Rev. Rul. 58-592

Advice has been requested whether retail sales of clocks and watches to an agency of the United States Government for its use are exempt from the retailers excise tax on jewelry and related items.

Section 4001 of the Internal Revenue Code of 1954 imposes a tax upon retail sales of jewelry and related items, including clocks and watches.

Section 7510 of the Code, relating to the exemption from tax of domestic goods purchased for the United States, provides that the privilege existing by provision of law on December 1, 1873, or thereafter, of purchasing supplies of goods imported from foreign countries for the use of the United States, duty free, shall be extended, under such regulations as the Secretary of the Treasury or his delegate may prescribe, to all articles of domestic production which are subject to tax by provisions of the Internal Revenue Code of 1954.

Section 301.7510-1 of the Regulations on Procedure and Administration, relating to miscellaneous provisions, provides that for any regulations under section 7510 of the Code, the applicable regulations with respect to the various taxes should be consulted.

Section 320.20(a) of Regulations 51, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that sales of articles by the retailer to the United States on or after June 1, 1944, are not exempt from tax unless the sale is made pursuant to a contract entered into prior to such date, or to any agreement or change order supplemental to such contract bearing the same Government contract number.

Section 7510 of the Code relates to those products which are subject to excise tax upon the manufacture thereof, with payment postponed until the products are withdrawn from consumption or sale. There is no provision in the law or regulations under which exemption from the retailers excise tax is extended to sales to an agency of the United States for its exclusive use. Accordingly, it is held that sale at retail of clocks and watches to an agency of the United States are not exempt from the excise tax on jewelry and related items imposed by section 4001 of the Code.