Rev. Rul. 59-301

Advice has been requested whether the radio speakers described below, when sold by the manufacturer, are subject to either the manufacturers excise tax on radio and television components or the manufacturers excise tax on automobile parts or accessories.

A company manufactures and sells speakers which are designed principally for use as rear seat speakers in automobiles. Some of these speakers are sold `bare' while others are equipped with special housings, grills, and control knobs to facilitate their installation in automobiles.

Section 4141 of the Internal Revenue Code of 1954 imposes a tax upon the sale by the manufacturer, producer or importer of certain enumerated articles (including in each case parts or accessories therefor sold on or in connection with the sale thereof). Among the enumerated articles are radio receiving sets, automobile radio receiving sets, and radio and television components. Section 4142 of the Code defines the term `radio and television components' to include speakers which are suitable for use on or in connection with, or as component parts of, any of the articles enumerated in section 4141 of the Code, whether or not primarily adapted for such use.

Section 4061(b) of the Code imposes a tax upon automobile parts or accessories (other than tires and inner tubes and other than automobile radio and television receiving sets) sold by the manufacturer, producer, or importer.

Under the provisions of section 316.55(a) of Regulations 46, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, the term `parts or accessories' includes, among other things:

(2) any article designed to be attached to or used in connection with such vehicle or article to add to its utility or ornamentation, and

(3) any article the primary use of which is in connection with such vehicle or article whether or not essential to its operation or use.

The speakers described above are suitable for use in connection with automobile radio receiving sets irrespective of whether they are sold `bare' or equipped with special housings, grills, and control knobs which merely constitute parts or accessories for the speakers. Accordingly, it is held that they are radio and television components as defined in section 4142 of the Code. Therefore, sales of these speakers by the manufacturer are subject to the manufacturers excise tax on radio and television components imposed by section 4141 of the Code. However, under the provisions of section 4221(a)(1) of the Code, no manufacturers excise tax would apply to the sale of these speakers to an automobile manufacturer for use in the further manufacture of automobiles.

It is true that when the speakers are equipped with the special housings, grills, and control knobs, they come within the scope of the term automobile `parts or accessories.' However, it does not appear to have been the intent of Congress to impose two manufacturers excise taxes upon a manufacturer's sale of an article, even though that article might fall within the scope of two categories of tax. In such a situation, it is the position of the Internal Revenue Service that the tax should apply under the section of the Code which, either by its terms or by the terms of the regulations, more specifically applies to that article. Accordingly, under the circumstances described above, the tax imposed by section 4061(b) of the Code will not be imposed upon the sale of these speakers which are subject to the tax imposed by section 4141 of the Code.