Rev. Rul. 55-162

Advice has been requested whether the tax on the transportation of property imposed by section 3475 of the Internal Revenue Code of 1939 applies to amounts paid for the transportation of construction materials consigned to a State Highway Commission, a State Department of Public Works, a State Public Housing Authority, or any other agency or instrumentality of a State, in care of a contractor, for incorporation into a State project.

Under the provisions of section 3475(b) of the Code, amounts paid for the transportation of property to or from the government of a State, Territory of the United States, or political subdivision thereof, or the District of Columbia, are exempt from the tax.

Section 143.24 of Regulations 113 provides that where the shipping papers show the consignor or consignee to be a State, Territory or political subdivision thereof, or the District of Columbia, or an agency or instrumentality of any of the foregoing, such papers may be accepted by the carrier as proof of the exempt character of the shipment. No certificate of exemption is required.

It is held that the exemption provided by section 3475(b) of the Code applies to amounts paid for the transportation of construction materials to be incorporated into a State project, where such materials are consigned to a State or political subdivision of a State, including an agency or instrumentality thereof, in care of a contractor. In such cases, the shipping papers must clearly show that the property is consigned to the State or political subdivision. However, before a contractor may take advantage of this exemption and have construction materials consigned to a State or political subdivision, in care of himself, it will be necessary for the particular State or political subdivision to issue appropriate instructions authorizing such procedure.

The exemption provided by section 3475(b) of the Code does not apply with respect to shipments of fuel, lubricants, spare parts and items of construction equipment belonging to the contractor and which will not be incorporated in the construction project and which will not become the property of the State or political subdivision thereof