Rev. Rul. 55-548

Advice has been requested whether the retailers' excise tax applies to 24K gold inlays which a gun engraver sets and tools into steel surfaces of guns belonging to sportsmen or gun collectors. The inlays, which are produced from gold furnished by the gun engraver, may include the initials of the owner of the gun or game scenes, such as pheasants, ducks and dogs.

Section 2400 of the Internal Revenue Code of 1939 imposes a tax on the sale at retail of articles made of, or ornamented, mounted or fitted with, precious metals or imitations thereof.

According to the provisions of section 320.33 of Regulations 51 the term `precious metals' includes platinum, gold, silver, and other metals of similar or greater value. The term `imitations thereof' includes alloys of precious metals and platings of such metals which are one one-hundred-thousandth of an inch or more in thickness. See S.T. 935, C.B. 1948-2, 192.

It is held that inlays, such as initials or game scenes, constitute taxable articles under section 2400 of the Code, when made of, or ornamented, mounted or fitted with, gold or other precious metals or imitations thereof. Under the circumstances in the instant case the tax is applicable to the total charge made by the gun engraver to his customers for the gold inlays, including any labor charge for producing them