Rev. Rul. 59-364

Advice has been requested whether tobacco products and cigarette papers and tubes may continue to be delivered, without payment of tax, for use as ship's supplies (sea stores) on vessels and aircraft engaged in trade between ports in the State of Hawaii and other ports in the United States.

Section 5704 of the Internal Revenue Code of 1954 provides, in part, as follows:

A manufacturer or export warehouse proprietor may transfer tobacco products and cigarette papers and tubes, without payment of tax, to the bonded premises of another manufacturer or export warehouse proprietor, or remove such articles, without payment of tax, for shipment to a foreign country, Puerto Rico, the Virgin Islands, or a possession of the United States, or for consumption beyond the jurisdiction of the internal revenue laws of the United States; and manufacturers may similarly remove such articles for use of the United States; in accordance with such regulations and under such bonds as the Secretary or his delegate shall prescribe.

Section 141.1 of the Regulations Relating to Shipment or Delivery of Manufactured Tobacco, Snuff, Cigars, or Cigarettes for Use as Sea Stores Without Payment of Internal Revenue Tax provides, in part, that tobacco products and cigarette papers and tubes may be delivered, without payment of tax, for use as sea stores on vessels operating on a regular schedule in trade between one customs great district of the United States and another customs great district thereof. These regulations also provide that such articles may be delivered, without payment of tax, for use as sea stores on aircraft operating on a regular schedule in trade between one customs great district of the United States and another such great district, when the schedule requires operation outside the jurisdiction of the internal revenue laws of the United States.

Section 141.2 of the regulations states that customs great districts include, first, the seacoast between the northern boundary of the State of Maine and the southern boundary of the State of Texas: second, the island of Puerto Rico; third, the seacoast between the southern boundary of the State of California and the northern boundary of the State of Washington; fourth, the State of Alaska; and, fifth, the Territory of Hawaii.

Now that Hawaii has formally become a state, the reference to the Territory of Hawaii, contained in the above section, will be construed as a reference to the State of Hawaii.

In view of the foregoing, tobacco products and cigaretee papers and tubes may continue to be delivered, without payment of tax, for use as ship's supplies (sea stores) beyond the jurisdiction of the internal revenue laws on vessels and aircraft operating on a regular schedule in trade between any port in the State of Hawaii and any other port in the United States outside of Hawaii.

See also Revenue Ruling 59-54, C.B. 1959-1, 121, with respect to similar deliveries in the case of Aslaska.