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THE MUSIC TRADE REVIEW, OCTOIlKll, 1W
Tax Levy
Interpreted
Bulletin released by Nat. Piano Mfg / r / s
Association shows method of payment
Secretary W. A. Mennie of the National
Piano Manufacturers Association released
a bulletin the last week in September
showing the method of paying the new
excise tax of 10'* on musical instru-
ments, particularly on pianos, which went
into effect on October 1st. The interpreta-
tion of this new law was made, through
the efforts of R. C. Rolfing, president of the
association, by a well known legal tax ex-
pert. The interpretation reveals that, un-
like the billing which was done during the
last war, the piano and all charges inci-
dent to placing the piano in condition for
shipment are taxable.
The Section of the bill as it pertains to
musical instruments is herewith printed,
followed by the interpretation as con-
tained in the bulletin distributed by the
association.
"Sec. 545. There shall be imposed
upon the following articles (including in
each case, except in the case of musical
instruments, parts or accessories therefor
sold on or in connection with the sale
thereof) sold by the manufacturer, pro-
ducer, or importer, a tax equivalent to 10
per centum of the price for which sold.
(a) Radio receiving sets, automobile
radio receiving sets, combination radio
and phonograph sets, and phonographs.
(b) Chassis, cabinets, tubes, reproduc-
ing units, power packs, antennae of the
"built-in" type and phonograph mechan-
isms, which are suitable for use on or in
connection "with, or as component parts
of, any of the articles enumerated in sub-
section (a) whether or not primarily
adapted for such use.
(c) Phonograph records.
(d) Musical instruments."
INTERPRETATION
Section 545 of the Revenue Act of 1941
imposes an excise tax of 10'< upon musi-
cal instruments (which, for tax purposes,
includes pianos) sold by the manufac-
turer. The tax becomes effective October
1, 1941. This bulletin is prepared in the
effort to furnish answers to the tax ques-
tions which will most commonly arise in
the operation of the manufacturer' busi-
ness. It is based upon the new law, such
information as is currently available with
respect thereto, the general administrative
provisions of the existing laws and regu-
lations relating to excise taxes, and the
6. CONTAINERS, CRATES AND
PACKAGING
All charges incident to placing the mer-
chandise in condition for shipment must
be included. This is true even though
there are optional methods of packaging
and separate charges are made therefor.
7. TRANSPORTATION CHARGES
Transportation, insurance, and delivery
charges may be excluded. If the manufac-
turer sells on a delivered price basis, the
actual cost of transportation may be de-
ducted from the price.
8. DISCOUNTS
Readjustments in price, by way of dis-
analogies which may properly be drawn
from the previous administration of Fed- counts, rebates or bonuses may be de-
eral Excise Tax Laws. We believe that the ducted but only as allowed and taken. If
views expressed represent a correct inter- the readjustment is not made prior to the
pretation of the law, but, of course, they close of the month in which the tax is
constitute only an opinion, and the Treas- returned, it may be claimed as a credit
ury Department will, no doubt, issue new against tax shown on subsequent returns.
regulations which will provide more
9. THE TAX ITSELF
authoritative instructions when they are
available.
The excise tax imposed, of course, is
to be excluded from the price. It may be
1. EFFECTIVE DATE
billed as a separate item in which case
The tax applies to sales by the manu- it represents 10 ] ' <> of the price. It may be
facturer made on and after October 1, included in the price, and not shown sep-
1941. The tax attaches when title is trans- arately, in which case it represents 1 11
ferred from the manufacturer to the pur- of the price.
chaser. Title ordinarily passes when the
EXAMPLE NO. 1
merchandise is delivered to the purchaser,
or to a transportation agency for delivery
Sale F.O.B. Factory
to the purchaser. If merchandise is sold
A manufacturer's regular wholesale
and delivered to the purchaser prior to
price, exclusive of the new excise tax,
October 1, 1941, no tax is due.
is $200.00 for a piano, F.O.B. factory.
No
transportation charges are in the
2. SALES FOR DELIVERY AFTER
price, and none, therefore, may be de-
OCTOBER 1, 1941
ducted. The tax would be 10';, of
$200.00 or $20.00. The instrument
If a bona fide contract was made prior
might be billed as follows:
to October 1 for the sale of merchandise
after such date, the tax must be added to
(a) Piano
$200.00
the contract price, or, if the contract of
Excise Tax at 10',
20.00
sale prohibits such addition, the tax is
nevertheless imposed on the vendee and
Total
$220.00
the manufacturer is directed to collect it
If the manufacturer desires to quote
from the vendee. If the vendee refuses to
a price inclusive of excise tax, the in-
pay, the tax will be collected directly from
strument might be billed as follows:
the vendee by the Commissioner of In-
(b) Piano
$220.00
ternal Revenue.
(The price includes Federal Manu-
3. INSTALLMENT SALES
facturers Excise Tax.)
In cases of sales on the installment plan,
In such case the tax reported to the
whereby title does not pass to the pur-
government would be computed as
1/11 of the price of $220.00 or $20.00.
chaser until full payment of the price, the
The result so far as the tax is con-
manufacturer may pay the tax in install-
cerned is, of course, the same.
ments, paying, as to each installment re-
ceived that proportion of the total tax
EXAMPLE NO. 2
which such payment bears to the total
Sale
on
delivered price basis
price.
The manufacturer's regular wholesale
4. CONSIGNMENT SALES
delivered price, exclusive of the new
excise tax. is $305.00. The basis for tax
Where the manufacturer consigns mer-
would
be $305.00 less the actual cost
chandise to a dealer, retaining title, the
of transportation—say $5.00 . The net
tax does not attach until the dealer sells
basis would thus be $300.00. The tax
the merchandise to a customer.
might be computed as 10' < of the base,
or $30.00 and separately stated on the
5. BASIS OF TAX-GENERALLY
invoice, as in Example No. 1 (a), or the
The manufacturer's actual price at the
delivered price might be quoted at
point of distribution or sale furnishes the
$335.00 inclusive of tax, in which case
basis for tax.
the tax would be computed by first re-