Rev. Rul. 58-345

Advice has been requested whether the sales by the manufacturer of phonographs which use transistors instead of tubes are subject to the manufacturers excise tax imposed by section 4141 of the Internal Revenue Code of 1954.

A manufacturer produces and sells small phonographs which use transistors instead of tubes for power amplification. These phonographs, which are suitable for playing phonograph records, are contained in leatherette covered cabinets which resemble small suitcases.

Section 4141 of the Code imposes a tax upon the sales by the manufacturer, producer, or importer of radio receiving sets, automobile radio receiving sets, television receiving sets, automobile television receiving sets, phonographs, combinations of any of the foregoing, radio and television components, and phonograph records. This section further provides that except in the case of radio and television components and phonograph records, the tax imposed by this section shall apply only to articles of the entertainment type.

Revenue Ruling 56-217, C.B. 1956-1, 509, holds that transistors are not considered to be radio or television tubes of the types contemplated by section 4142 of the Code; therefore, such sales of those articles are not subject to the manufacturers excise tax. However, this conclusion is not considered to affect the taxability of phonographs which use transistors as components. Whether the sale of a phonograph is subject to tax depends on the suitability of such phonograph for use in the playing of phonograph records. The determination of taxability is not dependent upon size, type of power used, or the type of components used, except as these factors may be determinative of whether or not the phonograph is of the entertainment type.

Accordingly, it is held that, since the phonographs in the instant case are suitable for use in playing phonograph records, the sale of such phonographs by the manufacturer thereof is subject to the manufacturers excise tax imposed by section 4141 of the Code.