Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 72-38

1972-1 C.B. 330

IRS Headnote

Aviation fuel sold for use, or used, as a fuel in a new aircraft being ferried from the manufacturer in the United States to its customer located in a foreign country is not exempt from the retailers excise tax.

Full Text

Rev. Rul. 72-38

Advice has been requested as to whether exemption from the tax on aviation fuel imposed by section 4041(c) of the Internal Revenue Code of 1954 is available under the circumstances described below.

A company is engaged in the business of ferrying new aircraft of various makes to the aircraft manufacturers' foreign-based customers. In performing this service, an aircraft is flown from the factory to the company's airfield and there fitted with extra fuel tanks. The aircraft is then filled with aviation fuel and flown to the customer. En route, the company may purchase additional fuel in the United States for the aircraft before it leaves the country.

The specific question presented is whether the aviation fuel is exempt from the retailers excise tax by reason of any one of the following:

Item (1). The fuel is used in commercial aviation.

Item (2). The fuel is used as a supply for aircraft.

Item (3). The fuel is exported.

Section 4041(c) of the Code imposes a tax on gasoline and any other liquid either (1) sold by any person to an owner, lessee, or other operator of an aircraft, for use as a fuel in such aircraft in noncommercial aviation, or (2) used by any person as a fuel in an aircraft in noncommercial aviation, unless there was a taxable sale of such liquid under this section. Under the provisions of section 4041(c)(4) of the Code, the term "noncommercial aviation" means any use of aircraft other than use in a business of transporting persons or property by air for compensation or hire.

Section 4041(g) of the Code provides that no tax shall be imposed under section 4041 on any liquid sold for use or used as supplies for vessels or aircraft (within the meaning of section 4221(d)(3)). Under the provisions of section 4221(d)(3) of the Code, the term "vessels" includes civil aircraft employed in foreign trade or trade between the United States and any of its possessions.

Section 4056 of the Code provides that no retailers excise tax shall be imposed upon the sale of any article for export, or for shipment to a possession of the United States, and in due course so exported or shipped.

Section 154.1-1 of the Temporary Regulations in Connection with the Airport and Airways Revenue Act of 1970 sets forth rules under which aircraft fuel that is used in other than noncommercial aviation may be purchased tax free when delivered by a seller into a fuel supply tank of an aircraft. The provisions of the section also apply to sales or purchases of fuel, delivered into a fuel tank of an aircraft, which are exempt from tax by reason of sections 4041(f), 4041(g), 4055, and 4057 of the Code relating to exemptions for farm use, use as supplies for aircraft, state and local governments, and nonprofit educational organizations, respectively.

With respect to Item (1), the ferrying of an aircraft to a customer is "noncommercial aviation" as defined in section 4041(c) of the Code since it is a use of the aircraft other than in a business of transporting persons or property for compensation or hire.

Regarding Item (2), since the aircraft is not transporting persons or property for compensation or hire, it is not employed in foreign trade or trade between the United States and any of its possessions within the meaning of section 4221 (d)(3) of the Code. Therefore, the fuel is not used as a supply for an aircraft for purposes of section 4041(g) of the Code.

With respect to Item (3), the sale of fuel delivered into the fuel tank of an aircraft that is flown directly out of the United States is not a sale for export within the meaning of section 4056 of the Code. See Revenue Ruling 69-150, C.B. 1969-1, 286, which holds that when gasoline is sold by the producer and delivered into the fuel tank of a vehicle that is to be driven, or shipped, directly out of the United States, the exemption from manufacturers excise tax by reason of exportation does not apply to the sale.

Accordingly, it is held that there is no exemption from the retailers excise tax imposed by section 4041(c) of the Code for aviation fuel that is sold for use, or used, as a fuel in a new aircraft being ferried from the manufacturer in the United States to its customer located in a foreign country.