Rev. Rul. 57-320

Advice has been requested whether legitimate auction houses may be properly classified under section 182.860(a) of the Industrial Alcohol Regulations as a general retail store or a bona fide retailer of cosmetics, or under section 182.860(b) as `persons, other than those specified in paragraph (a) of this section, who are engaged in a legitimate * * * other business.'

Subsection (a) of section 182.860 of the regulations provides, in part, that, except as provided in subsection 182.860(b), products such as bay rum, lilac vegetal, hair lotions, dry shampoos, deodorant sprays, skin lotions, perfumes, toilet waters, and similar products, made with specially denatured alcohol, may be sold only to barber shops, beauty salons, beauty and barber supply dealers, wholesale and retail drug stores, general retail and wholesale stores, bona fide retailers of cosmetics, and actual users.

Subsection (b) of section 182.860 provides that the Assistant Regional Commissioner, Alcohol and Tobacco Tax, pursuant to application, may authorize the sale of such products to persons, other than those specified in subsection (a), who are engaged in a legitimate reprocessing, bottling, distributing, or other business, and who establish a bona fide need for such products for reprocessing, bottling, repackaging, and/or sale.

Auction houses are held not to be `general wholesale and retail stores' or `bona fide retailers of cosmetics.' Therefore, sales to auction houses are not authorized by section 182.860(a) of the regulations. Sales to other persons, as authorized in section 182.860(b), may be made only pursuant to application filed by the purchaser and approved by the Assistant Regional Commissioner. Approval of applications filed by such other persons is within the discretion of the Assistant Regional Commissioner and approval will be given only if he finds that such persons may be properly permitted to obtain the specially denatured alcohol products in question. Sales of the products by such other persons whose applications are approved are restricted to the classes of persons enumerated in section 182.860(a).

Because of the nature of the business conducted by auction houses, the basic rule of which is to sell to the highest bidder, regardless of other considerations except payment prior to removal of the products, applications will not be approved authorizing auction houses to purchase the products in question.