Rev. Rul. 64-3

Advice has been requested as to the deductibility, for Federal income tax purposes, of taxes on liquors and beer imposed by section 53-160, Reissue Revised Statutes of Nebraska, as amended by Legislative Bill 9, effective June 1, 1963.

The impact of the tax is declared, by section 2 of the Bill, to be on the vendee, user, consumer or possessor of the alcoholic liquor and beer, even though paid by any other person.

It is accordingly held that, on and after June 1, 1963, the tax imposed by the State of Nebraska under section 53-160, Reissue Revised Statutes of Nebraska, 1943, as amended by Legislative Bill 9, on the privilege of engaging in business as a manufacturer or distributor at wholesale of alcoholic liquors, wines and beer, is deductible under section 164(a) of the Internal Revenue Code of 1954, by the consumer in computing taxable income, except that, in the case of an individual who elects to use the optional standard deduction, the tax is not deductible unless attributable to a trade or business carried on by him which does not consist of the performance of services by the taxpayer as an employee. In the latter event, the tax is deductible from gross income in computing adjusted gross income.

Effective June 1, 1963, (with respect of the tax imposed by Legislative Bill 9) no deduction is allowable to the distributors or manufacturers paying the tax to the State of Nebraska, and the portion of the price paid by the consumer to the distributors or manufacturers which represents the Nebraska State tax on alcoholic beverages is not includible in the gross income of such manufacturers or distributors.

For a discussion of the deductibility under section 164(a) of the Code of a cigarette tax imposed by a Nebraska Statute which is very similar to the Nebraska Statute imposing the alcoholic beverage tax involved in this ruling, see Revenue Ruling 58-45, C.B. 1958-1, 99.