Internal Revenue Service
Revenue Ruling
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smRev. Rul. 64-52
1964-1 C.B. 357
Caution: Obsoleted by Rev. Rul. 69-227
IRS Headnote
The rental of binoculars by a concessionaire to the patrons of a race track for their use within the confines of the race track premises for viewing one afternoon of racing is not a `lease' of the binoculars within the meaning of section 4052 of the Internal Revenue Code of 1954. Therefore, the amounts received for the rental of the binoculars are not subject to the tax imposed by section 4001 of the Code.
Full Text
Rev. Rul. 64-52
Advice has been requested concerning the applicability of the retailers excise tax to amounts received for the rental of binoculars under the circumstances described below.
A person is engaged in the business of operating a concession at a race track. One of the services offered is the rental of binoculars to the patrons of the track for their use in viewing the program of racing for one afternoon.
These binoculars are not offered for sale by the concessionaire at any time. Under the terms of the oral rental agreement between the concessionaire and the patron, the use of the binoculars is restricted to the confines of the race track premises. They must be returned to the concessionaire at the conclusion of the racing program.
In order to insure the return of the binoculars, the patron, upon his first rental, is required to submit proof of his identification to the concessionaire, or, if unable to do so, to make a cash deposit. The name and address of the patron is recorded on the books of the concessionarie, and, in the event of his failure to return the binoculars at the required time, he is contacted by mail, notified of his obligation to return the binoculars, and advised of the legal consequences of his failure to do so.
The specific question is whether the described transaction is considered to be a `lease' of the binoculars within the meaning of section 4052 of the Internal Revenue Code of 1954.
Section 4001 of the Code imposes an excise tax on the retail sale of various enumerated articles, including binoculars. Section 4052 of the Code provides that, for the purposes of the retailers excise taxes, the lease of an article shall be considered the sale of such article.
Section 320.10(a) of Regulations 51, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that the term `lease' means a continuous right to possession or use of a particular article for a period of time. The regulations further provide that the term does not include the use of an article merely as the occasion demands, but the contract must give the lessee the right to possess or use the article, without interruption, for a period of time.
Revenue Ruling 59-111, C.B. 1959-1, 302, holds that the retailers excise tax applies to any charges made by a retailer to a broadcasting company for the use of taxable articles as `props' on television shows. That Revenue Ruling is conditioned upon the fact that, under the particular circumstances involved, the broadcasting company `has a continuous right to possession or use of the articles for a period of time.'
Under the circumstances here involved, there is such restriction inherent in the nature of the terms and conditions surrounding the rental and use of the binoculars that the patron does not have the `continuous right to the possession or use of' the binoculars, `without interruption, for a period of time,' within the contemplation of the regulations.
Accordingly, it is held that the rental of binoculars, under the facts present in the instant case, is not a `lease' of the binoculars within the meaning of section 4052 of the Code. Therefore, the amounts received for the rental of the binoculars are not subject to the tax imposed by section 4001 of the Code.
This Revenue Ruling is not determinative of the question whether a patron's failure to return the binoculars and the forfeiture of his deposit might constitute a sale of the binoculars for purposes of the retailers excise tax.