Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 67-59

1967-1 C.B. 303

IRS Headnote

In determining the price for which articles were sold for purposes of computing the manufacturers excise tax, the manufacturer's price to the purchaser may not be reduced by an amount equal to a warehouse `handling-out' charge incurred by the manufacturer for having the articles moved from the inner storage area of a public warehouse to the loading platform of the warehouse.

Full Text

Rev. Rul. 67-59

Advice has been requested whether, in determining the `price for which an article is sold' for purposes of computing the manufacturers excise tax, a manufacturer's price to a purchaser may be reduced by an amount equal to the warehouse `handling-out' charge described below.

A manufacturer of articles subject to an ad valorem manufacturers excise tax stored quantities of manufactured articles in a public warehouse. The purpose of this warehousing of finished articles was to assure an adequate supply to avoid delays in filling orders. The normal warehouse storage costs incurred by the manufacturer are not involved here.

Following the receipt of an order or orders for a number of articles, the manufacturer asked the warehouse to move the specified number of articles from the inner storage area to the loading platform of the warehouse from which the articles could be placed aboard a conveyance for delivery to the purchaser. In accordance with the storage contract, the warehouse made a `handling-out' charge to the manufacturer for this movement of the stored articles to the loading platform.

The specific question presented here is whether, within the meaning of section 4216(a) of the Internal Revenue Code of 1954, this `handling-out' charge to the manufacturer should be considered as a transportation or delivery charge which is reflected in the manufacturer's price to the purchaser.

In defining price for purposes of the manufacturers excise tax, section 4216(a) of the Code provides as follows:

CONTAINERS, PACKING AND TRANSPORTATION CHARGES.-In determining, for the purposes of this chapter, the price for which an article is sold, 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, but there shall be excluded the amount of tax imposed by this chapter, whether or not stated as a separate charge. A transportation, delivery, insurance, installation, or other charge (not required by the foregoing sentence to be included) shall be excluded from the price only if the amount thereof is established to the satisfaction of the Secretary or his delegate in accordance with the regulations.

As noted in United States v. Stowe-Woodward Inc. , 306 F.2d 678 (1962), certiorari denied, 371 U.S. 949 (1963), the `price for which an article is sold' essentially excludes nothing incurred by the manufacturer up to the moment of shipment. In the case of F. W. Fitch Co. v. United States , 323 U.S. 582 (1945), Ct.D. 1625, C.B. 1945, 433, the Supreme Court of the United States stated that `In essence, all manufacturing and other charges incurred prior to the actual shipment of an article and reflected separately or otherwise in the f.o.b. wholesale price are to be included in the sale price underlying the tax, while all charges incurred subsequent thereto are to be excluded.'

In the instant case, the `handling-out' charge was an expense incurred by the manufacturer prior to the shipment of the articles to the purchaser. That expense was incidental to warehousing the articles for the benefit or convenience of the manufacturer prior to their sale and shipment.

Accordingly, it is held that, in determining the price for which the articles were sold for purposes of computing the manufacturers excise tax, the manufacturer's price to the purchaser may not be reduced by an amount equal to the described warehouse `handling-out' charge.