USE OF FEDERAL TAX EXEMPTION CERTIFICATES ON PRIVATELY PAID STATE TRAVEL

USE OF FEDERAL TAX EXEMPTION CERTIFICATES ON PRIVATELY PAID STATE TRAVEL.

Federal Tax exemption upon State travel is only granted when State paid.

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                                                                   March 5, 1951

Honorable E. D. Brabrook
Director of Budget
Olympia, Washington                                                                                                 Cite as:  AGO 49-51 No. 462

Dear Sir:

            You have requested our opinion upon whether:

            A member of the Eastern Washington State Historical Society may, upon making a railroad trip to eastern United States on State business, if she pays her own fare, use the so-called tax exemption certificates for her railroad tickets.

            Summarized our answer is that she may not.

                                                                     ANALYSIS

            Title 26, sec. 3469, (1950 Supp.) of the Internal Revenue Code (26 U.S.C.A. § 3469) imposes a Federal tax on the transportation of all persons.  Subsection (f) (1) exempts:

            "* * * transportation or facilities furnished to any state * * * or political subdivision thereof, * * *"  (Emphasis supplied).

            Section 3472 of that Title provides:

            "The commissioner, with the approval of the secretary, shall prescribe and publish all needful rules and regulations for the enforcement of this chapter."  (26 U.S.C.A. § 3472).

             [[Orig. Op. Page 2]]

            Pursuant to this authority, the Treasury Department has published Internal Revenue Service "Form 731" entitled "Exemption Certificate."  The user is required to certify in part:

            "* * * that the charges for the * * * [transportation]have been, or will be paid by a State or Territory, or Political Subdivision thereof, * * *" (Emphasis supplied).

            It has been administratively determined on the Federal level, with some justification, that transportation is not "furnished to" the State or its political subdivision unless the State or municipal subdivision is or becomes liable for the payment thereof.  Further, as a matter of proof, certification to that effect will be required.  We feel that this is within the rule making powers granted by 26 U.S.C.A. § 3472, quoted above.  Note that if traveling expenses are not actually paid by the State or political subdivision, honest certification could not be made upon the present form.

            It is true the State receives a benefit from the travel of a conscientious official at his own expense, however, this is not travel furnished the state.  The question is close and if the particular official disagrees with the regulation promulgated by the Federal tax commissioner, he may always pay the tax and then, at his own expense, seek reimbursement.  The State could not be concerned in such action since no State funds are involved.

Very truly yours,

SMITH TROY
Attorney General

JENNINGS P. FELIX
Assistant Attorney General