View all text of Subpart D [§ 49.4261-1 - § 49.4263-6]
§ 49.4262-1 - Taxable transportation.
(a) In general. Unless excluded under section 4262(b) of the Internal Revenue Code (Code) (see § 49.4262-2), taxable transportation means:
(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 within the meaning of section 4262(c)(3) of the Code and § 49.4262-3(c). Transportation from one port or station in the United States occurs whenever a carrier, after leaving any port or station in the United States, makes a regularly scheduled stop at another port or station in the United States irrespective of whether stopovers are permitted or whether passengers disembark.
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 4262(a) (1). In each of the following examples the transportation is taxable transportation and the amount paid within the United States for such transportation is subject to the taxes imposed by section 4261(a) and (b):
(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. The following examples illustrate the application of section 4262(a)(2) and the taxes imposed by section 4261(a) and (b) of the Code:
(1) Example (1). A purchases in New York a ticket for air transportation from New York to Nassau, Bahamas, with a scheduled stopover of 14 hours in Miami. The part of the transportation from New York to Miami is taxable transportation as defined in section 4262(a) because such transportation is from one station in the United States to another station in the United States and the trip is not uninterrupted international air transportation (because the scheduled stopover interval in Miami is greater than 12 hours). Therefore, the amount paid for the transportation from New York to Miami is subject to the taxes imposed by section 4261(a) and (b).
(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. The following examples illustrate 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 within the meaning of section 4262(c)(3) and § 49.4262-3(c). In the event the transportation is paid for outside the United States, no tax is due since the transportation does not begin and end in the United States.
(f) Applicability date. This section applies to amounts paid on and after January 19, 2021. For rules that apply before that date, see 26 CFR part 49, revised as of April 1, 2020.