Rev. Rul. 59-40

Advice has been requested whether the tax imposed by section 5001(a)(10) of the Internal Revenue Code, as amended, effective July 1, 1959, by the Excise Tax Technical Changes Act of 1958, Public Law 85-859, 85th Cong., 26 U.S.C. 5314, C.B. 1958-3, 92, is applicable in respect of bay rum or any article containing distilled spirits brought from Puerto Rico into the United States where there is compliance with the provisions of section 5314(a)(2) of the Code, as amended.

Section 5314(a)(2) of the Internal Revenue Code of 1954, as amended by the Excise Tax Technical Changes Act of 1958, provides that authorized tax free distilled spirits for certain purposes, denatured distilled spirits, and articles containing denatured distilled spirits, produced or manufactured in Puerto Rico, may be brought into the United States free of any tax imposed by section 5001(a)(4) or section 7652(a)(1) of the Code, for disposal under the same conditions as like spirits, denatured spirits, and articles produced or manufactured in the United States.

The reference to section 5001(a)(4) appearing in section 5314(a)(2) of the Code, as amended, should to be section 5001(a)(10). The reference to section 5001(a)(4) relates to the provisions of the Code prior to amendment by the Excise Tax Technical Changes Act of 1958. In the Act the provisions of section 5001(a)(4) were redesignated as section 5001(a)(10). However, the operation of section 5314, as amended, is not impaired by this erroneous reference.

Section 5001(a)(4) as contained in the Excise Tax Technical Changes Act of 1958, imposes no tax with respect to products of Puerto Rico brought into the United States. Therefore the reference in section 5314(a)(2) to such provisions can have no effect.

Section 5001(a)(10) of the Code, as amended by the Excise Tax Technical Changes Act of 1958, provides as follows:

Except as provided in section 5314, upon bay rum, or any article containing distilled spirits, brought from Puerto Rico into the United States for consumption or sale there is hereby imposed a tax on the spirits contained therein at the rate imposed on distilled spirits produced in the United States.

The provisions of section 5001(a)(10) of the Code, as amended, which impose a tax with respect to alcoholic compounds brought from Puerto Rico into the United States make it clear that the tax imposed under this paragraph is not applicable where there is compliance with the provisions of section 5314 of the Code, as amended.

Accordingly, the tax imposed by section 5001(a)(10) of the Internal Revenue Code, as amended by the Excise Tax Technical Changes Act of 1958, is not applicable in respect of bay rum or any article containing distilled spirits brought from Puerto Rico into the United States where there is compliance with the provisions of section 5314(a) of the Internal Revenue Code, as amended by the Act.

Since section 5314 of the Internal Revenue Code, as amended by the Excise Tax Technical Changes Act of 1958 will not be effective until July 1, 1959, this ruling is prospective from July 1, 1959.