Rev. Rul. 58-529

The Internal Revenue Service has been asked whether the manufacturers excise tax on musical instruments applies to sales of upright pianos which have been restyled in the manner described below.

A company manufactures new pianos. Also, old upright pianos are bought for the purpose of restyling them for resale. The restyling is accomplished by remodeling or refinishing the cabinets, replacing any defective parts, and, in some cases, covering the cabinets with leatherette, inserting mirrors over the keyboards and performing other types of restyling to produce a marketable instrument. These restyled pianos are advertised and sold by the company as rebuilt pianos.

Section 4151 of the Internal Revenue Code of 1954 imposes a tax on the price for which musical instruments, including pianos, are sold by the manufacturer, producer, or importer. Section 316.4 of Regulations 46, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that the term `manufacturer' includes a person who produces a taxable article from scrap, salvage, or junk material, as well as from new or raw material, (1) by processing, manipulating, or changing the form of an article or (2) by combining or assembling two or more articles.

The restyling of pianos described above is considered to constitute a rebuilding operation the result of which is the production of an article which is different from the old pianos purchased by the company. Therefore, the rebuilder is a `manufacturer' as that term is defined in the regulations. Accordingly, it is held that the manufacturers excise tax applies to sales of the rebuilt pianos by the rebuilder.