Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 57-24

1957-1 C.B. 395

IRS Headnote

Under certain circumstances, the tax on the transportation of persons imposed by section 4261 of the Internal Revenue Code of 1954 does not apply to payments made outside the United States by members of the Armed Forces of the United States or their dependents for transportation between two or more points within the United States, which is a continuation of a journey to or from a point outside the United States.

Full Text

Rev. Rul. 57-24

Advice has been requested whether the tax on the transportation of persons applies to payments made outside the United States by members of the Armed Forces of the United States or their dependents for commercial transportation between two or more points within the United States, which is a continuation of a journey to or from a point outside the United States, where the connecting transportation to or from the point outside the United States is furnished by a vessel or aircraft operated by the Armed Forces of the United States. The question arises because of the fact that the members of the Armed Forces or their dependents, at the time of purchasing transportation for the United States portion of the journey, do not have evidence, such as a ticket or order, that such transportation is for use in conjunction with connecting transportation to or from a point outside the United States.

Section 4261(b) of the Internal Revenue Code of 1954 imposes a tax upon the amount paid without the United States for taxable transportation of persons by rail, motor vehicle, water, or air but only if such transportation begins and ends in the United States.

Under the provisions of section 42.4261-6 of the Facilities and Services Excise Tax Regulations, the tax on the transportation of persons does not apply to a payment made outside the United States for transportation which begins or ends outside the United States. A payment made outside the United States for transportation between two or more points within the United States, which is part of a transportation from or to a point outside the United States, is considered to be a payment for transportation which begins or ends outside the United States where it is definitely established, at the time of making payment for the United States portion, that such portion is purchased for use in making the journey from or to a point outside the United States.

It is held that transportation between two or more points within the United States furnished to members of the Armed Forces or their dependents, which is part of a transportation to or from a point outside the United States, is transportation which begins or ends outside the United States, where the connecting transportation is furnished by a vessel or aircraft of the Armed Forces and the serviceman is not serving under orders as a member of the crew of the ship or aircraft during the  trip is question. Accordingly, under these circumstances, the tax on the transportation of persons does not apply to payments made outside the United States by members of the Armed Forces or their dependents for transportation within the United States, provided (1) that it is definitely determined by the agency or carrier, at the time of the receipt of payments for tickets for such transportation, that the tickets are strictly for use in conjunction with connecting transportation to or from points outside the United States and such connecting transportation is to be furnished by a vessel or aircraft of the Armed Forces, and (2) that the ticket or exchange orders issued for such transportation and related travel orders, or United States of America Transportation Requests, Standard Form No. 1169, are appropriately cross-referenced or inscribed, thereby establishing the continuity of the journey between a point outside the United States and a point within the United States.