Rev. Rul. 58-57

Advice has been requested whether the retailers excise tax applies to periodic or occasional auction sales by the United States Customs Service and the United States Postal Service of confiscated, unclaimed, forfeited, and damaged articles.

The United States Customs Service and the United States Postal Service acquire title to jewelry, furs, toilet preparations, luggage, etc., through failure or refusal of consignees to claim shipments, forfeited seizures, claims for merchandise damaged in transit, and various other causes incidental to their functions as instrumentalities of the United States. This merchandise is periodically auctioned to the public for the sold purpose of disposing of it.

Sections 4001, 4011, 4021, and 4031 of the Internal Revenue Code of 1954 impose a tax upon jewelry and related items, furs, toilet preparations, and luggage, handbags, etc., respectively, sold at retail.

Section 4002 of the Code states, in part, that, for purposes of the tax on jewelry and related items imposed by section 4001 of the Code, the term `articles sold at retail' includes an article sold at retail by an auctioneer or other agent in the course of his business on behalf of a person who is not engaged in the business of selling like articles. In the case of articles so sold, the auctioneer or other agent shall be considered the `person who sells at retail.' Section 4012(b) of the Code contains similar provisions regarding auction sales of furs.

Section 320.3(a) of Regulations 51, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that every person who sells at retail any article covered by these regulations, or leases such article, is liable for tax whether such sale or lease is made directly or through an agent. Section 320.1(b) of the regulations provides that the phrase `every person who sells at retail' means any person engaged in the business of selling articles to a purchaser at retail.

It is held that periodic or occasional auction sales by the United States Customs Service and by the United States Postal Service of jewelry, furs, toilet preparations, and luggage, which have been confiscated, forfeited, unclaimed, or damaged, are incidental to the conduct of the customs and postal service business and that such instrumentalities are not engaged in the business of selling at retail, and are not auctioneers or other agents selling articles on behalf of other persons as contemplated by sections 4002 or 4012(b) of the Code. Accordingly, neither the United States Customs Service nor the United States Postal Service is liable for the payment of the retailers excise tax in connection with such sales.