Rev. Rul. 59-3

Advice has been requested concerning the liability of a transfer agent for documentary stamp taxes with respect to transfers made prior to the specific transfer which the transfer agent is requested to effect of record.

For example, dealer A sold 100 shares of X company stock to dealer B and neither party affixed the documentary stamps to the bill of sale or to the certificates. B sold the shares to C , a customer, and delivered the certificates to D , the transfer agent, accompanied by bills of sale with requisite stamps affixed to cover the sale from B to C , with instructions to register the shares in the name of C . The specific question is whether D , the transfer agent, is liable for the documentary stamp tax on the transfer of the stock from A to B .

Section 4321 of the Internal Revenue Code of 1954 imposes a tax on each sale or transfer of shares or certificates of stock, or of rights to subscribe for or to receive such shares or certificates, issued by a corporation. Section 4331 of the Code imposes a tax on each sale or transfer of any certificates of indebtedness issued by a corporation.

Section 4383 of the Code before it was redesignated as section 4384 by the Excise Tax Technical Changes Act of 1958, Public Law 85-859, C.B. 1958-3, 92, provides that the documentary stamp tax shall be paid by any person who makes, signs, issues, or sells any of the documents and instruments subject to the tax, or for whose use or benefit the same are made, signed, issued or sold.

Under the provisions of section 4383 of the Code, liability for the documentary stamp tax is imposed on any of the parties to the transaction, including a transfer agent. Therefore, a transfer agent may be held liable for the transfer tax incurred on any transfer which he may effect. However, such agent cannot be held liable for any tax incurred on a transfer to which he was not a party. Accordingly, it is held that a transfer agent is not liable for the stamp tax incurred on any transfer of securities made prior to the one he is requested to effect and to which he was not a party as transfer agent or otherwise. If, in any case of a requested transfer, there is patent evidence in the record of an error or mistake with respect to the affixing of stamps in a prior transaction, the transfer agent may, as part of his service, bring the matter to the attention of the responsible parties in order that appropriate action may be taken.