Internal Revenue Service
Revenue Ruling
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smRev. Rul. 58-37
1958-1 C.B. 370
Caution: Obsoleted by Rev. Rul. 69-227
IRS Headnote
Information for use by retailers as a guide in determining their liability for the retailers excise tax on furs imposed by section 4011 of the Internal Revenue Code of 1954.
Full Text
Rev. Rul. 58-37
The Internal Revenue Service has been asked to publish information for use as a guide by retailers in determining their liability for the retailers excise tax on furs.
Section 4011 of the Internal Revenue Code of 1954 imposes a tax upon the sale at retail of articles made of fur on the hide or pelt, and articles of which such fur is the component material of chief value, but only if such value is more than three times the value of the next most valuable component material. Section 320.40 of Regulations 51, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that the tax is not confined to the sale of fur articles used as wearing apparel but applies to sales of any fur article suitable for any use, such as rugs, fur robes, etc. The tax does not apply to sales of raw fur.
It will be noted that there are two categories of articles which are subject to the tax, namely, (1) those made of fur on the hide or pelt, and (2) those of which fur on the hide or pelt is a component material , the value of which is more than three times the value of the next most valuable component material. In determining whether the sale of an article of which fur is a component material is subject to tax, the value of such fur at the time of assembly of the article must be compared to the value of each other single component, at such time. In comparing the value of the fur to the other components, all costs, including labor, of making or preparing a complete component should be considered. However, the cost of assembling the components into the finished article should not be considered. Where the value of the fur, as compared with the value of the other component materials in an article, is not such as to render the sale taxable, the retailer must establish that fact by maintaining adequate records or documentary evidence, such as a written statement obtained from the manufacturer or producer of the article, stating that the value of the fur at the time of assemblage of the article was not more than three times the value at such time of the next most valuable component material. In the absence of such records or documentary evidence, the tax must be paid with respect to the sale of such article at retail.
The Internal Revenue Service has received numerous inquiries concerning whether certain materials should be classified as `fur on the hide or pelt.' The peltries of certain animals, with the hair wholly or partially intact, are well recognized as being `fur on the hide or pelt.' There are other animals, however, such as certain types of sheep, whose hair is so fine that its natural tendency is to become matted or felted, so that in its natural condition it neither resembles fur nor is used as fur. Just before such sheep are slaughtered, the wool is closely sheared from the animal for use in weaving woolen fabrics. The resulting pelt, with the remaining short wool still having a matted or felted appearance, is known as `domestic type' shearling. The term `domestic type' includes sheepskin or lambskin of either domestic or foreign origin, such as sheepskin or lambskin from merino or crossbred sheep or lambs. Thus, the term `domestic type' refers to domesticated types of animals without regard to their place of origin.
The `domestic type' shearling described above is used extensively as linings in coats, gloves, and slippers. When used in this condition, it is not considered to be fur. However, there have been developed certain processes involving combing, `electrifying' with chemicals, washing, bleaching, dyeing, etc., whereby this `domestic type' shearling loses its felted appearance. The material thus processed is known and sold commercially as fur under various names. Other animals, such as South American sheep, posses hair which grows in tight spirals and does not felt as readily as the hair of the `domestic type' animals. Accordingly, the pelts of such animals are known and sold commercially as fur without the extensive processing described above.
The list below is illustrative of the determinations which have been made by the National Office of the Service on questions of classification. The `taxable' column includes the materials which have been held to constitute `fur on the hide or pelt,' while the `nontaxable' column includes materials which have been held not to constitute `fur on the hide or pelt.'
TAXABLE NONTAXABLE
Alpaca.
Baum marten.
Bear.
Beaver.
Bobcat.
Broadtail.
Buffalo.
Bunny fur.
Calfskin, with hair on.
Caracal.
Caribou hide, with hair on.
Chamois skins.
Cougar.
Cowhide, with hair on.
Coyote.
Deer hides, with hair on.
Doghide, with hair on.
Ermine pelts or tails.
Fox pelts or tails.
Goatskins.
Hair seal.
Horsehide, with hair on.
Iceland lambskin, whether in
natural state, processed or
dyed.
Iceland sheepskin, whether in
natural state, processed or
dyed.
Kidskin.
Krimmer.
Laskinlamb, whether in natural
colors, processed or dyed.
Lambskin of the so-called
"domestic type" if
electrified, dyed or
otherwise processed to
resemble fur.
Lambskin of the so-called
"domestic type", in its
natural condition.
Lion pelts.
Marten.
Mink pelts and tails.
Moose hide.
Mouton, whether in natural color
or dyed.
Muskrat.
Nutria.
Nylon, even though processed
and dyed to resemble fur.
Otter.
Persian lamb.
Pony.
Rabbit.
Raccoon pelts or tails.
Rayon, even though processed
to resemble fur.
Reindeer hide, with hair on.
Sable.
Shearling of the so-called
"domestic type" which has been
electrified or otherwise
processed to resemble fur.
Shearling of the so-called
"domestic type" in its
natural unprocessed
condition.
Sheepskin of the so-called
"domestic type" which has been
electrified or otherwise
processed to resemble fur.
Sheepskin of the so-called
"domestic type" in its
natural unprocessed
condition.
Slink, with hair on.
South American lambskin.
South American sheepskin.
Spanish lambskin.
Squirrel.
Tiger pelts.
Wolf.
Wolverine.
The Service has received other inquiries concerning whether certain articles should be classified as articles made of fur on the hide or pelt, or as articles of which fur on the hide or pelt is a component material . Retail sales of articles of the first category are taxable without regard to the relative value of the fur, while articles of the second category are taxable only if the value of the fur component is more than three times the value of the next most valuable component. The list below is illustrative of the determinations which have been made on such questions.
ARTICLES OF WHICH FUR IS A
ARTICLES MADE OF FUR COMPONENT MATERIAL
Ascots, fur.
Bags, fur.
Belts, fur.
Belts, fur-trimmed.
Berets, fur.
Berets, fur-trimmed.
Boots, made entirely of fur.
Boots, fur-lined.
Boots, fur, with leather
soles.
Borders, fur.
Boutonnieres, fur.
Buttons, fur.
Capes, fur.
Caps, fur.
Caps, fur-trimmed or
fur-lined.
Chokers, fur.
Coats, fur.
Coats, fur-trimmed cloth.
Coats, reversible, made of fur
on one side and cloth on the
other.
Coats, fur-lined cloth.
Collars, fur, which can be worn
separately or interchangeably
with coats, suits or other
garments.
Cuffs, fur.
Doll clothing, fur, such as
booties, coats, etc.
Dress novelties, fur-trimmed.
Ear muffs, fur.
Gloves, fur.
Gloves, fur-backed with palm
of another material.
Gloves, fur-lined.
Hats, fur.
Hats, fur-trimmed.
Head bands, fur.
Lapels, fur.
Lining, fur, when sold separately
from the sale of a coat.
Mittens, fur.
Mittens, fur-backed with palm
of another material.
Muffs, fur.
Muffs, cloth, fur-trimmed.
Parkas, fur.
Parkas, fur-trimmed or
fur-lined.
Piping, fur, sold separately.
Play clothing, such as Davy
Crockett fur hats.
Play clothing, such as
fur-trimmed or fur-lined
Davy Crockett hats, suits
and jackets.
Rugs, fur, regardless of whether
bound or lined.
Scarves, fur.
Shakos, fur-trimmed.
Shoe dusting mitts.
Shoes, made partially of fur.
Skins, completely finished and
mounted, such as those used in
scarves.
Sleeves, fur.
Stoles, fur.
Slippers, fur-lined.
Striping, fur, sold separately.
Tails, fur.
Toys or novelties made of fur
and stuffed with other
materials.
Turbans, fur.
Turbans, fur-trimmed.
For further guidance in determining the taxability of articles, see Mimeograph 6128, C.B. 1947-1, 154, Revenue Ruling 98, C.B. 1953-1, 424, Revenue Ruling 54-100, C.B. 1954-1, 245, and Revenue Ruling 56-291, C.B. 1956-1, 501.
The above classifications are not to be considered all-inclusive. They merely reflect determinations which have been made by the National Office of the Service. In any case where the classification of a particular material or article not listed above is in question, a specific ruling or determination thereon should be requested from the Service.
Regarding fur articles produced from pelts furnished by customers, section 4012 of the Code provides that where a person, who is engaged in the business of dressing or dyeing fur skins or of manufacturing, selling, or repairing fur articles, produces a taxable fur article from fur on the hide or pelt furnished, directly or indirectly, by a customer, and the article is for the use of, and not for resale by, such customer, the transaction shall be deemed to be a sale at retail and the person producing the article shall be deemed to be the person selling such article at retail for the purposes of the tax. The tax applicable to such transactions is to be computed upon the fair retail market value of the finished article, as determined by the Secretary of the Treasury or his delegate. Generally, the fair retail market value may be considered as the retail sales price for which the same or a similar finished article is sold by retailers generally in the ordinary course of the retail trade.
Taxable fur articles, such as collars, cuffs, lapels, buttons, borders, etc., may be produced by retail furriers in connection with the repairing, remodeling, or restyling of used fur garmets. See S.T. 930, C.B. 1944, 607, which also holds that under such circumstances the tax attaches to that portion of the price charged for the entire job which is attributable to the fur article so produced, where any complete garment or complete article is produced (1) from fur, either used or unused , which is furnished by the furrier, or (2) from unused fur furnished by the customer. That ruling further holds, however, that the tax does not attach (1) where a complete garment or article is produced from used fur furnished by the customer, or (2) where fur, whether used or unused and whether furnished by the furrier or by the customer, is used in a repair, remodeling, or restyling operation in which no complete garment or article is produced.