Rev. Rul. 65-133

The Internal Revenue Service has received a number of inquiries whether various articles, when sold on or in connection with the sale of dictating and transcribing machines by the manufacturer, producer, or importer of the machines, are classified as (1) parts or accessories of or for the machines or (2) supplies or other articles for purposes of computing the manufacturers excise tax on business machines.

Section 4191 of the Internal Revenue Code of 1954 imposes a tax upon the sale by the manufacturer, producer, or importer of certain enumerated business machines (including in each case parts or accessories of such articles sold on or in connection therewith, or with the sale thereof). Among the business machines enumerated in section 4191 of the Code are dictating and transcribing machines.

Section 48.4191-2(a) of the Manufacturers and Retailers Excise Tax Regulations provides that the tax attaches in respect of parts or accessories for articles specified in section 4191 of the Code sold on or in connection therewith or with the sale thereof at the rate applicable to the sale of the basic articles. The tax attaches in such case whether or not the parts or accessories are billed separately. On the other hand, no tax attaches in respect of parts or accessories for taxable machines which are sold otherwise than on or in connection with, or with the sale of such machines.

As a guide for uniform application of the tax, there are listed below examples of articles classified as-

(1) Parts or accessories to which tax attaches when sold on or in connection with the sale of a dictating and transcribing machine:

AC adapters.

Batteries.

Battery chargers designed to serve also as power supplies for operating the machines.

Carrying cases or bases constructed as permanent parts or housings for the machines.

Controls-stop, start, reverse, forward, speed, hand, and foot.

Ear loops.

Earphones.

Extension cables.

Inverters designed to permit use of the machines from power sources other than their basic input current.

Microphones.

Recording tape.

Recording wire.

Remote dictation or transcription units, which in themselves are not business machines, for use in remote dictation systems.

Spools or reels.

Stands specifically constructed to hold the machines for dictation or transcription.

Stethophones.

Telephone adapters.

(2) Supplies and other articles to which tax does not attach when sold with a dictating or transcribing machine provided the taxpayer's records satisfactorily show the portion of the sale price attributable to these articles:

Auxiliary amplifier-speaker units which serve no dictating or transcribing function.

Carrying case not constructed as a permanent base or housing for the machine.

Cartons for mailing or storing tape or wire.

Cleaning materials.

Correspondence folders.

Index cards.

Log pads.

Shoulder holsters.

Stands for general use.

Stereophonic headsets. Where any question exists as to application of the above determinations to sales of specific products, advice should be sought from the Internal Revenue Service.