Rev. Rul. 56-140

Advice has been requested with respect to the requirements of the tobacco regulations covering the storage, shipment, and delivery of tobacco materials.

Section 280.50 of the Regulations relating to Dealers in Tobacco Materials exempts warehousemen from qualifying as dealers in tobacco materials. However, where such a warehouseman stores tobacco materials for a dealer in tobacco materials or a manufacturer of tobacco products, it is necessary for such dealer or manufacturer to include the warehouse as an outside place of storage in connection with his qualification as a dealer or a manufacturer. The use of such warehouses as outside places of storage is permitted under the Internal Revenue Code of 1954 and the regulations in order to provide dealers in tobacco materials and manufacturers of tobacco products with greater freedom in their operations, and to liberalize the controls and requirements formerly imposed, in connection with tobacco materials.

Under the provisions of section 270.156 of the Regulations relating to Cigars and Cigarettes (manufacturers, importers, and dealers) and section 275.145 of the Regulations relating to Manufactured Tobacco (manufacturers, importers, and dealers), manufacturers of tobacco products are permitted certain industry operations and functions beyond city, town, or state lines. However, for reasons of effective administration, such operations and functions are not permitted to be extended across internal revenue regional boundaries except in the case of the use of outside places of storage of tobacco materials by dealers in tobacco materials. Accordingly, a qualified dealer in tobacco materials is permitted to include in the premises of his establishment any buildings, or portions of buildings, in the same Internal Revenue Region, to be used by him in carrying on such business. In such case, consolidated records must be maintained by him, at one of the buildings comprising his establishment, of all tobacco materials received and handled under his bond and permit. A dealer in tobacco materials may, however, elect to exclude from the premises of his establishment any buildings in the same region in which his establishment is located which he uses merely for the storage of his tobacco materials. Such buildings as are excluded from the premises of his establishment must be shown by the dealer as outside places of storage. Under the Regulations relating to Dealers in Tobacco Materials, each such dealer is also permitted to cover under the bond and permit of his establishment any warehouses in the United States as outside places of storage, provided consolidated records of all tobacco materials received therein are maintained at the qualified establishment of the dealer.

A qualified manufacturer of tobacco products may be permitted to include in the premises of his factory any buildings, or portions of buildings, in the same city, town, or village, to be used by him in carrying on his business. In addition, he is also permitted to cover under his factory bond any warehouses in the same region as his factory as outside places of storage.

Outside places of storage are restricted to the storage of tobacco materials, including fumigation of tobacco materials. The premises of the establishment of qualified dealer in tobacco materials or the factory of a qualified manufacturer of tobacco products can not be shown as an outside place of storage by other dealers or manufacturers. However, a warehouse intended to be used merely as an outside place of storage may be qualified by a number of dealers and manufacturers as an outside place of storage.

A qualified dealer in tobacco materials may show the premises of a warehouseman as an outside place of storage for his tobacco materials. Similarly, a qualified manufacturer of tobacco products may show the premises of a warehouseman located in the same region as his factory as an outside place of storage for his tobacco materials. However, where such warehouseman operates more than one storage warehouse in the same city, town, or village, it will be sufficient for the qualified dealer or manufacturer to show as his outside place of storage the principal warehouse address of the warehouseman to whom the tobacco materials are shipped for storage.

All tobacco materials stored by a dealer in the premises of his establishment for other qualified dealers or manufacturers of tobacco products should be carried in the records of the storing dealer and such tobacco materials should be shown in the records of the shipping dealer or manufacturer as having been shipped to the storage dealer. Similarly, when the tobacco materials are shipped out of storage, a record of the shipment should be made in the records of the storing dealer, and a record of the receipt of such materials should be made in the records of the dealer or manufacturer to whom shipped, when the tobacco materials are actually received in the latter's establishment or factory or outside place of storage.

In filing Form 2093, Application for Permit, required to be filed by every person to qualify as a dealer in tobacco materials, the applicant should appropriately set forth under Item 3 of the form the location of each building, or portion of a building, in the same Internal Revenue Region, to be included in the premises of his qualified establishment. The building of such establishment in which consolidated records of the dealer's operations will be maintained should be properly indicated by the use of the term `Major location' or `Records maintained here.'

Inquiries in regard to this Revenue Ruling should refer to the number thereof and should be directed to the appropriate Assistant Regional Commissioner, Alcohol and Tobacco Tax.