Internal Revenue Service
Rev. Rul. 73-262
1973-1 C.B. 437
Fishing kits for children. A 16" metal rod and a reel resembling an adhesive tape spool, contained in a manufacturer's fishing kit designed for children as toys to simulate fishing, are not subject to the manufacturers tax under section 4161 of the Code. However, a 40" two-piece, fiberglass rod and a reel similar in construction to a conventional fishing reel, contained in a fishing kit for children but designed for practical use in fishing, are subject to the manufacturers tax. The tax does not apply to the fishing hooks, fishing line, and instruction booklet in the kits.
Rev. Rul. 73-262
Advice has been requested whether the tax on certain articles of fishing equipment imposed by section 4161 of the Internal Revenue Code of 1954, is applicable to sales of the articles described below. A company manufacturers and sells products that are designed primarily for use by children. Among its merchandise are two products that are advertised and sold as "fishing kits."
The first kit contains a one-piece, metal rod that is 16 inches in length, exclusive of a small wooden handle with which it is equipped. A rudimentary reel, resembling in appearance an empty adhesive tape spool, is fastened to the rod. The kit also contains a booklet with simple instructions on how to fish, and several pieces of bent metal wire intended to resemble fishhooks but they are neither sharpened nor barbed.
The second kit contains a two-piece, fiberglass rod that measures 40 inches in length, exclusive of its wooden handle. This kit contains a more elaborate reel similar in construction to a conventional-type fishing reel. The reel has no gears but is equipped with a switch that produces a "clicking" effect. The reel may be attached to the fiberglass rod by means of a ferrule provided in the kit. The rod is equipped with a guide and a guide tip. The kit also includes a nylon fishing line, a package of authentic fishhooks, and a more detailed booklet containing instructions on how to fish and information pertaining to various kinds of fish and the best locations for finding them.
Section 4161 of the Code imposes a tax upon the sale by the manufacturer, producer, or importer of fishing rods, creels, reels, and artificial lures, baits, and flies (including parts or accessories of such articles sold on or in connection therewith or with the sale thereof).
Section 48.4161-1(a)(2) of the Manufacturers and Retailers Excise Tax Regulations provides that the tax attaches to the sale of any article specified in section 4161 which is designed or constructed for use in playing or participating in the conventional game or sport to which the particular article is associated. However, that section of the regulations further provides that the tax does not attach to the sale of articles in the nature of toys or novelties which simulate sporting goods of the type referred to and which are not designed or constructed for use in playing or participating in the conventional game or sport to which the particular article is associated.
In accordance with the regulations, the tax imposed by section 4161 of the Code applies to articles, such as rods and reels, that are constructed so as to be fit for practical use in the sport of fishing and the law does not provide an exception for articles designed to be used by children rather than adults. On the other hand, articles not constructed for practical use in the sport of fishing are not subject to the tax.
The facts presented indicate that the rod and reel contained in the first kit described above are not designed or constructed so as to be fit for practical use in the sport of fishing, but are designed and constructed for use by children as toys in simulating the sport of fishing. Therefore, it is held that sales of such articles are not subject to the tax imposed by section 4161 of the Code, and the manufacturer is not liable for the tax imposed by that section with respect to his sales of the first kit. With respect to the second kit, the facts indicate that the rod and reel contained therein, although sold for use by children, are designed and constructed for practical use in the sport of fishing. Therefore, it is held that sales of the rod and reel included in the second kit are subject to the tax imposed by section 4161 of the Code. The tax does not apply to the fishing hooks, fishing line, and instruction booklet contained in the kit, inasmuch as these articles are not enumerated in section 4161 of the Code, nor do they constitute parts or accessories for the articles with which they are sold. See Rev. Rul. 58-606, 1958-2 C.B. 805. The tax applies only to the portion of the total sale price of the kit (if sold as a unit) attributable to the rod and reel. For the method of computing the manufacturers excise tax where taxable articles are sold in combination with nontaxable articles, see Rev. Rul. 69-394, 1969-2 C.B. 206.