Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 64-12

1964-1 C.B. 574

IRS Headnote

A manufacturer or importer must taxpay all cigars of the same brand, shape, and size at the same tax rate, including cigars delivered to salesmen of the manufacturer or importer for free distribution as samples to prospective purchasers.

Revenue Ruling 55-662, C.B. 1955-2, 473, superseded.

Full Text

Rev. Rul. 64-12 /1/

Advice has been requested as to the tax rate applicable to cigars removed by a manufacturer for distribution to his salesmen for use as free samples to prospective purchasers.

In the instant case, the cigars removed as samples are identical to cigars which the manufacturer regularly taxpays at the Class C rate. The question here involved is whether the sample cigars should be taxpaid at the same rate as identical cigars removed for commercial sale and consumption or whether they may be removed and taxpaid at the Class A rate.

Section 5701(b) of the Internal Revenue Code of 1954 provides seven taxable classes for large cigars (cigars weighing more than three pounds per thousand) and requires that cigars removed but not intended for sale shall be taxed at the same rate as cigars removed for sale.

Under the provisions of section 5701(b) of the Code, section 270.21 of the Manufacture of Tobacco Products Regulations, and section 275.31 of the Regulations relating to the Importation of Tobacco Materials, Tobacco Products, and Cigarette Papers and Tubes, a manufacturer or importer must taxpay all cigars of the same brand, shape, and size at the same rate upon removal for taxable purposes. No exception is made for cigars removed as samples. Accordingly, cigars delivered by a manufacturer or importer to his salesmen for free distribution as samples to prospective purchasers must be taxpaid at the same tax rate as identical cigars when removed for sale.

Revenue Ruling 55-662, C.B. 1955-2, 473, is hereby superseded.

/1/ Prepared pursuant to Revenue Procedure 62-24, C.B. 1962-2, 489.