Wednesday, February 13, 2013

Tax Break for Clown Animals and Performers Traveling by Air

Internal Revenue Code section 4261 imposes a 7.5% excise tax on the cost of any person traveling by air.  In addition, each travel segment is subject to a tax of $3 to $17.

But Treasury Regulation 49.4261-8(d) provides that the excise taxes do not apply to the air transportation of circus or show performers, laborers, animals, equipment, and so on, as long as they do not receive any separate tickets for regular passenger flights (such as if the circus is traveling as a group).

The circus exemption is not authorized by the statute and appears to be made up by the Treasury Department as one of several examples of air travel where no "persons" are being transported.  For example, Treasury Regulation 49.4261-8(e) provides that the taxes do not apply to the transportation of corpses, but they apply to anyone accompanying the corpse.

While one could reasonably claim that corpses and circus animals are not "persons," circus performers and laborers generally are persons (even if some clowns think they are dead on the inside).  There is no clue why circus performers are so broadly exempt from the air transportation taxes. 


The circus exemption applied only to "circus or show trains" when it was first created in 1959, at a time when the excise taxes applied to all travel by train, air, water, and road.  When the taxes were modified to apply only to air travel by the innocuously-named Tax Rate Extension Act of 1962, the circus exemption was changed to apply to all travel subject to the taxes, i.e., air travel.


Treasury Regulation §49.4261-8. Examples of payments not subject to tax.

In addition to a payment specifically exempt under section 4263, 4293, or 4294, the following are examples of payments not subject to tax:
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(d) Circus or show conveyances. The amount paid pursuant to a contract for the movement of a circus or show conveyance where the amount covers only the transportation of the performers, laborers, animals, equipment, etc., by such conveyances is not subject to the tax on the transportation of persons imposed by section 4261. However, if the contract payment also covers the issuance to advance agents, bill posters, etc., of circus or show scrip books, or other evidence of the right to transportation, for use on regular passenger conveyances, that portion of the contract payment properly allocable to such scrip books or other evidence is subject to the tax on the transportation of persons.
(e) Corpses. The tax on the transportation of persons does not apply to the amount paid for the transportation of a corpse, but does apply to the amount paid for the transportation of any person accompanying the corpse.

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