Rev. Rul. 70-386

The purpose of this Revenue Ruling is to update and restate certain Revenue Rulings relating to 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 that are registered in a foreign country and employed in foreign trade or trade between the United States and any of its possessions.

The Revenue Rulings in question are Revenue Ruling 63-62, C.B. 1963-1, 250, Revenue Ruling 63-230, C.B. 1963-2, 539, Revenue Ruling 64-228, C.B. 1964-2, 437, Revenue Ruling 67-193, C.B. 1967-1, 306, Revenue Ruling 68-229, C.B. 1968-1, 483, and Revenue Ruling 69-404, C.B. 1969-2, 213.

Section 4041(b) of the Code imposes a tax on sales of special motor fuel at retail. However, section 4041(g) of the Code provides that no tax shall be imposed under section 4041 in the case of any liquid 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 imposed under the provisions of chapter 32 of the Code. Section 4221(a)(3) of the Code provides that no manufacturers excise tax shall be imposed on the sale by the manufacturer of an article for use by the purchaser as supplies for vessels or aircraft.

Section 4221(d)(3) of the Code provides that the term "supplies for vessels or aircraft" means fuel supplies, ships' stores, sea stores, or legitimate equipment, to the extent applicable therein, 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 this exemption the term "vessels" include civil aircraft employed in foreign trade or trade between the United States and any of its possessions.

Section 4221(e)(1) of the Code provides that the privileges granted under section 4221(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 section 4221(a)(3) of the Code 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 possessions.

The Secretary of Commerce has found that the foreign countries listed below 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 Columbia Costa Rica Czechoslovakia Denmark Dominican Republic Ecuador Egypt (only aircraft fuel and lubricants) Eire El Salvador Finland France Federal Republic of Germany Greece Guatemala Haiti Honduras Iceland (only aircraft fuel and lubricants, beginning June 1, 1967) India Israel Italy Jamaica Japan Lebanon Mexico Netherlands New Zealand Nicaragua Norway Pakistan Panama Paraguay Peru (except gasoline) Republic of the Philippines (only aircraft fuel and lubricants) Portugal Spain Sweden Switzerland Thailand Trinidad and Tobago (only aircraft fuel and lubricants) Union of South Africa Union of Soviet Socialist Republics United Kingdom Uruguay Venezuela

The Secretary of Commerce has found that Saudi Arabia does not allow substantially reciprocal privileges.

This Revenue Ruling should not be construed as indicating in any way the status of countries not mentioned herein.

Revenue Ruling 63-62, Revenue Ruling 63-230, Revenue Ruling 64-228, Revenue Ruling 67-193, Revenue Ruling 68-229, and Revenue Ruling 69-404 are hereby superseded since the conclusions set forth therein are updated and restated in this Revenue Ruling.