Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 62-4

1962-1 C.B. 214

IRS Headnote

A company manufactures automobile truck tank bodies which it sells to oil jobbers for use in the delivery of liquid products. The `finish' coat of paint is applied to the bodies by the manufacturer at the time of sale in accordance with the specifications of the purchaser. For purposes of the manufacturers excise tax imposed by section 4061(a)(1) of the Internal Revenue Code of 1954, the manufacturer's separate charge for this `finish' coat of paint is a part of the price for which the bodies are sold. On the other hand, the tax does not apply to separate charges for special lettering painted over the `finish' coat  in accordance with the purchaser's request.

Full Text

Rev. Rul. 62-4

Advice has been requested concerning the applicability of the manufacturers excise tax to amounts charged by the manufacturer of automobile truck tank bodies for the so-called `finish' coat of paint applied to the bodies by the manufacturer at the time of sale in accordance with the specifications of the purchasers of the bodies.

A company manufactures and sells automobile truck tank bodies, which are subject to the manufacturers excise tax imposed by section 4061(a)(1) of the Internal Revenue Code of 1954. These tank bodies are sold to oil jobbers for use in the delivery of liquid products. Ordinarily, upon completion of the assembly of the bodies, they are given a `prime' coat of paint and placed in a storage yard or warehouse awaiting sale.

When one of the bodies is sold to an oil jobber, that purchaser specifies the type and color of the paint to be used by the manufacturer for the `finish' coat. The color, or combination of colors, requested by the jobber usually is prescribed by the oil company which he represents. In addition to the `finish' coat of paint, the purchaser may request that the manufacturer also paint on the body such things as the name or trademark of the oil company, the name and address of the jobber, or the operating license or truck number.

The manufacturing company invoices separately its additional charges for the `finish' coat painting of the bodies and for the other painting done in accordance with the purchaser's specifications. These amounts may be paid by the oil company rather than by the jobber. The question presented is whether any or all of these additional charges should be included in determining, for purposes of computing the manufacturers excise tax, the price for which the truck tank bodies are sold.

Section 4061(a)(1) of the Code imposes a tax on certain enumerated articles, including, chassis and bodies for automobile trucks, sold by the manufacturer, producer, or importer. This tax is based on the price for which the articles are sold.

Section 4216(a) of the Code provides that in determining the price for which an article is sold, for purposes of the manufacturers excise tax, there shall be included any charge for coverings and containers of whatever nature, and any charge incident to placing the article in condition packed ready for shipment.

In accordance with the practice throughout the industry, automobile truck tank bodies in normal use are covered with both a `prime' coat and a `finish' coat of paint. The `finish' coat serves an important function in the protection of the body from deterioration and in the ornamentation of the body. In view of its significant function, the `finish' coat of paint is considered to be inherently a part of the tank body.

The `finish' coat of paint is no less a part of the body merely because the purchaser may have specified the type and colors of paint to be used or because the particular colors chosen may serve an additional function of customer advertising and product identification. Furthermore, it is of no significance that the `finish' coat of paint may not be applied by the manufacturer until the time of sale of the body, if the circumstances are such as to warrant the presumption that the painting in fact is merely a component element of the overall transaction which constitutes the sale of a taxable body by the manufacturer. This painting is merely another step in completing the manufacture of the taxable body which actually is sold to the purchaser.

Accordingly, under the circumstances in the instant case, it is held that any charge which is made by the body manufacturer for the `finish' coat of paint is to be included in determining the price for which the body is sold by the manufacturer. It is immaterial for this purpose whether this portion of the price is charged to the purchasing jobber or to the oil company which he represents.

On the other hand, special lettering painted over the `finish coat in accordance with the purchaser's specifications , in the manner stated above, would not serve any significant function in connection with the body itself, and such lettering is not inherently a part of the body as it is sold by the manufacturer. Accordingly, any charges for painting the name or trademark of the oil company, the name and address of the jobber, or the operating license or truck number would not be considered to be a part of the price for which the body is sold, provided, of course, that the manufacturer has contracted separately for that work and has invoiced the charges therefor separately from the price for which the body is sold.

For a similar conclusion, see Revenue Ruling 60-80, C.B. 1960-1,497, in which the `prime' coat and the `finish' coat of paint are referred to as `ordinary' painting and the additional lettering, etc., is referred to as `special' painting.