Rev. Ruling 68-341
Questions have been raised as to whether removals of cigars and cigarettes from tobacco products factories for shipment to governmental agencies or to their contractors in the United States for use in ration kits or for in-flight meals should be made under the regulations in 26 CFR Part 290 relating to tax-exempt exportation or 26 CFR Part 295 relating to tax-exempt use of the United States. Since ration kits are frequently used in the United States on military maneuvers and to stock fallout shelters, and since military in-fight meals are often consumed on domestic flights, it is not always known at the time of removal whether the products will be exported or used in the United States.
Unless the governmental agency specifies that the products will be directly exported as provided for in Part 290, removals of cigars and cigarettes for use in ration kits or inflight meals should be made under the provisions of Part 295 for use of the United States.
Where removals are to be made under Part 295 to contractors for packing in ration kits and in-flight meals, the manufacturer must assure and have evidence available at the factory that the recipient has authority to receive them for the government agency for packaging under the governmental contract. The evidence should include the identity of the contract and the name and address of both the governmental contracting office and the governmental agency to which delivery is to be made. Where such evidence of a legitimate contract is available then the manufacturer making the removal is relieved of tax liability on the cigars and cigarettes under 26 CFR 295.35 when the private contractor receives the products as agent for the government. The private contractor is thereafter responsible to the United States for the tax on those cigars and cigarettes received by him but not accounted for.
26 U.S.C. 5704; 27 CFR 295.1