support a tax-free sale thereto. The exemption certificate must show the date of such determination letter or ruling and that such determination letter or ruling is still in effect and has not been withdrawn or revoked. Where the exempt character of the institution has not been established by a determination letter or ruling, or in some other manner as previously indicated in this section, the institution, in order to enable the manufacturer to establish his right to sell tax-free, may apply to the district director for the district in which its principal office is located for a determination of its status. Application for a determination should be made by filing Form 1023 with such district director. Copies of the form and instructions as to the appropriate procedure to be followed in filing it may be obtained from the appropriate district director. (4) Acceptable form of exemption certificate.-The following form of exemption certificate will be acceptable for the purposes of this section and must be adhered to in substance: EXEMPTION CERTIFICATE (For use by a religious or nonprofit educational institution purchasing musical Instruments subject to tax under section 4151 of the Internal Revenue Code of 1954 for exclusively religious or educational purposes.) (RELIGIOUS OF NONPROFIT EDUCATIONAL INSTITUTION) is authorized to execute this certificate; and that the musical instruments specified in the accompanying order or on the reverse side hereof are purchased by such institution for exclusively religious or educational purposes. It is understood that this exemption certificate is for use only by a religious or nonprofit educational institution in the tax-free purchase of musical instruments for exclusively religious or educational purposes; and it is agreed that if the musical instruments purchased tax free are used otherwise than as set forth in this certificate, such fact will be reported to the manufacturer, producer, or importer from whom the instruments were purchased tax free. The institution (if other than a church) claiming exemption under this certificate has received a determination letter or ruling from the Internal Revenue Service holding the institution (1) to be a religious or nonprofit educational institution of the type described in section 501(c)(3) of the Internal Revenue Code of 1954, and (2) exempt from income tax under section 501 (a) thereof or not entitled to exemption from income tax under section 501 (a) by reason of the provisions of section 503 or 504 of such Code, relating to prohibited transactions and to accumulations out of income, respectively (or corresponding provisions of prior revenue laws). The date of such determination letter or ruling is and such determination letter or ruling has not been withdrawn or revoked. The undersigned also understands that the fraudulent use of this certificate for the purpose of securing this exemption will subject him and all guilty parties to a fine of not more than $10,000, or to imprisonment for not more than five years, or both, together with costs of prosecution. 503055-59 --4 (SIGNATURE) (5) Evidence required to establish that the musical instrument is purchased for exclusively a religious or educational purpose.—In the absence of circumstances indicating a different use, the exemption certificate procured by the manufacturer from the purchasing religious or nonprofit educational institution will be acceptable as prima facie proof that the musical instrument is purchased for exclusively a religious or educational purpose. (e). Exemption certificate not obtained prior to filing of manufacturer's excise tax return.-If the sale is otherwise exempt but the exemption certificate is not obtained prior to the time the manufacturer files a return covering taxes due for the period during which the sale was made, the manufacturer must include the tax on such sale in his return for that period. However, if the certificate is later obtained, a claim for refund of the tax paid on such sale may be filed on Form 843, or a credit for such amount may be taken upon a subsequent return, as provided by section 6416 (b) (2). § 40.4152-2 OTHER TAX-FREE SALES.-For provisions relating to tax-free sales of musical instruments, see (a) Section 4220, relating to sales or resales to manufacturers for further manufacture; (b) Section 4222, relating to sales for use as supplies for certain vessels and airplanes; (c) Secton 4224, relating to articles sold for the exclusive use of a State or local government; and (d) Section 4225, relating to sales for export; as applicable to sales made prior to January 1, 1959. CHARLES I. Fox, Acting Commissioner of Internal Revenue. Approved April 16, 1959. FRED C. SCRIBNER, Jr., Acting Secretary of the Treasury. (Filed by the Division of the Federal Register on April 21, 1959, 8:45 a.m. and published in the issue of the Federal Register for April 22, 1959, 24 F.R. 3109.) SECTION 4151.-IMPOSITION OF TAX 26 CFR 40.4151: Statutory provisions; imposition of tax. Regulations under the Internal Revenue Code of 1954 relating to the manufacturers tax on musical instruments. See T.D. 6372, page 18. SECTION 4216.-DEFINITION OF PRICE [SPECIAL PROVISIONS APPLICABLE TO MANUFACTURERS TAX] Rev. Rul. 59-163 M company, a corporation, manufactures articles which are subJect to the manufacturers excise tax. N company, a corporation, handles all of the domestic sales of the articles produced by M. The two companies have the same stockholders, they occupy the same premises, and the same employees maintain the books and records of both companies. No sales invoices are made for transactions between M and N, but a journal entry is made at the end of each month to account for such transactions. Held, under these circumstances, there is no actual sale of articles by M to N, but only a bookkeeping transaction. The taxable sale occurs when title to the articles passes to the first independent distributor or jobber. Furthermore, advertising and selling expenses are not to be excluded from the selling price in computing the manufacturers excise tax irrespective of whether these expenses are incurred by M or N. Advice has been requested concerning the determination of the taxable selling price of certain articles which are subject to the manufacturers excise tax and are sold under the circumstances described below. M company, a corporation, manufactures articles, which are subject to the manufacturers excise tax, for sale in both domestic and foreign markets. The officers and stockholders of M formed N company, a corporation, to handle all of the domestic sales. The two companies have the same stockholders. The books and records of the two companies are maintained by the same employees in the same office space. No sales invoices are prepared for transactions between M and N, but a journal entry is made at the end of each month to account for the transactions between the two companies. The articles are not delivered by M to N, but are delivered to carriers for shipment to customers directly from M's production line. N purportedly incurs advertising and selling expenses in promoting the sale of the articles. In setting forth special provisions applicable to the manufacturers excise tax, section 4216(a) of the Internal Revenue Code of 1954 provides that in determining the price for which an article is sold, a transportation, delivery, insurance, installation or other charge (not otherwise required to be included) shall be excluded from the price for which an article is sold. Section 4216(b) of the Code provides that, if an article is sold (otherwise than through an arm's length transaction) at less than fair market price, the manufacturers excise tax shall (if based on the price for which the article is sold) be computed on the price for which such articles are sold, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Secretary of the Treasury or his delegate. Section 318.1 (f) of Regulations 46, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, defines the term "sale" as 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 316.15(c) of the regulations provides that all sales at wholesale are subject to tax on the basis of the actual sale price of each article so sold. In the case of Kin-Septic Co. v. United States, 64 Fed. Supp. 142, the United States Court of Claims held that the Commissioner of Internal Revenue could treat two corporations as one organization for purposes of computing the manufacturers excise tax where the same stockholder owned and managed both corporations and both corporations used the same premises and the same employees. In refuting the petitioner's contention that certain advertising and selling expenses fall within the term "other charge" as used in language similar to that now included in section 4216(a) of the Code, the Supreme Court of the United States held in the case of The F. W. Fitch Co. v. United States of America, 323 U.S. 582, Ct. D. 1625, C.B. 1945, 433, that such expenses incurred by the manufacturer clearly fall within the class of charges which Congress intended to be included in the tax base. The Court stated, "Regardless of whether we consider such expenses technically as manufacturing costs, it is obvious that they are incurred prior to the actual shipment of articles to wholesale purchasers and that they enter into the composition of the wholesale selling price. Even if the purchaser accepts delivery at the factory, he pays for the advertising and selling expenses. Thus, they must be included in the taxable sales price." Accordingly, under the circumstances set forth above, it is held that there is no actual sale of articles by M to N but only a bookkeeping transaction; and the taxable sale or transaction occurs when title to the articles passes to the first independent distributor or jobber, and the manufacturers excise tax is based upon the actual wholesale price for which the articles are sold in each instance. It is further held that advertising and selling expenses incurred by M and N are not to be excluded from the selling price in determining the price for which the articles are sold. SECTION 4231.-IMPOSITION OF TAX Rev. Rul. 59-164 An amount paid to gain admission to an auction sale represents a payment for admission subject to the tax on admissions, imposed by section 4231 (1) of the Internal Revenue Code of 1954. The fact that the admission payment may be refunded or credited to the purchase of an article at the sale does not change the nature of the charge. However, if the amount of the admission payment is refunded when the person making the payment makes a purchase at the sale or if the amount of the payment is credited to the purchase made at the sale, then the amount of the admissions tax should also be refunded or credited. Advice has been requested whether, under the circumstances described below, amounts paid to enter a room in which an auction sale is being conducted are subject to the tax on admissions. Due to space limitations, an auctioneer makes a charge of two dollars a person for admission to the room in which an auction is being conducted in order to discourage people who are not interested in making a purchase from attending the auction. The admission fee is collected at the door of the auction room and all persons entering the room must pay the charge. When a spectator is a successful bidder, his admission payment is refunded to him or credited against his purchase. Where a spectator does not make a purchase, he receives no refund and the auctioneer keeps the admission payment. Section 4231 (1) of the Internal Revenue Code of 1954, as amended by the Excise Tax Technical Changes Act of 1958, Public Law 85-859, imposes a tax of one cent for each ten cents or major fraction thereof of the amount in excess of one dollar paid for admission to any place. Section 101.2 (a) of Regulations 43, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides, in part, that the tax is imposed on "the amount paid for admission to any place," and applies to the amount which must be paid in order to gain admission to a place. The term "admission" means the right or privilege to enter into a place. Section 6415 (d) of the Code provides that any person making a refund of any payment on which tax imposed by certain enumerated sections of the Code, including section 4231(1), has been collected may repay therewith the amount of tax collected on such payment. Section 101.43 of the regulations provides, in part, that where an amount paid for admission is refunded it will be treated, as far as tax liability is concerned, as not having been paid, and the tax collected should be refunded to the taxpayer at the same time the payment for admission is refunded. It is held that an amount paid to gain admission to an auction represents a payment for admission within the meaning of section 4231 of the Code. The fact that the payment for admission may be refunded or credited to the purchase of an article at the sale does not change the nature of the payment. Accordingly, in the instant case, the tax on admissions will apply to the payment for admission at the time it is made, that is, when it is collected at the door of the auction room. However, if the amount of the payment for admission is refunded when the person making the payment makes a purchase at the sale or if the amount of the payment is credited to the purchase made at the sale, then the amount of the admissions tax should also be refunded or credited. The tax collected on the payments for admission which are not so refunded or credited should be reported and paid over to the Internal Revenue Service in the manner prescribed in the Code and regulations. SECTION 4361.-IMPOSITION OF TAX [CONVEYANCES] 26 CFR 43.4361-1: Imposition of tax. Rev. Rul. 59-165 Instruments that transfer any interest in the ownership of real property are subject to the documentary stamp tax imposed by section 4361 of the Internal Revenue Code of 1954. Accordingly, with respect to realty located in the State of Minnesota, a sheriff's "certificate of sale" delivered to a foreclosure purchaser and a "certificate of redemption" delivered to a judgment debtor (redemptioner) are subject to the tax imposed by section 4361 of the Code. Advice has been requested concerning the applicability of the documentary stamp tax on conveyances of real property, imposed by |