Rev. Rul. 58-196

The Internal Revenue Service has been asked whether the retailers excise tax attaches to the sale of the following articles:

1. Wrist watch bands and bracelets made from stainless steel or other nonprecious metals.

2. Wrist watch bonds on which the gold plating is less than one one-hundred thousanth of an inch in thickness.

3. Wrist watch bands on which the gold plating is one one-hundred thousandth of an inch or more in thickness.

4. Wrist watch bands, bracelets, or straps made of leather, plastic, cloth, or other such materials, when made:

(a) without buckles;

(b) with buckles made of nonprecious metals;

(c) with buckles on which the gold plating is less than one one-hundred thousandth of an inch in thickness;

(d) with buckles on which the sold plating is one one-hundred thousandth of an inch or more in thickness.

Section 4001 of the Internal Revenue Code of 1954 imposes a tax upon the sale by the retailer of jewelry and related items, including all articles commonly or commercially known as jewelry, whether real or imitation, and articles made of, or ornamented, mounted, or fitted with precious metals or imitations thereof. That section also enumerates watches, clocks, and cases and movements for watches and clocks, as articles which are subject to the tax.

Section 320.33 of Regulations 51, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that the term `precious metals' includes platinum, gold, silver, and other metals of similar or greater value and that the term `imitations thereof' includes platings and alloys of such metals. S.T. 935, C.B. 1948-2, 192, holds that articles, other than articles commonly or commercially known as jewelry, merely coated with a deposit of precious metal or an alloy of such metal which is less than one one-hundred thousandth of an inch in thickness, and not ornamented with a precious metal or imitation thereof.

Bands, bracelets, or straps which are designed for the purpose of holding a wrist watch are not considered articles commonly or commercially known as jewelry. However, wrist watch bonds, bracelets, or straps which are made of, or ornamented, mounted, or fitted with precious metals or imitations thereof are taxable articles within the meaning of section 4001 of the Code. Such articles are considered to be ornamented when plated with a deposit of precious metal or an alloy of such metal if the plating is one one-hundred thousandth of an inch or more in thickness.

Accordingly, it is held that the retailers excise tax imposed by section 4001 of the Code will attach to the sale of items 3 and 4(d) But will not attach to the sale of items 1, 2, 4(a), 4(b), and 4(c) above when sold at retail as separate articles. However, where a wrist watch band, bracelet, or strap is sold on or with a wrist watch, the retailers excise tax will attach to the entire selling price of the watch and band, bracelet, or strap, regardless of the material of which made.