Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 70-53

1970-1 C.B. 218

IRS Headnote

Applicability of the manufacturers tax to a mobile sewer cleaning system installed on a truck chassis which is equipped with water tanks of limited capacity for use only with fire hydrants or larger tanks for use with or without hydrants.

Full Text

Rev. Rul. 70-53

Advice has been requested as to the applicability of the manufacturers excise tax imposed by section 4061(a)(1) of the Internal Revenue Code of 1954 to sales of the article described below.

A company manufacturers and sells a mobile sewer cleaning system installed on a truck chassis. The system consists of the basic cleaner apparatus, a water tank, a flat shell upon which the apparatus and tank are mounted, and a metal shroud covering the equipment. The basic cleaner apparatus includes a gasoline-powered engine, pump, reel, and a specially designed hose and nozzle. The apparatus utilizes water at high pressure to propel the hose and nozzle through clogged sewer lines to clean the lines with spray, loosen foreign matter, and remove the debris as the hose and nozzle are retrieved.

In areas where fire hydrants are available, the water source is generally obtained by connecting the apparatus to a hydrant and using the water tank to provide a conduit or cushion to equalize the pressure from the hydrant. When the equipment is being operated where there are no hydrants, such as in rural areas, the tank is used to carry and furnish the water supply. Consequently, some of the sewer cleaning systems are equipped with water tanks of limited capacity that are designed only for use in conjunction with fire hydrants. Other systems are sold equipped with tanks of much larger capacity that are designed either to be used with hydrants or to transport sufficient quantities of water to perform the cleaning operation without the use of hydrants.

The metal shroud is designed to retain heat around the tank and cleaner apparatus and protect them when operating at temperatures below freezing.

Section 4061(a)(1) of the Code imposes a tax upon the sale by the manufacturer, producers, or importer of certain motor vehicle articles, including bodies and chassis for automobile trucks.

In the instant case, where a sewer cleaning system is equipped with a water tank of small capacity for use only where fire hydrants are utilized, the water tank is considered to be a component of the basic cleaner apparatus in performing its cleaning function at job sites. With respect to the sale of those systems, it is held that the metal shroud and flat shell comprise an automobile truck body subject to the manufacturers excise tax imposed by section 4061(a)(1) of the Code. However, no tax applies to the portion of the selling price of the complete system that is reasonably attributable to the water tank and basic cleaner apparatus.

On the other hand, the water tanks with sufficient capacity to perform cleaning operations without the use of hydrants are considered to be designed for transporting property over the highways. Therefore, where the company sells sewer cleaning systems equipped with such tanks, it is further held that the metal shroud, flat shell, and water tank together constitute an automobile truck body subject to the tax imposed by section 4061(a)(1) of the Code. As in the case of the other systems, no tax applies to that portion of the complete selling price attributable to the basic cleaner apparatus.