Rev. Rul. 61-183

Advice has been requested whether the manufacturers excise tax on radio and television components, imposed by section 4141 of the Internal Revenue Code of 1954, applies to sales of the multiplex adapters described below.

A manufacturer produces and sells multiplex adapters which are designed for use with frequency modulation (FM) radio tuners for the reception of stereophonic FM radio broadcasts utilizing the so-called `compatible' multiplex system. The multiplex adapter includes an FM detector and can be connected to any FM radio tuner that is equipped with a multiplex jack.

Generally, stereophonic programs which are broadcast under the `compatible' multiplex system are transmitted simultaneously by the same FM radio station on a primary or main channel and on a subchannel. For purposes of sound reproduction, a monophonic FM radio tuner can detect only the signals which are transmitted on the primary or main channel of the multiplex system. The second channel or sub-carrier signal is delivered by the tuner but at such frequencies as to be unusable by an audio amplifier.

The function of a multiplex adapter when used with an FM radio tuner is to detect or demodulate the sub-carrier signal and to deliver such signal in a form which is suitable for sound reproduction when transmitted to an audio amplifier. The combined output of the FM radio tuner and the multiplex adapter is fed into the audio stereophonic amplifier and then into speakers for stereophonic reproduction of the broadcast.

Section 4141 of the Code imposes a tax upon the sale by the manufacturer, producer, or importer of radio receiving sets, automobile radio receiving sets, television receiving sets, automobile television receiving sets, phonographs, combinations of any of the foregoing, radio and television components, and phonograph records (including in each case parts or accessories therefor sold on or in connection with the sale thereof).

Section 4142 of the Code provides that the term `radio and television components,' as used in section 4141 of the Code, means, among other things, `chassis' which are suitable for use on or in connection with, or as component parts of, any of the articles enumerated in section 4141 of the Code, whether or not primarily adapted for such use.

Section 48.4142-1(c)(1) of the Manufacturers and Retailers Excise Tax Regulations provides that the term `chassis' includes any assembly of parts into circuits for the reception and conversion of radio or television signals into impulses suitable for the reproduction of (i) sound by a radio receiving set, or (ii) a picture, either with or without its associated sound, by a television receiving set.

A device falling within the foregoing tests is taxable without regard to what it may be called, i.e. , detector, adapter, converter, tuner, or by any other name. Thus, where an article is considered a `chassis' for purposes of the Code and regulations, it is not necessary that the article be functional without other equipment to be taxable.

The multiplex adapter described above contains an FM detector the function of which is to demodulate or convert the second carrier signal delivered by the FM tuner into impulses suitable for the reproduction of sound when such impulses are transmitted to the input of a stereophonic amplifier and thence to the speakers. Therefore, such a multiplex adapter is considered to be a chassis within the meaning of section 4142 of the Code.

Accordingly, it is held that sales of these multiplex adapters by the manufacturer, producer, or importer thereof are subject to the manufacturers excise tax on radio and television components imposed by section 4141 of the Code.