Rev. Rul. 56-503

Advice has been requested whether, for purpose of the exemption from he retailers excise tax, sales by the manufacturer of kits containing sample of toilet preparations, which are used by beauticians while attending training classes conducted by the manufacturer, are considered as sales of toilet preparations to a `person operating a school for instruction of students in beauty culture,' or as sales by the manufacturer of `miniature samples for demonstration use.'

Revenue Ruling 54-488, C.B. 1954-2, 395, holds that the exemption from retailers excise tax applicable with respect to the sale of toilet preparations to any person operating a barber shop, beauty parlor, or similar establishment for use in the operation thereof, is applicable to toilet preparations sold to any person operation a school for instruction of students in beauty culture. The basis for this conclusion is that such a school is an establishment similar to a barber shop or beauty parlor. That ruling also holds that the foregoing exemption does not apply to the sale of toilet preparations to students of a beauty school for use by them in practice work or on patrons of the school, or for any other purpose, for the reason that such students do not qualify as persons operating barber shops, beauty parlors, or similar establishments.

Section 4022(c) of the Internal Revenue Code of 1954 provides that the sale of miniature samples of toilet preparations for demonstration use only to a house-to-house salesman by the manufacturer or distributor shall not be considered as a sale at retail.

Beauticians using samples of toilet preparations while attending training classes conducted by the manufacturer of such preparations would not come within either (1) the exemption specified in Revenue Ruling 54-488, supra , or (2) the exemption provided for in section 4022(c) of the Code.

Accordingly, it is held that sales by a manufacturer of kits containing miniature samples of toilet preparations to beauticians for use in training classes conducted by the manufacturer are subject to the retailers excise tax imposed by section 4021 of the Code. If the kits contain both taxable and nontaxable articles, the tax applies only to that portion of the price charged for the complete kit which is attributable to the taxable articles. See Revenue Ruling 204, C.B. 1953-2, 350, as to the method of determining the tax with respect to the sales of combinations of taxable and nontaxable articles.