Rev. Rul. 60-225

The Internal Revenue Service has been asked whether the manufacturers excise tax on certain sporting goods, imposed by section 4161 of the Internal Revenue Code of 1954, applies to the manufacturer's sales of the articles described below.

Situation (1). A corporation manufactures and sells various articles which are designed for use by fishermen. Included among these articles are different sizes and styles of `blades.' These blades are stamped from copper or brass sheets, after which they undergo a finishing process. After the blades are plated or lacquered, the manufacturer sells some of them separately, either to vendees for resale as such or to other manufacturers for use in further manufacture of other articles. On the other hand, the manufacturer of the blades attaches to some of them certain other items, which include various combinations of a plastic, glass, or fluorescent beads, fish hooks, shot, swivels, or sinker assortments. The articles thus produced are then sold by the manufacturer. The corporation sometimes sells separately the beads, hooks, shot, swivels, or sinker assortments.

Situation (2). Another corporation produces and sells various articles of fishing equipment, including (1) spinners, (2) a `worm harness,' consisting of a spinner and beads, (3) a `worm harness' equipped with a plastic worm, (4) a `fishing rig,' which includes a spinner and a bead, (5) a lure which consists of a spoon, beads, a hook, and a leader and which is designed to be used with live bait, (6) a clear plastic float which is designed to look like a natural bubble in the water, and (7) a colored plastic float, the color and water action of which is said to bring fish within striking distance of a lure.

Section 4161 of the Code imposes a tax upon the sale by the manufacturer, producer, or importer of certain enumerated articles, including in each case parts or accessories of such articles sold on or in connection therewith, or with the sale thereof. Among the articles enumerated in section 4161 of the Code are `fishing rods, creels, reels and artificial lures, baits and flies.'

Generally, it is the position of the Service that the term `artificial lures,' as used in section 4161 of the Code, includes all objects which are designed and produced for use to attract fish, such as spoons, spinners, and other similar objects, as well as imitation mice, insects, minnows, etc. The type of material from which these objects are produced is of no significance. Likewise, it is immaterial whether they are sold with or without leaders or hooks attached or whether they are intended for use with artificial or live bait.

So-called `blades' are objects which have reached such a stage of manufacture that they, as such, are recognized as objects which are designed for use to attract fish. Therefore, they come within the scope of the term `artificial lures.' However, there are certain other articles which, of any by themselves, do not come within the scope of the term `artificial lures,' even though to some extent they may be used as component elements in the production of other objects which are considered to be `artificial lures.'

Accordingly, it is held that the blades described in situation (1) are `artificial lures' which are subject to the tax imposed by section 4161 of the Code, irrespective of whether they are sold separately or with the beads, hooks, shot, swivels, or sinker assortments attached. On the other hand, the beads, hooks, shot, swivels, or sinker assortments, when sold separately , are not considered to be `artificial lures.' It should be noted that, under the provisions of sections 4221 and 4222 of the Code, the taxable blades may be sold tax-exempt for use for further manufacturer of other taxable articles.

It is further held that the term `artificial lures' includes all of the articles described in situation (2) except the plastic floats.