Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 62-91

1962-1 C.B. 304

IRS Headnote

Where a retailer sells a diamond ring on credit and pays the applicable retailers excise tax but subsequently repossesses the ring because of the purchaser's failure to make any payment, the retailer may be allowed a credit or refund of the tax under the provisions of section 6416(b)(1) of the Internal Revenue Code of 1954.

Full Text

Rev. Rul. 62-91

Advice has been requested as to the allowability of a credit or refund of the retailers excise tax under the circumstances described below.

A retailer sold a diamond ring on an open charge account and paid to the Government the applicable retailers excise tax. However, the purchaser failed to make any payment, and the ring was repossessed by the retailer six months after the date of sale.

Section 6416(b)(1) of the Internal Revenue Code of 1954, relating to special cases in which retailers or manufacturers excise tax payments may be considered overpayments, provides that when the price on which a tax was based is readjusted by reason of the return or repossession of an article, a credit or refund may be allowed, with respect to the article, in the amount of that part of the tax proportionate to the part of the price which is repaid or credited to the purchaser.

Where an article subject to retailers excise tax is in fact and in law repossessed by the taxpayer for failure by the customer to make appropriate payment on his account covering such article, a credit or refund is allowable in the amount of tax paid which is proportionate to the amount of the price credited or repaid to the customer. In such repossession cases, the allowability of a credit or refund under the provisions of section 6416(b)(1) of the Code will be determined without regard to the period of time that has elapsed since the delivery of such article to the purchaser.

Accordingly, it is held that when a diamond ring is repossessed under the circumstances set forth above, the retailer is entitled to a credit or refund of the excise tax paid on the sale, provided he files a claim for credit or refund within the time limit specified in section 6511(a) of the Code, which relates to the period of limitations on filing claims for credit or refund of an overpayment of any tax imposed by the Internal Revenue Code in respect of which the taxpayer is required to file a return.