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, effective January 1, 1959, 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. Under the prescribed tax rate, the tax on admission would be four cents on an established price of $1.45 and five cents on an established price of $1.46; therefore, it is impossible to have a properly computed total charge of $1.50. Likewise, it is not possible to devise combinations that will result in total charges for admission and tax of $2.05, $2.60, $3.15, and certain larger amounts. Accordingly, it is held that under section 4231 (1) of the Code, as amended, admission tickets may not be printed showing the established price of admission to be $1.45 and the Federal tax to be five cents. The sale of such tickets would result in a collection of a greater amount of admissions tax than that which is legally due. See Mimeograph 5656, C.B. 1944, 635, relating to similar circumstances under prior law. SECTION 4231.-IMPOSITION OF TAX Temporary rules relating to collection by proprietors of the cabaret tax from concessionaires under section 423(6) of the 1954 Code, as amended by the Excise Tax Technical Changes Act of 1958. See T. D. 6347, page 37. SECTION 4294.-EXEMPTION FOR NONPROFIT EDUCATION ORGANIZATIONS [SPECIAL PROVISIONS APPLICABLE TO SERVICES AND FACILITIES TAXES] Temporary rules implementing the provisions of the Excise Tax Technical Changes Act of 1958 which accord an exemption from the services and facilities taxes to certain nonprofit educational organizations. See T. D. 6344, page 24. SECTION 4451.-IMPOSITION OF TAX [PLAYING CARDS] Rev. Rul. 59-20 The excise tax on playing cards imposed by section 4451 of the Internal Revenue Code of 1954 does not apply to sales of a specially designed deck of cards which is used to play a game called "Hi-Fen," and which is not suitable for use in the same manner as regular playing cards. Advice has been requested whether the tax on playing cards applies to a specially designed deck of cards used to play a game called "Hi-Fen." The game is played with a deck of 53 or possibly 54 cards consisting of 52 card faces imprinted with a letter of the alphabet, 26 cards in black and 26 cards in red, plus either one or two cards designated as "Hi-Fen." The object of the game is to form words from the letters which appear on the cards. A "Hi-Fen" card may be used in place of any letter in forming a word. None of the cards in the "Hi-Fen" pack have pips, numerals, or pictures of figures such as the king, queen, and jack, such as appear on regular playing cards. Section 4451 of the Internal Revenue Code of 1954 imposes a tax of 13 cents per pack on every pack of playing cards containing not more than 54 cards, manufactured or imported, and sold, or removed for consumption or sale, by a manufacturer. Article 8 of Regulations 66, made applicable to the 1954 Code by Treasury Decision 6091, C. B. 1954-2, 47, states that the tax applies to ordinary playing cards such as are used in playing games of skill or chance such as "poker," "euchre," "pinochle," and the like, and to cards that may be used in lieu of ordinary playing cards. Cards for the game of "authors," so called, and the like, differing wholly from ordinary cards, are not subject to tax. Accordingly, it is held that the tax on playing cards imposed by section 4451 of the Code does not apply to sales of "Hi-Fen" playing cards since they are not suitable for use in the same manner as ordinary playing cards. 490547-59 PART III ALCOHOL TAX RULINGS AND DECISIONS SUBPART A.-RULINGS AND DECISIONS UNDER THE INTERNAL REVENUE CODE OF 1954 Rulings and decisions published in Part III, Subpart A, of the Internal Revenue Bulletin are based on the application of provisions of the Internal Revenue Code of 1954 and, unless otherwise noted therein, are published without consideration as to any application of the provisions of the Internal Revenue Code of 1939, the Federal Alcohol Administration Act, or other public laws. SECTION 5003.-EXEMPTIONS [DISTILLED SPIRITS, WINES, AND BEER] 26 CFR 225.860: General. (Also Sections 5053, 5362, 7805; 245.195, 240.690, 252.92.) Rev. Rul. 59-21 Section 309 of the Tariff Act of 1930, as amended, 19 U. S. C. 1309, provides, in part, that distilled spirits, wines, and beer of foreign or domestic origin may be withdrawn free of duty and internal revenue tax, or with benefit of drawback, for supplies of aircraft registered in the United States and actually engaged in foreign trade or trade between the United States and any of its possessions. Similar provision are contained in pertinent regulations issued under chapter 51 of the Internal Revenue Code of 1954. Held, under the above provisions, liquors (including wines and beer) may be withdrawn free of tax or with benefit of drawback for lading on aircraft engaged in foreign trade, as supplies, and are eligible for use while such aircraft are in nonstop flights over the United States such as flights from Chicago, Illinois, to Mexico City, Mexico, and that the liquors served during such flights may be considered as used in international travel. See, however, Revenue Ruling 54-480, C. B. 1954-2, 558, with respect to special tax liability as a retail dealer in liquors. SECTION 5053.-EXEMPTIONS [BEER] 26 CFR 245.195: General. Withdrawal of beer, free of tax for lading as supplies on aircraft for serving to passengers during nonstop flights over the United States. See Rev. Rul. 59-21, above. SECTION 5176.-DISTILLER'S BOND 26 CFR 170.145: Execution. Rev. Rul. 59-22 Registered distillers and registered fruit distillers are required to file a notice and execute a new bond annually on the first day of May. Where such bonds on Form 30, Distiller's Bond, or Form 301/2, Fruit Distiller's Bond, are given without surety but instead are supported by a consent of surety on the distiller's Transportation and Warehousing Bond, Form 1571, the requirements of section 170.145 of the Miscellaneous Regulations relating to Liquor may be satisfied if Form 1533, Consent of Surety, when executed by the principal and the surety, is appropriately worded. Advice has been requested concerning the procedure to be followed by registered distillers or registered fruit distillers, who are required to file notices and execute new bonds annually on the first day of May, where a Distiller's Bond, Form 30, is given without surety but which is supported by consent of surety on the distiller's Transportation and Warehousing Bond, Form 1571. Section 5176 of the Internal Revenue Code of 1954 states, in effect, that every person intending to commence or to continue the business of a distiller shall, on filing his notice of such intention, before proceeding with such business, and on the first day of May of each succeeding year, execute a bond in the form prescribed by the Secretary of the Treasury or his delegate. Such bond shall be with such sureties, approved by the Secretary or his delegate, and for a penal sum not less than the amount of tax on the spirits that can be distilled in his distillery during a period of 15 days. Such bond shall not exceed the sum of $100,000. Section 170.145 of the Miscellaneous Regulations Relating to Liquor provides as follows: Consents of surety submitted under the provisions of this subpart must be executed on Form 1533, in duplicate, by the distiller and the surety, in accordance with the instructions in the notice on the form. The Form 1533 must properly identify the bond affected thereby and contain the following statement of purpose: "To continue in effect the terms and conditions of said bond (including all extensions" or limitations of such terms and conditions previously consented to and approved) to cover operations from May 1, 1959, to June 30, 1959, both dates inclusive." Accordingly, it is held that where Form 30, Distiller's Bond, is given without surety but instead is supported by a consent of surety on Form 1571, Transportation and Warehousing Bond, the requirements of section 170.145 of the regulations may be satisfied by the filing of Form 1533, Consent of Surety, executed by the principal and the surety, reading as follows: To extend the terms of the above-described bond, Form 1571, and distiller's bond, Form 30, dated effective in the penal sum of $100,000, written without surety, to cover operation of registered distillery No. (address), to continue in effect the terms and conditions of said bond, Form 30, (including all extensions or limitations of such terms and conditions previously consented to and approved) to cover operations from May 1, 1959, to June 30, 1959, both dates inclusive. This procedure is equally applicable to bonds on Form 302, Fruit Distiller's Bond. SECTION 5194.-TRANSFER OF SPIRITS AT 26 CFR 220.554: Vodka. (Also Part III-C, Section 5 (e); 27 CFR 5.21.) Rev. Rul. 59-23 Alcohol may be used in the production of vodka at a rectifying plant. The transfer of alcohol in bond to a registered distillery for the production of vodka is not authorized. Vodka produced by the extractive distillation process at a registered distillery may not be shipped to rectifying plants (or to taxpaid bottling houses) for completion and bottling as vodka but must be reduced to vodka proof prior to shipment. In the manufacture of vodka by the use of activated carbon, the time of contact with the reduced spirits is left to the discretion of the producer. Revenue Ruling 58-336, C. B. 1958-1, 588, amplified. Advice has been requested whether Revenue Ruling 58-336, C. B. 1958-1, 588, extends to the use of alcohol in the production of vodka and for further clarification of the processing and shipment of vodka. It is held in Revenue Ruling 58-336, that vodka may be produced by the extractive distillation process under authority of section 220.554 (c) of the Regulations relating to the Production of Distilled Spirits. It is also held that vodka may be produced by a distiller or a rectified by the treatment of neutral spirits of 110 degrees of proof with one ounce of activated carbon for each 100 gallons of reduced spirits processed provided the neutral spirits, prior to reduction in proof, meet specified conditions. While the Revenue Ruling refers only to neutral spirits, it does not exclude the use of alcohol, produced at an industrial alcohol plant, by rectifiers in the production of vodka, provided that prior to treatment with activated carbon the alcohol intended for use substantially meets the specifications set forth in the Ruling. Revenue Ruling 55-114, C. B. 1955–1, 573, provides that alcohol transferred to a registered distillery pursuant to section 5217 of the Internal Revenue Code of 1954, relating to national emergency transfers of distilled spirits, may not be redistilled or otherwise used in the production of vodka at a registered distillery as spirits so transferred may not be redistilled or reduced below the eligible proof (160 degrees) necessary for withdrawal for national defense purposes. Thus, the transfer of alcohol in bond to a registered distillery for the production of vodka by any process is not authorized. The manufacture of vodka at a registered distillery by the extractive distillation process pursuant to section 220.554 of the Regulations relating to Production of Distilled Spirits must be one complete operation as provided in Revenue Ruling 55-114, and the final product must conform with the standards for vodka established by section 21(a), Class 1, of the Regulations relating to the Labeling and Advertising of Distilled Spirits. Since such Ruling and the standards of identity established for vodka require reduction to not more than 110 degrees proof and not less than 80 degrees proof, the spirits may not be shipped prior to such reduction in proof to rectifying plants (or to taxpaid bottling houses) for completion and bottling as vodka. In manufacturing vodka by the use of activated carbon, the time of contact of the activated carbon with the reduced spirits is left to the discretion of the producer. |