Rev. Rul. 64-86

Advice has been requested whether the exemption from the retailers excise taxes with respect to sales for export, provided by section 4056 of the Internal Revenue Code of 1954, applies to sales of articles by retailers to the United States under the circumstances described below. Advice also has been requested whether the exemption from the manufacturers excise taxes provided by section 4221(a)(2) of the Code applies to sales of articles by manufacturers under similar circumstances.

The taxable articles are purchased by the United States from retailers or from manufacturers for presentation as gifts to foreign dignitaries. They are delivered to designed offices of the United States Government gift-wrapped and ready for presentation.

Sometimes the articles are presented to dignitaries while they are on short visits to the United States. In these cases, the articles are almost immediately taken out of the country by the donees. In other cases the articles are taken abroad by United States officials for presentation to dignitaries in foreign countries.

In most instances, the articles are inscribed with the names of the donor and donee, the date of presentation, and the city in which the presentation is made.

Section 4056 of the Code provides that, under regulations prescribed by the Secretary of the Treasury or his delegate, no retailers excise tax shall be imposed upon the sale of any article for export where the article is in due course so exported.

Section 4221(a)(2) of the Code provides that, under regulations prescribed by the Secretary or his delegate, no manufacturers excise tax shall be imposed upon the sale by the manufacturer of an article for export, or for resale by the purchaser to a second purchaser for export, but only if such exportation is to occur before any other use. Section 4221(b) of the Code provides that this exemption shall cease to apply unless, within the 6-month period which begins on the date of the sale by the manufacturer (or, if earlier, on the date of shipment by the manufacturer), the manufacturer receives proof that the article has been exported.

Section 320.21(a) of Regulations 51, relating to the retailers excise taxes, and section 316.25(a) of Regulations 46, relating to the manufacturers excise taxes, each made applicable to the 1964 Code by Treasury Decision 6091, C.B. 1954-2, 47, provide that to exempt from tax a sale for export it is necessary that two conditions be met; namely, (1) that the article be identified as having been sold by the taxpayer for export and (2) that it be exported in due course.

Articles sold by a retailer or by a manufacturer under the circumstances described above will be deemed to be sold for export provided the taxpayer is furnished, before his sale, a statement by an official of the United States authorized to make such certification that the articles are being purchased for export. Subsequently, the taxpayer must obtain another statement from such an official affirming that the articles have been presented to the foreign dignitaries under the circumstances described above. The later statement will be accepted by the Internal Revenue Service as `proof of exportation' under the described circumstances.

Accordingly, it is held that the exemptions provided by sections 4056 and 4221(a)(2) of the Code are applicable to the sales of the articles to the United States where the aforementioned statements are furnished to the taxpayers. However, the exemption from the manufacturers excise taxes is conditioned upon the receipt of the `proof of exportation' within the 6-month period prescribed by section 4221(b)(2) of the Code. In the event a manufacturer should receive the `proof of exportation' after having paid the tax upon the expiration of the 6-month suspension of liability, a credit or refund may be claimed.

The exemption from the manufacturers excise taxes provided by section 4221(a)(2) of the Code relates to situations in which the manufacturer sells articles with the knowledge that they are to be exported by the purchaser or by the purchaser's vendee. However, it should be noted that section 6416(b)(2)(A) of the Code provides for the credit or refund of the manufacturers excise tax paid in respect of any article which was exported by any person, subject to the limitations of section 6416(g) of the Code. These credit or refund provisions would apply in case taxpaid articles are sold for export by a dealer rather than by the manufacturer as in the instant case.