Internal Revenue Service
Rev. Rul. 75-390
1975-2 C.B. 416
Exemption; association of state-operated high schools. The exemption from communications, manufacturers, and retailers taxes provided for states and political subdivisions is applicable to articles sold, or communications services and facilities furnished, to an athletic association comprised entirely of accredited state-operated high schools; Rev. Rul. 59-37 superseded.
Rev. Rul. 75-390
The purpose of this Revenue Ruling is to update and restate under the current statutes the conclusions set forth in Rev. Rul. 59-37, 1959-1 C.B. 384. That Revenue Ruling relates to whether an association of state-operated high schools comes within the scope of the Federal excise tax exemptions provided by section 4292 of the Internal Revenue Code of 1954. In updating that Revenue Ruling, the Internal Revenue Service also has considered whether the association comes within the scope of the exemptions provided by sections 4055 and 4221(a)(4).
An athletic association of accredited state-operated high schools was formed on a voluntary basis in a certain state for the purpose of promoting amateur athletics among its member institutions. It promotes and controls the interscholastic athletic contests, activities, and interests of its members. It is administered by a board of directors who are either high school principals or superintendents. The directors ordinarily serve without pay, but are reimbursed by the association for expenses incurred by them in connection with yearly board meetings and such other services that they are called upon to perform for the association. The association derives its income from dues collected from the member schools and from a percentage of the receipts from athletic activities. This income is used to defray the association's expenses.
Section 4055 of the Code provides that the retailers excise taxes will not apply to the sale of any article for the exclusive use of any State, Territory of the United States, or any political subdivision of any of the foregoing, or the District of Columbia, or with respect to the use by any of the foregoing of any liquid as a fuel.
Section 4221(a)(4) of the Code provides that the manufacturers excise taxes will not apply to the sale by the manufacturer of an article to a State or local government for the exclusive use of a State or local government.
Section 4292 of the Code provides that no tax shall be imposed under section 4251 upon any payment received for communication services or facilities furnished to the Government of any State, Territory of the United States, or any political subdivision of the foregoing, or the District of Columbia.
Under the Airport and Airway Revenue Act of 1970, which imposed user taxes on transportation of persons and property, section 4292 of the Code was amended to remove previous statutory exemptions that had applied to transportation taxes. Thus, there is no longer a Federal tax exemption provided for State and political subdivisions with respect to amounts paid for any transportation that began on or after July 1, 1970.
Since all the schools that comprise the membership of the association described above are state-operated schools, articles sold for the use of the association in its official capacity are articles sold for the exclusive use of a state. Similarly, communication services and facilities furnished to the association for use in transacting its official business are services and facilities furnished to a state.
Accordingly, the association comes within the scope of the exemptions provided by sections 4055, 4221(a)(4), and 4292 of the Code. Therefore, where taxable articles are sold to the association, or communication services and facilities are furnished to the association, for its official use, the excise tax exemptions will apply, provided the requirements of the law and applicable regulations with respect to the particular exemption are met.
Rev. Rul. 59-37 is superseded since the position set forth therein is restated under current law in this Revenue Ruling.