Advice has been requested whether the retailers excise tax on jewelry and related items applies to sales of certain articles ornamented with precious or semi-precious stones or imitations thereof which are designed and intended for use only in the home. A company sells rhinestone-decorated plastic lipstick holders which have five holes or compartments to accommodate five lipstick cases. The company also sells rhinestone-decorated nonprecious metal containers for glass perfume bottles. These articles are intended and designed for use on a dressing table in the home. They are not suitable for carrying on the person. Sales of these articles are made at cosmetic or jewelry counters of retail stores. Section 4001 of the Internal Revenue Code of 1954 imposes a tax upon the sale at retail of (a) all articles commonly or commercially known as jewelry, whether real or imitation, (b) pearls, precious and semi-precious stones, and imitations thereof, and (c) articles made of, or ornamented, mounted or fitted with precious metals or imitations thereof. Effective January 1, 1959, this section was amended by the Excise Tax Technical Changes Act of 1958, Public Law 85-859, by striking out "pearls, precious and semi-precious stones, and imitations thereof" and by substituting therefor a list of stones. Section 320.31 (a) of Regulations 51, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, states that jewelry in general includes articles designed to be worn on the person or apparel for the purpose of adornment and which in accordance with custom or ordinary usage are worn so as to be displayed, such as rings, chains, brooches, bracelets, cuff buttons, necklaces, earrings, beads, etc. The tax is imposed on the sale of any such articles at retail, regardless of the substance of which made and without reference to their utilitarian value or purpose, unless for a purpose specifically exempted by law. Section 320.31 (b) of the regulations states that jewelry also includes articles to be carried in the hand, or hung on the arm, or carried or worn on the person, whether in pocket or bag or under the outer garments, such as cigarette cases, eyeglass cases, pencils, powder boxes, garter buckles, canes, purses or handbags, if made of, or ornamented, mounted or fitted with, pearls, precious or semiprecious stones, or imitations thereof. Such articles are likewise subject to tax without regard to their utilitarian value or purpose. Section 320.33 of the regulations provide that the retailers excise tax is imposed on the sale at retail of any article, as distinguished from those articles commonly or commercially known as jewelry as described in section 320.31 of the regulations, which are made of, or ornamented, mounted or fitted with, precious metals or imitations thereof. Articles which are not commonly or commercially known as jewelry as described in section 320.31 of the regulations are not made taxable by reason of their being ornamented with pearls, precious or semiprecious stones, or imitations thereof. On the other hand, articles made of, or ornamented, mounted or fitted with precious metals or imitations thereof are taxable without regard to whether they are commonly or commercially known as jewelry. Since the lipstick holder and the perfume bottle container described above are intended and designed for use only in the home and are not suitable for carrying on the person, they are not articles commonly or commercially known as jewelry within the meaning of section 4001 of the Code. Accordingly, it is held that the retailers excise tax imposed by that section does not apply to sales of such articles. However, it is further held that, should the perfume bottle and metal container therefor be sold at retail containing perfume, cologne, or other toilet preparation taxable under section 4021 of the Code, the tax imposed by that section would apply to the total selling price including the bottle and metal container. SECTION 4091.-IMPOSITION OF TAX Rev. Rul. 59-215 Sales of lubricating oils by the manufacturer thereof to purchasers for use solely as a coolant in grinding or honing metal with stone, as a component material in the manufacture of rubber, and for application on the outside of calender rolls solely to prevent paper from adhering to the rolls, are not subject to the manufacturers excise tax imposed by section 4091 of the Internal Revenue Code of 1954, provided the manufacturer obtains the necessary exemption certificates from the purchasers. Advice has been requested whether the manufacturers excise tax on lubricating oils applies to sales of lubricating oils, by the manufacturer thereof, for use solely as coolants in grinding or honing metal with stone, as component materials in the manufacture of rubber, and for application on the outside of calender rolls solely to prevent paper from adhering to the rolls. Section 4091 of the Internal Revenue Code of 1954 imposes a tax on lubricating oils sold by the manufacturer or producer thereof. Section 314.40 of Regulations 44, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that the term "lubricating oils" includes all oils, regardless of their origin, which are sold as lubricating oil and all oils which are suitable for use as a lubricant. Section 314.43 (a) of the regulations provides that no tax attaches where oil is sold by the manufacturer direct to a purchaser who uses it for nonlubricating purposes. No sale of oil may be made tax-free by the manufacturer to a dealer for resale for nonlubricating uses even though it is known at the time of sale that the oil will be so resold. However, where any dealer resells tax-paid oil for nonlubricating uses, the manufacturer who paid the tax to the United States on his sale of the oil, may secure a credit in accordance with the provisions of section 314.64 of the regulations. Section 314.43 (b) of the regulations. provides that in order to establish the right to exemption from tax with respect to lubricating oil sold by the manufacturer direct for nonlubricating purposes, it is necessary that the manufacturer have definite knowledge, prior to or at the time of sale, that the product is purchased for such purposes, and he obtain from the purchaser and retain in his possession the prescribed exemption certificate. It is held that lubricating oils used solely as coolants in grinding or honing metal with stone, as component materials in the manufacture of rubber, and for application on the outside of calender rolls solely to prevent paper from adhering to the rolls are used for nonlubricating purposes. Accordingly, sales of lubricating oils by the manufacturer thereof to be used by the purchaser for any of the above-named purposes are not subject to the manufacturers excise tax imposed by section 4091 of the Code, provided the manufacturer obtains from the purchaser the exemption certificate prescribed by section 314.43 of the regulations. However, where lubricating oils used as coolants, or for application on calendar rolls to prevent paper from adhering to the rolls, also serve as lubricants, the sales of the oils for such purposes are properly subject to the excise tax. S.T. 905, C. B. 1940-2, 305, enumerates other lubricating oils which are not subject to the manufacturers excise tax when sold by the manufacturer to the consumer for nonlubricating uses under the conditions prescribed in the regulations. SECTION 5702.-DEFINITIONS [TOBACCO, CIGARS, CIGARETTES, AND CIGARETTE PAPERS AND TUBES] Submission of the package design and samples where "reconstituted tobacco" is to be used as a wrapper for rolls of tobacco. See Rev. Proc. 59-15, page 30. SECTION 5741.-RECORDS TO BE MAINTAINED [RECORDS OF MANUFACTURERS OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES, EXPORT WAREHOUSE PROPRIETORS, AND DEALERS IN TOBACCO MATERIALS] 26 CFR 295.56: Record of removals. (Also Section 7342; 295.40.) T.D. 63791 TITLE 26-INTERNAL REVENUE, 1954.-CHAPTER I, SUBCHAPTER E, PART 295.— Simplification of requirements and improvement of procedures OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington 25, D.C. To Officers and Employees of the Internal Revenue Service and Others Concerned: On December 13, 1958, a notice of proposed rulemaking with respect to regulations designated as Part 295 of Title 26 of the Code of Federal Regulations are published in the Federal Register (23 F.R. 9674). The purpose of the proposal was to simplify the requirements and improve the procedures with respect to the removal of tobacco products and cigarette papers and tubes, without payment of tax, for use of the United States, and to make certain clarifying and 124 F.R. 41C6. conforming changes. No data, views, or arguments pertaining thereto have been received during the period of 30 days prescribed. However, it has been determined that this proposal will cause section 295.2, relating to forms, to be superfluous. Therefore, the regulations as so published, supplemented by the revocation of section 295.2, are hereby adopted. PARAGRAPH 1. Section 295.2 is revoked. PAR. 2. A new section 295.21a to read as follows is inserted immediately after section 295.21: § 295.21a INTERNAL REVENUE OFFICER. "Internal revenue officer" shall mean an officer or employee of the Treasury Department duly authorized to perform any function relating to the administration or enforcement of this part. PAR. 3. Section 295.30 is revoked. PAR. 4. Section 295.40 and the headnote are amended to read as follows: § 295.40 AUTHORITY OF INTERNAL REVENUE OFFICERS TO ENTER PREMISES. Any internal revenue officer may enter in the daytime any premises where tobacco products or cigarette papers or tubes removed under this part are kept, so far as it may be necessary for the purpose of examining such articles. When such premises are open at night, any internal revenue officer may enter them, while so open, in the performance of his official duties. The owner of such premises, or person having the superintendence of the same, who refuses to admit any internal revenue officer or permit him to examine the articles removed under this part shall be liable to the penalties prescribed by law for the offense. (68A Stat. 872, 903; 26 U.S.C. 7342, 7606) PAR. 5. Section 295.41 is amended by inserting in the first sentence, immediately after the word "any", the word "internal". PAR. 6. Section 295.51 is revoked. PAR. 7. Section 295.52 is revoked. PAR. 8. Section 295.56 and the headnote are amended to read as follows: $295.56 RECORD OF REMOVALS. Every manufacturer who removes tobacco products and cigarette papers and tubes under this part shall keep a supporting record of such removals and shall make appropriate entries therein at the time of removal. Such supporting record shall show, with respect to each removal, the date of removal, the name and address of the Federal agency or institution to which shipped or delivered, the quantity and, with respect to large cigars, the class designation. Where the manufacturer keeps, at the factory, copies of invoices or other commercial records containing the information required as to each such removal, in such orderly manner that such information may be readily ascertained therefrom by internal revenue officers, such copies will be considered the supporting record required by this part. Such record shall be retained for two years following the close of the year in which the tobacco products and cigarette papers and tubes were removed, and shall be made available for inspection by any internal revenue officer upon his request. (72 Stat. 1423; 26 U.S.C. 5741) PAR. 9. Section 295.58 is revoked. PAR. 10. Section 295.59 is amended to read as follows: $295.59 TAX LIABILITY. Responsibility for the tax on tobacco products and cigarette papers and tubes removed under this part shall rest upon the manufacturer making the removal until such articles are received by the Federal agency or institution. Where the manufacturer has knowledge that all or part of a shipment removed under this part has not been received by the Federal agency or institution, he shall immediately notify the assistant regional commissioner, furnish all pertinent details with respect to the loss or shortage, and either pay the tax due thereon or file claim for remission of the tax liability as provided in Parts 270, 275, and 285 of this subchapter. This Treasury Decision shall be effective on the first day of the first month which begins not less than 30 days following the date of publication in the Federal Register. (This Treasury Decision is issued under the authority contained in section 7805 of the Internal Revenue Code of 1954. (68A Stat. 917; 26 U.S.C. 7805).) Approved May 19, 1959. FRED C. SCRIBNER, JR., DANA LATHAM, Commissioner of Internal Revenue. Acting Secretary of the Treasury. (Filed by the Division of the Federal Register on May 22, 1959, at 8:47 a.m., and published in the issue of the Federal Register for May 23, 1959, 24 F.R. 4166.) SECTION 6103.-PUBLICITY OF RETURNS AND LISTS OF TAXPAYERS 26 CFR 301.6103 (a)-101: Inspection of returns by committees of Congress other than those enumerated in section 6103 (d) of the Internal Revenue Code of 1954. (Also Part II, Section 55.) E.O. 108181 Inspection of income, excess-profits, estate, and gift tax returns by the Committee on Government Operations, House of Representatives. By virtue of the authority vested in me by sections 55 (a), 508, and 729 (a) of the Internal Revenue Code of 1939 (53 Stat. 29, 111; 54 Stat. 989, 1008; 26 U.S.C. 55 (a), 508, and 729(a)), and by section 6103 (a) of the Internal Revenue Code of 1954 (68A Stat. 753; 26 124 F.. 3779. |