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Rev. Rul. 58-219, 1958-1 CB 492

REV-RUL, SECTION 6420.--GASOLINE USED ON FARMS, Rev. Rul. 58-219, 1958-1 CB 492, (Jan. 01, 1958)

SECTION 6420.--GASOLINE USED ON FARMS
The relief provided by section 6420(a) of the Internal Revenue Code of 1954 does not apply to gasoline used in spraying lawn areas and in cultivating the soil for seeding at schools, churches, institutions and private estates. However, the relief provision applies to gasoline used in spraying fruit orchards.

Advice has been requested whether the relief provided by section 6420(a) of the Internal Revenue Code of 1954, pertaining to gasoline used on a farm for farming purposes, applies to gasoline used by a company (1) in operating a hydraulic sprayer to spray fruit orchards and lawn areas, (2) in operating tractors to cultivate the soil for seeding at schools, churches, institutions, and private estates, and (3) in operating a fork lift to handle lumber in its lumber yard. The hydraulic sprayer, the tractors, and the fork lift are owned and operated by the company.

Under the provisions of section 6420(a) of the Code, if gasoline is used on a farm for faming purposes, the ultimate purchaser is entitled to a payment determined by multiplying the number of gallons so used by the rate of tax on gasoline which applied on the date he purchased such gasoline. Section 6420(c)(1) of the Code provides that gasoline shall be treated as used on a farm for farming purposes only if used (A) in carrying on a trade or business, (B) on a farm situation in the United States, and (C) for farming purposes.

Section 6420(c)(2) of the Code provides that the term "farm" includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards.

Section 6420(c)(3)(A) of the Code provides that gasoline shall be treated as used for farming in purposes only if used by the owner, tenant, or operator of a farm in connection with cultivating the soil, or in connection with raising or harvesting any agriculture or horticulture commodity on a farm of which he is the owner, tenant, or operator. However, if such use is by any person other than the owner, tenant, or operator of such farm, the owner, tenant, or operator of the farm on which the gasoline is used shall be treated as the user and ultimate purchaser of such gasoline.

Accordingly, it is held that gasoline used by an owner, tenant, or operator of a farm for spraying fruit orchards is considered to be gasoline used on a farm for farming purposes. However, if gasoline for spraying the fruit orchards is used by any person other than the owner, tenant, or operator of the farm, the owner, tenant, or operator of the farm on which the service is performed is considered to be the user and ultimate purchaser of such gasoline. Therefore, in the instant case, the farmer, and not the company performing the custom service, is entitled to file a claim for the payment provided by section 6420(a) of the Code with respect to the gasoline used for spraying the fruit orchards.

It is further held that the relief provided by section 6420(a) of the Code does not apply to gasoline used to spray lawn areas, to cultivate the soil at schools, churches, institutions, and private estates, or to operate a fork lift to handle lumber in a lumber yard, since such gasoline is not used on a farm for farming purposes. However, section 6421(a) of the Code provides, in part, that the ultimate purchaser is entitled to a payment equal to one cent for each gallon of gasoline which is purchased on or after July 1, 1956, and which is used otherwise than as a fuel in a highway vehicle which (at the time of such use) is registered, or is required to be registered, for highway use under the laws of any state or foreign country. Accordingly, where the tractors and the fork lift are not registered, and are not required to be registered for highway use under the laws of any state or foreign country, the company is entitled to a payment equal to one cent for each gallon of gasoline used in such tractors and fork lift.