PLR 1322040: IRS says a vessel owner need not register or file Form 720-CS when a manager operates the vessel

Plain-English summary

The IRS ruled that a company owning a petroleum vessel was not required to register as a vessel operator under section 4101. The company had no employees and had hired a separate manager to operate the vessel, employ the seamen, handle pension reporting, and act as operator under labor contracts. Because the manager, rather than the owner, operated the vessel within the bulk transfer and terminal system, the owner was not a vessel operator under the regulation. The IRS also ruled that the owner did not have to file Form 720-CS because it was not a bulk transport carrier.

Ruling snapshot

• Question: Must the vessel owner register under section 4101 or file Form 720-CS when a separate manager operates the vessel?
• Outcome: Approved, no registration or Form 720-CS filing required
• Key authorities: IRC §§ 4041(a), 4081, 4101, and 6110(k)(3); Treas. Reg. §§ 48.4101-1(b)(8), 48.4101-1(c)(1)(vii), and 48.4101-2(a)(1).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201322040 Third Party Communication: None
Release Date: 5/31/2013 Date of Communication: Not Applicable
Index Number: 4101.00-00
Person To Contact:
--------------------------------------------- ----------------------, ID No. ---------------
-------------------------------- Telephone Number:
--------------------- -------------------
-------------------------------------------- Refer Reply To:
CC:PSI:B07
PLR-147262-12
Date:
February 05, 2013

Legend:

Owner = ---------------------------------------------------------------------------------------------------------------------

Manager = -----------------------------

Vessel = ------------------------

Dear -------------:

   This letter responds to your October 31, 2012, request for a ruling whether, under

the facts described below, Owner (1) must be registered by the Internal Revenue
Service under § 4101 of the Internal Revenue Code (Code) and (2) whether Owner
must file Form 720-CS, Carrier Summary Report.

   The facts submitted state that Owner owns a vessel (Vessel) used to carry

petroleum products within the bulk transfer/terminal system. Owner does not have
employees and has never operated Vessel itself. Owner hired Manager, by entering
into a management agreement, to operate Vessel. All of the seamen that work on
Vessel are employed by Manager pursuant to labor agreements entered into between
Manager and the applicable seafaring union. The wages are paid by a related payroll
company at the direction of Manager. All pension benefits and reporting is conducted
through Manager. Manager is the vessel operator under all labor union contracts. All
marketing materials refer to Manager as the vessel operator.

   Section 4101(a)(1) requires that every person required by the Secretary to

register under § 4101 with respect to the tax imposed by §§ 4041(a) or 4081 must
register with the Secretary at such time, in such form and manner, and subject to such
terms and conditions, as the Secretary may by regulations prescribe.
PLR-147262-12 2

  Section 4101(d) allows the Secretary to require information reporting by any

person registered under § 4101, and information reporting by such other persons as the
Secretary deems necessary to carry out the taxes on taxable fuel.

   Section 48.4101-2(a)(1) of the Manufacturers and Retailers Excise Taxes

Regulations requires each information report under section 4101(d) to be made in the
form required by the Commissioner.

  Section 48.4101-1(c)(1)(vii) requires vessel operators to be registered by the IRS

under § 4101.

  Section 48.4101-1(b)(8) generally defines a “vessel operator” as any person that

operates a vessel within the bulk transfer/terminal system.

 Based on the facts submitted and representations made, we conclude that

Owner is not a vessel operator as that term is defined in § 48.4101-1(b)(8) because
Manager, and not Owner, operates Vessel. Accordingly, we further conclude that
Owner is not required to be registered as a vessel operator under § 4101.

    Form 720-CS requires bulk transport carriers (barges, ships, and pipelines) who

receive or deliver reportable liquid products in or out of storage at a terminal, or any
other location designated by a facility control number, to file the form. Because Owner
is not a bulk transport carrier, Owner does not have to file a Form 720-CS.

   Except as expressly provided herein, no opinion is expressed or implied

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.

  This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of

the Code provides that it may not be used or cited as precedent.

     In accordance with the Power of Attorney on file with this office, a copy of this

letter is being sent to your authorized representative.
PLR-147262-12 3

  The rulings contained in this letter are based upon information and

representations submitted by the taxpayer and accompanied by a penalty of perjury
statement executed by an appropriate party. While this office has not verified any of
the material submitted in support of the request for rulings, it is subject to verification on
examination.

                                    Sincerely,



                                    Frank K. Boland
                                    Chief, Branch 7
                                    (Passthroughs & Special Industries)

Enclosures (2)

   Copy of this letter
   Copy for section 6110 purposes