Rev. Rul. 58-107

Advice has been requested whether the manufacturers excise tax applies to the sale of an article by the manufacturer, producer, or importer, where the purchaser of such article donates it to a public school or other instrumentality of a State or political subdivision thereof.

In the instant case, a manufacturer sold a taxable article to a local unit of the Parent-Teachers Association, which in turn donated the article to a State-operated school.

Section 4224 of the Internal Revenue Code of 1954 provides that under regulations prescribed by the Secretary or his delegate, no manufacturers excise tax shall be imposed upon the sale of any article for the exclusive use of any State or political subdivision thereof. Section 316.24(a) of Regulations 46, made applicable to the 1954 Code by Treasury Decision 6091, C. B. 1954-2, 47, provides that no tax attaches to articles sold by the manufacturer direct to any State or political subdivision thereof for its exclusive use.

Section 6416(b)(2)(A) of the Code provides that credit or refund shall be allowed where an article subject to the manufacturers excise tax is resold by any person for the exclusive use of any State or political subdivision thereof.

The above provisions of law and regulations apply to articles which are sold direct by the manufacturer, or resold by another person to a State or political subdivision thereof. The statute contains no provision which exempts from tax the sale of an article by the manufacturer, where the purchaser of the article donates it to such a governmental unit. Furthermore, there is no provision of the Code whereby the tax paid by the manufacturer may be credited or refunded because the purchaser donates the article to such a governmental unit.

Accordingly, it is held that the manufacturer's sale of a taxable article to the Parent-Teachers Association is not exempt from tax under section 4224 of the Code; neither does the subsequent donation of the article to a State-operated school establish a basis for a credit or refund under section 6416(b)(2)(A) of the Code.