Rev. Rul. 63-62

Advice has been requested concerning the applicability of the special rule provided by section 4221(e)(1) of the Internal Revenue Code of 1954 with respect to articles sold for use as supplies for civil aircraft which are registered in a foreign country and employed in foreign trade or trade between the United States and any of its possessions. Specifically, the Internal Revenue Service has been asked to furnish a list of the foreign contries which have been found by the Secretary of Commerce to allow substantially reciprocal privileges in respect of aircraft registered in the United States.

Special motor fuels are subject to a retailers excise tax which is imposed by subsection (b) of section 4041 of the Code. However, subsection (e) of section 4041 provides as follows:

EXEMPTION FOR USE AS SUPPLIES FOR VESSELS.-Under regulations prescribed by the Secretary of the Treasury or his delegate, no tax shall be imposed under subsection (b) in the case of any fuel sold for use or used as supplies for vessels or aircraft (within the meaning of section 4221(d)(3)).

Various articles are subject to the manufacturers excise taxes which are imposed under the provisions of chapter 32 of the Code. To the extent applicable here, section 4221 of the Code provides as follows:

(a) GENERAL RULE.-Under regulations prescribed by the Secretary or his delegate, no tax shall be imposed under this chapter on the sale by the manufacturer of an article-

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(3) for use by the purchaser as supplies for vessels or aircraft,

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(d) DEFINITIONS.-For purposes of this section-

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(3) SUPPLIES FOR VESSELS OR AIRCRAFT.-The term `supplies for vessels or aircraft' means fuel supplies, ships' stores, sea stores, or legitimate equipment on * * * vessels actually engaged in foreign trade or trade between the Atlantic and Pacific ports of the United States or between the United States and any of its possessions. For purposes of the preceding sentence, the term `vessels' includes civil aircraft employed in foreign trade or trade between the United States and any of its possessions, * * *.

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(e) SPECIAL RULES.-

(1) RECIPROCITY REQUIRED IN CASE OF CIVIL AIRCRAFT.-In the case of articles sold for use as supplies for aircraft, the privileges granted under subsection (a)(3) in respect of civil aircraft employed in foreign trade or trade between the United States and any of its possessions, in respect of aircraft registered in a foreign country, shall be allowed only if the Secretary of the Treasury has been advised by the Secretary of Commerce that he has found that such foreign country allows, or will allow, substantially reciprocal privileges in respect of aircraft registered in the United States. If the Secretary of the Treasury is advised by the Secretary of Commerce that he has found that a foreign country has discontinued or will discontinue the allowance of such privileges, the privileges granted under subsection (a)(3) shall not apply thereafter in respect of civil aircraft registered in that foreign country and employed in foreign trade or trade between the United States and any of its possession.

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The Secretary of Commerce has found that the following foreign countries now allow reciprocal privileges in respect of aircraft registered in the United States:

Argentina (except aircraft fuel and lubricants)

Australia

Bahama Islands

Belgium

Bermuda

Bolivia

Brazil

Canada

Chile

Republic of China

Colombia

Costa Rica

Denmark

Dominican Republic

Ecuador

Egypt (only aircraft fuel and lubricants)

Eire

El Salvador

France

Federal Republic of Germany

Greece

Guatemala

Haiti

Honduras

India

Israel

Italy

Jamaica

Japan

Lebanon

Mexico

Netherlands

New Zealand

Nicaragua

Norway

Pakistan

Panama

Paraguay

Peru (except gasoline)

Spain

Sweden

Switzerland

Thailand

Union of South Africa

United Kingdom

Uruguay

Venezuela

The Secretary of Commerce has found that the following foreign countries do not allow substantially reciprocal privileges.

Iceland

Philippines

Saudi Arabia

Union of Soviet Socialist Republics

S.T. 879, C.B. 1939-1 (Part 1), 354, and S.T. 883, C.B. 1939-2, 362 (modifying S.T. 879), which set forth a list of countries which at that time allowed or did not allow substantially reciprocal privileges, are hereby superseded.