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    Internal Revenue Service
 Revenue Ruling

Rev. Rul. 66-77

1966-1 C.B. 242

Sec. 1441

IRS Headnote

Remuneration paid to residents of Canada who are not citizens of the United
States and who, in performing services as truck drivers, enter and leave
the United States at frequent intervals, is not subject to income tax
withholding under section 1441 or section 3402 of the Internal Revenue Code
of 1954. Such remuneration is subject to the taxes under the Federal
Insurance Contributions Act. 

Full Text

Rev. Rul. 66-77 

Advice has been requested whether the remuneration paid by a Canadian
employer to its truck driver employees who are not citizens of the United
States and who are residents of Canada, for services performed in the
United States, is subject to Federal income tax withholding under either
section 1441 or section 3402 of the Internal Revenue Code of 1954 and to
the taxes under the Federal Insurance Contributions Act (chapter 21,
subtitle C, Internal Revenue Code of 1954). 

In performing services as truck drivers for the Canadian employer, the
employees enter and leave the United States at frequent intervals.
Consequently, income tax withholding from their remuneration is not
required under section 1441 of the Code, in view of the provisions of
section 1441(c)(4)(A) of the Code and section 1.1441-4(b)(1) of the Income
Tax Regulations. Under this section of the regulations, the salary or other
compensation for personal services of a nonresident alien individual who is
a resident of Canada or Mexico and who enters and leaves the United States
at frequent intervals is not subject to income tax withholding under
section 1441 of the Code. 

Section 3401(a)(6) of the Code excepts from `wages,' for purposes of income
tax withholding under section 3402 of the Code, remuneration paid for
services performed by a nonresident alien individual, other than a resident
of a contiguous country who enters and leaves the United States at frequent
intervals. Section 3401(a)(7) of the Code excludes from `wages'
remuneration paid for such services, performed by a nonresident alien
individual who is a resident of a contiguous country and who enters and
leaves the United States at frequent intervals, as may be designated by
regulations. 

Section 31.3401(a)(7)-1(a) of the Employment Tax Regulations provides, in
part, as follows: 

* * * Remuneration paid to nonresident aliens who are residents of a
contiguous country (Canada or Mexico) and who, in the performance of their
duties in transportation service between points in the United States and
points in a contiguous country, enter and leave the United States at
frequent intervals, is excepted from wages and hence is not subject to
withholding. This exception applies to personnel engaged in railroad, bus,
ferry, steamboat, and aircraft services and applies whether the employer is
a domestic or foreign entity. * * * 

Although section 31.3401(a)(7)-1(a) of the regulations states that the
exception from wages applies to personnel engaged in railroad, bus, ferry,
steamboat, and aircraft services, and does not specifically mention truck
services, the reference to the specified services is merely illustrative of
the types of transportation services included in the exception and does not
exclude truck services. 

Accordingly, remuneration paid to residents of Canada who are not citizens
of the United States and who, in performing services as truck drivers,
enter and leave the United States at frequent intervals, is not subject to
withholding of income tax under section 3402 of the Code. This conclusion
does not mean that such aliens are never subject to United States income
tax or to a duty to file United States income tax returns, as to which see
section 871(c) of the Code and Article VII of the Tax Convention between
the United States and Canada as amended by Supplementary Convention signed
August 8, 1956, C.B. 1957-2, 1014. 

The taxes under the Federal Insurance Contributions Act apply to `wages'
for `employment,' as those terms are defined in the Act. Under section
3121(b) of the Act the term `employment,' with certain exceptions not here
material, includes services performed within the United States by an
employee for the person employing him, irrespective of the citizenship or
residence of either. Accordingly, the remuneration paid to residents of
Canada who are not citizens of the United States, for the services which
they perform as truck drivers in the United States is subject to the taxes
under the Act. 

See also Revenue Ruling 56-609, C.B. 1956-2, 1066, concerning Federal
Insurance Contributions Act tax liability of other Canadian employees
performing services in the United States. 26 CFR 31.3401(c)-1: Employee. 

Status of foreign citizens in the United States who perform services for a
United States corporation in connection with a training program conducted
by the company. See Rev. Rul. 66-76, page 238.