Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 73-86

1973-1 C.B. 608

IRS Headnote

The penalty imposed under section 7275(c) of the Code will not apply if air passenger tickets prepared using a "fare construction ladder" show the total paid for transportation and tax for each travel segment and the total for all of the segments.

Full Text

Rev. Rul. 73-86

Advice has been requested as to the application of the provisions of section 7275 of the Internal Revenue Code of 1954 as amended with respect to air transportation when air passenger tickets are prepared using a so-called "fare construction ladder."

"Fare construction ladder" refers to the practice of showing separate charges for segments of air transportation on airline tickets.

Section 7275(c) of the Code provides, in part, a penalty for any person who is convicted of violating any provision of section 7275(a).

Section 7275(a) of the Code (as amended by Public Law 9-680, 1971-1 C.B. 548, effective July 1, 1970) provides in the case of transportation by air all of which is taxable transportation (as defined in section 4262) that the ticket for such transportation shall show the total of the amounts paid for transportation and the taxes imposed by sections 4261(a) and (b). If the ticket shows separate amounts paid for any segment of such transportation, then the ticket must also show the total of the amount paid for transportation and the amount paid for the taxes imposed by sections 4261(a) and (b) of the Code with respect to such segment, as well as with respect to the sum of all segments.

Held, with respect to transportation beginning after June 30, 1970, if a "fare construction ladder" is used on an airline ticket, the penalty imposed by section 7275(c) of the Code shall not apply where the total amount paid for transportation and taxes imposed by section 4261(a) and (b) is shown for each segment of air transportation indicated on the ticket, as well as for the sum of the segments shown. If the foregoing procedure is followed, then it is immaterial whether the ticket also shows the amount of tax paid as a separate figure.