Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 54-69

1954-1 C.B. 257

Caution: Superseded by Rev. Rul. 64-17

IRS Headnote

Cigarettes may not be withdrawn free of tax for delivery to military and naval bases and establishments in this country for distribution to officers and enlisted personnel at special and holiday dinners or recreational activities, where the funds used for the purchase of the cigarettes are derived from donations by officers and enlisted personnel to club or camp funds and profits from post or base exchanges.

Full Text

Rev. Rul. 54-69

Permission has been requested for the withdrawal of nontaxpaid cigarettes for delivery to military and naval bases and establishments in the United States for distribution to officers and enlisted personnel at special and holiday dinners and at recreational activities.

While such goods are intended for gratuitous distribution, the funds with which the cigarettes would be purchased are derived from donations by officers and enlisted personnel to club or camp funds, and profits from post or base exchanges.

Section 3331 of the Internal Revenue Code provides as follows:

The privilege existing by provisions of law on December 1, 1873 or thereafter of purchasing supplies of goods imported from foreign countries for the use of the United States, duty free, shall be extended, under such regulations as the Secretary may prescribe, to all articles of domestic production which are subject to tax by the provisions of this subtitle.

Section 140.212 of Regulations 8, as added by Treasury Decision 6052, C.B. 1953-2, 346, issued under the authority of section 3331 of the Internal Revenue Code, provides as follows:

Manufacturers of tobacco, snuff, cigars, cigarettes, and cigarette papers and tubes, may ship such articles tax-free from their factories, in accordance with this subpart, to Federal agencies and institutions for gratuitous distribution. Shipments of such articles for sale by Federal agencies or institutions are not within the meaning of the law authorizing the purchase of articles tax-free for use of the United States. Institutions owned or controlled by the Governments of the several States, Territories, or the District of Columbia, are not entitled to receive such articles tax-free.

The purpose of the statute is to avoid the procedures of requiring the Government to pay into the Treasury as taxes funds appropriated out of the Treasury for its support.

Since the cigarettes will be paid for from funds of the respective organizations, and not from congressionally appropriated funds, the withdrawal of cigarettes for delivery to military and naval bases and establishments in this country for distribution to officers and enlisted personnel at special and holiday dinners and at recreational activities would not be withdrawals `for use of the United States' within the meaning of section 3331 of the Internal Revenue Code. Cigarettes may not be withdrawn from factories tax-free for such purposes.