Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 61-78

1961-1 C.B. 846

IRS Headnote

Electric can openers constitute equipment under section 5(b) of the Federal Alcohol Administration Act.

Post Exchanges and Clubs selling alcoholic beverages on military reservations are retailers.

Section 5(b) of the Act applies to the inducement of Post Exchanges and Clubs selling beer on military reservations unless the State has reserved the power to regulate such operations and the State law is dissimilar.

Since the Act is only applicable in the United States, its restrictions do not apply to the inducement of retailers not located within the United States.

Full Text

Rev. Rul. 61-78

Advice has been requested whether brewers, importers or wholesalers of malt beverages may furnish, as advertising material, electric beer can openers, bearing a lithographed facsimile of the brewer's label to `on sale' retailers (including Army Post Exchanges) for their use in opening cans for their patrons.

Section 5 of the Federal Alcohol Administration Act provides in part, as follows:

It shall be unlawful for any person engaged in business as a distiller, brewer, rectifier, blender, or other producer, or as an importer or wholesaler, of distilled spirits, wine, or malt beverages, or as a bottler, or warehouseman and bottler, of distilled spirits, directly or indirectly or through an affiliate:

*

(b) `Tied house': To induce through any of the following means, any retailer, engaged in the sale of distilled spirits, wine, or malt beverages, to purchase any such products from such person to the exclusion in whole or in part of distilled spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such inducement is made in the course of interstate or foreign commerce, or if such person engages in the practice of using such means, or any of them, to such an extent as substantially to restrain or prevent transactions in interstate or foreign commerce in any such products, or if the direct effect of such inducement is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such retailer in interstate or foreign commerce:

*

(3) by furnishing, giving, renting, lending, or selling to the retailer, any equipment, fixtures, signs, supplies, money, services or other thing of value, subject to such exceptions as the Secretary of the Treasury shall by regulation prescribe, having due regard for public health, the quantity and value of articles involved, established trade customs not contrary to the public interest and the purposes of this subsection.

With respect to malt beverages, section 5 of the Act also provides that this provision shall apply to transactions between a retailer in any State and a brewer, importer, or wholesaler of malt beverages outside that State only to the extent that the State imposes similar requirements with respect to similar transactions between persons within its boundaries. See also Rev. Rul. 54-390, C.B. 1954-2, 578. Section 6.21 of the Regulations Relating to Inducements Furnished to Retailers excepts from the restrictions imposed by section 5(b) the sale of tapping accessories under certain specified conditions.

Section 6.28 of these regulations also excepts the furnishing, giving or selling of certain retailer advertising specialties bearing advertising matter and primarily valuable to the retailer as point of sale advertising media within specified cost limitations.

Accordingly, it is held that electric beer can openers are regarded as items of equipment, even though they may bear advertising matter. Since they do not fall within the categories of equipment excepted from the statutory restrictions by the regulations cited, it is unlawful to supply them to retailers as inducements to purchase, provided, of course, that the law of the retailer's State imposes similar restrictions.

Insofar as the application of section 5(b) of the Act to the furnishing of equipment is concerned, Post Exchanges or Clubs selling malt beverages and located on a military reservation are considered to be retailers, as that term is used in the statute, and therefore are within the coverage of the law unless the State in which they are located has reserved to itself the power to regulate the liquor traffic within the reservation, in which event the application of the Federal provision depends upon the similarity of the State law in which the reservation is located.

Since the term `United States' is defined in the Act as including the several States, the District of Columbia and Puerto Rico, the law does not apply to transactions between brewers, importers or wholesalers in the United States and retailers (including Post Exchanges or Clubs in military installations) which are located in foreign countries or insular possessions of the United States.