Rev. Rul. 85-33

1985-1 C.B. 335, 1985-12 I.R.B. 7.

COMMUNICATIONS EXCISE TAX; COMMON CARRIER EXEMPTION; AUTOMOBILE RENTAL

COMPANY SHUTTLE BUS SERVICE

Published: March 25, 1985

Section 4253.-Exemptions, 26 CFR 49.4253-6: Exemption for common carriers and communications companies.

(Also Section 4251; 49.4251 -1.)

  Communications excise tax; common carrier exemption; automobile rental company shuttle bus service. For purposes of the common carrier exemption for communications excise tax, an automobile rental company is not considered a common carrier with respect to the shuttle bus service it provides to its rental customers.

ISSUE

  For purposes of the communications excise tax exemption provided by section 4253(f) of the Internal Revenue Code, is an automobile rental company considered a common carrier with respect to the shuttle bus service it provides to its customers?

FACTS

  A company that is a subscriber to 'toll telephone service' within the meaning of section 4252(b)(2) of the Code is engaged in the business of renting automobiles to the general public. The company maintains rental offices at airport terminals, hotels, and other locations in major cities of the United States. The vehicles are kept in parking lots which are generally not at the same locations as the rental offices. The rental company provides its rental customers with a 'free' bus service between the rental offices and the parking lots. The bus transportation is available only to the rental customers and not to the general public. The buses are owned by the rental company and are operated by its employees. Although the bus service is advertised as 'free', a portion of the automobile rental charge is used to cover the cost of operating the bus service.

LAW AND ANALYSIS

  Section 4251 of the Code imposes a tax on the amounts paid for toll telephone service.

  Section 4252(b)(2) of the Code defines 'toll telephone service', in part, as a service which entitles the subscriber, upon payment of a periodic charge, to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radio telephone stations in a specified area which is outside the local telephone system area in which the station provided with this service is located.

  Section 4253(f) of the Code states that no tax shall be imposed on the amount paid for any toll telephone service described in section 4252(b)(2) to the extent that the amount so paid is for use by a common carrier in the conduct of its business as such.

  Rev. Rul. 76-405, 1976-2 C.B. 352, defines the term 'common carrier' for purposes of section 4253(f) of the Code as one holding itself out to the public as engaged in the business of transportation of persons or property from place to place for compensation, offering its services to the public generally.

  In the instant case, the company holds itself out to the public as being in the business of renting automobiles, not transporting persons from place to place by bus. The bus transportation provided by the company is incidental to its business of renting automobiles. The shuttle bus service is furnished only to persons who are rental customers in order to transport them to and from the remotely located parking lots where the vehicles are kept.

  In Rev. Rul. 63-155, 1963-2 C.B. 566, the Internal Revenue Service held that a hotel that conducted regularly scheduled round-trip airplane flights in connection with package tours sold to its patrons was furnishing taxable transportation for purposes of the tax on the transportation of persons by air imposed by section 4261(a) of the Code. The revenue ruling noted that the Civil Aeronautics Board had held, under similar circumstances, that resort hotel was engaged in the carriage by aircraft of persons or property as a common carrier for compensation or hire and that the classification had been upheld in Las Vegas Hacienda, Inc. v. CAB, 298 F.2d 430( 1962), cert. denied, 359 U.S. 885 (1962). The court in Las Vegas Hacienda, Inc., used the term 'common carrier' as defined in the Federal Aviation Act.

  In Trans National Travel, Inc. v. United States, 5 Ct. Cl. 648 (1984), the court held that a travel organization engaged in the business of selling charter air transportation to the public was not a common carrier within the meaning of section 4253(f) of the Code. The court agreed with the government that the many authorities cited by the plaintiff to support its definition of a common carrier were within the context of regulatory statutes and regulations, i.e., the Civil Aeronautics Act and the Federal Aviation Act. The Internal Revenue Code, on the other hand, is not per se, a regulatory statute, its purpose being to raise revenue. Thus, the exemption under section 4253(f) should be strictly construed. The same result was reached under similar facts in Rev. Rul. 8-34, 1980-1 C.B. 251.

HOLDING

  For purposes of the communications excise tax exemption provided by section 4253(f) of the Code, an automobile rental company is not considered a common carrier with respect to the shuttle bus service it provides to its customers.

Rev. Rul. 85-33, 1985-1 C.B. 335, 1985-12 I.R.B. 7.