PART 49—FACILITIES AND SERVICES EXCISE TAXES Authority: 26 U.S.C. 7805. Section 49.4251-4 also issued under 26 U.S.C. 4251(d). Subpart A—Introduction Source: T.D. 6430, 24 FR 9664, Dec. 3, 1959, unless otherwise noted. § 49.0-1 Introduction. The regulations in this part 49 are designated “Facilities and Services Excise Tax Regulations.” The regulations relate to the taxes on communications and transportation by air imposed by chapter 33 of the Internal Revenue Code and the taxes on indoor tanning services imposed by section 5000B. See part 40 of this chapter for regulations relating to returns, payments, and deposits of these taxes. [T.D. 9621, 78 FR 34876, June 11, 2013] § 49.0-2 General definitions and use of terms. As used in the regulations in this part, unless otherwise expressly indicated: (a) The terms defined in the provisions of law contained in the regulations in this part shall have the meanings so assigned to them. (b) The Internal Revenue Code of 1954 means the Act approved August 16, 1954 (68A Stat.), entitled “An Act to revise the internal revenue laws of the United States”, as amended. (c) District director means district director of internal revenue. The term also includes the Director of International Operations in all cases where the authority to perform the functions which may be performed by a district director has been delegated to the Director of International Operations. (d) Calendar quarter means a period of 3 calendar months ending on March 31, June 30, September 30, or December 31. Subpart B [Reserved] Subpart C—Communications Source: T.D. 6664, 28 FR 7252, July 16, 1963, unless otherwise noted. § 49.4251-1 Imposition of tax. (a) In general. (b) Termination of tax on general telephone service. (2) In the case of amounts paid pursuant to bills rendered on or after July 1, 1965, for general telephone service for which no previous bill was rendered, no tax is imposed on that portion of the amount paid pursuant to such bill or bills as is attributable to general telephone service rendered subsequent to April 30, 1965. However, the tax applies to that portion of the amount paid pursuant to any such bill or bills as is attributable to general telephone service rendered prior to May 1, 1965. The tax also applies to amounts paid for general telephone service pursuant to bills rendered before July 1, 1965, without regard to when the payment is made or the service is rendered. [T.D. 6664, 28 FR 7252, July 16, 1963, as amended by T.D. 6694, 28 FR 12929, Dec. 5, 1963; T.D. 6753, 29 FR 12718, Sept. 9, 1964] § 49.4251-2 Rate and application of tax. (a) Rate of tax. Taxable service Rate of tax (percent) General telephone service 10 Toll telephone service 10 Telegraph service 10 Teletypewriter exchange service 10 Wire mileage service 10 Wire and equipment service 8 (b) Amounts paid. (c) Liability for, and return of, tax. [T.D. 6664, 28 FR 7252, July 16, 1963, as amended by T.D. 8442, 57 FR 48186, Oct. 22, 1992] § 49.4251-3 [Reserved] § 49.4251-4 Prepaid telephone cards. (a) In general. (b) Definitions. Carrier Comparable PTC Dollar card Holder Prepaid telephone card (PTC) Tariff Tariffed unit card (1) To a holder at a price that does not exceed the designated number of units on the PTC multiplied by the carrier's tariffed price per unit; or (2) To a transferee reseller subject to a contractual or other arrangement under which the price at which the PTC is sold to a holder will not exceed the designated number of units on the PTC multiplied by the carrier's tariffed price per unit. Transferee Transferee reseller Unit card Untariffed unit card (c) Determination of face amount Dollar card. (2) Tariffed unit card. (3) Untariffed unit card Transfer to holder. (ii) Transfer to transferee reseller In general. ( 1 ( 2 ( 3 (B) Applicable rate. 3 (C) Sales not at arm's length. 2 (4) Exclusion. (d) Liability for tax In general. (2) Effect of statement that purchaser is a carrier On transferor. (ii) On purchaser. (3) Exemptions. (e) Examples. Example 1. Unit card; sold to individual. (i) On May 1, 2000, A, a carrier, sells a card it calls a prepaid telephone card at A's retail store to P, an individual, for P's use in making telephone calls. A provides P with a PIN. The value of the card is not denominated in dollars, but the face of the card is marked 30 minutes. The sales price is $9. A tariff has not been filed for the minutes on the card. The toll telephone service acquired by purchasing the card will be obtained by entering the PIN and the telephone number to be called. (ii) Because P purchased from a carrier other than for resale, P is a holder. The card provides its holder, P, with a fixed amount of communications services (30 minutes of toll telephone service) to be obtained by means of a PIN, for which P pays in advance of obtaining service; therefore, the card is a PTC. Because the value of the PTC is not designated in dollars and a tariff has not been filed for the minutes on the PTC, the PTC is an untariffed unit card. Because it is transferred by the carrier to the holder, the face amount is the sales price ($9). (iii) The card is a PTC; thus, under section 4251(d), the face amount is treated as an amount paid for communications services and that amount is treated as paid when the PTC is transferred from A to P. Accordingly, at the time of transfer, P is liable for the 3 percent tax imposed by section 4251(a). The amount of the tax is $0.27 (3% × the $9 face amount). Thus, the total paid by P is $9.27, the $9 sales price plus $0.27 tax. A is responsible for collecting the tax from P. Example 2. Unit card; given to individual. (i) The facts are the same as in Example 1, (ii) Although the card provides P with a fixed amount of communications services (30 minutes of toll telephone service) to be obtained by means of a PIN, P does not pay for the service. Therefore, the card is not a PTC, even though it is called a prepaid telephone card by A. (iii) Because the card is not a PTC, section 4251(d) does not apply. Furthermore, no tax is imposed by section 4251(a) because no amount is paid for the communications services. Example 3. Unit card; adding value. (i) After using the card described in Example 2, (ii) Because P purchased from a carrier other than for resale, P is a holder. The arrangement provides its holder, P, with a fixed amount of communications services (30 minutes of toll telephone service) to be obtained by means of a PIN, for which P pays in advance of obtaining service; therefore, the arrangement is a PTC. Because the value of the PTC is not designated in dollars and a tariff has not been filed for the minutes on the PTC, the PTC is an untariffed unit card. Because it is transferred by the carrier to the holder, the face amount is the sales price ($9). (iii) The arrangement is a PTC; thus, under section 4251(d), the face amount is treated as an amount paid for communications services and that amount is treated as paid when the PTC is transferred from A to P. Accordingly, at the time of transfer, P is liable for the 3 percent tax imposed by section 4251(a). The amount of the tax is $0.27 (3% × the $9 face amount). Thus, the total paid by P is $9.27, the $9 sales price plus $0.27 tax. A is responsible for collecting the tax from P. Example 4. Dollar card; sold other than for resale. (i) On May 1, 2000, B, a carrier, sells 100,000 cards it calls prepaid telephone cards to Q, an auto dealer, for $50,000. Q will give away a card to each person that visits Q's dealership. B provides Q with a PIN for each card. The face of each card is marked $3. The toll telephone service acquired by purchasing the card will be obtained by entering the PIN and the telephone number to be called. (ii) Because Q purchased from a carrier other than for resale, Q is a holder. Each card provides its holder, Q, with a fixed amount of communications services ($3 of toll telephone service) to be obtained by means of a PIN, for which Q pays in advance of obtaining service; therefore, each card is a PTC even though Q's visitors do not pay for the cards. The value of each PTC is designated in dollars; therefore, each PTC is a dollar card. Because the PTC is a dollar card, the face amount is the designated dollar value ($3). (iii) The cards are PTCs; thus, under section 4251(d), the face amount is treated as an amount paid for communications services and that amount is treated as paid when the PTCs are transferred from B to Q. Accordingly, at the time of transfer, Q is liable for the 3 percent tax imposed by section 4251(a). The amount of the tax is $9,000 (3% × the $3 face amount × 100,000 PTCs). Thus, the total paid by Q is $59,000, the $50,000 sales price plus $9,000 tax. B is responsible for collecting the tax from Q. Example 5. Tariffed unit card; sold to transferee reseller. (i) On May 1, 2000, C, a carrier, sells 1,000 cards it calls prepaid telephone cards to R, a convenience store owner, for $7,000. C provides R with a PIN for each card. The value of the cards is not denominated in dollars, but the face of each card is marked 30 minutes and a tariff of $0.33 per minute has been filed for the minutes on each card. R agrees that it will sell the cards to individuals for their own use and at a price that does not exceed $0.33 per minute. R actually sells the cards for $9 each (that is, at a price equivalent to $0.30 per minute). The toll telephone service acquired by purchasing the card will be obtained by entering the PIN and the telephone number to be called. (ii) Because R purchased from a carrier for resale, R is a transferee reseller. Because R's customers will purchase other than for resale, they will be holders. Each card sold by R provides its holder, R's customer, with a fixed amount of communications services (30 minutes of toll telephone service) to be obtained by means of a PIN provided by the carrier, for which R's customer pays in advance of obtaining service; therefore, each card is a PTC. Because the value of each PTC is not designated in dollars and C sells the PTCs to R subject to an arrangement under which the price at which the PTCs are sold to holders will not exceed the designated number of minutes on the PTC multiplied by C's tariffed price per minute, each PTC is a tariffed unit card. Because the PTCs are tariffed unit cards, the face amount of each PTC is $9.90, the designated number of minutes on the PTC multiplied by the tariffed price per minute (30 × $0.33), even though the retail sale price of each card is $9. (iii) The cards are PTCs; thus, under section 4251(d), the face amount is treated as an amount paid for communications services and that amount is treated as paid when the PTC is transferred from C to R. Accordingly, at the time of transfer, R is liable for the 3 percent tax imposed by section 4251(a). The amount of the tax is $297 (3% × the $9.90 face amount × 1,000 PTCs). Thus, the total paid by R is $7,297, the $7,000 sales price plus $297 tax. C is responsible for collecting the tax from R. Example 6. Unit card; sold to transferee reseller. (i) On May 1, 2000, D, a carrier, sells 10,000 cards it calls prepaid telephone cards to S, a convenience store owner, for $60,000. D provides S with a PIN for each card. The value of the cards is not denominated in dollars, but the face of each card is marked 30 minutes. A tariff has not been filed for the minutes on each card. S will sell the cards to individuals for their own use for $9 each. D also sells a card that provides 30 minutes of the same type of communications service at its retail store for $9. The toll telephone service acquired by purchasing the card will be obtained by entering the PIN and the telephone number to be called. (ii) Because S purchased from a carrier for resale, S is a transferee reseller. Because S's customers will purchase other than for resale, they will be holders. Each card sold by S provides its holder, S's customer, with a fixed amount of communications services (30 minutes of toll telephone service) to be obtained by means of a PIN provided by the carrier, for which S's customer pays in advance of obtaining service; therefore, each card is a PTC. Because the value of each PTC is not designated in dollars and a tariff has not been filed for the minutes on the PTC, each PTC is an untariffed unit card. (iii) The PTCs are untariffed unit cards transferred by the carrier to a transferee reseller. Thus, the face amount is determined under paragraph (c)(3)(ii) of this section, which permits D to choose from three alternative methods. Under paragraph (c)(3)(ii)(A)( 1 2 3 (iv) The cards are PTCs; thus, under section 4251(d), the face amount is treated as an amount paid for communications services and that amount is treated as paid when the PTCs are transferred from D to S. Accordingly, at the time of transfer, S is liable for the 3 percent tax imposed by section 4251(a). Assuming that D chooses to determine the face amount as provided in paragraph (c)(3)(ii)(A)( 2 Example 7. Transfer of card that is not a PTC. (i) On May 1, 2000, E, a carrier, provides a telephone card to T, an individual, for T's use in making telephone calls. E provides T with a PIN. The card provides access to an unlimited amount of communications services. E charges T $0.25 per minute of service, and bills T monthly for services used. The communications services acquired by using the card will be obtained by entering the PIN and the telephone number to be called. (ii) Although the communications services will be obtained by means of a PIN, T does not receive a fixed amount of communications services. Also, T cannot pay in advance since the amount of T's payment obligation depends upon the number of minutes used. Therefore, the card is not a PTC. (iii) Because the card is not a PTC, section 4251(d) does not apply. However, the 3 percent tax imposed by section 4251(a) applies to the amounts paid by T to E for the communications services. Accordingly, at the time an amount is paid for communications services, T is liable for tax. E is responsible for collecting the tax from T. (f) Effective date. [T.D. 8855, 64 FR 1057, Jan. 7, 2000; 65 FR 10153, Feb. 25, 2000] § 49.4252-1 [Reserved] § 49.4252-2 Toll telephone service. (a) In general. (b) Amounts paid. (2) The tax attaches to the total charge made to a hotel or similar subscriber for toll telephone service furnished to the hotel or its guests, but no tax attaches to any charge made by the hotel for service rendered in placing the calls for its guests. (c) Cross reference. § 49.4252-3 [Reserved] § 49.4252-4 Provisions common to telephone and telegraph services. (a) In general. (b) When transmission begins and ends. (c) Services rendered under contract. (2) Where a telegraph company agrees to transmit over its wires dispatches or messages relating to the business of a carrier free or at reduced rates in consideration of services to be performed by the carrier in transporting men or materials of the telegraph company, all such dispatches or messages are subject to tax. (d) Meaning of the term “United States”. (e) Exemptions. § 49.4252-5 Teletypewriter exchange service. (a) In general. (b) Amounts paid. (c) Exemptions. § 49.4253-1 Exemption for certain coin-operated service. (a) In general. (b) Exception where service furnished for a guaranteed amount. § 49.4253-2 Exemption for news services. (a) In general. (1) In the collection of news for the public press or radio or television broadcasting or in the dissemination of news through the public press or by means of radio or television broadcasting; or (2) In the collection or dissemination of news by a news ticker service furnishing a general news service similar to that of the public press. For the exemption to apply, the charge for the services must be billed in writing to the person paying for the services and such person must certify in writing that the services are so utilized. (b) Scope of the exemption. (2) The exemption does not extend to the collection and dissemination of information or matters for publication in magazines, periodicals, and trade and scientific publications issued to supply information on certain subjects of interest to particular groups; or to amounts paid by newspapers, press associations, radio or television news broadcasting agencies or networks, or news ticker services, for general telephone service taxable under section 4251. § 49.4253-3 Exemption for certain organizations. (a) The American National Red Cross. (b) International organizations. (c) Exemption certificate. Exemption of Certificate (Date) __________________________ 19____ I certify that ______________________ (Name of service) have been furnished by (Telephone, telegraph company, etc.) to ____________________ (International Organization, etc.); that the charges of $______ will be paid from ____________________ (International Organization, etc.) funds; and that the charges are exempt from tax under section 4253(c) of the Internal Revenue Code. (Signature of officer or employee) (Address) (Title) Note: Penalty for fraudulent use, $10,000 or imprisonment or both. § 49.4253-4 Exemption for servicemen in combat zone. (a) In general. (b) Service in combat zone. (c) Exemption certificate. Exemption Certificate (Overseas Telephone Calls) (Date) ____________________________ 19____ I certify that the toll charges of $__________ are for telephone or radio telephone messages originating at __________________________ (Point of origin) within a combat zone from (Name) a member of the Armed Forces of the United States performing service in such combat zone; that the transmission facilities were furnished by ____________________ (Name of carrier); and that the charges are exempt from tax under section 4253(d) of the Internal Revenue Code. (Signature of subscriber) (Address) Note: Penalty for fraudulent use, $10,000 or imprisonment or both. (2) See § 49.4253-11 for further provisions relating to exemption certificates. § 49.4253-5 Exemption for items otherwise taxed. A dispatch, message, or conversation transmitted by toll telephone, telegraph, or teletypewriter exchange over the combined facilities of several lines or stations of one or more persons is considered to be one dispatch, message, or conversation, and is subject to only one payment of tax under section 4251. § 49.4253-6 Exemption for common carriers and communications companies. (a) In general. (2) The tax imposed by section 4251 on amounts paid for general telephone service does not apply to amounts paid for the use of a continuous telephone or radio telephone line or channel to the extent that the amounts paid are for use by a common carrier, telephone or telegraph company, or television or radio broadcasting station or network in the conduct of its business as such, if such line or channel connects stations between any two of which there would otherwise be a toll charge. A line or channel connects stations between which there would otherwise be a toll charge if the telephone company makes a toll charge for a single message transmitted between the two stations in the case of the ordinary residential and business or commercial telephone service. A line or channel connecting two stations is considered a continuous line or channel if such line or channel does not connect with any switchboard interposed between the two stations, which makes it possible to carry on two or more independent conversations simultaneously. Where a line or channel connects with such a switchboard, the exemption is inapplicable to so much of the amount paid as is attributable to the portion of the line or channel which extends from a station to a switchboard located in the same local service area. (b) Exemption inapplicable. § 49.4253-7 Exemption for installation charges. (a) In general. (b) Maintenance charges subject to tax. §§ 49.4253-8-49.4253-9 [Reserved] § 49.4253-10 Exemption for certain private communications services. (a) In general. (b) Exemption inapplicable. § 49.4253-11 Use and retention of exemption certificates. A separate exemption certificate (as required by §§ 49.4253-3 and 49.4253-4) shall be furnished for each message paid for as a separate item, but where periodic payments are made, a blanket certificate (for a period not to exceed four calendar quarters) may be accepted as evidence of the right to exemption. An agent of a telegraph, telephone, radio, or cable company should not accept an exemption certificate unless satisfied, on the basis of proper credentials or otherwise, that the person who signed it is the person whom he represents himself to be and that the exemption claimed is allowable under the law. Exemption certificates should be retained with the record of the services rendered for inspection by internal revenue officers as provided in section 6001 and the regulations in Subpart G of this part. § 49.4253-12 Cross reference. For exemptions applicable to amounts received as payment for services furnished to the government of any State or political subdivision of a State, to the District of Columbia, to the government of the United States, or to certain nonprofit educational organizations, see sections 4292, 4293, and 4294, and the regulations thereunder contained in Subpart F of this part. § 49.4254-1 Computation of tax. (a) General rule. (b) Special rule in certain cases. § 49.4254-2 Payment for toll telephone service or telegraph service in coin-operated telephones. Where the tax on a toll telephone or radio telephone message or conversation, or a telegraph, cable, or radio dispatch or message is paid by inserting coins in a coin-operated telephone, the tax shall be computed to the nearest multiple of 5 cents, and where the tax is midway between multiples of 5 cents, the next highest multiple shall apply. In other words, one-half or a greater fraction of 5 cents shall be treated as 5 cents and a smaller fraction shall be ignored. Subpart D—Transportation of Persons Source: T.D. 6430, 24 FR 9665, Dec. 3, 1959, unless otherwise noted. Note: For exemption from tax on transportation of persons by air of amounts paid by the Department of the Interior for fire prevention and control activities, see 32 FR 5457, April 1, 1967. § 49.4261-1 Imposition of tax; in general. (a) In general. (1) Percentage tax. See taxable transportation. (2) Domestic segment tax. See domestic segment. See rural airport. (3) International travel facilities tax. See See (b) Payment and collection obligations In general. taxpayer. See collector See Quarterly Federal Excise Tax Return, See See See See See (2) Failure to collect tax. See See (c) Type of aircraft. See (d) Purpose of transportation. (e) Routes. See (f) Exemptions from tax; cross-references Aircraft management services. (2) Hard minerals, oil, and gas. (3) Trees and logging operations. (4) Air ambulances. (5) Skydiving. (6) Seaplanes. (7) Fractionally-owned aircraft. (8) Small aircraft on nonestablished lines. (9) Affiliated groups. (10) United States and territories. (g) Applicability date. [T.D. 9948, 86 FR 5001, Jan. 19, 2021] § 49.4261-2 Application of tax. (a) Tax on total amount paid. (b) Tax on transportation of each person. (c) Charges for nontransportation services. (d) Applicability date. see [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6518, 25 FR 13134, Dec. 21, 1960, as amended by T.D. 6618, 27 FR 11222, Nov. 14, 1962; T.D. 9948, 86 FR 5001, Jan. 19, 2021] § 49.4261-3 Payments made within the United States. (a) Transportation beginning and ending in the United States or the 225-mile zone. (b) Other transportation. (1) Begins in the United States or the 225-mile zone and ends outside such area, (2) Begins outside the United States or the 225-mile zone and ends inside such area, or (3) Begins outside the United States and ends outside such area, is taxable only with respect to the portion of the transportation by air which is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if such portion is not a part of “uninterrupted international air transportation” within the meaning of section 4262(c)(3) and § 49.4262-3(c). Thus, on a trip by air from Chicago to London, England, with a stopover at New York, for which payment is made in the United States, if the portion from Chicago to New York is not a part of “uninterrupted international air transportation” within the meaning of section 4262(c)(3) and § 49.4262-3(c), the taxes would apply to the part of the payment which is applicable to the transportation from Chicago to New York. However, if the portion from Chicago to New York is a part of “uninterrupted international air transportation” within the meaning of section 4262(c)(3) and § 49.4262-3(c), the taxes would not apply. (c) Method of computing tax on taxable portion. (d) Cross reference. (e) Applicability date. see [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6618, 27 FR 11222, Nov. 14, 1962; T.D. 9948, 86 FR 5001, Jan. 19, 2021] § 49.4261-4 Payments made within the United States; evidence of nontaxability. (a) Presumption of taxability. (b) Through tickets. (c) Separate tickets. (1) The international ticket or order shall be inscribed or stamped with an appropriate legend (for example, “Cannot be reused to obtain any tax exemption on a domestic ticket or order”) to show that a domestic ticket or order has been purchased wholly or partially tax free for use in conjunction therewith. (2) The domestic ticket or order shall be inscribed to show (i) the identity of the agency or carrier which received payment therefor (unless otherwise shown on the ticket or order), (ii) the origin and destination of the additional transportation, (iii) the identify of the carrier furnishing the additional transportation, and (iv) the serial number of the ticket or order covering such additional transportation. If the domestic ticket or order is not large enough to accommodate the prescribed inscription, a statement setting forth the required information shall be attached to such ticket or order. (d) Tickets issued for uninterrupted international air transportation. [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6618, 27 FR 11223, Nov. 14, 1962; T.D. 9948, 86 FR 5003, Jan. 19, 2021] § 49.4261-5 Payments made outside the United States. (a) In general. (b) Transportation between two or more points in the United States. (2) The following examples illustrate the application of this paragraph: Example (1). W travels from Havana, Cuba to New York by way of Miami. He purchases in Havana a steamship ticket for his transportation from Havana to Miami and an exchange order for air transportation from Miami to New York. The ticket for the connecting transportation from Havana to Miami, and the order for the transportation from Miami to New York were not appropriately inscribed by the agency or carrier which received the payment for the air transportation involved at the time such payment was received so as to clearly show that the ticket and order were purchased for use in conjunction with each other. Therefore, the agency or carrier which accepts the exchange order and issues the ticket for the transportation from Miami to New York is required to collect the tax which applies to the amount paid outside the United States for such transportation. Example (2). X travels on a round trip from Montreal, Canada, to Los Angeles by way of New York. He purchases in Montreal air transportation for the round trip between New York and Los Angeles, and uses a private automobile for transportation from Montreal to New York and return to Montreal. The amount paid in Montreal for the round-trip transportation between New York and Los Angeles is a payment for transportation which begins and ends in the United States and is therefore subject to tax. (c) Cross reference. [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended at T.D. 9948, 86 FR 5003, Jan. 19, 2021] § 49.4261-6 Payments made outside the United States; evidence of nontaxability. (a) In general. (b) Through tickets. (c) Separate tickets. (1) The ticket or order for the connecting transportation from or to a point outside the United States shall be inscribed or stamped with an appropriate legend (for example, “Not to be used again for purchase of tax-free United States transportation”) to show that the United States portion has been purchased tax free for use in conjunction therewith. (2) Where the ticket for the United States portion is issued outside the United States, it shall be inscribed to show (i) the identity of the agency or carrier which received payment therefor (unless otherwise shown on the ticket), (ii) the origin and destination of the connecting transportation, (iii) the identity of the carrier furnishing the connecting transportation, and (iv) the serial number of the ticket or order covering such connecting transportation. If the ticket is not large enough to accommodate the prescribed inscription, a statement setting forth the required information shall be attached to such ticket. (3) Where an order for the United States portion is issued outside the United States, it shall be inscribed to show (i) the origin and destination of the connecting transportation, (ii) the identity of the carrier furnishing the connecting transportation, and (iii) the serial number of the ticket or order covering such connecting transportation. (d) Ticket issued pursuant to inscribed order. (e) Maintenance of records. (f) Examples. Example (1). Y travels from London, England, to San Francisco by way of New York. He purchases from an agency or carrier in England all of the transportation involved in such journey, which includes air transportation from London to New York and from New York to San Francisco, for which separate tickets are issued. The agency or carrier which receives the payment for Y's transportation from New York to San Francisco will not be required to collect tax with respect to the payment, provided it determines at the time such payment is received that the transportation in question is being purchased for use in conjunction with the connecting transportation from London to New York and it appropriately inscribes both of the tickets for the journey. Example (2). Z travels from Havana, Cuba, to New York by way of Miami. He purchases in Havana a ticket for his transportation by water from Havana to Miami, and later purchases from a travel agency in Havana air transportation from Miami to New York for which the travel agency issues an exchange order. To establish the nontaxable character of the payment for Z's transportation from Miami to New York the travel agency shall determine at the time payment is received by it that the transportation is being purchased for use in conjunction with the connecting transportation from Havana to Miami, and shall make the appropriate inscription on the ticket and the order. The carrier which accepts the exchange order and issues the ticket for the transportation from Miami to New York will not be required to collect tax with respect to the ticket so issued if it appropriately inscribes the ticket as provided in paragraph (d) of this section. § 49.4261-7 Examples of payments subject to tax. The following are examples of payments for transportation which, unless otherwise exempt under section 4261, 4281, 4282, or 4293 of the Internal Revenue Code are subject to tax: (a) Cash fares. (b) [Reserved] (c) Additional charges. (d)-(e) [Reserved] (f) Prepaid orders, exchange orders, or similar orders. (g) [Reserved] (h) Aircraft charters. (2) The charterer of an aircraft who sells transportation to other persons must collect and account for the tax with respect to all amounts paid to the charterer by such other persons. In such case, no tax will be due on the amount paid by the charterer for the charter of the aircraft but it shall be the duty of the owner of the aircraft to advise the charterer of the charterer's obligation for collecting, accounting for, and paying over the tax to the Internal Revenue Service. (i) All-expense tours. (j) Payments remitted to foreign countries by persons in the United States. (k) Applicability date. see [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6618, 27 FR 11223, Nov. 14, 1962; T.D. 9948, 86 FR 5003, Jan. 19, 2021] § 49.4261-8 Examples of payments not subject to tax. In addition to a payment specifically exempt under section 4261, 4281, 4282, or 4293 of the Internal Revenue Code the following are examples of payments not subject to tax: (a) Exchange of prepaid order, scrip, etc., for tickets. (b) Caretakers and messengers accompanying freight shipments. (c) Special baggage transportation equipment. (d) Circus or show conveyances. (e) Corpses. (f) Miscellaneous charges. (1) Charges for transportation of baggage, including incidental charges such as excess value, storage, transfer, parcel checking, special delivery, etc. (2)-(3) [Reserved] (4) Charges for admissions, guides, meals, hotel accommodations, and other nontransportation services, for example, where such items are included in a lump sum payment for an all-expense tour. (5) [Reserved] [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6618, 27 FR 11223, Nov. 14, 1962; T.D. 9948, 86 FR 5003, Jan. 19, 2021] § 49.4261-9 Mileage awards. (a) Tax imposed. See (b) [Reserved] (c) Applicability date. [T.D. 9948, 86 FR 5003, Jan. 19, 2021] § 49.4261-10 Aircraft management services. (a) In general Overview. See (2) Private aviation. (3) Adequate records required. (b) Definitions. (1) Aircraft management services. aircraft management services (i) Statutory services. (ii) Other services. (2) Aircraft management services provider. aircraft management services provider (3) Aircraft owner In general. aircraft owner (ii) Persons not included in the definition of aircraft owner. (4) Disqualified lease. disqualified lease (5) Fair market value. fair market value (6) For-hire flight. for-hire flight (7) Owner trust. owner trust (8) Private aviation. private aviation (9) Substitute aircraft. substitute aircraft (c) Pro rata allocation In general. See (2) Substitute aircraft Flight treated as a charter. (ii) General rule for flights provided on substitute aircraft. (iii) Special rule for for-hire flights provided on substitute aircraft. (d) Choice of flight rules. (e) Aircraft available for hire. See (f) Billing methods. (g) Multiple aircraft management services providers not disqualifying. (h) Examples. (1) Example 1 Facts. (ii) Analysis. See (2) Example 2 Facts. (ii) Analysis. See (3) Example 3 Facts. (ii) Analysis. See See See (i) Applicability date. [T.D. 9948, 86 FR 5003, Jan. 19, 2021] § 49.4262-1 Taxable transportation. (a) In general. (1) Transportation by air which begins in the United States or in that portion of Canada or Mexico which is not more than 225 miles from the nearest point in the continental United States (225-mile zone) and ends in the United States or in the 225-mile zone; and (2) In the case of any other transportation by air, that portion of such transportation that is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if such transportation is not part of uninterrupted international air transportation The provisions of this paragraph are applicable whether the transportation is by rail, motor vehicle, water, or air, or any combination thereof, except that with respect to transportation which begins after November 15, 1962, the tax, if applicable, applies only to the amount paid for that portion of the transportation which is by air. (b) Illustrations of taxable transportation under section (1) New York to Seattle; (2) New York to Vancouver, Canada, with a stop at Toronto, Canada; (3) Chicago to Monterrey, Mexico; (4) Montreal, Canada, to Toronto, Canada; and (5) Miami to Los Angeles via Panama. If in the examples in paragraph (b)(1) and (5) of this section, payment for the transportation had been made outside the United States, such payment would nevertheless have been subject to tax since in each case the transportation begins and ends in the United States. (c) [Reserved] (d) Examples. (1) Example (1). (2) [Reserved] (3) A purchases a through ticket for air transportation from San Francisco to London with stopovers at Denver, Chicago, Philadelphia, and New York. At each stopover the air carrier has scheduled his arrival and departure within 12 hours. After arriving in Philadelphia, A, for his own convenience, decides to stopover for more than 12 hours. The total amount paid by A for his transportation from San Francisco to New York is subject to the taxes imposed by section 4261(a) and (b) since the scheduled interval between the beginning or end and the end or beginning of any two segments of the domestic portion of international air transportation exceeded 12 hours. If the stopover interval in Philadelphia is extended for more than 12 hours by the carrier solely for its own convenience such as making repairs to the aircraft, the domestic portion of A's trip will not become taxable, provided A continues his international air transportation no later than on the first available flight offered by the carrier. (4) A purchases a through ticket for transportation by air from Los Angeles to Barbados with stopovers at Houston, Mexico City, Mexico, and Miami. At each stopover, except Mexico City, A's scheduled time of arrival and departure is within 12 hours. At Mexico City, A's scheduled time of arrival and departure exceeds 12 hours. The total amount paid by A for his transportation from Los Angeles to Miami, including that part of the transportation to and from Mexico City, is subject to tax since the transportation includes a portion which is indirectly from one port or station in the United States to another port or station in the United States (Houston to Miami via Mexico City) and the scheduled interval in Mexico City between two segments of such portion exceeds 12 hours. If A's scheduled arrival and departure at each stopover of his transportation which is directly or indirectly between ports or stations in the United States, including that at Mexico City, had been within a 12 hours interval and A had arrived and departed at each such stopover within that period, the transportation would have qualified as uninterrupted international air transportation and no part of the amount paid for the transportation by air from Los Angeles to Barbados would be subject to the taxes imposed by section 4261(a) and (b). (e) Examples of transportation that is not taxable transportation. (1) New York to Trinidad with no intervening stops; (2) Minneapolis to Edmonton, Canada, with a stop at Winnipeg, Canada; (3) Los Angeles to Mexico City, Mexico, with stops at Tijuana and Guadalajara, Mexico; (4) New York to Whitehorse, Yukon Territory, Canada, by air with a scheduled stopover in Chicago of five hours. Amounts paid for the transportation referred to in examples set forth in paragraphs (e)(1), (2), and (3) of this section are not subject to the tax regardless of where payment is made, since none of the trips: (i) Begin in the United States or in the 225-mile zone and end in the United States or in the 225-mile zone, nor (ii) Contain a portion of transportation which is directly or indirectly from one port or station in the United States to another port or station in the United States. The amount paid within the United States for the transportation referred to in the example set forth in paragraph (4) of this section is not subject to tax since the entire trip (including the domestic portion thereof) is uninterrupted international air transportation (f) Applicability date. see [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6618, 27 FR 11223, Nov. 14, 1962. Redesignated and amended by T.D. 9948, 86 FR 5005, Jan. 19, 2021] § 49.4262-2 Exclusion of certain travel. (a) In general. (1) Such portion is outside the United States; (2) Neither such portion nor any segment thereof is directly or indirectly: (i) Between ( a b (ii) A port or station in the 225-mile zone; (3) Such portion: (i) Begins at either ( a b (ii) Ends at either ( a b (4) A direct line from the point (or the port or station) specified in subparagraph (3) (i) of this paragraph, to the point (or the port or station) specified in subparagraph (3) (ii) of this paragraph, passes through or over a point which is not within 225 miles of the United States. For purposes of this section, the route of the transportation shall be deemed to leave or enter the United States when it passes over (i) the international boundary line between any part of the United States and a contiguous foreign country, or (ii) a point three nautical miles (3.45 statute miles) from low tide on the coast line. (b) Transportation to or from Alaska or Hawaii. (2) The provisions of subparagraph (1) of this paragraph may be illustrated by the following examples: Example (1). A buys a ticket for transportation by air from Seattle to Fairbanks, Alaska, via Ketchikan and Juneau, Alaska, and Whitehorse, Yukon Territory, Canada. The portion of the transportation between the point where the route of the transportation leaves the continental United States and the point where it first enters Alaska (the three-mile limit or the international boundary) is not subject to tax. Example (2). [Reserved] Example (3). C purchases a ticket in the United States for transportation by air from Vancouver, Canada, to Honolulu, Hawaii. No part of the route followed by the carrier passes through or over any part of the continental United States. The only part of the payment made by C for this transportation which is subject to the tax is that applicable to the portion of the transportation between the three-mile limit off the coast of Hawaii and the airport in Honolulu. (c) Method of computing tax on travel not excluded. (i) The tax may be computed on that proportion of the total amount paid which the mileage of the taxable portion of the transportation bears to the mileage of the entire trip, or (ii) If the taxable portion of the transportation includes transportation from one port or station to another port or station for which an applicable local fare of a like class is available, the tax may be computed on the amount of such local fare, plus an amount equivalent to that proportion of the remainder of the total amount paid which the mileage of the remainder of the taxable portion of the transportation bears to the remainder of the mileage of the entire trip. If the taxable transportation includes a leg from a station to a coastal gateway point of embarkation for which a uniform fare is charged regardless of the gateway point actually used, the tax on such a leg may be computed on the basis of such uniform fare. In the absence of a fare described in this subparagraph, the tax must be determined in accordance with subdivision (i) of this subparagraph. If the taxable portion of the transportation includes a leg between coastal gateway points of embarkation for which no additional fare is charged no tax shall be applicable to such leg of the transportation. (2) The basis for determining the proportions described in subdivisions (i) and (ii) of subparagraph (1) of this paragraph shall be the average mileage of the established route traveled by the carrier between given points under normal circumstances. (d) Example. Table 1 to Paragraph (d) Mileage of entire trip (San Francisco airport to Honolulu airport) (miles) 2,400 Mileage in continental United States (miles) 15 Mileage in Hawaii (miles) 5 20 Fare from San Francisco to Honolulu $168.00 Payment for taxable portion (20/2400 × $168) $1.40 Tax due (7.5% (rate in effect on date of payment) × $1.40) $0.11 (All distances and fares assumed for purposes of this example. This example addresses only the computation of the tax imposed by section 4261(a). It does not address the computation of any other tax imposed by section 4261 that may apply to these facts.) (e) Applicability date. see [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6618, 27 FR 11224, Nov. 14, 1962. Redesignated and amended by T.D. 9948, 86 FR 5006, Jan. 19, 2021] § 49.4262-3 Definitions. (a) The continental United States. (b) The 225-mile zone. (c) Uninterrupted International air transportation. (i) Where the transportation within the United States involves one stop, the scheduled interval between the beginning or end of the United States portion of such air transportation and the end or beginning of the remainder of the air transportation, and (ii) Where the United States portion of such transportation involves two or more stops, the scheduled interval between the beginning or end of one segment and the end or beginning of the continuing segment of such portion does not exceed 12 hours. The transportation is considered to be entirely by air even though the passenger may use other means of transportation between two airports provided the scheduled 12-hour limitation for his continuing air transportation is complied with. Transportation which otherwise is uninterrupted international air transportation does not cease to be such because of the use of non-air transportation between ports or stations which are outside the United States, provided the non-air transportation is not part of transportation which is indirectly from one port or station in the United States to another port or station in the United States. (2) Where the interval between arrival and departure time at any stopover point in the United States exceeds 12 hours, such transportation is not uninterrupted international air transportation even though the schedules of the air lines do not make possible a scheduling within the 12-hour limit. Where any interval scheduled for 12 hours or less is increased to exceed 12 hours, the transportation will continue to be uninterrupted international air transportation if the increase in time is attributable to delays in the arrival or departure of the scheduled air transportation. In such case the transportation shall continue to be uninterrupted international air transportation if the passenger continues his transportation no later than on the first available flight offered by the continuing carrier which affords the passenger substantially the same accommodations as originally purchased. However, if for any other reason such interval at any stopover is increased to more than 12 hours, the transportation will lose its classification of uninterrupted international air transportation. The tax applicable in such case shall be paid as provided in § 49.4263-3(a)(2). The transportation from the point of orgin in the United States to a port or station outside the United States and the 225-mile zone, with a stopover in the United States, must be scheduled before the time the initial transportation commences in order for the United States portion of such transportation to qualify as uninterrupted international air transportation. For example, where transportation by air from Chicago to New York only is scheduled in Chicago and transportation by air from New York to London, England, is scheduled by the passenger after his arrival in New York, the Chicago to New York trip does not qualify as uninterrupted international air transportation even though the passenger may depart on the London flight within 12 hours after arrival in New York. (d) Transportation. transportation (e) Applicability date. see [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6618, 27 FR 11225, Nov. 14, 1962; 27 FR 11691, Nov. 28, 1962. Redesignated and amended by T.D. 9948, 86 FR 5007, Jan. 19, 2021] § 49.4263-1 Duty to collect the tax; payments made outside the United States. (a) Duty to collect tax. See See (b) Applicability date. see [T.D. 9948, 86 FR 5007, Jan. 19, 2021] § 49.4263-2 Duty to collect the tax in the case of certain refunds. (a) Special rule for collection of tax. (b) Return of tax. (c) Example. [T.D. 6430, 24 FR 9665, Dec. 3, 1959. Redesignated and amended by T.D. 9948, 86 FR 5007, Jan. 19, 2021] § 49.4263-3 Special rule for the payment of tax. (a) In general. (b) Relationship to other sections. (c) [Reserved] (d) Applicability date. see [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6618, 27 FR 11226, Nov. 14, 1962. Redesignated and amended by T.D. 9948, 86 FR 5007, Jan. 19, 2021] § 49.4263-4 Cross reference. For the rules applicable under section 4263(d) see § 49.4261-4 relating to payments made within the United States. [T.D. 6430, 24 FR 9665, Dec. 3, 1959. Redesignated and amended by T.D. 9948, 86 FR 5007, Jan. 19, 2021] § 49.4263-5 Round trips. (a) In general. (b) Open jaw transportation. [T.D. 6430, 24 FR 9665, Dec. 3, 1959. Redesignated by T.D. 9948, 86 FR 5007, Jan. 19, 2021] § 49.4263-6 Transportation outside the northern portion of the Western Hemisphere. (a) Transportation which leaves and re-enters the northern portion of the Western Hemisphere. (b) [Reserved] (c) Northern portion of the Western Hemisphere. [T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6618, 27 FR 11227, Nov. 14, 1962. Redesignated and amended by T.D. 9948, 86 FR 5007, Jan. 19, 2021] Subpart E—Transportation of Property § 49.4271-1 Tax on transportation of property by air. (a) Purpose of this section. (b) Imposition of tax (2) The tax imposed by section 4271 does not apply to amounts paid for the transportation of property by air if such transportation is furnished on an aircraft having a maximum certificated takeoff weight (as defined in section 4281(b) of the Code) of 6,000 pounds or less, unless such aircraft is operated on an established line or when such aircraft is a jet aircraft. The tax imposed by section 4271 also does not apply to any payment made by one member of an affiliated group (as defined in section 4282(b) of the Code) to another member of such group for services furnished in connection with the use of an aircraft if such aircraft is owned or leased by a member of the affiliated group and is not available for hire by persons who are not members of such group. (c) Property exported or imported entirely by air. (2) If a through airwaybill covering air transportation from its beginning in the United States to a foreign destination, or from its beginning abroad to a U.S. destination, has not been issued, then the export or import character of the shipment must be evidenced by a contract or other written evidence clearly showing the beginning point and ending point of the air transportation. (3) If a through airwaybill has been issued covering air transportation to a foreign destination, but the transportation nevertheless ends in the United States (for example, because the foreign consignee cancels the order before the shipment leaves a gateway city), then the amount paid for air transportation is taxable. In such a case the air carrier must collect the tax from the shipper or other person who paid for the air transportation. (4) Any transportation of property by air shipped by the Department of Defense through an aerial port of embarkation and debarkation on a U.S. Government bill of lading shall be considered to: (i) Begin in the United States and end outside the United States if the bill of lading states that the shipment is “For Export”, or (ii) Begin outside the United States and end in the United States if the bill of lading states that the shipment is “Imported by Air”. If a U.S. Government bill of lading stating that a shipment is “For Export” has been issued but the shipment nevertheless ends in the United States, then the amount paid for air transportation is taxable. In such a case the Department of Defense shall notify the air carrier that the shipment is taxable and shall pay the tax to such carrier. (d) Exportation involving two or more modes of transportation. (2)(i) Continuous movement in the course of exportation shall be evidenced by ( a b (ii) Form 1363 may be used in connection with a separate payment otherwise subject to tax or it may be used, with the permission of the district director, as a blanket exemption certificate by a person who expects to make payments for numerous export shipments over an indefinite period of time. If used in connection with a separate payment, the certificate shall be executed, in duplicate, by the shipper or other person making the payment subject to tax. Such person shall retain the duplicate with the shipping papers for at least 3 years from the last day of the month during which the shipment was made from the point of origin, and shall file the original with the carrier at the time of payment of the transportation charge. The carrier receiving the original certificate shall retain it along with the document showing payment of the transportation charge, for a period of at least 3 years from the last day of the month during which the shipment was made from the point of origin. (iii) Form 1363 may be used as a blanket exemption certificate by a person who demonstrates to the satisfaction of the district director that it is impracticable to execute a separate Form 1363 for each payment. Permission to execute a blanket exemption certificate shall be requested, in writing, from the district director for the district in which is located the principal place of business or principal office or agency of the shipper or other person seeking permission. If permission is granted a separate certificate shall be executed in duplicate, by the shipper or other person making the payments, for each air carrier to be used in making export shipments. Such person shall retain the duplicate together with all shipping papers, and shall file the original with the air carrier with or before payment of the first transportation charge to be covered by the certificate. The air carrier shall retain the original certificate together with all documents showing payment of the transportation charges. Permission to execute a blanket exemption certificate if granted, shall remain in force until withdrawn by the person who requested such permission or until withdrawn by the district director who granted such permission. Each person shall retain the certificate for at least 3 years after the last day of the month during which the final shipment covered by the certificate was made from the point of origin. Each person shall retain the shipping and payment documents for at least 3 years after the last day of the month during which the shipment was made from the point of origin. (3) The filing of a properly executed Form 1363 with the carrier suspends liability for the payment of the tax for a period of 6 months from the date of shipment from the point of origin. If the person who is liable for the tax has not provided evidence to the carrier of the actual exportation of a shipment within such period, then the temporary suspension of the liability for the payment of the tax ceases and the carrier shall collect the tax from the person who paid the carrier for the transportation charge. If, after collection of the tax by the carrier, proof of exportation is subsequently received by the carrier, credit or refund of the tax may be obtained under the terms set forth in section 6415 of the Internal Revenue Code of 1954. (4) Documentary evidence of the exportation of the property may consist of a copy of export bill of lading, memorandum from the captain of the vessel, customs official, or a foreign consignee, shipper's export declaration, or other evidence sufficient to establish that the property has actually been exported. The person making the payment subject to tax shall furnish the appropriate documentary evidence to the carrier, or a statement that he holds such documentary evidence. In the latter case, the statement must: (i) Certify that the property covered by the Export Exemption Certificate, Form 1363 was exported; (ii) identify the evidence of exportation; (iii) specify the foreign destination or the possession of the United States to which the property was shipped; and (iv) show the place where such evidence will be available for inspection by internal revenue officers. Any documentary evidence or statement, as the case may be, shall be retained by the carrier and the person making the payment subject to tax for a period of three years from the last day of the month during which the shipment was made from the point of origin. If the person making the payment subject to tax is not the actual exporter and is unable to obtain documentary evidence of exportation, such person shall obtain from the person having custody of the documentary evidence a statement containing the same facts as listed above for a statement furnished to the carrier by the person liable for the tax. The person making the payment subject to tax shall furnish the original of such statement to the carrier and shall retain a copy in his records. The statement shall be retained for the same three year period as the evidence of exportation is to be retained. (e) Definitions Property. (2) Transportation. (3) Taxable transportation. (f) Collection of tax. (g) Applicability date. see [T.D. 7054, 35 FR 12117, July 29, 1970, as amended by T.D. 7190, 37 FR 12794, June 29, 1972; T.D. 7316, 39 FR 21126, June 19, 1974; T.D. 7517, 42 FR 58935, Nov. 14, 1977; T.D. 7953, Redesignated and amended by T.D. 8328, 56 FR 190, Jan. 3, 1991; T.D. 8442, 57 FR 48186, Oct. 22, 1992; T.D. 9948, 86 FR 5007, Jan. 19, 2021] § 49.4271-2 Aircraft management services. For rules regarding the exemption for certain amounts paid by aircraft owners for aircraft management services, see § 49.4261-10. This section applies to amounts paid on and after January 19, 2021. For rules that apply before that date, see [T.D. 9948, 86 FR 5008, Jan. 19, 2021] § 49.4281-1 Small aircraft on nonestablished lines. (a) In general. (b) Maximum certificated takeoff weight. maximum certificated takeoff weight (c) Established line. (d) Jet aircraft. jet aircraft (e) Applicability date. see [T.D. 6430, 24 FR 9665, Dec. 3, 1959. Redesignated by T.D. 6618, 27 FR 11226, Nov. 14, 1962. Further redesignated and amended by T.D. 9948, 86 FR 5007, Jan. 19, 2021] § 49.4282-1 [Reserved] Subpart F—Collection of Tax By Persons Receiving Payment § 49.4291-1 Persons receiving payment must collect tax. Except as otherwise provided in section 4263(a), every person receiving any payment for facilities or services on which a tax is imposed upon the payor thereof under chapter 33 shall collect the amount of the tax from the person making that payment. Under section 7501, all taxes collected in this manner are held by the collecting agent in trust for the United States. If the person from whom the tax is required to be collected refuses to pay it or if for any reason it is impossible for the collecting agent to collect the tax from that person, the collecting agent is required to report to the Commissioner the name and address of that person, the nature of the facility provided or service rendered, the amount paid therefore, and the date on which paid. Applicable October 1, 2004, this report must be made on or before the report due date. Upon receipt of this report the Commissioner will proceed against the person to whom the facilities were provided or the services rendered to assert the amount of tax due, affording that person the same conference, protest, and appellate rights as are available to other excise taxpayers. In addition, when a field or office audit of a collecting agent's records, or of a taxpayer's records, discloses that the collecting agent failed during prior reporting periods to collect taxes due, the Commissioner may assert those taxes directly against the person to whom the facilities were provided or the services rendered, whether or not the collecting agent had attempted collection or the person liable for the tax had refused payment thereof. For purposes of this section, the report due date is— (a) In the case of a person using the alternative method of making deposits described in § 40.6302(c)-3 of this chapter, the due date of the return on which the item of adjustment relating to the uncollected tax would be reflected if items of adjustment were determined without regard to the limitation in § 40.6302(c)-3 of this chapter; and (b) In any other case, the due date of the return on which the tax would have been reported but for the refusal to pay or inability to collect. [T.D. 8685, 61 FR 58007, Nov. 12, 1996, as amended by T.D. 9051, 68 FR 15942, Apr. 2, 2003; T.D. 9149, 69 FR 48394, Aug. 10, 2004; T.D. 9221, 70 FR 49870, Aug. 25, 2005] Subpart G—Indoor Tanning Services § 49.5000B-1 Indoor tanning services. (a) Overview. (b) Imposition of tax General rule. (2) Undesignated payment cards In general. (c) Definitions indoor tanning service (2) The term other goods and services (3) The term phototherapy service (i) Dermatological conditions (such as acne, psoriasis, and eczema); (ii) Sleep disorders; (iii) Seasonal affective disorder or other psychiatric disorder; (iv) Neonatal jaundice; (v) Wound healing; or (vi) Other medical condition determined by a licensed medical professional to be treatable by exposing the individual to specific wavelengths of light. (4) The term provider (5) The term qualified physical fitness facility (i) In which the predominant business or activity is providing equipment and services to its members for purposes of exercise and physical fitness (determined by taking into consideration all of the facts and circumstances, such as the cost of the equipment, variety of services offered, actual usage of services by customers, revenue generated by different services, and how the entity holds itself out to the public through advertising or other means); (ii) In which providing indoor tanning services is not a substantial part of the business or activity; and (iii) That does not sell indoor tanning services for a fee to the public or otherwise offer different pricing options to its members based in whole or in part on access to indoor tanning services. (6) The term undesignated payment card (d) Application of tax Tax on total amount paid for indoor tanning services In general. (ii) Free services and reduced rates. (iii) Bonus points. (iv) Other fees. (2) Charges for other goods and services; tanning services separately stated. (i) Are separable (regardless of the manner of invoicing the charges); (ii) Do not exceed the fair market value of such other goods and services; and (iii) Are shown in the exact amounts in the provider's records pertaining to the indoor tanning services charge. (3) Charges for other goods and services; tanning services bundled. (i) Applying to the total amount paid a ratio determined by comparing— (A) The provider's charge for indoor tanning services not in bundled services or, if the provider only charges for indoor tanning services as part of bundled services, the fair market value of similar indoor tanning services (based on the amount charged by comparable providers in the same geographic area); to (B) The charge determined in paragraph (d)(3)(i)(A) of this section plus the provider's charge for the other goods and services in the bundled services or, if the provider only charges for other goods and services as part of bundled services, the fair market value of similar goods and services (based on the amount charged by comparable providers in the same geographic area); or (ii) Any other method allowed in guidance published in the Internal Revenue Bulletin. (4) Exemption; qualified physical fitness facilities. (e) Person liable for the tax General rule. (2) Undesignated payment cards In general. (ii) Alternative treatment. (3) Tax not collected at time of payment. (f) Persons receiving payment must collect tax. (g) Examples. Example 1: Imposition of tax; general rule. (i) P is a nail salon that also provides indoor tanning service incidental to its primary business of providing nail salon services. P advertises a price of $15.00 (exclusive of the tax imposed by section 5000B) for one 10-minute indoor tanning service. During a period when the tax is 10 percent of the amount paid, P calculates the section 5000B tax on $15.00 as provided by paragraph (d)(1) of this section. Thus, the tax is $1.50 ($15.00 × 10%). The person paying for the service is liable for the tax when that person pays for the services. If P does not collect the tax from the person at the time of the payment for the services, P is liable for the tax. (ii) The facts are the same as in paragraph (i) of this example except that P's advertised price of $15.00 includes the tanning tax. In this case, the tax is $1.36 ($15.00 × 10%/110%) under the second sentence of paragraph (d)(1) of this section. Example 2: Charges for other goods and services; tanning services separately stated. P provides indoor tanning services and other goods and services. On July 1, 2013, A, an individual, pays P for one 10-minute indoor tanning service and one pair of protective eyewear. P charges $15.00 for the 10-minute indoor tanning service and $2.00 for a pair of protective eyewear. The $2.00 charge for the protective eyewear does not exceed its fair market value. The invoice from P is $17.00 (exclusive of the tax imposed by section 5000B) and separately states the cost of the protective eyewear. Because the cost of the protective eyewear is separately stated, P calculates the section 5000B tax on $15.00 as provided by paragraph (d)(2) of this section. A is liable for the tax when A pays for the services. If P does not collect the tax from A at the time A pays for the services, P is liable for the tax. Example 3: Charges for other goods and services; tanning services bundled. P provides indoor tanning services and other goods and services and offers bundled services. On July 1, 2013, A, an individual, buys bundled service from P that includes 10 swimming lessons, the use of towels while on P's premises, one pair of protective eyewear, and 2 “free” 10-minute indoor tanning services. P charges $252.00 (exclusive of the tax imposed by section 5000B) for the bundled services. If these services are purchased separately, P charges (exclusive of the tax imposed by section 5000B) $25.00 per swimming lesson, $15.00 for a 10-minute indoor tanning service, $2.00 for the protective eyewear, and does not charge for the use of towels while on P's premises. As determined under paragraph (d)(3) of this section, the section 5000B tax applies to the amount reasonably attributable to the indoor tanning service, which is $26.81 (($30.00/$282.00) × $252.00). Example 4: Person liable for the tax. On July 1, 2013, A buys bundled services (described in Example 3 Example 5: Undesignated payment cards. (i) P operates a spa that provides a variety of cosmetic goods and services, including indoor tanning services. On July 1, 2013, A buys a gift certificate in the amount of $100.00 from P as a gift for B. The gift certificate may be redeemed by B for B's choice among several services offered by P, including indoor tanning services. On July 15, 2013, B partially redeems the gift certificate to pay for one 10-minute indoor tanning service. (ii) Under paragraph (b)(2) of this section, a payment for indoor tanning services is made, and the tax under section 5000B is imposed, on July 15, 2013, when B partially redeems the gift certificate to pay for one indoor tanning service. Under paragraph (e)(2) of this section, B is the person who pays for the indoor tanning services. Therefore, B is liable for the tax, computed under the rules of paragraph (d) of this section, and pays the tax by permitting P to debit the amount of the tax from the balance of the gift certificate or by paying the amount of the tax to P in cash. If B does not pay the tax at the time B partially redeems the gift certificate to pay for the indoor tanning services, P is liable for the tax. Example 6: Charges for other goods and services; tanning services bundled; amount attributable to tanning services. On July 1, 2013, A pays $1,000.00 (exclusive of the tax imposed by section 5000B) to spa P for the right to use the following equipment and services during the month of July: up to four massages or facials, unlimited use of a sauna, steam room, showers, and towel service, and unlimited indoor tanning services. If the services are purchased separately, P charges (exclusive of the tax imposed by section 5000B) $150.00 for unlimited indoor tanning services during the month of July, and $900.00 for the other equipment and services during the month of July, not including indoor tanning services. Under paragraph (b) of this section, A has made a payment for indoor tanning services and the tax will be computed under the rules of paragraph (d)(3) of this section. As determined under paragraph (d)(3) of this section, the section 5000B tax applies to the amount reasonably attributable to the indoor tanning services, which is $142.86 (($150.00/$1050.00) × $1000.00). If A does not pay the tax at the time A pays for the bundled services, P is liable for the tax. Example 7: Payments to qualified physical fitness facilities. P operates a full-service gym facility that offers fitness classes, multiple exercise machines (such as treadmills, stationary bicycles, weight training machines, and free weights), and has as its predominant business providing these facilities, equipment, and services to members for purposes of exercise and physical fitness. P provides its members with access to indoor tanning services, comprised of two tanning beds that meet the definition of indoor tanning services under paragraph (c)(1) of this section. P generally charges its members a fee for monthly usage of its facilities, equipment, and services, but also offers short-term or free trial memberships and allows non-members to purchase individual or a series of exercise classes. P does not charge any fee for the indoor tanning services, does not offer indoor tanning services separately from its other services, and has no membership tier or category that differs from others based on access to the indoor tanning services. P holds itself out to the public through advertising and marketing as providing equipment and services to improve physical fitness. On July 1, 2013, A pays a membership fee to P in return for use of P's facility during the month of July. Under paragraph (d)(4) of this section, no portion of A's membership fee payment is treated as a payment made for indoor tanning services, because A is a qualified physical fitness facility under paragraph (c)(5) of this section. Therefore, no liability for tax arises under section 5000B. (h) Effective/applicability date. [T.D. 9621, 78 FR 34876, June 11, 2013]