Rev. Rul. 57-329

Advice has been requested whether, in determining the selling price for purposes of computing the Federal retailers excise tax, there may be excluded the amount of State sales tax which is not separately stated on an invoice, bill, or other memorandum of sale.

Section 4051 of the Internal Revenue Code of 1954 provides that in determining the price for which an article is sold, there shall be excluded, if stated as a separate charge, the amount of any retail sales tax imposed by any State or Territory or political subdivision of the foregoing, or the District of Columbia. Section 320.7(b) of Regulations 51, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that a retail sales tax imposed by a State, etc., may be excluded from the taxable price of an article only when billed as a separate item; if not so billed, the amount of tax must be included in the taxable sales price.

Accordingly, where sales of articles subject to the Federal retailers excise tax are also subject to a State retail sales tax, any invoice, bill, or other memorandum of sale (other than a cash register receipt) which is furnished to the purchaser must show thereon the exact amount of the State sales tax in order for that amount to be excluded from the selling price on which the Federal retailers excise tax is based. The fact that the retailer shows the amount of the State sales tax as a separate item on his records is not sufficient to justify exclusion of that amount from the base for computing the Federal tax.

However, it is held that where no memorandum of sale other than a cash register receipt is furnished to a purchaser, the State sales tax may be excluded from the base for computing the Federal retailers excise tax if the retailer indicates the rate of the State sales tax by means of signs on counters or on the walls of his store, and, in addition, he shows the amount of the State sales tax separately on his sales records. The State sales tax may also be excluded if it is collected as a separate item, such as where the State provides tokens to be used in payment of the tax. Such methods are considered to be substantial compliance with the law and regulations. However, a mere oral statement to the purchaser as to the amount of the State tax applicable to a sale does not comply with the requirement.