Rev. Rul. 59-347

The Internal Revenue Service has been asked to reconsider Revenue Ruling 58-529, C.B. 1958-2, 801, which holds that the restyling of pianos, as described in the paragraph below, constitutes a rebuilding operation so as to make the company performing such operation liable for the manufacturers excise tax on its sales of the rebuilt pianos.

A company manufactures new pianos. Also, old upright pianos are bought for the purpose of restyling them for resale. The restyling is accomplished by remodeling or refinishing the cabinets, replacing any defective parts, and, in some cases, covering the cabinets with leatherette, inserting mirrors over the keyboards and performing other types of restyling to produce a marketable instrument. These restyled pianos are advertised and sold by the company as rebuilt pianos.

Section 4151 of the Internal Revenue Code imposes a tax on the price for which musical instruments, including pianos, are sold by the manufacturer, producer, or importer. Section 316.4 of Regulations 46, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that the term `manufacturer' includes a person who produces a taxable article from scrap, salvage, or junk material, as well as from new or raw material, (1) by processing, manipulating, or changing the form of an article or (2) by combining or assembling two or more articles.

After extensive study and consideration of additional facts, various briefs, and legal arguments submitted by members of the piano industry and others concerned, the Service has concluded that the restyling or remodeling of used pianos as described above is not such as to constitute manufacturing. Accordingly, the company incurs no excise tax liability on its sales of the used pianos so restyled or remodeled.

This change of position should not be construed as the expression of an opinion that the restoration of an old piano to a useful and marketable condition will never result in a rebuilding or manufacturing operation. Certain operations performed on a used piano may be sufficiently extensive or major in scope as to be considered rebuilding or manufacturing, so as to make the person performing such operation liable for the manufacturers excise tax on his sale of the rebuilt piano. Among such operations would be the replacement of one or more of the following components: sounding board, tuning pin block, metal frame, set of keys, and key frame.

This Revenue Ruling supersedes Revenue Ruling 58-529.

¹ Based on Technical Information Release 174, dated September 8, 1959.