the tax. The person paying for the service is liable for Example 5: Undesignated payment cards. (i) P the tax when that person pays for the serv- operates a spa that provides a variety of cos- ices. If P does not collect the tax from the metic goods and services, including indoor person at the time of the payment for the tanning services. On July 1, 2013, A buys a services, P is liable for the tax. gift certificate in the amount of $100.00 from (ii) The facts are the same as in paragraph P as a gift for B. The gift certificate may be (i) of this example except that P’s advertised redeemed by B for B’s choice among several price of $15.00 includes the tanning tax. In services offered by P, including indoor tan- this case, the tax is $1.36 ($15.00 × 10%/110%) ning services. On July 15, 2013, B partially re- under the second sentence of paragraph (d)(1) deems the gift certificate to pay for one 10- of this section. minute indoor tanning service. Example 2: Charges for other goods and serv- (ii) Under paragraph (b)(2) of this section, a ices; tanning services separately stated. P pro- payment for indoor tanning services is made, vides indoor tanning services and other and the tax under section 5000B is imposed, goods and services. On July 1, 2013, A, an in- on July 15, 2013, when B partially redeems dividual, pays P for one 10-minute indoor the gift certificate to pay for one indoor tan- tanning service and one pair of protective ning service. Under paragraph (e)(2) of this eyewear. P charges $15.00 for the 10-minute section, B is the person who pays for the in- indoor tanning service and $2.00 for a pair of door tanning services. Therefore, B is liable protective eyewear. The $2.00 charge for the for the tax, computed under the rules of protective eyewear does not exceed its fair paragraph (d) of this section, and pays the market value. The invoice from P is $17.00 tax by permitting P to debit the amount of (exclusive of the tax imposed by section the tax from the balance of the gift certifi- 5000B) and separately states the cost of the cate or by paying the amount of the tax to protective eyewear. Because the cost of the P in cash. If B does not pay the tax at the protective eyewear is separately stated, P time B partially redeems the gift certificate

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to pay for the indoor tanning services, P is of exercise and physical fitness. P provides liable for the tax. its members with access to indoor tanning Example 6: Charges for other goods and serv- services, comprised of two tanning beds that ices; tanning services bundled; amount attrib- meet the definition of indoor tanning serv- utable to tanning services. On July 1, 2013, A ices under paragraph (c)(1) of this section. P pays $1,000.00 (exclusive of the tax imposed generally charges its members a fee for by section 5000B) to spa P for the right to use monthly usage of its facilities, equipment, the following equipment and services during and services, but also offers short-term or the month of July: up to four massages or fa- free trial memberships and allows non-mem- cials, unlimited use of a sauna, steam room, bers to purchase individual or a series of ex- showers, and towel service, and unlimited in- ercise classes. P does not charge any fee for door tanning services. If the services are pur- the indoor tanning services, does not offer chased separately, P charges (exclusive of indoor tanning services separately from its the tax imposed by section 5000B) $150.00 for other services, and has no membership tier unlimited indoor tanning services during the or category that differs from others based on month of July, and $900.00 for the other equipment and services during the month of access to the indoor tanning services. P July, not including indoor tanning services. holds itself out to the public through adver- Under paragraph (b) of this section, A has tising and marketing as providing equipment made a payment for indoor tanning services and services to improve physical fitness. On and the tax will be computed under the rules July 1, 2013, A pays a membership fee to P in of paragraph (d)(3) of this section. As deter- return for use of P’s facility during the mined under paragraph (d)(3) of this section, month of July. Under paragraph (d)(4) of this the section 5000B tax applies to the amount section, no portion of A’s membership fee reasonably attributable to the indoor tan- payment is treated as a payment made for ning services, which is $142.86 (($150.00/ indoor tanning services, because A is a quali- $1050.00) × $1000.00). If A does not pay the tax fied physical fitness facility under paragraph at the time A pays for the bundled services, (c)(5) of this section. Therefore, no liability P is liable for the tax. for tax arises under section 5000B. Example 7: Payments to qualified physical fitness facilities. P operates a full-service gym (h) Effective/applicability date. This facility that offers fitness classes, multiple section applies to amounts paid on or exercise machines (such as treadmills, sta- after June 11, 2013. For rules that apply tionary bicycles, weight training machines, before that date, see 26 CFR part 49 (re- and free weights), and has as its predominant vised as of April 1, 2013). business providing these facilities, equipment, and services to members for purposes [T.D. 9621, 78 FR 34876, June 11, 2013]

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