Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 77-91

1977-1 C.B. 335

Section 4071 -- Tax on Tires and Tubes

IRS Headnote

Valveless inner tubes. Inner tubes with regular valves designed for use with pneumatic tires that are taken from inventory and sold by the manufacturer, with valves removed, to a purchaser who inserts "football type" valves in its manufacture of water tube articles are not subject to tax under section 4071(a)(3) of the Code.

Full Text

Rev. Rul. 77-91

Advice has been requested regarding the applicability of the manufacturers excise tax on inner tubes for tires imposed by section 4071(a)(3) of the Internal Revenue Code of 1954 under the circumstances described below.

A company manufacturers inner tubes with regular valves designed for use with pneumatic tires and places them in general inventory for sale. Upon receipt of a special order for valveless tubes, inner tubes were taken from inventory and the valves removed by a cutting out process by the manufacturer before sale to the purchaser. The purchaser inserts "football type" valves in the tubes in its manufacture of water tube articles. The procedure of withdrawing completed tubes from inventory and removing the valves was employed because, due to the nature of the manufacturing process, that procedure was more efficient than originally manufacturing valveless tubes.

The specific questions presented are whether the removal of the valves from the inner tubes was a taxable use of the tubes within the purview of section 4218(b) of the Code, and, if not, whether the sales of the valveless tubes are subject to tax under section 4071(a)(3).

Section 4071(a)(3) of the Code imposes a tax upon the sale of inner tubes for tires by the manufacturer, producer, or importer thereof.

Under the provisions of section 4218(b) of the Code, if any person manufactures, produces, or imports an inner tube taxable under section 4071 (except a bicycle tube), and sells it on or in connection with the sale of any article, or uses it, then such person shall be liable for manufacturers excise tax in the same manner as if the inner tube were sold by that person.

Section 48.4072-1(d) of the Manufacturers and Retailers Excise Tax Regulations provides that the term "inner tubes" includes air containers of all types made wholly or in part of rubber and designed and manufactured for use in pneumatic tires.

In order for the company in the instant case to fill the purchaser's order for valveless tubes, it removed valves from completed inner tubes. The removal of the valves was an integral step in the process of manufacturing valveless tubes.

The tubes were not used as material in or as a component part of another article. Thus the present case is distinguishable from Rev. Rul. 62-51, 1962-1 C.B. 218, which concluded that a "use" occurs within the meaning of section 4218 of the Code when a taxable lubricating oil is blended with another item to produce a new product.

Accordingly, the removal of the valves is not a use of taxable inner tubes within the purview of section 4218(b) of the Code.

The tax does not apply to the sale of an inner tube that was designed for for use with a truck tire but was manufactured with a valve of a type that renders it unsuitable for use as an air container for a truck tire. See Rev. Rul. 71-552, 1971-2 C.B. 368.

An inner tube without a valve is not suitable for use in a pneumatic tire. Therefore, the tax imposed by section 4071(a)(3) of the Code does not apply to the sale of an inner tube without a valve. However, if the purchaser of a nontaxable inner tube thereafter installs a valve that renders it suitable for use in a tire, such purchaser would be the manufacturer of a taxable inner tube.