Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 56-61

1956-1 C.B. 521

Caution: Obsoleted by Rev. Rul. 69-227

IRS Headnote

Transportation furnished regularly by a carrier between a resort hotel and a mountain summit constitutes the operation of motor vehicles on an established line and is taxable under section 4261 of the Internal Revenue Code of 1954, including the transportation of passengers who are occasionally picked up and delivered at places other than the terminal or the starting point. However, transportation to and from railroad stations furnished occasionally to hotel guests and transportation furnished only at infrequent intervals and without any degree of regularity to mountain climbers, skiers, sight-seeing parties, etc., whose pick-up and delivery points are designated by the passengers, does not constitute transportation on an established line and is, therefore, not subject to such tax.

Full Text

Rev. Rul. 56-61

Advice has been requested concerning the application of tax on the transportation of persons, imposed by section 4261 of the Internal Revenue Code of 1954, to charges made by a carrier which provides transportation service in a resort area.

A company, which operates station wagons having a seating capacity of eight passengers, including the driver, furnishes transportation services at a resort area between a certain hotel, which serves as its base of operation, and a mountain summit. It advertises and maintains regular service over this route and charges a fixed rate for a round trip which entitles passengers to transportation in a certain vehicle on a stated date. Occasionally, it picks up passengers for this trip in response to telephone calls at various resort points or surrounding towns for which no set charges are made other than the regular fee for transportation to the mountain summit. Under a working agreement with a hotel, it infrequently furnishes transportation to and from railroad stations for guests of the hotel for which no fixed charges are made by the carrier for a particular trip. It also furnishes transportation occasionally, within a radius of 25 miles, to mountain climbers, skiers, sightseeing parties, etc., whose pick-up and delivery points are designated by the passengers. There is no set fee for this service and the amount charged depends upon the circumstances involved.

Section 4261(a) of the Code imposes a tax upon amounts paid for the transportation of persons by rail, motor vehicle, water, or air. Section 4262(c) of the Code provides that the tax imposed by section 4261(a) of the Code shall not apply to transportation by motor vehicles having a passenger seating capacity of less than ten adult passengers, including the driver, except when such vehicle is operated on an established line.

Section 130.58 of Regulations 42, applicable under the 1954 Code by virtue of Treasury Decision 6091, C.B. 1954-2, 47, provides that the term `operated on an established line' means operated with some degree of regularity between definite points. It does not necessarily mean that strict regularity of schedule is maintained, that the full run is always made, that a particular route is followed, or that intermediate stops are restricted. The term implies that the person rendering the service maintains and exercises control over the direction, route, time, number of passengers carried, etc. It implies also that the primary contract between the operator and the person served is for the transportation of the person and not for the hire or use of the vehicle.

Accordingly, since the transportation provided by the carrier between the resort hotel and the mountain summit is operated with a sufficient degree of regularity between definite points and under such control of the carrier as to constitute the operation of motor vehicles on an established line, it is held that the tax on the transportation of persons imposed by section 4261 of the Code is applicable even though, in a few instances, the passengers are picked up and delivered at places other than the terminal or the starting point. Where transportation of guests of the hotel to and from railroad stations is furnished only at infrequent intervals and without any degree of regularity, and where transportation is furnished to mountain climbers, skiers, sightseeing parties, etc., whose pick-up and delivery points are designated entirely by the passengers, such transportation does not constitute the operation of motor vehicles on an established line within the meaning of section 4262(c) of the Code and, therefore, the charges for such transportation are not subject to the tax imposed by section 4261 of the Code.