Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 73-49

1973-1 C.B. 433

IRS Headnote

A manufacturer of tires subject to the tax imposed by section 4071 of the Code may not sell tires tax free to a distributor for testing purposes only, or be allowed any credit or refund for the tax paid on such tires.

Full Text

Rev. Rul. 73-49

Advice has been requested as to the applicability of the manufacturers excise tax imposed by section 4071 of the Internal Revenue Code of 1954 to the sale of tires under the circumstances described below.

A company manufactures tires that are of a type used on highway vehicles and that are subject to the tax imposed by section 4071 of the Code when sold by the manufacturer. The manufacturer sells such tires to a distributor who is in the business of reselling tires under his own brand name. To insure that the tires purchased from the manufacturer meet United States Government safety standards, the distributor tests some of them. The tests are conducted on an indoor wheel and conform to the standards specified by the Department of Transportation. The tires tested are not used for any other purpose nor are they resold.

The question presented is whether the tire manufacturer may sell tires tax free to the distributor for testing purposes or, if not, whether a credit or refund is allowable to the manufacturer for the tax paid on sales of such tires.

Section 4071 of the Code imposes a tax on the sale by the manufacturer, producer, or importer of certain enumerated articles, including "tires of the type used on highway vehicles."

Under the provisions of section 4221(a) of the Code, no manufacturers excise tax is imposed on sales by manufacturers of tires for export, for use as supplies for vessels or aircraft, to a State or local government, or to a nonprofit educational organization. Section 4221(e)(2) of the Code provides that no tax shall be imposed on the sale by the manufacturer of a tire if such tire is sold for use by the purchaser for sale on or in connection with the sale of another article manufactured or produced by such purchaser and such other article is to be sold by such purchaser in a sale that would qualify as a tax-free sale as one of the exceptions mentioned above provided by section 4221(a).

Section 6416(b) of the Code provides for a credit or refund of tax paid on sales of tires by manufacturers where such tires are subsequently resold by purchasers for the same purposes and under the same conditions set forth above under sections 4221(a) and 4221(e). In addition, section 6416(c) of the Code provides that if tires on which manufacturers excise tax has been paid are sold on or in connection with, or with the sale of, another article subject to the manufacturers excise tax, a credit shall be applied against the tax imposed on the sale of such other article.

A manufacturer may sell taxable highway-type tires tax free or may be allowed credit or refund with respect to tax-paid tires only under the conditions set forth in the statutory provisions cited. There is no provision of law or regulation whereby a manufacturer of tires may sell tires tax free for testing purposes or be allowed a credit or refund with respect to tax-paid tires used by a purchaser for testing purposes only. Thus, except for the tax-free sale provisions and credit or refund provisions cited above, the tax applies to sales of all taxable highway-type tires without regard to the actual purpose or use for which the tires are sold or the use to which they are put.

Therefore, it is held that the manufacturer in the instant case may not sell tires tax free to the distributor for testing purposes, nor is any credit or refund allowable to the manufacturer for the tax paid on such tires.