AFTER OCT. 1, 1984, SALES OF FISHING TACKLE AND ARTIFICIAL LURES, EXCEPT FOR BEADS SOLD SEPARATELY, ARE SUBJECT TO EXCISE TAX ON SPORTS EQUIPMENT

Rev. Rul. 85-152

ISSUE

Whether certain items of terminal tackle and certain components of artificial lures are subject to the manufacturers excise tax on sport fishing equipment.

FACTS

The Internal Revenue Service has reconsidered Rev. Rul. 60-225, 1960-1 C.B. 489, because of amendments made to the Internal Revenue Code by the Tax Reform Act of 1984, Pub. L. No. 98-369, 1984-3 (Vol. 1) C.B. 1, 525 (the Act). In SITUATION 1 of Rev. Rul. 60-225, a corporation manufactures and sells various articles that are designed for use by fishermen. Included among these articles are different sizes and styles of "blades." these blades are stamped from copper or brass sheets, after which they undergo a finishing process. After the blades are plated or lacquered, the manufacturer sells some of them separately, either to vendees for resale as such or to other manufacturers for use in further manufacture of other articles. In some instances, the manufacturer of the blades attaches to some of them certain other items, which include various combinations of plastic, glass, or fluorescent beads, fishhooks, shot (a type of sinker), swivel, or sinker assortments. The articles thus produced are then sold by the manufacturer. The corporation sometimes sells separately the beads, fish hooks, shot, swivels, or sinker assortments.

In SITUATION 2, another corporation produces and sells various articles of fishing equipment, including (1) spinners, (2) a "worm harness," consisting of a spinner and beads, (3) a "worm harness" equipped with a plastic worm, (4) a "fishing rig," which includes a spinner and a bead, (5) a lure which consists of a spoon, beads, a hook, and a leader, and which is designed to be used with live bait, (6) a clear plastic float which is designed to look like a natural bubble in the water, and (7) a colored plastic float, the color and water action of which is said to bring fish within striking distance of a lure.

Rev. Rul. 60-225 holds that the beads, fish hooks, shot, swivels, and sinkers in SITUATION 1, when sold separately, are not artificial lures subject to the manufacturers excise tax imposed by section 4161(a) of the Internal Revenue Code, but that the blades, whether sold separately, or with the beads, fish hooks, shot, swivels, or sinkers attached, are artificial lures subject to the tax. The revenue ruling further holds that all of the items in SITUATION 2, with the exception of the clear plastic or colored plastic floats, are artificial lures subject to the tax. The floats are held to be not taxable.

LAW AND ANALYSIS

Section 4161(a)(1) of the Code, as amended by section 1015(a) of the Act, effective October 1, 1984, imposes a tax on the sale of any sport fishing equipment by the manufacturer, producer, or importer.

Section 4162(a)(5) of the Code, as added by section 1015(b) of the Act, effective October 1, 1984, defines the term "sport fishing equipment" to include items of terminal tackle, including:

(A) leaders, (B) artificial lures, (C) artificial baits, (D) artificial flies, (E) fishing hooks, (F) bobbers, (G) sinkers, (H) snaps, (I) drayles (sic), and (J) swivels,

but not including natural bait or any item of terminal tackle designed for use and ordinarily used on fishing lines over 130 pounds test. This definition expands the types of fishing equipment subject to the tax imposed by section 4161(a)(1).

All the items described in SITUATIONS (1) and (2) constitute "sport fishing equipment" under section 4162(a)(5) of the Code, except for the beads in SITUATION (1) when sold separately by the manufacturer.

HOLDING

Effective October 1, 1984, sales by the manufacturer, producer, or importer of all the items described in SITUATIONS (1) and (2), except for the beads in SITUATION (1) when sold separately, are subject to the manufacturers excise tax imposed by section 4161(a)(1) of the Code.

EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 60-225 is superseded, effective October 1, 1984.