Rev. Rul. 56-157

Many travel agencies and transportation companies are now selling travel gift certificates. While these certificates sometimes are issued in the precise amount of the fare for the journey which the donor wishes the donee to take, they frequently are issued in round-dollar amounts, generally in excess of the cost of the transportation contemplated by the purchaser. The recipient of the gift certificate has the right either to use the certificate for the purchase of transportation (receiving in cash any excess in value of the certificate over the cost of the transportation) or to take the entire face value of the certificate in cash without the purchase of any transportation. Held, since the gift certificates are nothing more than obligations accepted by the issuing agency or carrier to pay a sum certain in money to the designated payee upon demand, the amount paid for the purchase of such a gift certificate is not an amount paid for transportation within the meaning of section 4261 of the Internal Revenue Code of 1954. Therefore, the tax on transportation of persons does not apply to the purchase of the gift certificate. The payment for transportation takes place when the gift certificate is used by the donee for the purchase of transportation rather than when the gift certificate is purchased by the donor. Accordingly, at the time of such use any tax which may be due on the transportation purchased should be collected.