Rev. Rul. 64-202

Advice has been requested whether liability for the manufacturers excise tax on firearms, imposed by section 4181 of the Internal Revenue Code of 1954, is incurred with respect to the sale of firearms produced under the circumstances set forth below.

A gunsmith buys used military-type firearms. He discards the stocks, sights, and trigger guards and uses only the barrels and actions in making custom-type firearms. The total process involved includes adding a custom-made stock, cutting down the barrel, bluing the barrel and action, altering and polishing the bolt, and replacing the trigger guard and sight. In some instances, telescopic sights are installed.

Section 4181 of the Code imposes a tax upon the sale by the manufacturer, producer, or importer of pistols, revolvers, and other firearms.

Section 316.4(a) 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.

The total process performed by the gunsmith in the instant case constitutes a manufacturing process the result of which is the production of custom-type firearms different from the used firearms acquired by the gunsmith. Accordingly, the gunsmith is the `manufacturer' of such firearms within the meaning of the regulations.

Therefore, it is held that the gunsmith's sales of the custom-type firearms are subject to the manufacturers excise tax imposed by section 4181 of the Code. See Revenue Ruling 58-586, C.B. 1958-2, 806, which relates to the excise tax consequences of the processing of firearms under various other circumstances.