Rev. Rul. 73-132

Advice has been requested as to who is entitled to the payment provided by section 6418(a) of the Internal Revenue Code of 1954, for tax paid under section 4501(a) on manufactured sugar under the circumstances described below.

A company manufactures cake mixes containing various ingredients, including tax-paid manufactured sugar. During the manufacturing process, however, some of this mix is rendered unsuitable for human consumption because of its off-quality or because some of the packages are damaged. The company packages the off-quality mix and the mix from the damaged packages in 80-pound bags and sells it for use as livestock feed.

Section 4501(a) of the Code imposes a tax upon manufactured sugar manufactured in the United States. The tax is payable with respect to manufactured sugar which has been sold, or used in the production of other articles, by the manufacturer.

Section 6418(a) of the Code provides that upon the use of any manufactured sugar, or article manufactured therefrom as livestock feed, or in the production of livestock feed, there shall be paid by the Secretary or his delegate to the person so using such manufactured sugar, or article manufactured therefrom, the amount of any tax paid under section 4501(a) with respect thereto.

The specific question in this case is whether the payment provided by section 6418(a) of the Code is payable to the cake mix company on the grounds that it used the sugar "in the production of livestock feed" or to those persons who actually used the cake mix as livestock feed.

Although the company used the sugar in the production of a product to be sold as cake mix, some of the cake mix was eventually packaged and sold as livestock feed. Therefore, such sugar was used "in the production of livestock feed," within the meaning of section 6418(a) of the Code. Accordingly, it is held that the company, rather than those who purchased and used the cake mix as livestock feed, is entitled to the payment provided by that section.