Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 75-26

1975-1 C.B. 339

IRS Headnote

Truck parts comparable to automobile-truck interchangeable parts. A manufacturer of light trucks is not liable for manufacturers tax on the sale or use of its parts or accessories that are comparable to a competing manufacturer's nontaxable parts or accessories actually used interchangeably between the competing manufacturer's trucks and passenger vehicles.

Full Text

Rev. Rul. 75-26

Advice has been requested as to the application of the manufacturers excise tax on automotive parts or accessories imposed by section 4061(b)(1) of the Internal Revenue Code of 1954 under the circumstances described below.

X company manufactures and sells light and medium trucks and passenger automobiles. X also manufactures and sells certain parts and accessories that X company can establish are used interchangeably on its trucks and passenger automobiles. X company's sales or use of the interchangeable parts and accessories are not subject to the tax imposed by section 4061(b)(1) of the Code by reason of the exemption provided by section 4061(b)(2).

Y company manufactures and sells light and medium trucks, but not passenger automobiles. The trucks are competitive with those manufactured by X. Y also manufactures and sells parts and accessories for its trucks, that are comparable to the interchangeable parts and accessories manufactured by X. However, Y company cannot establish that these comparable parts and accessories are actually used interchangeably between trucks and passenger vehicles because it does not manufacture passenger vehicles.

The question presented is whether those parts or accessories manufactured by Y company, that are comparable to interchangeable parts and accessories of X company, should also be considered exempt interchangeable parts or accessories, despite the fact that Y company cannot establish that any of its parts or accessories are used interchangeably between trucks and passenger vehicles.

Section 4061(b)(1) of the Code imposes a tax on parts or accessories (other than tires and inner tubes) for any of the articles enumerated in section 4061(a)(1) sold by the manufacturer, producer, or importer. Among those articles enumerated in section 4061(a)(1) are chassis and bodies for trucks and buses and for truck and bus trailers and semitrailers.

Section 4061(b)(2) of the Code provides that no tax shall be imposed by section 4061(b) upon any part or accessory that is suitable for use (and ordinarily is used) on or in connection with, or as a component part of any chassis or body for a passenger automobile.

The exemption from tax for interchangeable automotive parts or accessories was introduced in the Excise Tax Reduction Act of 1965, section 201, 1965-2 C.B. 568, 569. The Senate Finance Committee Report to accompany that Act, S. Rep. No. 324, 89th Cong., 1st Sess. (1965), 1965-2 C.B. 676, 695, contains the following statement:

It has come to your committee's attention that most manufacturers of light and medium trucks also produce a complete line of passenger cars and that many of the parts and accessories which they manufacture or purchase may be used interchangeably on their trucks and their line of passenger cars. However, there are other manufacturers who produce light and medium trucks which are competitive with the comparable trucks produced by the larger group of manufacturers. But these latter manufacturers do not produce any, or produce incomplete, lines of passenger cars which would use the same parts and accessories. As a result, many of the parts and accessories manufactured by these manufacturers are not interchangeably used in their passenger cars. It is your committee's intention that these parts and accessories be deemed "suitable for use" on passenger cars within the meaning of the statute and, therefore, exempt from the truck part tax if they are comparable to parts and accessories of other manufacturers which are interchangeably used in their trucks and passenger cars.

The foregoing quotation from the Senate Committee Report expresses the intention of Congress with respect to the application of section 4061(b)(2) of the Code to a manufacturer in a situation similar to that of Y company in the instant case. Accordingly, a manufacturer of trucks who also manufactures parts and accessories for such trucks, but does not manufacture passenger vehicles, is not liable for manufacturers excise tax on his sale or use of any of his parts or accessories that are comparable to such parts or accessories of a competing truck manufacturer that are actually used interchangeably between the competing manufacturer's trucks and passenger vehicles.

Therefore, in the instant case, Y company is not liable for manufacturer's excise tax on its sales or use of its parts or accessories which are comparable to parts or accessories of X company that are actually used interchangeably on X's trucks and passenger vehicles.

The above conclusion is also applicable to independent manufacturers of truck parts or accessories.