Rev. Ruling 66-125
Claim for Credit or Refund of Tax on Cigars and Cigarettes
Advice has been requested whether a corporation which purchased all of the capital stock of a manufacturing corporation, after which the manufacturing corporation was dissolved, is entitled to file a claim for credit or refund of the tax on cigars and cigarettes withdrawn from the market where the tax was paid on the products removed from its factory by the manufacturing corporation prior to its sale.
The tax was paid by X company on cigars and cigarettes produced in and removed form its factory. Subsequent thereto, all of the capital stock of X company was transferred to Y corporation and X company was formally dissolved, at which time the assets of X company were distributed to Y corporation. The cigars and cigarettes were withdrawn from the market by Y corporation after dissolution of X company, and Y corporation filed a claim for refund of the tax paid on the products.
Section 5705(a) of the Internal Revenue code of 1954 provides, in part that a credit or refund of any tax imposed by chapter 52 thereof shall be allowed or made to the manufacturer on proof satisfactory to the Secretary of the Treasury or his delegate that the claimant manufacturer has paid the tax on cigars and cigarettes withdrawn by him from the market.
26 CFR 270.283 provides, in part, for the credit or refund to the manufacturer of the tax on cigars and cigarettes withdrawn from the market by the manufacturer.
It is held that the claimant manufacturer referred to in section 5705(a) of the Code and 26 CFR 270.283 covers not only the corporate entity which manufactured the product but also a corporation into which the manufacturing corporation was merged, a new corporation resulting from the consolidation of another corporation with the manufacturing corporation, and a corporation which acquires all of the corporate stock of the manufacturing corporation which is thereafter dissolved, as well as the transfer by operation of law of the control of the manufacturing corporation, such as through bankruptcy, the appointment of a receiver, or by other court order.
Accordingly, a corporation which acquires all of the capital sock of the manufacturing company, which was thereafter formally dissolved, should be considered the "manufacturer" within the intent of section 5705(a) of the Code since that corporation is the successor to the manufacturing company and, therefore, is entitled to file claim for credit or refund of tax on the cigars and cigarettes subsequently withdrawn form the market. On the other hand, if a corporation merely purchases the assets of a manufacturing company which continues in existence, then the purchasing corporation is not entitled to file a claim for credit or refund of the tax on cigars and cigarettes produced and removed by the manufacturing company prior to the sale of its assets.
Revenue Ruling 64-20, C.B. 1964-1 (Part 1), 580, is hereby superseded.
26 U.S.C. 5705; 27 CFR 270.283