Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 63-35

1963-1 C.B. 224

Caution: Obsoleted by Rev. Rul. 69-227

IRS Headnote

A manufacturer of electronic spinet organs installs in certain of the organs a device called a `panoramic tone projector,' which enhances the sound by producing reverberation effects. Held , the total sales price of an organ in which a `panoramic tone projector' has been installed is subject to the manufacturers excise tax on musical instruments imposed by section 4151 of the Internal Revenue Code of 1954. However, the tax does not apply to separate sales of the `panoramic tone projector.'

Full Text

Rev. Rul. 63-35

A company manufactures and sells electronic spinet organs to dealers for resale to consumers. These organs are designed and sold for use mainly in homes and small churches. In order to simulate the reverberations produced by organs in large churches and halls, the company manufactures a so-called `panoramic tone projector' which is installed in some of the organs when sold by the manufacturer. Advice has been requested concerning the applicability of the manufacturers excise tax on musical instruments to those organs which are sold by the manufacturer with the `panoramic tone projectors' installed.

A `panoramic tone projector' consists basically of a coiled length of wire with a transmitter and a receiver at the ends of the wire. The device is activated from the power supply unit of the organ in which it is installed. A sound wave originating at the transmitter travels along the wire to the receiver, at which point a small portion of the sound is converted into an electrical signal. The remainder of the sound is reflected back and forth along the wire, creating overlapping echoes of diminishing strength.

The device described above does not alter the tonal characteristics or wave shapes. It merely gives the original wave back to the speaker system in the form of overlapping and diminishing echoes. Although the `panoramic tone projector' enhances and extends the sound of the organ, it is not itself capable of producing music. In order that an organ may be played either with or without the reverberation effects, each `panoramic tone projector' is equipped with an `on' and `off' switch, which is mounted adjacent to the keyboard on the organ.

The manufacturer sometimes sells `panoramic tone projectors' separately, usually in kit form, for installation in organs previously sold to consumers without the devices installed.

Section 4151 of the Internal Revenue Code of 1954 imposes a tax 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 intruments.

For purposes of the manufacturers excise tax on musical instruments, an organ in which a `panoramic tone projector' has been installed, which is capable of producing reverberation effects, is a different article from the same type of organ without such a projector. The `panoramic tone projector' is an integral component of the organ in which it is installed. Accordingly, it is held that the manufacturers excise tax applies to the price for which such an organ is sold by the manufacturer, without reduction for any portion of the price which may be attributable to the `panoramic tone projector' installed therein.

On the other hand, the tax does not apply to the manufacturer's separate sales of the `panoramic tone projectors,' since those articles are not themselves `musical instruments.'