Rev. Rul. 58-437

Advice has been requested whether the retailers excise tax applies to the sale of an article of silver-plated flatware which is also partially plated with a deposit of gold greater than one-hundred-thousandth of an inch in thickness.

A retailer sells silver-plated flatware. In addition, he sells some articles of silver-plated flatware which are partially gold-plated. The thickness of the gold-plating is considerably greater than one one-hundred-thousandth of an inch. For example, a silver-plated teaspoon with an overall surface of about eight square inches, has about one square inch of the handle gold-plated.

Section 4001 of the Internal Revenue Code of 1954 imposes a tax upon the sale at retail of certain articles, including `articles made of, or ornamented, mounted, or fitted with precious metals or imitations thereof' and `gold, gold-plated, silver, or sterling flatware or hollow ware, and silver-plated hollow ware.'

Section 320.33(a) of Regulations 51, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, defines the term `precious metals' to include platinum, gold, silver, and other metals of similar or greater value and the term `imitations thereof' to include platings and alloys of such metals. Section 320.35(a) of the regulations provides that the terms `flatware and hollow ware' include all articles commonly or commercially known and sold as such in the trade, and that any gold, gold-plated, silver, silver-plated, or sterling article which is not so known is subject to the tax as an article made of, ornamented, mounted or fitted with precious metals or imitations thereof. Section 320.35(b) of the regulations provides that no tax attaches to the sale at retail of any article commonly or commercially known or sold in the trade as `silver-plated flatware.'

S.T. 935, C.B. 1948-2, 192, provides that articles, other than articles commonly or commercially known as jewelry, merely coated with a deposit of precious metal which is less than one one-hundred-thousandth of an inch in thickness are not considered to be ornamented with a precious metal or imitation thereof within the meaning of the law. Thus, an article, other than jewelry, having a deposit of a precious metal or alloy which is one one-hundred-thousandth of an inch or greater in thickness is considered to be an article ornamented with a precious metal or imitation thereof.

When an article of silver-plated flatware, such as a teaspoon is partially plated with a deposit of gold having a thickness of one one-hundred-thousandth of an inch or more, such article then becomes an article which is ornamented, mounted, or fitted with a precious metal or imitation thereof within the meaning of section 4001 of the Code. Accordingly, it is held that retail sales of such articles are subject to the tax imposed by that section.