Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 54-62

1954-1 C.B. 265

IRS Headnote

The tax on the transportation of persons imposed by section 3469 of the Internal Revenue Code is to be collected by a carrier at the prescribed rate of 15 percent with respect to each payment for transportation. In  computing the amount of tax to be collected a fractional part of a cent must be disregarded unless it amounts to one-half cent or more, in which case it must be increased to one cent. The Internal Revenue Service cannot authorize the collection of tax in an amount greater than that legally due.

Full Text

Rev. Rul. 54-62

Advice is requested whether a carrier in collecting the tax on the transportation of persons imposed by section 3469 of the Internal Revenue Code may collect an amount in excess of 15 percent of its established passenger fare.

In the instant case the carrier's established passenger fare is 43 cents with respect to which a tax of 6.45 cents is applicable computed at the prescribed rate of 15 percent. The carrier in order to avoid the use of pennies desires to collect 7 cents as tax with respect to each fare or a total of 50 cents.

Sections 3469(a) and 1650 of the Internal Revenue Code impose a tax of 15 percent upon the amount paid for the transportation of persons by rail, motor vehicle, water, or air. Section 3469(d) of the Code provides that the tax shall be paid by the person making the payment subject to the tax.

Section 3658 of the Code provides that in the payment of any tax not payable by stamp a fractional part of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it must be increased to one cent.

It is held that a carrier must collect the tax at the prescribed rate of 15 percent of each payment made to it for the transportation of persons and that in computing the tax on each such payment a fractional part of a cent must be disregarded unless it amounts to one-half cent or more, in which case it must be increased to one cent. Accordingly, the tax required to be collected on an established passenger fare of 43 cents is 6 cents and the Internal Revenue Service cannot authorize the collection of tax in an amount greater than that legally due.