Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 65-77

1965-1 C.B. 484

IRS Headnote

The manufacturers excise tax on business machines, imposed by section 4191 of the Internal Revenue Code of 1954, applies to sales by manufacturers of certain described devices, which print numbers or record the time of day. However, the tax does not apply to sales of a check endorsing machine, a signature stamp machine and an automatic printing machine.

Full Text

Rev. Rul. 65-77

Advice has been requested concerning the applicability of the manufacturers excise tax on business machines to the articles described below.

Item (1): An electric time stamp, dater, and numbering machine . This machine is used by hotels, banks, insurance companies, purchasing departments, etc., for the purpose of printing on bills and invoices at the time of payment, the number of the transaction, the word `paid,' the date and time of day, and the name of the organization using the machine. The machine can be set for consecutive, duplicate, or triplicate numbering.

Item (2): An electric time stamp machine . This machine is designed to print the date and time of day on mail, telegrams, orders, and other business documents when they are received or dispatched. Also, the machine is equipped with upper and lower name plates which print on the documents the name of the organization and the particular department that receives or dispatches the documents.

Item (3): An electric check endorsing machine . This machine is designed for use by banks to expedite check clearance endorsing. It prints on the back of checks the name and location of the bank, the bank's `ABA' number, the date, and the endorsement of the bank.

Item (4): An electric signature stamp machine . This machine is designed to print the signature of a particular individual on any document without regard to size. It is equipped with a tamper-proof lock for safety, and a bronze die to insure a legible signature. The device is housed in a conventional time stamp housing, requiring the manual insertion of each document to be signed, and is equipped with trigger trip registration control. It is advertised by the manufacturer as a general purpose signature stamp machine, without mention of any special suitability for signing particular documents, such as checks.

Item (5): An automatic printer . This electronically operated machine is designed for use in the marking departments of merchandising companies. Type characters are inserted in a printing head which snaps into a socket in the machine. The machine prints information with respect to style, size, price, etc., on tickets, labels, and tags. In addition, trademarks, signatures, or other special plates may be obtained with the machine to meet particular requirements.

Section 4191 of the Internal Revenue Code of 1954 imposes a tax upon the sale by the manufacturer, producer, or importer of certain enumerated articles or any combinations thereof (including in each case parts or accessories of such articles sold on or in connection therewith, or with the sale thereof). Included in that enumeration of articles are `time recording devices,' `numbering machines,' and `check writing, signing, canceling, perforating, cutting, and dating machines and other check protector devices.'

A device which, as a significant part of its overall purpose, prints the time of day is a `time recording device' within the meaning of section 4191 of the Code.

Generally, a device which is designed for printing or stamping numbers is considered to be a `numbering machine' for purposes of section 4191 of the Code. However, the tax imposed by that section does not apply to a device which (a) is designed as an incidental and minor part of other equipment not subject to tax under section 4191 and (b) is unsuitable for use as a numbering machine except as part of such other equipment. See Revenue Ruling 59-364, C.B. 1958-2, 807.

A signature device which is suitable for use in signing checks is considered to be a `check signing machine' within the meaning of section 4191 of the Code. A device which is advertised by the manufacturer for use in signing checks will be presumed to be taxable.

Because a significant part of the overall purpose of the machine described under Item (1) is the recording of the time of day, the machine qualifies as a `time recording device' within the meaning of section 4191 of the Code. Since another principal function of the machine is the numbering of documents, the device also qualifies as a `numbering machine' within the meaning of section 4191. The machine combines two devices taxable as business machines under section 4191 and is subject to the tax imposed by section 4191.

The device described under Item (2) is considered to be a `time recording device' within the meaning of section 4191 of the Code, for the reason that a significant part of the overall purpose of the machine is the recording of the time of day. Accordingly, the manufacturer's sales of Items (1) and (2) are subject to the tax imposed by section 4191.

Items (3), (4), and (5) do not come within the scope of any of the articles enumerated in section 4191 of the Code. Accordingly, sales of these articles are not subject to the tax imposed by section 4191. Item (4) is not considered to be a `check signing machine' within the meaning of section 4191, for the reason that it is not specially designed or adapted, or advertised, for use as a check signing machine.