Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 65-9

1965-1 C.B. 491

IRS Headnote

In determining a constructive sale price for purposes of computing the manufacturers excise tax imposed by section 4191 of the Internal Revenue Code of 1954, with respect to `old model' typewriters sold at retail, the manufacturer may use 60 percent of the reduced established retail list price for such typewriters, rather than 60 percent of the established retail list price for the current model, but not less than the manufacturer's cost of the typewriters.

Full Text

Rev. Rul. 65-9

Advice has been requested concerning the proper basis for computing the manufacturers excise tax, imposed by section 4191 of the Internal Revenue Code of 1954, on a manufacturer's sales of typewriters under the circumstances described below.

A company manufactures and sells at retail various models of electric typewriters. Whenever any model is superseded by a new model, the company reduces its established retail list price for the superseded model. Also, in some instances, the company reduces its established retail list price for those typewriters bearing low serial numbers within a particular model. All of the typewriters (hereinafter after referred to as `old model' typewriters) may be identified by their model designations and serial numbers. In either of the foregoing situations, the company issues a revised price schedule to reflect the newly established retail list price for the old model typewriters.

Since these typewriters are sold at retail, a constructive sale price under the provisions of section 4216(b)(1) of the Code has been determined to be 60 percent of the established retail list price for the typewriters. None of the retail sales of the typewriters involved here come within the scope of the special constructive sale price provisions of section 4216(b)(2) of the Code.

Specifically, the company asks whether it may compute the manufacturers excise tax on its sales at retail of the old model typewriters on the basis of a constructive sale price of 60 percent of the reduced established retail list prices.

Section 4191 of the Code imposes a tax upon the sale by the manufacturer, producer, or importer of certain enumerated articles, including `typewriters.'

Section 4216(b)(1) of the Code provides that if an article is sold at retail, the manufacturers excise tax shall (if based on the price for which the article is sold) be computed on the price for which such articles are sold, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Secretary of the Treasury or his delegate. That section further provides that, in the case of an article sold at retail, the computation shall be on whichever of the following prices is the lower: (i) the price for which such article is sold, or (ii) the highest price for which such articles are sold to wholesale distributors, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Secretary or his delegate.

Section 148.1-5(b)(1) of the temporary regulations relating to constructive sale price provides that where a manufacturer, producer, or importer sells an article at retail, the tax on his retail sale ordinarily will be computed upon the highest price for which similar articles are sold by him to wholesale distributors. However, in such cases it must be shown that he has an established bona fide practice of selling such articles in substantial quantities to wholesale distributors. If he has no such sales to wholesale distributors, a fair market price will be determined by the Commissioner. In any case the price so determined shall not be in excess of the actual price for which the article is sold by him at retail.

In the instant case, where the company reduces its established retail list price for particular model typewriters, the reduced established retail list price may be used as the basis for determining the constructive sale price of such typewriters for purposes of the manufacturers excise tax.

Therefore, it is held that the manufacturer may compute the manufacturers excise tax, imposed by section 4191 of the Code, on his sales at retail of the old model typewriters on the basis of a constructive sale price equal to 60 percent of the reduced established retail list price for such typewriters but not less the manufacturer's cost of the typewriters.