Rev. Rul. 58-125

In view of the decision of the United States Court of Appeals for the Seventh Circuit in the case of Torti v. United States , 249 Fed.(2d) 623, the Internal Revenue Service has given further consideration to Revenue Ruling 56-538, C.B. 1956-2, 1005.

In the case of Nathan Gellman, et al. v. United States , 235 Fed.(2d) 87, the United States Court of Appeals for the Eighth Circuit, reversed a decision of the United States District Court (Minnesota), 129 Fed.Supp. 291, which had sustained the position of the Government that in applying the retailers excise taxes imposed by sections 1651 and 2400 of the Internal Revenue Code of 1939, the term `sold at retail' is equivalent to `sale for purposes other than resale.'

Revenue Ruling 56-538 announced that the decision in the Gellman case would not be considered by the Service as a precedent in the disposition of other cases involving a similar factual situation. However, subsequent to the publication of that ruling, the United States Court of Appeals for the Seventh, Circuit in the Torti case also rejected the Government's definition of the term `sold at retail,' and the court followed the Gellman decision.

In view of these decisions, Revenue Ruling 56-538 has been reconsidered with the result that the Service will now recognize the Gellman and Torti cases as precedents in the disposition of other cases involving similar factual situations. This will apply whether the situation arises under section 1651, 2400, 2401, or 2402 of the 1939 Code or under the similar provisions of section 4001, 4011, 4021, or 4031 of the Internal Revenue Code of 1954.

Revenue Ruling 56-538, supra , is hereby revoked.