Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 59-36

1959-1 C.B. 345

Caution: Obsoleted by Rev. Rul. 69-227

IRS Headnote

The manufacturers excise tax on business machines imposed by section 4191 of the Internal Revenue Code of 1954 applies to parts or accessories, as distinguished from supplies, when sold in connection with watchmen's clocks or other time recording devices. However, the tax does not apply if the parts or accessories are sold separately.

Full Text

Rev. Rul. 59-36

Advice has been requested whether the manufacturers excise tax on business machines applies to sales of keys and other articles for use with watchmen's clocks or with other time recording devices.

A company which manufacturers time recording devices also manufacturers and sells metal card racks, station boxes and station keys for use with the time recording devices.

Section 4191 of the Internal Revenue Code of 1954 imposes a tax on the sale by the manufacturer, producer, or importer of certain business machines including time recording devices. The tax also applies to parts or accessories of such articles sold on or in connection therewith, or with the sale thereof.

Watchmen's clocks are considered to be time recording devices within the meaning of section 4191 of the Code. Accordingly, it is held that the manufacturers excise tax applies to the manufacturer's sales of watchmen's clocks.

Card racks, station boxes and station keys are not themselves taxable articles but are parts or accessories for the time recording devices. Therefore, the tax does not apply to the manufacturer's separate sales of such articles. However, when any of these articles are sold on or in connection with, or with the sale of a taxable article, such as a watchmen's clock or other time recording device, the manufacturers excise tax applies to the entire selling price of the taxable time recording device and the parts or accessories regardless of whether the charges for the parts or accessories may be shown separately on the invoice.

On the other hand, articles such as time cards and cardboard dials are considered to be supplies for, rather than parts or accessories for, the taxable watchmen's clocks. The manufacturers excise tax does not apply to sales of such supplies, even though they may be sold with taxable business machines, provided they are billed separately on the invoice or the manufacturer's records are sufficient to extablish the selling price of the business machines.