Rev. Rul. 62-104

Advice has been requested whether the excise tax on the transportation of persons applies to amounts paid for transportation service furnished under the following circumstances.

An operator of buses furnishes daily transportation of children to and from school. Tickets are not issued, but the carrier, in accordance with a contract with the parents of each child, agrees to provide such transportation upon the payment of a flat charge per year. The length of the trip for each child transported is less than ten miles.

Section 4261(a) of the Internal Revenue Code of 1954 imposes a tax upon the amounts paid within the United States for taxable transportation (as defined in section 4262 of the Code) of any person by rail, motor vehicle, water, or air.

Section 4263(a) of the Code provides, in part, that the tax imposed by section 4261 shall not apply to amounts paid for commutation or season tickets for single trips of less than 30 miles.

Although the circumstances of this case are such that the carrier does not actually issue `tickets' as evidence of the right to transportation, the annual payments made by the parents of each child transported are considered to be payments for `commutation or season tickets' within the meaning of section 4263(a) of the Code. Therefore, it is held that the tax imposed by section 4261(a) of the Code on the transportation of persons does not apply to the annual payments made to the carrier under the circumstances described above.