Rev. Rul. 72-10

Advice has been requested as to the applicability of the taxes imposed by the Airport and Airway Revenue Act of 1970 to transactions involving foreign diplomats, consular and other officers, agencies or commissions of foreign governments, and employees of international organizations.

Public Law 91-258, set forth in part in C.B. 1970-1, 361, effective July 1, 1970, states that the purpose of the Act is "to provide for the expansion and improvement of the Nation's airport and airway system, for the imposition of airport and airway user charges, and for other purposes."

The Internal Revenue Code was amended by the Act to provide for the following taxes:

(1) Section 4041(c) of the Code imposes a tax on gasoline and any other liquid either (1) sold by any person to an owner, lessee, or other operator of an aircraft, for use as a fuel in such aircraft in noncommercial aviation, or (2) used by any person as a fuel in an aircraft in noncommercial aviation, unless there was a taxable sale of such liquid under that section.

(2) Section 4261(a) of the Code imposes upon the amount paid for taxable transportation of any person by air a tax at a current rate of 8 percent of the amount so paid. In the case of amounts paid outside the United States for taxable transportation, the tax imposed by that section applies only if such transportation begins and ends in the United States. Section 4261(c) of the Code imposes a tax of $3 upon any amount paid (whether within or without the United States) for any transportation of any person by air, if such transportation begins in the United States, except that the tax does not apply to any transportation all of which is taxable under section 4261(a).

(3) Section 4271 of the Code imposes a tax on the amount paid within or without the United States for the taxable transportation of property by air, if such transportation begins and ends in the United States.

(4) Section 4491(a) of the Code imposes a basic tax of 25 dollars on the use of any taxable civil aircraft during any year. That section also imposes an annual poundage tax of 31/2 cents a pound for turbine-engine powered aircraft, and for other than turbine-engine powered aircraft weighing more than 2,500 pounds (1) a tax of 2 cents for each pound of the maximum certificated takeoff weight of the aircraft for the period July 1, 1970 to June 30, 1971, or (2) a tax of 2 cents a pound for each pound of the maximum certificated takeoff weight of the aircraft in excess of 2,500 pounds for periods beginning on or after July 1, 1971.

The Airport and Airway Revenue Act cited above provides for user charges in the form of taxes on air transportation, aviation fuel, and use of airport facilities. The Act also provides for the establishment of an Airport and Airway Trust Fund to insure that the aviation user taxes imposed by the Act are expended for the improvement and maintenance of the civil aviation system. The taxes imposed by the Act were intended to be levied upon users of the system who benefit from the resulting services. In this connection, Congress eliminated the previous statutory exemptions which had applied to the then applicable tax on transportation of persons by air and, in doing so, stated "the taxes on the transportation of persons and property by air are now generally viewed as user charges properly applicable in the case of all users." See Senate Report No. 91-706, C.B. 1970-1, 386 at 396.

In view of the foregoing, it is considered that the imposts provided by the Act are not "taxes" as that term is used in international comity and treaties. Accordingly, it is held that the taxes imposed by the Airport and Airway Revenue Act of 1970 are applicable to transportation services involving foreign diplomats, consular and other officers, and agencies or commissions of foreign governments. It is further held that all the taxes imposed by the Act apply with respect to employees of international organizations, even though such employees are otherwise exempt from certain Federal excise taxes by virtue of statutory or treaty provisions.

Compare Revenue Ruling 296, C.B. 1953-2, 325, that extends, in varying degree, exemptions from Federal excise taxes to foreign diplomatic, consular, and other officers, and agencies and commissions of foreign governments. Unlike the excise taxes to which Revenue Ruling 296 relates, the aviation user taxes imposed by the Airport and Airway Revenue Act are, as previously indicated, in the nature of user charges levied for specific services rendered and are applicable to all users.