Internal Revenue Service
Revenue Ruling
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smRev. Rul. 70-9
1970-1 C.B. 216
IRS Headnote
Application of the manufacturers tax under sections 4061(a)(1) and 4061(a)(2) of the Code with respect to the conversion of conventional passenger automobiles or panel trucks into so-called "stretch-out" type vehicles.
Full Text
Rev. Rul. 70-9
Advice has been requested whether the so-called "stretch-out" types of vehicles described below are "buses" subject to tax under section 4061(a)(1) of the Internal Revenue Code of 1954 or whether they are other automobiles subject to tax under section 4061(a)(2). The vehicles include limousines and coaches of various passenger capacities designed for use in public or private transportation, such as airport limousine service, courtesy vehicle resort service, charter service, and sightseeing tours.
Type 1. A conventional passenger sedan automobile, generally equipped by the original manufacturer with a heavy-duty "taxi or police package," is converted for sale or use by another person into an eight passenger (including a driver) sedan limousine. The vehicle is lengthened and reinforced, and as modified has two doors on each side and three rows of seats: two rows of bench-type seats (front and rear) and a center row of two sectional fold-down seats. Optional equipment that may be installed by the converter includes cord upholstery, push-button radio, and various types of air conditioning equipment.
Type 2. A conventional passenger sedan or station wagon automobile, generally equipped by the original manufacturer with a heavy-duty "taxi or police package," is converted for sale or use by another person into either a 9, 12, or 15 passenger sedan coach or station wagon coach. The conversion process includes lengthening and reinforcing the frame and body and extending the drive shaft. The process also includes the installation of such items as heavy-duty springs and shock absorbers, a roof baggage rack and tarpaulin, additional rows of bench-type seats, doors, windows, ash trays and arm rests. Optional equipment, in addition to that available for Type 1 vehicles, includes booster brakes, a public address system and microphone, seat belts, courtesy lights, two-tone paint, etc.
Type 3. A conventional panel truck, generally equipped by the original manufacturer with heavy-duty features, is converted for sale or use by another person into a 12, 15, 18, or 21 passenger coach. The conversion process employed, and optional equipment available, for this type of vehicle are substantially the same as that for Type 2 vehicles.
Under section 4061(a) of the Code manufacturers excise taxes are imposed on certain enumerated motor vehicle articles sold by the manufacturer, producer, or importer thereof. Section 4061(a)(1) of the Code currently imposes a tax at a ten percent rate on chassis and bodies for automobile trucks and buses, and for truck and bus trailers and semitrailers. Section 4061(a)(2) of the Code currently imposes a tax at a seven percent rate on automobile chassis and bodies other than those taxable under section 4061(a)(1), and on chassis and bodies for trailers and semitrailers (other than house trailers) suitable for use with passenger automobiles. For purposes of section 4061(a) of the Code a sale of a complete vehicle is considered to be a sale of a chassis and of a body.
For purposes of the manufacturers excise tax, the conversion of conventional passenger automobile chassis and bodies into chassis and bodies suitable for use as funeral coaches, ambulances, limousines is an act of manufacture, since new and different chassis and bodies are the result of such conversion. See Rev. Rul. 58-32, C.B. 1958-1, 391, and Rev. Rul. 60-81, C.B. 1960-1, 506. See also Revenue Ruling 60-155, C.B. 1960-1, 410, which holds that the conversion of an automobile truck chassis into a tractor designed for transporting house trailers constitutes an act of further manufacture. In that ruling, a motor vehicle article enumerated in one category of section 4061(a)(1) of the Code is further manufactured into a motor vehicle article enumerated in another category.
The information set forth above with respect to Type 1 vehicles indicates that although the Type 1 vehicles have been further manufactured into new and different chassis and bodies (limousines) designed to carry eight passengers (including a driver) they still retain the basic characteristics of conventional passenger automobiles and their classification as automobile chassis and bodies other than those enumerated in section 4061(a)(1) of the Code. Accordingly, it is held that the sale or use of these converted vehicles by the further manufacturer is subject to the manufacturers excise tax imposed by section 4061(a)(2) of the Code.
With respect to the Type 2 vehicles, a passenger sedan or station wagon automobile has been converted from a vehicle designed for conventional passenger car service into a vehicle designed to transport from nine persons (including a driver) to as many as fifteen persons. Furthermore, with the addition of such items as baggage carrying facilities, additional doors and windows, etc., the Type 2 vehicles have taken on other features usually found in buses, rather than in conventional passenger automobiles. Thus, the modified Type 2 vehicles have acquired a performance capacity that has converted them from conventional automobiles taxable under section 4061(a)(2) of the Code into motor vehicle articles possessing the essential characteristics of a "bus" taxable under section 4061(a)(1). Accordingly, it is held that the sale or use of Type 2 vehicles by the manufacturer of the modified vehicles is subject to the manufacturers excise tax imposed on automobile bus chassis and automobile bus bodies by section 4061(a)(1) of the Code.
Similarly, Type 3 vehicles have been converted from automobile trucks designed to transport property and a driver over the highway into buses designed to transport twelve or more persons (including the driver) over the highway. Accordingly, it is held that the sale or use of Type 3 vehicles by the manufacturer of the modified vehicles is subject to the manufacturers excise tax imposed on automobile bus chassis and automobile bus bodies by section 4061(a)(1) of the Code.
Since, in each of the three conversion operations described, both the chassis and bodies have been further manufactured, under the provisions of section 4221(a)(1) of the Code the chassis, bodies, and any taxable parts used in the conversion operations may be sold tax free by the manufacturers of the chassis, bodies, and parts, to the person who further manufactures the vehicles.
In those instances in which manufacturers excise tax has been paid on the bodies, chassis, or parts by the manufacturers thereof, credit or refund of any such tax may be claimed, under the provisions of section 6416(b)(3) of the Code, by the person who further manufactured the articles if he has purchased them directly from the manufacturer who paid the tax on the articles. If, however, manufacturers excise tax has been paid on the chassis, bodies, and parts, but the person who further manufactured the articles purchased them from a source other than the manufacturer who paid such tax, then under the provisions of section 6416(b)(2)(E) of the Code credit or refund of the tax is allowable only to the manufacturer who paid the tax, provided he can meet the condition to allowance set forth in section 6416(a).