Rev. Rul. 68-328

A school operated by a political subdivision of a state pays for the transportation by air of its students for school trips from funds derived from (1) charges for admissions to athletic events all other school activities, such as dances, plays, and concerts, (2) fees collected from all of the students, regardless of whether they participate in the trips, or (3) fees collected only from participating students for the purpose of defraying their individual expenses of the trips. The funds derived from sources (1) and (2) are administered and controlled by the school as school funds.

Held, where the school pays for transportation of its students from funds derived from sources (1) and (2), above, such payments are exempt from the tax on the transportation of persons by air under the exemption provided by section 4292 of the Internal Revenue Code of 1954, relating to transportation provided to state and local governmental units. However, where the payments are made from funds derived from source (3), such payments constitute payments for transportation furnished to the individual students and not for transportation furnished to the state or political subdivision thereof, within the meaning of the exemption provisions, since such payments are not from funds belonging to the school. Accordingly, such payments are subject to the tax on the transportation of persons by air imposed by section 4261 of the Code.

M.T. 28, C.B. 1948-2, 176, and Revenue Ruling 299, C.B. 1953-2, 434, are hereby superseded, since the positions stated therein are set forth under the current law in this Revenue Ruling.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.