Rev. Rul. 66-301

Advice has been requested whether the exemption for small aircraft operated on nonestablished lines applies in the following situation.

The presentation of a community fair lasting 10 days includes the offering by a private contractor of helicopter rides which are given as patrons present themselves for the service. There are no scheduled or fixed times of departure and no advance bookings or reservations are available. The helicopter has a capacity of four persons and a gross takeoff weight of less than 12,500 pounds.

Section 4261 of the Internal Revenue Code of 1954 imposes a tax on amounts paid within the United States for taxable transportation (or without the United States if the taxable transportation begins and ends in the United States) and on amounts paid for seating or sleeping accommodations in connection with such transportation. The tax imposed by this section, except in certain cases not here relevant, is to be paid by the person making payment for the service.

Section 4263(d) of the Code provides an exemption from the tax imposed by section 4261 in the case of small aircraft operated on nonestablished lines. The exemption applies to transportation by aircraft having (1) a gross takeoff weight of less than 12,500 pounds and (2) a passenger seating capacity of less than 10 adult passengers, including the pilot. However, the exemption does not apply in any case where the aircraft is operated on an established line.

Section 49.4263-5(c) of the Facilities and Services Excise Tax Regulations defines the term `operated on an established line.' The term means operated with some degree of regularity between definite points. The term does not necessarily mean that strict regularity of schedule is maintained; that the full run is always made; that a particular route is followed; or that intermediate stops are restricted. The term implies that the person rendering the service maintains and exercises control over the direction, route, time, number of passengers carried, etc.

The helicopter, in the factual situation described earlier, is within the statutory definition of a small aircraft in that it has a seating capacity of less than 10 adults and a gross takeoff weight of less than 12,500 pounds. The question of whether the exemption applies centers upon the meaning of the term `operated on an established line.'

The term does not mean that strict regularity of scedule is maintained; however, some degree of regularity is necessary. A schedule other than customer demands is necessary if the operation is to be conducted with `some degree of regularity.' Also, a sporadic operation, the existence of which is contingent upon the fair and the renewal of which is uncertain, lasting only a few days a year, as in the instant case, cannot be characterized as being `operated on an established line.'

Accordingly, the transportation services herein described are within the exemption provided in section 4263 of the Code. The charges made for such services are therefore not subject to the excise tax on the transportation of persons by air imposed by section 4261 of the Code.