Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 60-10

1960-1 C.B. 473

Caution: Obsoleted by Rev. Rul. 69-227

IRS Headnote

Where a manufacturer produces and sells electronic organs either with or without built-in percussion units, he is offering for sale two separate musical instruments distinguishable by reason of the percussion effects one is able to produce. Accordingly, the manufacturers excise tax on musical instruments applies to the total selling price of an electronic organ with percussion effects, including that portion of the selling price which is attributable to the percussion unit. However, separate sales by the manufacturer of percussion parts for installation of percussion units on organs sold without percussion effects are not subject to the manufacturers excise tax imposed by section 4151 of the Internal Revenue Code of 1954.

Full Text

Rev. Rul. 60-10

Advice has been requested as to the applicability of the manufacturers excise tax on musical instruments to sales of percussion units for electronic organs.

A company manufacturers and sells electronic spinet organs either with or without built-in percussion effects. These organs are sold to dealers who resell them to consumers. Occasionally, a dealer is requested by a consumer to install a percussion unit in an organ which was originally sold without percussion effects. The installation of a percussion unit in an organ involves the use of many separate parts which the dealer must order from the manufacturer. Some of these parts require soldering or the cutting of original wires and the soldering in of new wires. The percussion unit cannot be used as an independent musical instrument.

Section 4151 of the Internal Revenue Code of 1954 provides that a tax shall be imposed upon the sale of musical instruments by the manufacturer, producer, or importer. No tax is imposed by this section upon parts or accessories sold on or in connection with the sale of musical instruments.

Revenue Ruling 57-111, C.B. 1957-1, 376, provides that the term `musical instruments' as used in the statute includes all component elements of musical instruments essential to their operation. For example, in the case of a saxophone, one mouthpiece, one reed, and one ligature are essential to the operation of the instrument. Therefore, the tax applies to the complete instrument including such components when they are sold on or in connection with the instrument.

Where a percussion unit such as the one described above is built into an electronic organ, such unit becomes an integral part or component element of the organ rather than an accessory thereto. Therefore, the manufacturer described above produces and sells two separate organs distinguishable by reason of the percussion effects one is able to produce.

Accordingly, it is held that the manufacturers excise tax on musical instruments applies to the total selling price of an electronic organ with percussion effects, including that portion of the selling price which is attributable to the percussion unit. However, separate sales by the manufacturer to percussion parts for installation of percussion units on organs sold without percussion effects are not subject to the manufacturers excise tax imposed by section 4151 of the Code.