Rev. Rul. 58-608

Advice has been requested as to the applicability of the retailers excise tax to transactions involving merchandise obtained by means of fraudulent credit purchases.

A retailer sells jewelry and related items which are subject to the retailers excise tax. In some instances individuals obtain merchandise fraudulently by using charge plates which are stolen or found, while in other instances they obtain such merchandise through the use of fictitious names, addresses and forged credentials. The retailer contends that these transactions do not constitute bona fide credit sales and that the taxable items so acquired by the fraudulent purchaser should be excluded from the retailers excise tax.

Section 4001 of the Internal Revenue Code of 1954 imposes a tax upon articles of jewelry and related items sold at retail. A similar tax is imposed upon furs by section 4011, upon toilet preparations by section 4021, and upon luggage handbags, etc., by section 4031.

Section 320.1(f) of Regulations 51, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, defines the term `sale' to mean an agreement whereby the seller transfers the property (that is, the title or the substantial incidents of ownership) in goods to the buyer for a consideration called the price, which may consist of money, services, or other things.

For purposes of the retailers excise taxes, a sale takes place either on passage of title or transfer of the substantial incidents of ownership. The indicia of ownership are considered to be transferred when the `buyer' receives the goods and takes possession thereof. In the instant case, when the fraudulent purchaser takes possession of the merchandise, all the formal aspects of a sale have taken place and such transactions constitute sales at retail on which the retailer is liable for tax.

Accordingly, it is held that the fraudulent transactions referred to above are subject to the retailers excise tax imposed by section 4001 of the Code. A similar conclusion would apply to sales, under the same circumstances, of articles subject to the taxes imposed by section 4011, section 4021, or section 4031.