Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 70-11

1970-1 C.B. 229

IRS Headnote

Sales of articles to a State for use by the National Guard are sales for the exclusive use of a State and are exempt from the retailers and manufacturers taxes even though the articles are paid for from Federal funds; Revenue Ruling 68-671 amplified.

Full Text

Rev. Rul. 70-11

Revenue Ruling 68-671, C.B. 1968-2, 488, holds that sales of certain articles by retailers and by manufacturers, producers, or importers to a state for use by the National Guard are sales for the exclusive use of a state for purposes of the exemptions provided by sections 4055 and 4221(a)(4) of the Internal Revenue Code of 1954.

Under appropriate statutory authority, the Departments of the Army and Air Force may buy and issue to the National Guard of a state any supplies necessary to uniform, arm, and equip the state's various National Guard units for field duty. See 32 U.S.C. 702.

The specific question presented is whether the exemptions provided by sections 4055 and 4221(a)(4) of the Code for states and local governments apply if taxable articles are requisitioned by a National Guard unit of a state but paid for from Federal funds appropriated by Congress for use of the National Guard.

For purposes of the exemptions provided by sections 4055 and 4221(a)(4) of the Code, the test is whether the articles involved are purchased for the exclusive use of a state or political subdivision. Under the circumstances described above, it is immaterial whether payment is made directly by a state, or from Federal funds appropriated to purchase articles for use by the National Guard of a state, since the articles purchased are for the exclusive use of a state. Therefore, it is held that the excise taxes imposed under Chapters 31 and 32 of the Code do not apply to sales by retailers and by manufacturers, producers, or importers of articles purchased for the use of the National Guard.

Revenue Ruling 68-671 is hereby amplified.