Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 64-17

1964-1 C.B. 579

IRS Headnote

Tobacco products and cigarette papers and tubes may not be removed exempt from tax for delivery to military and naval bases and establishments in this country for distribution to officers and enlisted personnel at special and holiday dinners or recreational activities, where the articles are purchased with funds derived from donations by officers and enlisted personnel to club or camp funds or from profits from post or base exchanges.

Revenue Ruling 54-69, C.B. 1954-1, 257, superseded.

Full Text

Rev. Rul. 64-17 /1/

Permission has been requested for the removal of tobacco products and cigarette papers and tubes, without payment of tax, for delivery to military and naval bases and establishments in the United States for distribution to officers and enlisted personnel at special and holiday dinners and at recreational activities.

While such articles are intended for gratuitous distribution, the funds with which the articles would be purchased are derived from donations by officers and enlisted personnel to club or camp funds and from profits from post or base exchanges.

Section 7510 of the Internal Revenue Code of 1954 provides as follows:

The privilege existing by provision of law on December 1, 1873, or thereafter of purchasing supplies of goods imported from foreign countries for the use of the United States, duty free, shall be entended, under such regulations as the Secretary or his delegate may prescribe, to all articles of domestic production which are subject to tax by the provisions of this title.

Section 5704(b) of the Code provides, in part, that a manufacturer may remove tobacco products and cigarette papers and tubes, without payment of tax, for use of the United States, in accordance with such regulations and upon the filing of such bonds as the Secretary of the Treasury or his delegate shall prescribe.

Section 295.31 of the Regulations relating to the Removal of Tobacco Products and Cigarette Papers and Tubes, Without Payment of Tax, for use of the United States provides that tobacco products and cigarette papers and tubes purchased by a Federal agency with funds appropriated by the Congress of the United States may be removed, without payment of tax, in accordance with this part, for delivery to such Federal agency for grantuitous distribution under the supervision of such agency. Such articles purchased by a donor from a manufacturer, or donated directly by a manufacturer, may also be removed, without payment of tax, in accordance with this part, for delivery to a Federal agency for gratuitous distribution under the supervision of such agency to (1) charges of the United States, or (2) patients in a  hospital or institution operated by the Government of a State or the District of Columbia where the Federal agency maintains a program for such distribution to members or veterans of the armed forces of the United States in such hospital or institution. Tobacco products and cigarette papers and tubes removed under the provisions of this part may not be sold subsequent to removal.

Since the tobacco products and cigarette papers and tubes are neither purchased by a Federal agency with congressionally appropriated funds nor purchased by a donor and delivered to a Federal agency for gratuitous distribution under its supervision to charges of the United States or to patients, the removal of such articles for delivery to military and naval bases and establishments in this country for distribution to officers and enlisted personnel at special and holiday dinners and at recreational activities would not be `for use of the United States' within the meaning of section 5704(b) of the Code. Therefore, tobacco products and cigarette papers and tubes may not be removed for such purposes.

Revenue Ruling 54-69, C.B. 1954-1, 257, is hereby superseded.

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