Internal Revenue Service
Revenue Ruling
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smRev. Rul. 62-76
1962-1 C.B. 25
Caution: Superseded by Rev. Rul. 73-465
IRS Headnote
The tax imposed by the State of Georgia under the Georgia Retailers' and Consumers' Sales and Use Tax Act, as amended by the Acts of 1960, effective March 1, 1960, is a tax imposed upon the purchaser or consumer and is deductible under section 164(a) of the Internal Revenue Code of 1954.
Revenue Ruling 59-65, C.B. 1959-1, 51 and I.T. 4058, C.B. 1951-2, 22, distinguished.
Full Text
Rev. Rul. 62-76
Advice has been requested regarding the effect of the Acts of 1960 amending the Georgia Retailers' and Consumers' Sales and Use Tax Act, Georgia Laws, 1951, 360, approved on February 20, 1951, on the deductibility, under section 164(a) of the Internal Revenue Code of 1954, of taxes imposed under that Act.
The Georgia Retailers' and Consumers' Sales and Use Tax Act, as amended by the Acts of 1960, is found in Title 92, sections 92-3401a through 92-3451a of the Code of Georgia Annotated (1961 revision). The express purpose of the Georgia General Assembly in amending the Act was to make it clear that the tax imposed by the Act is a tax imposed upon the purchaser. See Georgia Laws, 1960, 153, 154, effective March 1, 1960. The Act, as amended, provides, in part, that the tax is levied and imposed on the retail purchase, retail sale, rental, storage, use or consumption of tangible personal property and certain services described in the Act.
Prior to the 1960 amendments, the Act levied and imposed a privilege or license tax on every person who engaged in the business of selling tangible personal property in the State or who rented or furnished any of the things or services taxable under the Act. Compare section 92-3402a of Title 92, as revised, with section 2 of the Act as approved on February 20, 1951, Georgia Laws 1951, 360.
The Act, as amended, also provides that a retailer or dealer who neglects, fails, or refuses to collect the tax is made liable for the tax himself. See section 92-3415a of Title 92, as revised.
Section 164(a) of the Internal Revenue Code provides, in general, that, except as otherwise provided, there shall be allowed as a deduction taxes paid or accrued within the taxable year.
Section 1.164-1 of the Income Tax Regulations provides, in part, that taxes are generally deductible only by the person upon whom they are imposed.
Revenue Ruling 59-65, C.B. 1959-1, 51, holds that the tax imposed by the State of Georgia by section 2 of the Georgia Retailers' and Consumers' Sales and Use Tax Act, Georgia Laws, 1951, 360, effective April 1, 1951, is a tax imposed upon the dealers who engage in the business of selling tangible personal property at retail in the State of Georgia. Such tax is deductible by the dealer under section 23(c) of the Internal Revenue Code of 1939, or section 164(a) of the Internal Revenue Code of 1954, whichever is applicable. The ruling further holds that, where the dealers collect the tax from the vendees, the total amounts so collected are includible in their gross income for Federal income tax purposes, See also I.T. 4058, C.B. 1951-2, 22, which expresses a position consistent with that expressed in Revenue Ruling 59-65.
Revenue Ruling 59-65 was published in view of the decision of the Supreme Court of the State of Georgia in the case of T. V. Williams, State Revenue Commissioner v. Bear's Den, Inc., 104 S.E. (2d) 230 (1958), which held under the Georgia Retailers' and Consumers' Sales and Use Tax Act, before the 1960 amendments, that the tax was imposed upon the retailer or dealer. Thus, Revenue Ruling 59-65 is distinguishable from the instant Revenue Ruling, since that ruling provides the Federal income tax treatment to be accorded to the tax imposed under the Act before the 1960 amendments whereas the instant ruling applies only to taxes imposed under the Act on and after March 1, 1960, the effective date of the amending Acts of 1960. I.T. 4058 is distinguishable from the instant ruling for the same reason.
It is clear, particularly in the light of the construction placed on the Act by the Bear's Den case before its amendment, that it was the intention of the Georgia General Assembly in amending the statute to impose the tax upon the purchaser or consumer on and after March 1, 1960, rather than upon the retailer or dealer. The mere fact that the Act, as amended, requires the retailer or dealer to collect the tax for the State or, in lieu of collecting the tax, to pay the uncollected tax to the State does not impose such tax upon the retailer or dealer when it is the clear intent of the statute that the tax is to be imposed upon the purchaser or consumer.
Accordingly, it is held that the tax imposed by the State of Georgia under the Georgia Retailers' and Consumers' Sales and Use Tax Act, as amended by the Acts of 1960, is a tax imposed upon the purchaser or consumer and is, therefore, deductible by the purchaser or consumer under section 164(a) of the Code.
However, in the case of an individual who elects the standard deduction or the optional tax table, no deduction is allowable unless the tax is attributable to a trade or business carried on by him. If the tax is attributable to a trade or business carried on by an individual, the amount thereof is deductible from gross income in computing adjusted gross income.
Since the retailers or dealers are merely agents of the State under the Act, as amended, for collection purposes, amounts collected by them as tax paid to the State are not includible in their gross income for Federal income tax purposes. However, amounts of the tax collected which are retained by such agents as fees, or otherwise, for collecting the tax are includible in their gross income.
Amounts paid to the State by retailers and dealers in lieu of collecting the tax are not deductible by them under section 164(a) of the Code, since such payments are not made as a result of a tax imposed upon such retailers and dealers, but may be deductible by them as business expenses if otherwise qualified for such treatment under section 162 of the Code.