Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 65-74

1965-1 C.B. 460

IRS Headnote

Ignition cable sets used in the repair of taxable motor vehicles are automobile `parts or accessories', and the packager of the set is the manufacturer thereof, within the meaning of section 4061(b) of the Internal Revenue Code of 1954.

Full Text

Rev. Rul. 65-74

Advice has been requested concerning the applicability of the manufacturers excise tax on automobile `parts or accessories' imposed by section 4061(b) of the Internal Revenue Code of 1954, to the article described below.

An individual packages and sells an article known as an `ignition cable set' (or kit). The parts of the set are mounted on a display card which contains the information that the set is intended for use in repairing the ignition systems of automotive and marine engines.

Each ignition cable set includes a length of ignition wire, distributor nipples, spark plug protectors, distributor wire terminals, and angle and straight spark plug terminals in various combinations. For example, one type of package contains a 23-foot length of wire, eight distributor nipples, and six each of the other items.

The specific questions presented are (1) whether the ignition cable set described above comes within the meaning of the term `parts or accessories' as used in section 4061(b) of the Code and (2) if so, whether the packager is the manufacturer of the taxable article for purposes of applying the manufacturers excise tax.

Section 4061(b) of the Code imposes a tax on the sale by the manufacturer, producerOr importer of parts or accessories (other than tires and inner tubes and other than automobile radio and television receiving sets) for any of the articles enumerated in section 4061(a) of the Code.

Section 48.4061(b)-2 of the Manufacturers and Retailers Excise Tax Regulations defines `parts or accessories,' in pertinent part, as follows:

(a) In general .-The term `parts or accessories' includes (1) any article the primary use of which is to improve, repair, replace, or serve as a component part of an automobile truck or bus chassis or body, or other automobile chassis or body, or taxable tractor, (2) any article designed to be attached to or used in connection with such chassis, body, or tractor to add to its utility or ornamentation, and (3) any article the primary use of which is in connection with such chassis, body, or tractor, whether or not essential to its operation or use. The term `parts or accessories' includes all articles which have reached such a stage of manufacture as to be commonly known as parts or accessories whether or not fitting operations are required in connection with their installation.

Section 316.4(a) of Regulations 46 (made applicable to the 1954 Code by T.D. 6091, C.B. 1954-2, 47) defines the term `manufacturer' to include a person who produces a taxable article from scrap, salvage, or junk material, as well as from new or raw material (1) by processing, manipulating or changing the form of an article, or (2) by combining or assembling two or more articles.

A package containing a number of items which, when associated in a single container, are commonly known and traded within an industry as a single product commercially distinguishable from the individual items comprising the package, is a distinct article, in and of itself, for manufacturers excise tax purposes. Under such circumstances the fact that the individual items supplied in the package may not be assembled into a complete functional unit is immaterial in determining whether the package is commonly or commercially recognized as a distinct article.

The ignition cable set in the instant case is recognized as a distinct commercial product, and is commonly sold as such within the automotive industry. The fact that the items in the set may not be assembled into a complete automobile part or accessory from a functional standpoint will not, for purposes of section 4061(b) of the Code, affect the status of the package as an automobile part or accessory.

As indicated above, section 48.4061(b)-2 of the regulations includes within the definition of an automobile part or accessory `any article, the primary use of which is to * * * repair' an article subject to the tax imposed by section 4061(a) of the Code. The facts indicate clearly that the described ignition cable set is held out for, and primarily used for, the repair of motor vehicle articles subject to the tax imposed by section 4061(a). Accordingly, the ignition cable set is held to be an automobile part or accessory, within the meaning of section 4061(b) of the Code.

Since the packager in the instant case has produced what has been determined to be an automobile part or accessory, by combining two or more articles in a common container, he comes within the definition of a `manufacturer' for manufacturers excise tax purposes, and his sales of the ignition cable sets so produced are subject to the manufacturers excise tax imposed by section 4061(b) of the Code.