Rev. Ruling 54-161

Price Reductions, Rebates, Refunds, and Discounts

Price reductions, rebates, refunds, and discounts given by a wholesale liquor dealer to a retail liquor dealer pursuant to an agreement made at the time of the sale of the merchandise involved are considered a part of the sales transaction, constituting reductions in price pursuant to the terms of the sale. Such transactions do not fall within the purview of section 5(b) of the Federal Alcohol Administration Act, provided they do not involve the imposition of any requirement upon the retailer to take and dispose of a certain quota of the wholesale dealer's products, or do not involve any of the other practices set forth in section 5(a) to 5(d), inclusive, of the Act. This view would hold irrespective of whether the quantity discount was prorated and allowed on each delivery, given in a lump sum after the entire quantity of merchandise purchased had been delivered, or based on dollar volume or on the quantity of merchandise purchased.

Ordinarily, "free" goods are nothing more than price reductions in the same status as discounts and, similarly, are not within the purview of section 5(b) of the Federal Alcohol Administration Act. For example, if a wholesale liquor dealer agreed to "give" a retail liquor dealer a "free" case for each 10 cases purchased, such transaction is essentially a reduction in the usual price. However, if the amount of the product given free with the order is such that the pricing aspect is merely a subterfuge, the transaction would constitute a "gift" within the meaning of this section of the Federal Alcohol Administration Act.

27 U.S.C. 205; 27 CFR 6.20. (Note: This Rev. Rul. 54-161 amplified by ATF Rul. 74-6, ATF C. B. 1974; and ATF Rul. 75-12, ATF B 1975-4).