Reg. § 49.4261-3 Payments made within the United States.
(a) Transportation beginning and ending in the United States or the 225-mile zone The taxes imposed by section and (b) of the Internal Revenue Code (Code) applies to payments made within the United States for transportation which begins in the United States or in the 225-mile zone and ends in the United States or in the 225-mile zone. For example, an amount paid within the United States for transportation between New York and Montreal, Canada; between Vancouver, Canada, and Windsor, Canada; or between Nogales, Mexico, and Hermosillo, Mexico, would be fully taxable under section and (b). See section (2) and for the definition of the term “225-mile zone”.
(b) Other transportation In the case of transportation, other than that described in of this section, for which payment is made in the United States, the taxes imposed by section and (b) apply with respect to the amount paid for that portion of such transportation by air which 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 portion is not a part of uninterrupted international air transportation within the meaning of section 4262(c)(3) of the Code and . Transportation that:
(1) Begins in the United States or the 225-mile zone and ends outside such area,
(2) Begins outside the United States or the 225-mile zone and ends inside such area, or
(3) Begins outside the United States and ends outside such area, is taxable only with respect to the portion of the transportation by air which 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 portion is not a part of “uninterrupted international air transportation” within the meaning of section and . Thus, on a trip by air from Chicago to London, England, with a stopover at New York, for which payment is made in the United States, if the portion from Chicago to New York is not a part of “uninterrupted international air transportation” within the meaning of section and , the taxes would apply to the part of the payment which is applicable to the transportation from Chicago to New York. However, if the portion from Chicago to New York is a part of “uninterrupted international air transportation” within the meaning of section and , the taxes would not apply.
(c) Method of computing tax on taxable portion Where a payment is made for transportation which is partially taxable under of this section, the tax imposed by section may be computed on that proportion of the total amount paid which the mileage of the taxable portion of the transportation bears to the mileage of the entire trip.
(d) Cross reference See section 4262(b) of the Code and for a partial exclusion with respect to amounts paid for certain transportation.
(e) 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.
[T.D. 6430, 24 FR 9665, Dec. 3, 1959, as amended by T.D. 6618, 27 FR 11222, Nov. 14, 1962; T.D. 9948, 86 FR 5001, Jan. 19, 2021]