Internal Revenue Service
Rev. Rul. 69-318
1969-1 C.B. 275
In determining the price for which articles are sold for Federal excise tax purposes, the service charge for articles sold on credit may be excluded where it is reasonably related to the costs of carrying the deferred portion of the sales price; Revenue Rulings 54-437 and 58-287 superseded.
Rev. Rul. 69-318
The retailers excise taxes imposed by sections 4001, 4011, 4021, and 4031 of the Internal Revenue Code of 1954 were repealed by the Excise Tax Reduction Act of 1965, Public Law 89-44, C.B. 1965-2, 568. Prior to that repeal, a retailer sold certain taxable articles on credit, adding to the established price for cash sales of the same articles a so-called "service charge" that was a uniform percentage of the balance remaining after deducting the customer's down payment.
The retailer has established that the added charge was reasonably related to the total actual costs of carrying the deferred portion of the price for which the articles were sold.
Held, under these circumstances the "service charge" may be excluded in determining the price for which the articles were sold in accordance with the provisions of section 4051 of the Code. See Macey's Jewelry Corporation v. United States, 387 F. 2d 70 (1967). Any other cases involving the "service charge" issue that may remain open will be disposed of on the basis of the foregoing conclusion if the retailer can establish that the added charge was reasonably related to the actual costs of carrying the deferred portion of the price.
Held further, a similar conclusion will be applied in determining, under section 4216(a) of the Code, the price for which articles subject to the manufacturers excise taxes are sold by the manufacturer, producer, or importer.
Revenue Ruling 57-437, C.B. 1957-2, 717, and Revenue Ruling 58-287, C.B.