Rev. Rul. 59-333

Advice has been requested whether the retailers excise tax on the sale of perfume applies to a retailer's charges for expenses incurred in transporting perfume from France direct to the customer in the United States under the circumstances described below.

A United States company sells French perfume in the United States at a price which includes delivery expenses from France to the customer in the United States. When an order for such perfume is received from a customer in the United States, the order is forwarded to the company's branch office in Paris, France. The branch office then directs the order to a perfume manufacturer in Paris. Upon receipt of the order, the manufacturer airmails the perfume from Paris direct to the customer at his address in the United States. After mailing the perfume, the French manufacturer bills the retailer's Paris branch office for the perfume and, as a separate item, for the actual cost of the airmail postage. The branch office then reports the sale to the company's office in the United States.

Section 4021 of the Internal Revenue Code of 1954 imposes a tax upon various toilet preparations when sold at retail, including perfume. The tax is based upon the price for which the perfume is sold. For the purpose of determining the price for which an article is sold, section 4051 of the Code provides that there shall be included certain charges. That section further provides that a transportation, delivery, insurance, installation, or other charge shall be excluded from the price only if the amount thereof is established to the satisfaction of the Secretary of the Treasury or his delegate.

In any case involving two movements (either actual or constructive) of the taxable goods, one from the supplier to the taxpayer-vendor and the other from the vendor to his vendee, no exclusion is allowable for the charges for the first of these movements but an exclusion is allowable for the charges for the second. There are no limitations as to the point of origin of a shipment upon the allowability of an exclusion from the tax base for transportation charges.

The shipment of the perfume from the French manufacturer direct to the customer in the United States constitutes a constructive shipment from the French manufacturer to the United States retailer's Paris branch office, and a subsequent shipment from the branch office to the customer in the United States. However, in this particular case, since the French manufacturer is located in Paris, the shipment of perfume from him direct to the customer in the United States is tantamount to a shipment from the company's Paris branch office to the customer. Accordingly, based on these specific facts, it is held that an exclusion is allowable for the transportation charges for the entire shipment. Therefore, an amount equal to the actual expenses incurred by the company for transporting the perfume from the French manufacturer direct to the customer in the United States may be deducted from the total amount charged the customer for the purpose of determining the taxable price for which the perfume is sold.