Internal Revenue Service TaxLinks.com sm Rev. Rul. 59-273 1959-2 C.B. 295 Caution: Superseded in part by Rev. Rul. 65-114 IRS Headnote The exemption from the manufacturers excise tax, provided by section 4182(b) of the Internal Revenue Code of 1954, applies to the sales of firearms, pistols, revolvers, shells, and cartridges to the Military, the Naval, and the Air Force Academies of the United States. However, sales of such articles to the United States Coast Guard are taxable unless the particular order for the articles is paid from funds appropriated for a military department. Full Text Rev. Rul. 59-273 Advice has been requested whether the exemption from the manufacturers excise tax, provided by section 4182(b) of the Internal Revenue Code of 1954, applies to sales of firearms, pistols, revolvers, shells, and cartridges to the United States Coast Guard, and to the Military, the Naval, and the Air Force Academies of the United States. Section 4181 of the Code provides as follows: There is hereby imposed upon the sale by the manufacturer, producer, or importer of the following articles a tax equivalent to the specified percent of the price for which so sold: ARTICLES TAXABLE AT 10 PERCENT- Pistols. Revolvers. ARTICLES TAXABLE AT 11 PERCENT- Firearms (other than pistols and revolvers). Shells, and cartridges. Section 4182(b) of the Code provides that no firearms, pistols, revolvers, shells, and cartridges purchased with funds appropriated for the military department shall be subject to any tax imposed on the sale or transfer of such articles. Section 316.81(b) of Regulations 46, made applicable to the 1954 Code by Treasury Decision 6091 C.B. 1954-2, 47, provides that: PURCHASES FOR THE MILITARY DEPARTMENTS OF THE UNITED STATES.-By virtue of the provisions of section 706 of the Second Supplemental Appropriation Act, 1951 (Public Law 911, 81st Congress, 2d Session), no tax attaches to the sale of firearms, shells, and cartridges paid for after January 5, 1951, with funds appropriated for the military departments of the United States by such Act or any other Act. For the purposes of this exemption the term `military departments' includes only the Department of the Army, Department of the Navy, and the Department of the Air Force. Included in the Navy are naval aviation and Marine Corps, and the Coast Guard when operating as a service in the Navy pursuant to the provisions of section 3 of Title 14 of the United States Code. Any manufacturer claiming exemption under this paragraph must be prepared to produce evidence which will establish the right to exemption. Generally, clearly identified orders or contracts of a military department when signed by an authorized officer of such department will be accepted in support of the exemption. However, in the absence of such orders or contracts, a statement signed by an authorized officer of military department that the firearms, shells, or cartridges sold were purchased with funds appropriated for the military departments will be acceptable. Article 9 of Regulations 47, also made applicable to the 1954 Code by Treasury Decision 6091, contains similar provisions with respect to pistols and revolvers. Section 1 of Title 14 of the United States Code, effective August 4, 1949, provides, in part, that the Coast Guard shall be a service in the Treasury Department, except when operating as a service in the Navy. Section 3 of Title 14 of the United States Code, effective August 4, 1949, provides, in part, that upon the declaration of war or when the President directs, the Coast Guard shall operate as a service in the Navy and shall so continue until the President, by executive order, transfers the Coast Guard back to the Treasury Department. It is held that since the Treasury Department is not a `military department' and since the basic operating funds of the Coast Guard are derived from Treasury Department appropriations, the exemption from manufacturers excise tax provided by section 4182(b) of the Code does not apply to sales of firearms, pistols, revolvers, shells, and cartridges purchased with such funds, and the sales of such articles are subject to the manufacturers excise tax on firearms imposed by section 4181 of the Code. However, some funds are received by the Coast Guard from the military departments for certain activities for which a military requirement has been established. When this is true, the exemption under section 4182(b) of the Code does apply to the sales of firearms, pistols, revolvers, shells, and cartridges to the Coast Guard under a particular order which is paid from funds appropriated for a military department. The application of the exemption under section 4182(b) is a question of fact to be determined when a particular contract is being negotiated. On the other hand, the Military Academy, the Naval Academy, and the Air Force Academy receive their operating funds from appropriations for the Department of the Army, the Department of the Navy, and the Department of the Air Force, respectively. Accordingly, the exemption provided by section 4182(b) of the Code applies to sales of firearms, pistols, revolvers, shells, and cartridges to these Academies. |