Rev. Ruling 64-296
Drawback on Distilled Spirits Sold to Aircraft Passengers
Advice has been requested whether drawback may be claimed on distilled spirits sold to a passenger of an aircraft departing the United States under the circumstances described below.
The passenger purchases from an exporter in the United States taxpaid distilled spirits which have been prepared especially for export with benefit of drawback under the applicable provisions of the Distilled Spirits Plants Regulations. The distilled spirits are delivered from a qualified export storage facility into the custody of the purser, or other officer of an aircraft with the understanding they will not be delivered to the passenger until (1) the aircraft has landed in a foreign country, or (2) the aircraft has left the continental limits of the United States.
Section 252.171 of the Exportation of Liquors Regulations provides, in part, that distilled spirits, manufactured or produced in the United States on which an internal revenue tax has been paid or determined, and which have been bottled or packaged (including stamping and labeling), or restamped and marked under the applicable provisions of the Distilled Spirits Plants Regulations, especially for export with benefit of drawback, may be exported with benefit of drawback, may be exported or laden for use on vessels or aircraft described in section 252.21 of the Exportation of Liquor Regulations. On receipt by the Assistant Regional Commissioner, Alcohol and tobacco Tax, of required evidence of such exportation or lading for use there shall be allowed a drawback equal in amount to the tax found to have been paid or determined on such spirits.
Therefore, in order to find that taxpaid distilled spirits sold to passengers of eligible aircraft departing from the United States are eligible for drawback, it is necessary to find the distilled spirits have either been exported or laden for use on the aircraft.
The term "exportation" is defined in section 252.11 of the regulations as a severance of goods from the mass of things belonging to the United States with the intention of uniting them to the mass of things belonging to some foreign country. The export character of any shipment shall be determined by the intention with which it is made, and it assumes an export character only when destined for use in a foreign country.
Neither the Internal Revenue Code of 1954 nor the regulations thereunder specifically define the term "laden for use on aircraft or vessels," however, section 309(b) of the Tariff Act of 1930, as amended, 19 U.S.C. 1309, which authorizes drawback for taxpaid spirits laden on vessels and aircraft provides that articles of domestic manufacture or production, laden as supplies upon any such vessel or aircraft shall be considered to be exported within the meaning of the drawback provision of this Act.
Accordingly, it is held that distilled spirits eligible for export with benefit of drawback which are sold by an exporter in the United States to a passenger who is departing therefrom by aircraft are considered to be exported under section 5062(b) of the Internal Revenue code of 1954, if they are released from a qualified export storage facility to the carrier and entered on the manifest as cargo of the aircraft for delivery to the passenger at his foreign destination. Under the prescribed regulations, the exporter who sold such spirits is entitled on compliance with the applicable procedure to obtain a drawback equal in amount to the tax found to have been paid on such spirits. If, however, the distilled spirits so sold are intended for delivery to the passenger before he arrives at his foreign destination, they are not considered exported under section 5062(b) of the Code nor are such spirits considered to be supplies for the aircraft under section 309(b) of the Tariff Act 1930. Consequently, drawback is not allowable under such circumstances.
26 U.S.C. 5062; 27 CFR 252.171