Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 61-77

1961-1 C.B. 489

IRS Headnote

The manufacturers excise tax applies to sales of taxable articles to the Office of Civil and Defense Mobilization for Federal use. However, the manufacturers excise tax does not apply to taxable articles purchased by or for State civil defense organizations, because of the exemption provided by section 4221(a)(4) of the Internal Revenue Code of 1954.

Full Text

Rev. Rul. 61-77

The Internal Revenue Service has been asked whether the manufacturers excise taxes are applicable to sales of taxable articles to the Office of Civil and Defense Mobilization or to the various States for their civil defense programs.

The Office of Civil and Defense Mobilization, an agency in the Executive Office of the President of the United States, purchases and stockpiles certain civil defense equipment for Federal use. It also makes financial contributions to States for their civil defense programs. Such contributions are equally matched by the various States. Regulations applicable to the administration of the Office of Civil and Defense Mobilization provide that title to equipment purchased for the civil defense programs of the States vests in the States. Some civil defense equipment for State use is purchased by the various States, and some is purchased for such use by the Office of Civil and Defense Mobilization. Whether a particular State or the Office of Civil and Defense Mobilization purchases the equipment for the use of that State depends on which can purchase it more economically or expeditiously.

Section 4221(a)(4) of the Internal Revenue Code of 1954, as amended by the Excise Tax Technical Changes Act of 1958, Public Law 85-859, C.B. 1958-3, 92, provides that under regulations prescribed by the Secretary of the Treasury or his delegate, no tax shall be imposed under the Code on the sale by the manufacturer of an article to a State or local government for the exclusive use of a State or local government.

Section 4293 of the Code provides, in part, that the Secretary of the Treasury may authorize exemption from the manufacturers excise tax as to any article, or class of articles, to be purchased for the exclusive use of the United States, if he determines that the imposition of such taxes with respect to such articles, or class of articles will cause substantial burden or expense which can be avoided by granting tax exemption and that full benefits of such exemption, if granted, will accrue to the United States. However, no exemption from the manufacturers excise tax has been authorized under the provisions of that section.

Accordingly, it is held that the manufacturers excise tax applies to taxable articles sold to the Office of Civil and Defense Mobilization for Federal use. However, where both a State and the Office of Civil and Defense Mobilization contribute equal amounts for the purchase of approved civil defense equipment and the State purchases taxable articles out of this fund for the use of the State, the exemption under section 4221(a)(4) of the Code applies. Furthermore, where the articles are purchased by the Office of Civil and Defense Mobilization for use by a State for the civil defense program of the State, the exemption also applies.