Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 57-15

1957-1 C.B. 368

Caution: Obsoleted by Rev. Rul. 92-18

Superseded in part by Rev. Rul. 82-217

IRS Headnote

The manufacturers excise tax does not apply to the sale of tread rubber to a state for its exclusive use. However, the tax applies to the sale of such rubber to a retreader, for use in the retreading of worn tires subsequently sold to a state, or for use in performing a retreading service for a state.

Full Text

Rev. Rul. 57-15

Advice has been requested whether the manufacturers excise tax applies to a manufacturer's sales of tread rubber for the following purposes:

(1) For use by a state in retreading its own tires for highway vehicles.

(2) For use by a retreader in retreading worn tires for highway vehicles, where such tires are subsequently sold to a state.

(3) For use by a retreader in retreading tires for highway vehicles, where the tires are owned by a state.

Section 4071(a) of the Internal Revenue Code of 1954, as amended by the Highway Revenue Act of 1956, 70  Stat. 387, C.B. 1956-2, 1150, imposes a tax on tread rubber sold by the manufacturer, producer, or importer. Section 4072(b) defines the term `tread rubber' to mean any material which is commonly or commercially known as tread rubber or camelback, or which is a substitute for such material and is of a type used in recapping or retreading tires. Pursuant to section 4073(c), the tax does not apply to tread rubber sold by the manufacturer to any person for use by such person otherwise than in the recapping or retreading of tires of the type used on highway vehicles.

Under the provisions of section 4224 of the Code, no manufacturers excise tax is imposed upon the sale of any article for the exclusive use of a State, territory of the United States, or any political subdivision of the foregoing, or the District of Columbia. Pursuant to the provisions of section 6416(b)(2)(A), a manufacturer may obtain refund or credit, without interest, of tax paid on the sales of articles which are resold by any person for the exclusive use of a state or other exempt governmental organization.

Under the provisions of section 4224 of the Code, it is held that no tax attaches where, as in the situation in (1) above, tread rubber is sold by the manufacturer direct to a state for use by the state in retreading its own tires. Furthermore, in accordance with the provisions of 6416(b)(2)(A), a manufacturer who has paid tax on the sale of tread rubber which is resold to a state for its exclusive use may obtain a refund or credit of the tax paid.

It is further held that the sale by a retreader to a state of tires which have been retreaded does not constitute a resale to the state of the tread rubber as such but, rather, constitutes a sale to the state of the tires in the processing of which tread rubber was used. Likewise, the use by a retreader of tread rubber in the retreading of tires which are owned by a state does not constitute a resale to the state of the tread rubber, but a use by the retreader of such rubber in the performance of a retreading service. Accordingly, a manufacturer may not sell tread rubber tax-free to a retreader for the purposes set forth in (2) and (3) above, nor may he obtain a refund or credit of the tax paid on tread rubber which is subsequently resold to a retreader for such use.