Internal Revenue Service TaxLinks.com sm Rev. Rul. 61-188 1961-2 C.B. 184 IRS Headnote A company which purchases artificial fishing lures in a finished condition, imprints its trade name thereon, and attaches them to display cards, has not further manufactured the lures. Therefore, sales of such lures by the company are not subject to the manufacturers excise tax on sporting goods imposed by section 4161 of the Internal Revenue Code of 1954. However, where the company purchases lures in an unfinished condition, paints them, and adds feathers to them, the company has further manufactured the lures, and sales of such lures by the company are subject to the tax imposed by that section. Full Text Rev. Rul. 61-188 The Internal Revenue Service has been requested to determine, for purposes of the manufacturers excise tax on sporting goods, who is the manufacturer of the articles produced under the circumstances described below. Among the articles sold by a company engaged in the business of selling fishing equipment are artificial lures. The company completely manufactures some of these lures in its own plant, but it also purchases both finished and unfinished lures from other suppliers. In those instances in which the lures are purchased in a finished condition, the company imprints its trade name on the articles and attaches them to display cards also bearing its name. In instances in which the lures are purchased in an unfinished condition, the company paints them and adds feathers to them, before imprinting its trade name on the articles and attaching them to display cards also bearing its name. Section 4161 of the Internal Revenue Code of 1954 imposes a tax upon the sale by the manufacturer, producer, or importer of certain enumerated articles of sporting goods (including in each case parts or accessories of such articles sold on or in connection therewith, or with the sale thereof). Included in the articles enumerated are `artificial lures, baits and flies.' Section 316.4(a) of Regulations 46, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, defines the term `manufacturer' to include a person who produces a taxable article from scrap, salvage, or junk material, as well as from new or raw material, (1) by processing, manipulating, or changing the form of an article, or (2) by combining or assembling two or more articles. In the situation described above wherein the company purchases artificial fishing lures in a finished condition and merely imprints its trade name on the lures and attaches them to display cards for resale in the same form, it is held that the company has not further manufactured the lures. Therefore, the company does not incur liability for the manufacturers excise tax on sporting goods imposed by section 4161 of the Code on its sales of such lures. The manufacturer who is subject to tax in this instance is the one who produced and sold the lures which were purchased by the company. On the other hand, when the company purchases lures in an unfinished condition, paints them and adds feathers to them, it is held that the company has further manufactured the lures. Accordingly, the company incurs liability for the manufacturers excise tax imposed by section 4161 of the Code on its sales of such lures. |