Rev. Rul. 56-141

Advice has been requested as to the procedures to be followed in transferring stamped packages of tobacco products from one factory to another factory producing the same kind of tobacco products, for the purpose of consolidating shipments thereof.

Section 270.144 of the Regulations relating to Cigars and Cigarettes (manufacturers, importers, and dealers) provides, in part, that all cigars and cigarettes shall, before removal, be put up by the manufacturer in packages which bear the proper stamps and mark, except that cigars and cigarettes transferred to another manufacturer of such products shall be exempt from these package requirements. Section 270.152 provides that a manufacturer of cigars and cigarettes may transfer such products, under his bond, without the payment of tax, to any qualified manufacturer of such products. Similar provisions are made in sections 275.134 and 275.141 of the Regulations relating to Manufactured Tobacco (manufacturers, importers, and dealers) with respect to manufactured tobacco. Procedures are not established in the regulations covering the transfer of packaged, taxpaid tobacco products between factories.

Although the regulations do not provide procedures for the transfer of tobacco products, upon taxpayment, between factories, packages of tobacco products, upon which the tax has been paid and which bear the appropriate stamps and marks, may be received on the bonded premises of a tobacco factory at which the same kind of tobacco products are manufactured if, prior to such transfer, the proprietor of the receiving tobacco or cigar and cigarette factory has made application to, and received permission from, the Assistant Regional Commissioner, Alcohol and Tobacco Tax, for the region in which his factory is situated. Such application shall set forth the products and the kind, quantity, and, in the case of large cigars, the class designation, to be received. If it is desired to receive a number of such shipments into the bonded premises, the appropriate Assistant Regional Commissioner may grant blanket authority to the proprietor of the receiving factory to receive stamped (taxpaid) tobacco products transferred from other factories, provided the proprietor of such factory furnishes him, with respect to each lot or shipment received, the information indicated above as to kind, quantity, etc.

For accounting purposes, the proprietor of the shipping factory will record the products and the tax stamps affixed thereto in the usual manner. Such products and stamps should also be reported by him in the usual manner on appropriate monthly reports, Form 2134, Monthly Report-Manufacturer of Tobacco, or Form 2136, Monthly Report-Manufacturer of Cigars and Cigarettes, as `Removed Tax Paid' and `Affixed to Packages Removed.'

In the case of the factory receiving such taxpaid tobacco products, the revenue records, Form 73, record of manufacturers of cigars and cigarettes, and Form 74, record of manufacturers of tobacco and snuff, should be modified by changing the heading of one of the unused columns to read `Received from Other Factories,' and appropriate entry should be made in this column to show the total quantity of each lot of stamped tobacco products received into the bonded premises of the factory. Such entry should be supported by an appropriate notation indicating the factory from which the tobacco products were received. The tax stamps involved should be taken up in the revenue record of the receiving factory by separate appropriate entries under `Stamps Purchased.' When the transferred stamped tobacco products are subsequently removed from the receiving factory, separate appropriate credit entries should be made in the revenue record, in the proper columns covering products removed taxpaid. Appropriate credit entries should also be made under stamps `Used' to show the value of the tax stamps attached to such products removed.

Pending revision of Forms 2134 and 2136, such tobacco products should be reported separately on the proper monthly report, under `Products Removed,' in the appropriate columns, with a notation, `Formerly Received.' The stamps attached to the products removed should be reported in the same monthly report, separately, in the proper columns under `Stamps Affixed to Packages Removed.'