Rev. Rul. 58-519

In Revenue Ruling 54-386, C.B. 1954-2, 414, the Internal Revenue Service held that an electric water heater with heating elements aggregating wattages not exceeding 7500 (7 1/2 KW) is a heater of the household type and the sale thereof by the manufacturer is subject to the manufacturers excise tax unless the heater by reason of other features of design and construction is primarily adapted for purposes other than household use.

Revenue Ruling 54-386 was subsequently amplified by Revenue Ruling 58-115, C.B. 1958-1, 409, published on March 24, 1958. The latter Revenue Ruling applies to the so-called `quick recovery' type electric water heaters. A quick recovery type electric water heater is designed with an upper and a lower heating element, neither of which has a wattage exceeding 7500 but whose aggregate wattage, if they were energized simultaneously, would exceed 7500. These heaters are equipped with an interlocking control so that only one element operates at a time. Revenue Ruling 58-115 holds that a quick recovery type electric water heater which is equipped with an interlocking control, or is so designed by the manufacturer that such a control may be readily installed, for operation on one element not exceeding 7500 watts, is an electric water heater of the household type and is therefore, subject to tax when sold by the manufacturer.

While this conclusion is consistent with the position intended to be set forth in Revenue Ruling 54-386, it is recognized that the language used in Revenue Ruling 54-386 is susceptible of a different interpretation when applied to the quick recovery type electric water heater described above. For this reason and under the provisions of section 7805(b) of the Internal Revenue Code of 1954, the conclusion set forth in Revenue Ruling 58-115 will not be applied to the quick recovery type electric water heaters sold before April 1, 1958.