Rev. Rul. 56-598

The New Mexico stamp tax, effective on and after July 1, 1955, is provided for by Chapter 72, Article 14-1 to 14-17 of the New Mexico Statutes Annotated, 1953 compilation, as amended by Chapter 263 of the Laws of 1955. It is levied upon the sale, gift, or consumption of cigarettes within the State of New Mexico and is imposed only upon the distributors and direct buying retailers. Payment of the tax must be evidenced by stamps affixed to the containers. Held, the tax is deductible for Federal income tax purposes under section 164(a) of the Internal Revenue Code of 1954 by the distributor or direct buying retailer who pays for and affixes the stamp. The tax is not a retail sales tax imposed on persons selling tangible personal property at retail and, therefore, is not deductible by the consumer or purchaser of the cigarettes under section 164(c) of the Code. Insofar as the ultimate consumer or purchaser is concerned, the tax merely represents an additional cost of the article.