TAX-EXEMPT SALES OF TOBACCO PRODUCTS
AT INTERNATIONAL AIRPORTS
Proprietors of tobacco export warehouses:
A recently approved revenue procedure sets forth certain acceptable
procedures you will probably find relevant if you sell tax-exempt tobacco
products at international airports. The substance of that revenue procedure,
which will soon be published in the Internal Revenue Bulletin, is printed
as an enclosure to this industry circular.
Please note that one feature of any acceptable procedure for sale to
international airline passengers is that the tobacco products may not be
given to passengers until the aircraft has left the territorial limits of
the United States. This provision is essential to assure proper implementation of section 5704 of the Internal Revenue Code, which authorizes these
tax-exempt sales and provides that the products are "for consumption beyond
the jurisdiction of the internal revenue laws of the United States."
Another provision to be noted is that sales may not be made tax-exempt
under section 5704 of the Code to passengers en route between the geographically separate parts of the United States (contiguous 48 States and the
District of Columbia, Alaska, and Hawaii). Commercial aircraft flying between
these different parts of the United States are eligible to lade tax-exempt
tobacco products, but only for use as aircraft supplies while outside the
territorial limits of the United States.
Our Inspectors will soon be visiting most export warehouses operating at
international airports to assure they are operating within the guidelines
discussed in the revenue procedure and this industry circular. Therefore,
if you make sales to international airlines or to airline passengers leaving
the United States you should review your procedures to make sure they are
fully in compliance with the regulations in 26 CFR Part 290 or an alternate
procedure approved by the Director, Alcohol, Tobacco and Firearms Division,
as prescribed in 26 CFR 290.72.
If your operations are not so conducted you should begin complying with
the regulations immediately, or contact the office of your Assistant Regional
Commissioner (Alcohol, Tobacco and Firearms) for his advice or approval of
an operation consistent with the enclosed revenue procedure.
Ralph H. Alkire,
Alcohol, Tobacco and Firearms Division
Revenue Procedure-Enclosure To Industry Circular 70-37
SECTION 1. PURPOSE.
This revenue procedure expresses procedures which may be
followed by proprietors of export warehouses at international
airports when tobacco articles are sold to passengers of aircraft
departing for destinations outside the United States.
SECTION 2. BACKGROUND.
Section 5704 of the Internal Revenue Code of 1954 provides
that an export warehouse proprietor may remove tobacco articles,
without payment of tax, for consumption beyond the jurisdiction of
the internal revenue laws of the United States. Regulations in 26
CFR 290.198 require that the export warehouse proprietor prepare
a notice of removal, Form 2150, for each shipment removed from his
warehouse. In connection with sales to airline passengers this
requires that a separate Form 2150 be prepared for each shipment of
tobacco articles sold to each passenger. It is reasonable that an
alternate procedure should be established which would be in compliance with the intent of regulations and afford equivalent security
to the revenue, but would not require a separate Form 2150 for each
passenger. Therefore, after review and concurrence of his assistant
regional commissioner (alcohol, tobacco and firearms), an export
warehouse proprietor making such removals may follow the procedures
in Section 3 below which the Director, Alcohol, Tobacco and Firearms
Division, finds in compliance with the intent of law and regulations.
SECTION 3. ACCEPTABLE PROCEDURES.
1. Sales Slips and lading receipts. The export warehouse
proprietor will prepare a separate sales slip for each sale of
tobacco articles. The minimum information which must be included
on the sales slip is a pre-printed serial number; a list of the
articles sold; the name of the passenger; and identity of the flight
by airline name (or abbreviation), flight number, and date. A
lading receipt on which all sales slips for a flight are itemized
will be prepared by the proprietor and presented to the purser or
other appropriate aircrew member, who will certify that the tobacco
articles were received on board and that delivery to the passengers
will not be made until the aircraft has left the territorial limits
of the United States. The lading receipt may or may not be certified by a customs officer, depending on local Customs' requirements.
The needs of Customs and the airline companies will be considered
in determining the numbers of copies and disposition of sales tickets
and lading receipts.
2. Other responsibilities of proprietor. The purchaser
must be clearly informed that the tobacco articles are for
consumption outside the United States and if returned to the
United States must be declared to Customs and are subject to
duty or tax. This may be accomplished by a conspicuous statement
on a copy of the sales slip furnished the passenger, or by some
other method acceptable to Customs and the assistant regional
commissioner (alcohol, tobacco and firearms). If a flight does
not depart or is diverted or returns without reaching a destination outside the United States the proprietor is responsible
for recovering and returning the unexported tobacco articles to
3. Notice of removal, Form 2150. Notice of removal, Form
2150, may be prepared daily, weekly, or semimonthly on the basis
of the lading receipts executed during the removal period. The
frequency of preparation of Forms 2150 will be dictated by the
volume of operations and administrative convenience to all concerned.
If the Form 2150 is prepared weekly and any week overlaps two months,
a separate Form 2150 must be filed for removals during that portion
of the week falling in each of the months. The Form 2150 will be
prepared in triplicate and presented to Customs for execution of the
certificate of export. The original completed form will be immediately
submitted to the assistant regional commissioner (alcohol, tobacco
and firearms), one copy will be furnished to Customs, and one copy
will be retained by the proprietor.
4. Acceptance of procedures to Customs and assistant regional
commissioner alcohol, tobacco and firearms. Procedures which an
export warehouse proprietor wishes to establish in accordance with
the foregoing criteria must be acceptable to the appropriate local
customs officer as evidenced by his written consent. Specifics of
the proposed procedures must also be approved in all respects by
the assistant regional commissioner (alcohol, tobacco and firearms)
before the proprietor begins operating under the procedures.
SECTION 4. ALTERNATE PROCEDURES.
The export warehouse proprietor may not use procedures other
than those specifically set forth in 26 CFR Part 290 or conforming
to this revenue procedure unless they are approved by the Director,
Alcohol, Tobacco and Firearms Division, as provided in 26 CFR 290.72
relating to authorizations for alternate methods or procedures.
Those proprietors who already have such specific authorizations may
continue to operate as approved therein.
SECTION 5. INQUIRIES.
Inquiries concerning this Revenue Procedure should refer to
its number and be addressed to the office of the appropriate assistant
regional commissioner (alcohol, tobacco and firearms).