Rev. Rul. 61-28

The Internal Revenue Service has been asked whether the manufacturers excise tax on certain photographic equipment applies to an importer's sales of a so-called `operating lamp' in which there is mounted a camera and lens. The Service also has been asked whether the tax applies to the importer's separate sales of the camera or lens for replacement use in such a lamp.

A company imports and sells an article, referred to as an `operating lamp,' which is designed to provide the special type of illumination required in hospital operating rooms. This ceiling-mounted general surgery lamp is a multiple-source light system which provides illumination through the use of several special incandescent bulbs.

The foreign manufacturer mounts inside the lamp housing a 35-millimeter still camera for use in photographing various phases of surgical operations. The camera, which is mounted in a specially designed aperture, is equipped with a modified telephoto lens with a focal length of 75 millimeters. The lens setting is fixed by a special collar which establishes the fixed object distance of three and one-half feet. The camera is comparable in size to the usual 35-millimeter camera, and it weighs less than four pounds exclusive of lens and accessories. It is pretested and adjusted at the factory after it has been installed in the lamp in which it is to be used.

Two electronic flash units are built into the lamp housing to provide additional lighting for photography. The camera and the flash units, which are synchronized with the camera shutter, are operated by an electrical remote control release which is designed to be operated by the surgeon or another member of the surgical team. After a picture has been taken, a spring mechanism automatically advances the film and cocks the shutter.

The camera and lens can be removed from the lamp housing and, after an adjustment, can be used as other 35-millimeter cameras with similar lenses. The lamp performs its function of providing illumination for surgery irrespective of whether the camera and lens are mounted in the housing.

The importer of the lamp purchases from a domestic manufacturer the electric light bulbs which are to be used in the lamp. These bulbs are then resold with the imported lamp. The manufacturers excise tax imposed on electric light bulbs by section 4131 of the Internal Revenue Code of 1954 is paid by the domestic manufacturer, and the applicability of that tax is not involved in this ruling.

Section 4171 of the Code imposes a tax upon the sale by the manufacturer, producer, or importer of certain enumerated articles (including in each case parts or accessories of such articles sold on or in connection therewith, or with the sale thereof). Included in the enumeration are `cameras' and `camera lenses.' However, section 4173 of the Code provides that this tax shall not apply to cameras weighing more than four pounds exclusive of lens and accessories or to still camera lenses having a focal length of more than one hundred and twenty millimeters.

In the instant case, neither the lamp nor the camera is considered to have lost its separate identity or character as a result of association with the other; or because of the inherent characteristic of the article being sold. Each article performs its separate function although joined with the other; the camera takes pictures and the lamp illuminates; and neither of the articles contributes to the intrinsic functional capacity of the other. Furthermore, the camera and the lamp are not physically interdependent since the lamp will function without the camera, and the camera can be taken out of the lamp and, after an adjustment, used as other 35-millimeter cameras.

In view of the foregoing, it is held that the sale by the importer of the imported article constitutes the sale of a taxable camera and a taxable lens in combination with a nontaxable lamp. Accordingly, the manufacturers excise tax imposed by section 4171 of the Code applies to that portion of the selling price of the entire combination which is attributable to the camera and the lens. The tax does not apply to that portion of the selling price which is attributable to the lamp unit, including the built-in photographic flash units, and the tax-paid electric light bulbs. The proper method for apportioning the selling price in combination sales involving taxable, nontaxable, and tax-paid articles is described in Revenue Ruling 60-259, C.B. 1960-2, 318.

Where the camera or the lens is imported and sold for replacement use in a hospital operating lamp, such sale is subject to the tax imposed by section 4171 of the Code.