Rev. Rul. 54-218

Advice is requested whether liability is incurred by a distiller to special (occupational and commodity) taxes as a result of the replacement of all copper tubes in a condenser. Advice is also requested whether the replacement of the entire outer jacket of a condenser would subject the distiller to such taxes.

Section 3250(j) of the Internal Revenue Code provides a special occupational tax of $55 upon manufacturers of stills and a commodity tax of $22 (to be paid by the manufacturer) for each still or worm manufactured. Section 3254(h) defines a manufacturer of stills as `any person who manufacturers any still or worm to be used in distilling.'

Section 181.30 of Regulations 23 provides that whenever a still, worm, or condenser, to be used in distilling, is repaired or altered by the addition of new material to such an extent as virtually to result in the construction of a new still, worm, or condenser, the person making such repairs or alterations will be held liable to the special (commodity) tax for each still, worm, or condenser so required or altered and will incur liability to the special (occupational) tax as a manufacturer of stills.

It is not considered that the repair of a condenser by replacing all of the tubes at one time would `virtually result in the construction of a new * * * condenser.' The shell and ends were in existence at all times and would have been referred to as a `condenser.' Similarly, the replacement of the entire outer jacket of a condenser, without other modification or change, would not constitute the manufacture of a new condenser.

Accordingly, it is held that a distiller would not incur liability to special (occupational and commodity) taxes by reason of (1) the replacement of all of the copper tubes in a condenser, without other modification or change or (2) by reason of the replacement of the entire outer jacket of a condenser, without other modification or change.