(f) Withholding exemptions. (1) In general.

An employee receiving wages shall on any day be entitled to the following withholding exemptions:

(A) an exemption for himself;

(B) one additional exemption for himself if, on the basis of facts existing at the beginning of such day, there may reasonably be expected to be allowable an exemption under section 151 (c) (1) (relating to old age) for the taxable year under subtitle A in respect of which amounts deducted and withheld under this chapter in the calendar year in which such day falls are allowed as a credit;

(C) one additional exemption for himself if, on the basis of facts existing at the beginning of such day, there may reasonably be expected to be allowable an exemption under section 151 (d) (1) (relating to the blind) for the taxable year under subtitle A in respect of which amounts deducted and withheld under this chapter in the calendar year in which such day falls are allowed as a credit;

(D) if the employee is married, any exemption to which his spouse is entitled, or would be entitled if such spouse were an employee receiving wages, under subparagraph (A), (B), or (C), but only if such spouse does not have in effect a withholding exemption certificate claiming such exemption; and

(E) an exemption for each individual with respect to whom, on the basis of facts existing at the beginning of such day, there may reasonably be expected to be allowable an exemption under section 151 (e) for the taxable year under subtitle A in respect of which amounts deducted and withheld under this chapter in the calendar year in which such day falls are allowed as a credit.

(2) Exemption certificates.

(A) On commencement of employment.

On or before the date of the commencement of employment with an employer, the employee shall furnish the employer with a signed withholding exemption certificate relating to the number of withholding exemptions which he claims, which shall in no event exceed the number to which he is entitled.

(B) Change of status.

If, on any day during the calendar year, the number of withholding exemptions to which the employee is entitled is less than the number of withholding exemptions claimed by the employee on the withholding exemption certificate then in effect with respect to him, the employee shall within 10 days thereafter furnish the employer with a new withholding exemption certificate relating to the number of withholding exemptions which the employee then claims, which shall in no event exceed the number to which he is entitled on such day. If, on any day during the calendar year, the number of withholding exemptions to which the employee is entitled is greater than the number of with

holding exemptions claimed, the employee may furnish the employer with a new withholding exemption certificate relating to the number of withholding exemptions which the employee then claims, which shall in no event exceed the number to which he is entitled on such day.

(C) Change of status which affects next calendar year.

If on any day during the calendar year the number of withholding exemptions to which the employee will be, or may reasonably be expected to be, entitled at the beginning of his next taxable year under subtitle A is different from the number to which the employee is entitled on such day, the employee shall, in such cases and at such times as the Secretary or his delegate may by regulations prescribe, furnish the employer with a withholding exemption certificate relating to the number of withholding exemptions which he claims with respect to such next taxable year, which shall in no event exceed the number to which he will be, or may reasonably be expected to be, so entitled.

(3) When certificate takes effect.

(A) First certificate furnished.

A withholding exemption certificate furnished the employer in cases in which no previous such certificate is in effect shall take effect as of the beginning of the first payroll period ending, or the first payment of wages made without regard to a payroll period, on or after the date on which such certificate is so furnished.

(B) Furnished to take place of existing certificate. A withholding exemption certificate furnished the employer in cases in which a previous such certificate is in effect shall take effect with respect to the first payment of wages made on or after the first status determination date which occurs at least 30 days from the date on which such certificate is so furnished, except that at the election of the employer such certificate may be made effective with respect to any payment of wages made on or after the date on which such certificate is so furnished; but a certificate furnished pursuant to paragraph (2) (C) shall not take effect, and may not be made effective, with respect to any payment of wages made in the calendar year in which the certificate is furnished. For purposes of this subparagraph the term "status determination date" means January 1 and July 1 of each year.

(4) Period during which certificate remains in effect. A withholding exemption certificate which takes effect under this subsection, or which on December 31, 1954, was in effect under the corresponding subsection of prior law, shall continue in effect with respect to the employer until another such certificate takes effect under this subsection.

(5) Form and contents of certificate.

Withholding exemption certificates shall be in such form and contain such information as the Secretary or his delegate may by regulations prescribe.

(6) Exemption of certain nonresident aliens. Notwithstanding the provisions of paragraph (1), a nonresident alien individual (other than an individual described in section 3401(a) (6) (A) or (B)) shall be entitled to only one withholding exemption.

(g) Overlapping pay periods, and payment by agent or fiduciary.

If a payment of wages is made to an employee by an employer

(1) with respect to a payroll period or other period, any part of which is included in a payroll period or other period with respect to which wages are also paid to such employee by such employer,

or

(2) without regard to any payroll period or other period, but on or prior to the expiration of a payroll period or other period with respect to which wages are also paid to such employee by such employer, or

(3) with respect to a period beginning in one and ending in another calendar year, or

(4) through an agent, fiduciary, or other person who also has the control, receipt, custody, or disposal of, or pays, the wages payable by another employer to such employee,

the manner of withholding and the amount to be deducted and withheld under this chapter shall be determined in accordance with regulations prescribed by the Secretary or his delegate under which the withholding exemption allowed to the employee in any calendar year shall approximate the withholding exemption allowable with respect to an annual payroll period.

(h) Withholding on basis of average wages.

The Secretary or his delegate may, under regulations prescribed by him, authorize employers

(1) to estimate the wages which will be paid to any employee in any quarter of the calendar year,

(2) to determine the amount to be deducted and withheld upon each payment of wages to such employee during such quarter as if the appropriate average of the wages so estimated constituted the actual wages paid, and

(3) to deduct and withhold upon any payment of wages to such employee during such quarter such amount as may be necessary to adjust the amount actually deducted and withheld upon the wages of such employee during such quarter to the amount required to be deducted and withheld during such quarter without regard to this subsection.

(i) Additional withholding.

The Secretary or his delegate is authorized by regulations to provide, under such conditions and to such extent as he deems proper, for withholding in addition to that otherwise required under this section in cases in which the employer and the employee agree (in such form as the Secretary or his delegate may by regulations prescribe) to such additional withholding. Such additional withholding shall for all purposes be considered tax required to be deducted and withheld under this chapter.

(j) Noncash remuneration to retail commission sales

man.

In the case of remuneration paid in any medium other than cash for services performed by an individual as a retail salesman for a person, where the service performed by such individual for such person is ordinarily performed for remuneration solely by way of cash commission an employer shall not be required to deduct or withhold any tax under this subchapter with respect to such remuneration, provided that such employer files with the Secretary or his delegate such information with respect to such remuneration as the Secretary or his delegate may by regulation prescribe. (Aug. 16, 1954, ch. 736, 68A Stat. 457; Aug. 9, 1955, ch. 666, § 2, 69 Stat. 605; Sept. 21, 1961, Pub. L. 87-256, § 110(g) (2), 75 Stat. 537; Feb. 26, 1964, Pub. L. 88-272, title III, § 302 (a), (b), 78 Stat. 140.)

AMENDMENTS

1964 Subsec. (a). Pub. L. 88-272, § 302 (a), reduced the tax from 18% to 14%.

Subsec. (c) (1). Pub. L. 88-272, § 302(b), substituted new tables reflecting lowered withholding rates.

1961-Subsec. (f) (6). Pub. L. 87-256 added subsec. (f) (6).

1955-Subsec. (a). Act Aug. 9, 1955, § 2(a), inserted "(except as provided in subsection (j))" after "upon such wages".

Subsec. (j). Act Aug. 9, 1955, § 2(b), added subsec. (j).

EFFECTIVE DATE OF 1964 AMENDMENT

Section 302 (d) of Pub. L. 88-272 provided that: "The amendments made by subsections (a) and (b) [to this section] of this section shall apply with respect to remuneration paid after the seventh day following the date of the enactment of this Act [Feb. 28, 1964]. The amendment made by subsection (c) [to section 1441 of this title] of this section shall apply with respect to payments made after the seventh day following the date of the enactment of this Act [Feb. 26, 1964].”

EFFECTIVE DATE OF 1961 AMENDMENT Amendment of section by Pub. L. 87-256 applicable with respect to wages paid after Dec. 31, 1961, see section 110(h) (4) of Pub. L. 87-256, set out as a note under section 3401 of this title.

EFFECTIVE DATE OF 1955 AMENDMENT

Section 3 of act Aug. 9, 1955, provided that: "The amendment made by section 2 [to subsecs. (a) and (1) of this section] shall be applicable only with respect to remuneration paid after the date of enactment of this Act (Aug. 9, 1955]."

MEANING OF TERMS

Section 1 of act Aug. 9, 1955, provided that: "The terms used in this Act (amending subsecs. (a) and (1) of this section] shall have the same meaning as when used in the Internal Revenue Code."

CROSS REFERENCES

Adjustment of tax under this section, see section 6205 (a) (1) of this title.

Amount and method of adjustment inapplicable to taxes under this chapter, see section 1314 (e) of this title.

Amount withheld as special trust fund for United States, see section 7501 (a) of this title.

Assessment for underpayment of tax imposed by this section, see section 6205 (b) of this title.

Excessive withholding under this chapter as overpayment, see section 6401 (b) of this title.

Nondeductibility of tax deducted and withheld under this chapter as deduction from gross income, see section 3502 (b) of this title.

Penalty for fraudulently withholding exemption certificate or failure to supply information, see section 7204 of this title.

Personal exemptions allowable as deductions from gross income, see section 151 et seq. of this title.

Receipts for employees for taxes withheld by employers, see section 6051 of this title.

Tax withheld on wages as credit against income tax, see section 31 of this title.

Time tax withheld deemed paid, see section 6513 (b) of this title.

§ 3403. Liability for tax.

The employer shall be liable for the payment of the tax required to be deducted and withheld under this chapter, and shall not be liable to any person for the amount of any such payment. (Aug. 16, 1954, ch. 736, 68A Stat. 469.)

CROSS REFERENCES

Refund or credit to employer for overpayment of tax imposed by this chapter, see section 6414 of this title. Wilful failure to collect or pay one's tax, punishment for, see section 7202 of this title.

§ 3404. Return and payment by governmental employer. If the employer is the United States, or a State, Territory, or political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing, the return of the amount deducted and withheld upon any wages may be made by any officer or employee of the United States, or of such State, Territory, or political subdivision, or of the District of Columbia, or of such agency or instrumentality, as the case may be, having control of the payment of such wages, or appropriately designated for that purpose. (Aug. 16, 1954, ch. 736, 68A Stat. 469.)

Chapter 25.-GENERAL PROVISIONS RELATING TO EMPLOYMENT TAXES

Sec.

3501. Collection and payment of taxes.

3502. Nondeductibility of taxes in computing taxable in

come.

3503. Erroneous payments.

3504. Acts to be performed by agents.

§ 3501. Collection and payment of taxes.

The taxes imposed by this subtitle shall be collected by the Secretary or his delegate and shall be paid into the Treasury of the United States as internal-revenue collections. (Aug. 16, 1954, ch. 736, 68A Stat. 471.)

§ 3502. Nondeductibility of taxes in computing taxable income.

(a) The taxes imposed by section 3101 of chapter 21, and by sections 3201 and 3211 of chapter 22 shall not be allowed as a deduction to the taxpayer in computing taxable income under subtitle A.

(b) The tax deducted and withheld under chapter 24 shall not be allowed as a deduction either to the employer or to the recipient of the income in computing taxable income under subtitle A. (Aug. 16, 1954, ch. 736, 68A Stat. 471.)

CROSS REFERENCES

Credit for amount withheld, see section 31 of this title. Taxes paid deductible from gross income, see section 164 of this title.

§ 3503. Erroneous payments.

Any tax paid under chapter 21 or 22 by a taxpayer with respect to any period with respect to which he is not liable to tax under such chapter

shall be credited against the tax, if any, imposed by such other chapter upon the taxpayer, and the balance, if any, shall be refunded. (Aug. 16, 1954, ch. 736, 68A Stat. 471.)

CROSS REFERENCES

Civil action for refund, see section 7422 of this title. Jurisdiction of district courts of actions by taxpayers for refund, see sections 1340 and 1346 of Title 28, Judiciary and Judicial Procedure.

Refund to employer of overpayment of withholding tax, see section 6414 of this title.

§ 3504. Acts to be performed by agents.

In case a fiduciary, agent, or other person has the control, receipt, custody, or disposal of, or pays the wages of an employee or group of employees, employed by one or more employers, the Secretary or his delegate, under regulations prescribed by him, is authorized to designate such fiduciary, agent, or other person to perform such acts as are required of employers under this title and as the Secretary or his delegate may specify. Except as may be otherwise prescribed by the Secretary or his delegate, all provisions of law (including penalties) applicable in respect of an employer shall be applicable to a fiduciary, agent, or other person so designated but, except as so provided, the employer for whom such fiduciary, agent, or other person acts shall remain subject to the provisions of law (including penalties> applicable in respect of employers. (Aug. 16, 1954. ch. 736, 68A Stat. 471; Sept. 2, 1958, Pub. L. 85-866, title I, § 71, 72 Stat. 1660.)

§ 4001. Imposition of tax.

There is hereby imposed upon the following articles sold at retail a tax equivalent to 10 percent of the price for which so sold:

All articles commonly or commercially known as jewelry, whether real or imitation.

The following stones, by whatever name called, whether real or synthetic:

Amber.

Beryl of the following types:

Aquamarine.

Emerald.

Golden Beryl. Heliodor.

Morganite.

Chrysoberyl of the following types: Alexandrite.

Cat's eye. Chrysolite.

Corundum of the following types: Ruby.

Sapphire.

Diamond.

Feldspar of the following type: Moonstone.

Garnet.

Jadeite (Jade).

Jet.

Lapis Lazuli.

Nephrite (Jade).
Opal.

Pearls (natural and cultured).
Peridot.

Quartz of the following types: Amethyst.

Bloodstone.

Citrine.

Moss agate.

Onyx.

Sardonyx.

Tiger-eye.

Spinel.

Topaz.

Tourmaline.

Turquoise.

Zircon.

Articles made of, or ornamented, mounted or fitted with precious metals or imitations thereof. Watches.

Clocks.

Cases and movements for watches and clocks. Gold, gold-plated, silver, or sterling flatware or hollow ware and silver-plated hollow ware. Opera glasses.

Lorgnettes.

Marine glasses.

Field glasses.
Binoculars.

(Aug. 16, 1954, ch. 736, 68A Stat. 473; Sept. 2, 1958, Pub. L. 85-859, title I, § 101, 72 Stat. 1275; Sept. 21, 1959, Pub. L. 86-344, § 1(a), 73 Stat. 617.)

AMENDMENTS

1959-Pub. L. 86-344 deleted "Coral" from the list of stones subject to the tax.

1958-Pub. L. 85-859 substituted provisions specifically enumerating stones that are taxable for provisions which

36-500 0-65-vol. 646

imposed a tax on pearls, precious and semi-precious stones, and imitations thereof.

EFFECTIVE DATE OF 1959 AMENDMENT

Section 1(b) of Pub. L. 86-344 provided that: "The amendment made by subsection (a) [to this section] shall take effect on the first day of the first calendar month which begins more than 10 days after the date of the enactment of this Act [Sept. 21, 1959]."

EFFECTIVE DATE OF 1958 AMENDMENT

Section 1 (c) of Pub. L. 85-859 provided in part that: "Except as otherwise provided, the amendments and repeals made by title I of this Act [adding sections 4057, 4143, 4221-4225 and 4294 of this title, amending chapter 34 and sections 4001, 4003, 4031, 4041, 4053, 4111, 4121, 4141, 4142, 4192, 4216-4218, 4231-4233, 4263, 4291, 4501, 4601, 6011, 6412, 6415, 6416 (a), (c), (g)—(1), 6420, 6421, 6501 and 6805 of this title, and repealing section 4112 of this title and former sections 4143, 4152, 42204225 and 4316 of this title] shall take effect on the first day of the first calendar quarter which begins more than 60 days after the date on which this Act is enacted [September 2, 1958]."

SHORT TITLE

Section 1 (a) of Pub. L. 85-859 provided that Pub. L. 85-859, which added sections 4057, 4143, 4221-4225, 4294, 5849, 5854, 5855 and 7608 of this title, amended chapters 34, 51 and 52 of this title and this section and sections 4003, 4031, 4041, 4053, 4111, 4121, 4141, 4142, 4192, 42164218, 4231-4233, 4241, 4243, 4251-4254, 4263, 4291. 4401, 4402, 4462, 4473, 4501, 4601, 5801, 5811, 5814, 5821, 5843, 5848, 5851, 6011, 6071, 6207, 6412, 6415, 6416, 64206422, 6501, 6805, 7214, 7272, 7301, 7324-7326, 7609, 7652 and 7655 of this title, repealed section 4112 of this title and former sections 4143, 4152, 4220-4225 and 5854 of this title, renumbered former sections 4057 and 4294 as 4058 and 4295, respectively, and enacted notes set out under sections 4001, 4217, 4241, 4251, 4383, 4401, 4462, 4473, 5001, 5006, 5025, 5064, 5175, 5304, 5601, 6416 and 6421 of this title, should be popularly known as the "Excise Tax Technical Changes Act of 1958".

CROSS REFERENCES

Penalty for representation that tax is excluded from price of article, see section 7261 of this title.

§ 4002. Definition of sale includes auctions.

For the purposes of section 4001, the term "articles sold at retail" includes an article sold at retail by an auctioneer or other agent in the course of his business on behalf of (1) a person who is not engaged in the business of selling like articles, or (2) the legal representative of the estate of a decedent who was not engaged in the business of selling like articles. In the case of articles so sold, the auctioneer or other agent shall be considered the "person who sells at retail." (Aug. 16, 1954, ch. 736, 68A Stat. 473.)

§ 4003. Exemptions.

(a) Specific articles.

The tax imposed by section 4001 shall not apply to any article used for religious purposes, to surgical instruments, to watches designed especially for use by the blind, to frames or mountings for spectacles or eye-glasses, to a fountain pen, mechanical pencil, or smokers' pipe if the only parts of the pen, the pencil, or the pipe which consist of precious metals are essential parts not used for ornamental purposes, or to buttons, insignia, cap devices, chin straps, and other devices prescribed for use in connection with the uniforms of the armed forces of the United States.

(b) Certain auction sales.

(1) In the case of an auction sale held at the home of a person whose articles are being sold, any taxable article (as defined in paragraph (2)) of such person sold by the auctioneer shall be exempt from the tax imposed by section 4001 except to the extent that the price for which such article is sold, when added to the sum of the sale prices of all other taxable articles of such person previously sold at the same auction, exceeds $100. (2) For the purposes of this subsection

(A) the term "taxable article" means an article which, by reason of section 4002 and without regard to the exemption provided in paragraph (1), is taxable under section 4001 when sold at auction; and

(B) in the case of articles of a decedent sold on behalf of the legal representative of his estate, an auction sale held at the home of such decedent shall be considered as "held at the home of a person whose articles are being sold".

(c) Clocks subject to manufacturers tax.

The tax imposed by section 4001 shall not apply to a clock or watch, or to a case or movement for a clock or watch, if a tax in respect of such clock, watch, case, or movement was imposed under chapter 32 by reason of its sale (1) as a part or accessory, or (2) on or in connection with or with the sale of any article.

(d) Certain parts of control or regulatory devices. The tax imposed by section 4001 shall not apply to a clock or watch, or to a case or movement for a clock or watch, if such clock, watch, case or movement is (1) a part of a control or regulatory device which is an article (or part thereof) not taxable under chapter 32, or (2) sold as a repair or replacement part for such a device. (Aug. 16, 1954, ch. 736, 68A Stat. 474; Sept. 2, 1958, Pub. L. 85-859, title I, § 102, 72 Stat. 1276.)

§ 4012. Definitions.

(a) Manufacture from customers material.

Where a person, who is engaged in the business of dressing or dyeing fur skins or of manufacturing, selling, or repairing fur articles, produces an article of the kind described in section 4011 from fur on the hide or pelt furnished, directly or indirectly, by a customer and the article is for the use of, and not for resale by, such customer, the transaction shall be deemed to be a sale at retail and the person producing the article shall be deemed to be the person selling such article at retail for the purposes of such section. The tax on such a transaction shall be computed and paid by such person upon the fair retail market value, as determined by the Secretary or his delegate, of the finished article. (b) Sale includes auctions.

For the purposes of section 4011, the term "articles sold at retail" includes an article sold at retail by an auctioneer or other agent in the course of his business on behalf of—

(1) a person who is not engaged in the business of selling like articles, or

(2) the legal representative of the estate of a decedent who was not engaged in the business of selling like articles. In the case of articles so sold, the auctioneer or other agent shall be considered the "person who sells at retail". (Aug. 16, 1954, ch. 736, 68A Stat. 475.)

§ 4013. Exemption of certain auction sales.

(a) In the case of an auction sale held at the home of a person whose articles are being sold, any taxable article (as defined in subsection (b)) of such person sold by the auctioneer shall be exempt from the tax imposed by section 4011 except to the extent that the price for which such article is sold, when added to the sum of the sale prices of all other taxable articles of such person previously sold at the same auction, exceeds $100. (b) For the purposes of this section

(1) the term "taxable article" means an article which, by reason of section 4012 (b) and without regard to the exemption provided in subsection (a), is taxable under section 4011 when sold at auction; and

(2) in the case of articles of a decedent sold on behalf of the legal representative of his estate, an auction sale held at the home of such decedent shall be considered as "held at the home of a person whose articles are being sold". (Aug. 16, 1954, ch. 736, 68A Stat. 475.)