Internal Revenue Service
Revenue Ruling
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smRev. Rul. 58-83
1958-1 C.B. 451
Caution: Obsoleted by Rev. Rul. 69-227
IRS Headnote
Where a truck broker (1) does not contract with the shipper to transport property or assume primary responsibility for such transportation, (2) is not liable for payment of the trucker's charges, and (3) receives remuneration only from the trucker, he is not considered to be `a person engaged in the business of transporting property for hire' within the meaning of section 4272 of the Internal Revenue Code of 1954.
Rev. Rul. 54-54, C.B. 1954-1, 273, modified.
Full Text
Rev. Rul. 58-83
Advice has been requested whether a truck broker who performs the services described below is considered to be a person engaged in the business of transporting property for hire.
A truck broker solicits business by advertising in trade publications, by distributing calendars and scratch pads, and by placing notices in various meeting places of truckers. He does not own or operate any transportation equipment. When a shipper contracts the broker describing the goods to be transported and the destination, the broker informs the shipper of the `going rate' being asked and received by truckers. If the rate is satisfactory, the shipper states the time and place the trucker is to pick up the merchandise. The broker then contacts a trucker and set forth the conditions of the shipment. If the conditions are unsatisfactory to the trucker and the broker is unable to locate other truckers to perform the transportation, the shipper has the alternative of offering an increased rate or contacting another broker.
Where the trucker agrees to the conditions of the shipment, he signs the bill of lading given to the shipper, which is furnished by the broker or the shipper. On a prepaid shipment, the broker collects the amount of the transportation charge and the excise tax from the shipper, deducts his commission, and, after receiving a receipt from the trucker showing delivery and acceptance of the shipment by the consignee, pays the trucker the amount agreed upon. In the case of a collect shipment, the trucker normally pays the broker's commission in advance and collects the amount of the transportation charge and the tax from the consignee. In some instances, the consignee is instructed by the broker to forward directly to the broker an amount which covers the commission and to pay the balance to the trucker. The broker receives no remuneration from the shipper or the consignee, but collects his commission from the trucker's charges.
There is no written agreement between the broker and the shipper, but the broker expressly or impliedly agrees to indemnify the shipper against any loss resulting to the shipper from the failure of the trucker to perform and deliver the load on time and in good condition. In the event of loss, the shipper is paid by the broker. However, the bill of lading normally provides that the trucker assumes full responsibility for any and all loss or damage of any nature whatever to the load while in his possession and until delivery to the consignee at destination, as well as any loss occasioned by delay. In some cases, the trucker executes a receipt for the merchandise in good condition and guarantees to deliver the load free from damage; in others, the trucker merely states that he is fully insured to cover the shipment.
Section 4271(a) of the Internal Revenue Code of 1954 imposes a tax upon the amount paid within or without the United States for the transportation of property by rail, motor vehicle, water, or air from one point in the United States to another.
Under the provisions of section 4272(a) of the Code, the tax applies only to amounts paid to a person engaged in the business of transporting property for hire. Section 143.1(b) of Regulations 113, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, defines the term `person engaged in the business of transporting property for hire' to include a common carrier, contract carrier, local moving or drayage concern, freight forwarder, express company, or other person transporting property for hire wholly or in part by rail, motor vehicle, water or air.
It is held that the term `person engaged in the business of transporting property for hire' for the purpose of the tax imposed by section 4271(a) of the Code applies only to a person who actually transports the property or to one who contracts to transport property for compensation and assumes the responsibility for such transportation but who assigns the transportation to another to perform. Since the truck broker in the instant case (1) does not contract with the shipper to transport the property or assume primary responsibility for such transportation, (2) is not liable to the trucker for payment of the trucker's charges, and (3) receives a commission payable by the trucker as the only remuneration for the services he performs, he is not considered to be `a person engaged in the business of transporting property for hire' within the meaning of section 4272(a) of the Code. Accordingly, he is not liable for reporting and remitting the transportation tax to the Government. However, where the transportation charge is paid to the truck broker, he is required to collect the transportation tax from the person making the payment and to forward such tax to the trucker. See Revenue Ruling 55-501, C.B. 1955-2, 469, which sets forth a similar conclusion with respect to a trucking exchange.
Revenue Ruling 54-54, C.B. 1954-1, 273, is modified to the extent that it defines the term `person engaged in the business of transporting property for hire' to include not only a carrier who actually transports the property but also a person who holds himself out to the public as one who for compensation sells, provides, procures, furnishes, or arranges for the transportation of property.