Rev. Rul. 64-270

Advice has been requested concerning the applicability of the manufacturers excise tax on certain business machines to sales by a manufacturer of the machines described below.

A manufacturer of `change making machines' produces and sells certain machines which are designed to dispense either (1) tokens and coins or (2) tokens only. For example, upon the insertion of a half dollar in one machine it will dispense a token and a quarter. Upon the insertion of a half dollar in another machine it will dispense two tokens. The tokens may be used in lieu of coins for certain designated purposes.

Each of these machines consists of an internal changer mechanism which is mounted in a steel cabinet. The front panel of the cabinet is designed with a slot for the insertion of coins of a designated denomination, a button for the return of coins, and a built-in cup for receiving the tokens and coins (or tokens only). Operating instructions are printed on the front panel.

These machines are manufactured in both electrically operated and manually operated models. The electric model uses standard house current and operates automatically when a coin of the designated denomination is inserted in the slot. The manual model is operated by a `pull and release' knob on the front panel.

In some instances, the manufacturer sells the internal mechanisms only, for use in the manufacture of other articles. These mechanisms alone cannot be used to perform the function for which the complete machines are intended.

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 `change making machines.'

The machines described above are considered to be `change making machines' within the purview of section 4191 of the Code, irrespective of whether they dispense (1) tokens and coins or (2) tokens only. Accordingly, it is held that the manufacturers excise tax imposed by that section applies to the sales of these machines by the manufacturer thereof. However, since the internal mechanism is not a complete change making machine, it does not come within the scope of section 4191 of the Code. Therefore, the tax imposed by that section does not apply to separate sales of the mechanisms only.