Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 65-43

1965-1 C.B. 449

IRS Headnote

Where a company transfers or `awards' articles of jewelry, or silver flatware or hollow ware, to individuals or groups of individuals who have submitted coupons or other evidence of retail purchase of the company's food products, such transfers are sales at retail of the articles. Accordingly, the company incurs liability for the retailers excise tax imposed by section 4001 of the Internal Revenue Code of 1954 on its transfers of the articles based on their fair retail market value at time of transfer.

Full Text

Rev. Rul. 65-43

Advice has been requested whether the retailers excise tax imposed by section 4001 of the Internal Revenue Code of 1954 applies to the transfer of taxable articles under the circumstances described below.

A company is engaged in the business of manufacturing food products which it sells to wholesalers for resale and to chain store warehouses for distribution to retail outlets. As part of a promotion program designed to stimulate retail sales of its products, the company engages in the transactions described below.

Transaction 1 The company transfers or `awards' articles of jewelry to retail purchasers of the company's products upon receiving, from an individual purchaser, appropriate evidence of a retail purchase. The evidence may be in the form of box tops, wrappers, labels, coupons, certificates, or other form of scrip.

Transaction 2 The company transfers or `awards' silver flatware or hollow ware to groups of individuals (referred to as `coupon clubs'), such as ladies' church groups, submitting coupons or other form of scrip, as evidence of retail purchase of the company's products.

In all of the transactions described above, the articles transferred by the company are of the type which are subject to the retailers excise tax imposed by section 4001 of the Code. None of these transactions involve the transfer of the articles to a person who resells them.

Section 4001 of the Code imposes a tax upon various categories of articles sold at retail, including `all articles commonly or commercially known as jewelry, whether real or imitation,' and `gold, gold-plated, silver, or sterling flatware or hollow ware and silver-plated hollow ware.'

Section 48.4001-1(d) of the Manufacturers and Retailers Excise Tax Regulations provides, in part, that the tax is payable by the person who sells at retail any article subject to the tax.

Section 320.1(f) of the Regulations 51, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that the term `sale' means an agreement whereby the seller transfers the property (that is, the title or the substantial incidents of ownership) in goods to the buyer for a consideration called the price, which may consist of money, services, or other things.

Section 320.5(d) of the regulations provides that the giving of a premium in consideration of the return of wrappers, labels, coupons, trading stamps, or other scrip, delivered or sold in connection with the sale of a commodity, constitutes a taxable transaction, and the person so giving the premium is considered to be one who sells at retail.

In view of the foregoing, it is held that the retailers excise tax imposed by section 4001 of the Code applies to the transfers of articles of jewelry, etc., to individuals, or groups of individuals, who have submitted coupons or other evidence of retail purchase of the company's products.

The company that sells at retail is liable for the retailers excise tax computed on the basis of the fair retail market value of the articles at the time of transfer.