Rev. Rul. 59-302

The Internal Revenue Service has been asked whether the manufacturers excise tax upon sales of `television receiving sets' and `radio and television components' is applicable to sales of a television monitor which can reproduce a picture but cannot reproduce sound.

A manufacturer makes and sells a television monitor which receives and reproduces a picture from electronic signals transmitted via cable directly from a television camera. The monitor operates on a closed-circuit television principle and cannot receive signals transmitted through space. It has no audio apparatus for the reproduction of sound nor tuning device for the selection of frequencies. The monitor is primarily designed and sold for use in industries and educational institutions for observation, instruction, or similar video communication.

Section 4141 of the Internal Revenue Code of 1954, as amended by the Excise Tax Technical Changes Act of 1958, Public Law 85-859, C.B. 1958-3, 92, imposes a tax upon the sale by the manufacturer, producer, or importer of certain enumerated articles, including television receiving sets and radio and television components. On and after September 1, 1955, and prior to January 1, 1959, the imposition of tax on the sale of television receiving sets was restricted to the sale of those sets of the entertainment type. The Excise Tax Technical Changes Act of 1958 removed this restriction from section 4141 of the Code.

Section 4142 of the Code defines the term `radio and television components' to mean chassis, cabinets, tubes, speakers, amplifiers, power supply units, antennae of `built-in' type, phonograph mechanisms, and phonograph record-players, 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.

A television receiving set receives and reproduces simultaneously both pictures and sound. It is held that the above-described monitor, which is capable of reproducing a picture but no sound, is not a television receiving set as contemplated in section 4141 of the Code. It is further held that the monitor is not a `radio and television component' as defined in section 4142 of the Code, because it is not suitable for use on or in connection with, or as a component part of, a television receiving set or any other article enumerated in section 4141 of the Code. Therefore, sales of the television monitor are not subject to the manufacturers excise tax imposed by section 4141 of the Code.