Rev. Rul. 54-276

Advice is requested whether fishing boats which go outside the continental United States, but do not enter or clear, are entitled to receive sea stores cigarettes.

Section 2197 of the Internal Revenue Code provides that the internal revenue laws imposing taxes on tobacco, snuff, cigars, or cigarettes shall be held to extend to such articles produced anywhere within the exterior boundaries of the United States, whether the same be within a collection district or not. This section further provides that the shipment or delivery of manufactured tobacco, snuff, cigars, cigarettes, or cigarette papers or tubes, for consumption beyond the jurisdiction of the internal revenue laws of the United States, as above defined, shall be deemed exportation within the meaning of the internal revenue laws applicable to the exportation of such articles without payment of internal revenue tax.

Article 1 of Regulations 76 provides that the shipment or delivery of tobacco products as sea stores may be made for consumption of such articles on the high seas beyond the 3-mile limit on various vessels, including vessels clearing through customs en route to places beyond the jurisdiction of the internal revenue laws.

Upon proper application, the Collectors of Customs at the various ports issue permits authorizing vessels to `touch and trade.' Such permits authorize the vessels to put in at foreign ports to take on supplies. However, in accordance with customs regulations, if a vessel which has been granted a permit to `touch and trade' returns to a port in the United States, whether or not it has touched at a foreign port or place, such permit is surrendered to the Collector of Customs.

Deliveries of nontaxpaid tobacco products to such vessels for consumption beyond the jurisdiction of the internal revenue laws of the United States, pursuant to section 2197 of the Internal Revenue Code, are accomplished under the supervision of customs officers at the ports of lading who furnish certificates or other evidence of lading of the merchandise on such vessels and dates of sailing of the vessels.

In view of the above procedure the Internal Revenue Service has approved of deliveries of nontaxpaid tobacco products of domestic manufacture to fishing vessels, operating under `touch and trade' permits issued by United States customs officers, for consumption beyond the jurisdiction of the internal revenue laws.

Where permits have been issued to fishing vessels to `touch and trade ,' proprietors of sea stores warehouses may withdraw nontaxpaid tobacco products for delivery to such fishing vessels. Before credit against the sea stores warehouse bond can be allowed for such deliveries, the Assistant Regional Commissioner, Alcohol and Tobacco Tax, must receive copies of Forms 550-B on which the certificates of inspection, receipt, and clearance have been properly executed.