Rev. Ruling 71-145

Advice has been requested whether tax-exempted cigars and cigarettes can be laden as supplies on vessels performing oceanographic work or on vessels operating along a single coastline of the United States when such vessels travel beyond the jurisdiction of the internal revenue laws.

Section 5704 of the Internal Revenue Code of 1954 provides an exemption from the tax in the case of cigars, cigarettes, and cigarettes and cigarettes papers and tubes removed for consumption beyond the jurisdiction of the internal revenue laws of the United States. Regulations in 26 CFR 290.62 which implement this provision of the Code set out restrictions on delivery of tax-exempt cigars, cigarettes, and cigarettes and cigarettes papers and tubes to vessels as supplies. Thus, a vessel traveling beyond the jurisdiction of the internal revenue laws of the United States is not entitled to lade tax-exempt cigars and cigarettes as supplies unless authorized to do so under 26 CFR 290.62.

In substance, that section provides that tobacco articles may be delivered: to vessels actually engaged in foreign, intercoastal, or noncontiguous territory trade (i.e., vessels operating on a regular schedule in trade or actually transporting passengers and/or cargo between certain designated places); to vessels clearing through Customs for a port beyond the jurisdiction of the internal revenue laws of the United States; to vessels of war or other governmental activity; and to United States vessels engaged in the fishing business and certain foreign fishing vessels.

Consequently, vessels engaged in oceanographic work or in trade along a single coastline of the United States, even though proceeding beyond the jurisdiction of the internal revenue laws of the United States, are not entitled to lade tax-exempt cigars and cigarettes as supplies solely by reason of such activity.

Under authority contained in section 7805(b) of the Code, this Revenue ruling will not be applied with respect to removals of tax-exempt tobacco products as ships' supplies prior to March 15, 1971.

26 U.S.C. 5704; 27 CFR 290.62