[Code of Federal Regulations]
[Title 26, Volume 15]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR31.3306(c)-2]

[Page 166-168]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 31_EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents
 
  Subpart D_Federal Unemployment Tax Act (Chapter 23, Internal Revenue 
                              Code of 1954)
 
Sec. 31.3306(c)-2  Employment; services performed after 1954.

    (a) In general. Whether services performed after 1954 constitute 
employment is determined under subsections (c) and (n) of section 3306.
    (b) Services performed within the United States. Services performed 
after 1954 within the United States (see Sec. 31.3306(j)-1) by an 
employee for the person employing him, unless specifically excepted 
under section 3306(c), constitute employment. With respect to services 
performed within the United States, the place where the contract of 
service is entered into is immaterial. The citizenship or residence of 
the employee or of the person employing him also is immaterial except to 
the extent provided in any specific exception from employment. Thus, the 
employee and the person employing him may be citizens and residents of a 
foreign country and the contract of

[[Page 167]]

service may be entered into in a foreign country, and yet, if the 
employee under such contract performs services within the United States, 
there may be to that extent employment.
    (c) Services performed outside the United States--(1) In general. 
Except as provided in subparagraph (2) of this paragraph, services 
performed outside the United States (see Sec. 31.3306(j)-1) do not 
constitute employment.
    (2) On or in connection with an American vessel or American 
aircraft. (i) This subparagraph relates to services performed after 1954 
``on or in connection with'' an American vessel, and to services 
performed after 1961 ``on or in connection with'' an American aircraft 
to the extent that the remuneration for the latter services is paid 
after 1961. Such services performed outside the United States by an 
employee for the person employing him constitute employment if:
    (a) The employee is also employed ``on and in connection with'' such 
vessel or aircraft when outside the United States; and
    (b) The services are performed under a contract of service, between 
the employee and the person employing him, which is entered into within 
the United States, or during the performance of the contract under which 
the services are performed and while the employee is employed on the 
vessel or aircraft it touches at a port within the United States; and
    (c) The services are not excepted under section 3306(c). (See 
particularly Sec. 31.3306(c)(17)-1, relating to fishing.)
    (ii) An employee performs services on and in connection with the 
vessel or aircraft if he performs services on the vessel or aircraft 
which are also in connection with the vessel or aircraft. Services 
performed on the vessel by employees as officers or members of the crew, 
or as employees of concessionaires, of the vessel, for example, are 
performed under such circumstances, since the services are also 
connected with the vessel. Similarly, services performed on the aircraft 
by employees as officers or members of the crew of the aircraft are 
performed on and in connection with such aircraft. Services may be 
performed on the vessel or aircraft, however, which have no connection 
with it, as in the case of services performed by an employee while on 
the vessel or aircraft merely as a passenger in the general sense. For 
example, the services of a buyer in the employ of a department store 
while he is a passenger on a vessel are not in connection with the 
vessel.
    (iii) If services are performed by an employee ``on and in 
connection with'' an American vessel or American aircraft when outside 
the United States and the conditions in (b) and (c) of paragraph 
(c)(2)(i) of this section are met, then the services of that employee 
performed on or in connection with the vessel or aircraft constitute 
employment. The expression ``on or in connection with'' refers not only 
to services performed on the vessel or aircraft but also to services 
connected with the vessel or aircraft which are not actually performed 
on it (for example, shore services performed as officers or members of 
the crew, or as employees of concessionaires, of the vessel).
    (iv) Services performed by a member of the crew or other employee 
whose contract of service is not entered into within the United States, 
and during the performance of which and while the employee is employed 
on the vessel or aircraft it does not touch at a port within the United 
States, do not constitute employment, notwithstanding that service 
performed by other members of the crew or other employees on or in 
connection with the vessel or aircraft may constitute employment.
    (v) A vessel includes every description of watercraft, or other 
contrivance, used as a means of transportation on water. An aircraft 
includes every description of craft, or other contrivance, used as a 
means of transportation through the air. In the case of an aircraft, the 
term ``port'' means an airport. An airport means an area on land or 
water used regularly by aircraft for receiving or discharging passengers 
or cargo. For definitions of ``American vessel'' and ``American 
aircraft'', see Sec. 31.3306(m)-1.
    (vi) With respect to services performed outside the United States on 
or in connection with an American vessel or American aircraft, the 
citizenship or

[[Page 168]]

residence of the employee is immaterial, and the citizenship or 
residence of the employer is material only in case it has a bearing in 
determining whether a vessel is an American vessel.

[T.D. 6658, 28 FR 6636, June 27, 1963]