[Title 26 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2020 Edition]
[From the U.S. Government Publishing Office]
[[Page i]]
Title 26
Internal Revenue
________________________
Parts 40 to 49
Revised as of April 1, 2019
Containing a codification of documents of general
applicability and future effect
As of April 1, 2019
Published by the Office of the Federal Register
National Archives and Records Administration as a
Special Edition of the Federal Register
[[Page ii]]
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Table of Contents
Page
Explanation................................................. v
Title 26:
Chapter I--Internal Revenue Service, Department of
the Treasury (Continued) 3
Finding Aids:
Table of CFR Titles and Chapters........................ 297
Alphabetical List of Agencies Appearing in the CFR...... 317
Table of OMB Control Numbers............................ 327
List of CFR Sections Affected........................... 345
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Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 26 CFR 40.0-1 refers
to title 26, part 40,
section 0-1.
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[[Page v]]
EXPLANATION
The Code of Federal Regulations is a codification of the general and
permanent rules published in the Federal Register by the Executive
departments and agencies of the Federal Government. The Code is divided
into 50 titles which represent broad areas subject to Federal
regulation. Each title is divided into chapters which usually bear the
name of the issuing agency. Each chapter is further subdivided into
parts covering specific regulatory areas.
Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
The appropriate revision date is printed on the cover of each
volume.
LEGAL STATUS
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evidence of the text of the original documents (44 U.S.C. 1510).
HOW TO USE THE CODE OF FEDERAL REGULATIONS
The Code of Federal Regulations is kept up to date by the individual
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To determine whether a Code volume has been amended since its
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EFFECTIVE AND EXPIRATION DATES
Each volume of the Code contains amendments published in the Federal
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OMB CONTROL NUMBERS
The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires
Federal agencies to display an OMB control number with their information
collection request.
[[Page vi]]
Many agencies have begun publishing numerous OMB control numbers as
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PAST PROVISIONS OF THE CODE
Provisions of the Code that are no longer in force and effect as of
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``[RESERVED]'' TERMINOLOGY
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INCORPORATION BY REFERENCE
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(a) The incorporation will substantially reduce the volume of
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(b) The matter incorporated is in fact available to the extent
necessary to afford fairness and uniformity in the administrative
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(c) The incorporating document is drafted and submitted for
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What if the material incorporated by reference cannot be found? If
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CFR INDEXES AND TABULAR GUIDES
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alphabetical list of agencies publishing in the CFR are also included in
this volume.
[[Page vii]]
An index to the text of ``Title 3--The President'' is carried within
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Oliver A. Potts,
Director,
Office of the Federal Register
April 1, 2019.
[[Page ix]]
THIS TITLE
Title 26--Internal Revenue is composed of twenty-two volumes. The
contents of these volumes represent all current regulations issued by
the Internal Revenue Service, Department of the Treasury, as of April 1,
2019. The first fifteen volumes comprise part 1 (Subchapter A--Income
Tax) and are arranged by sections as follows: Sec. Sec. 1.0-1.60;
Sec. Sec. 1.61-1.139; Sec. Sec. 1.140-1.169; Sec. Sec. 1.170-1.300;
Sec. Sec. 1.301-1.400; Sec. Sec. 1.401-1.409; Sec. Sec. 1.410-1.440;
Sec. Sec. 1.441-1.500; Sec. Sec. 1.501-1.640; Sec. Sec. 1.641-1.850;
Sec. Sec. 1.851-1.907; Sec. Sec. 1.908-1.1000; Sec. Sec. 1.1001-
1.1400; Sec. Sec. 1.1401-1.1550; and Sec. 1.1551 to end of part 1. The
sixteenth volume containing parts 2-29, includes the remainder of
subchapter A and all of Subchapter B--Estate and Gift Taxes. The last
six volumes contain parts 30-39 (Subchapter C--Employment Taxes and
Collection of Income Tax at Source); parts 40-49; parts 50-299
(Subchapter D--Miscellaneous Excise Taxes); parts 300-499 (Subchapter
F--Procedure and Administration); parts 500-599 (Subchapter G--
Regulations under Tax Conventions); and part 600 to end (Subchapter H--
Internal Revenue Practice).
The OMB control numbers for title 26 appear in Sec. 602.101 of this
chapter. For the convenience of the user, Sec. 602.101 appears in the
Finding Aids section of the volumes containing parts 1 to 599.
For this volume, Robert J. Sheehan, III was Chief Editor. The Code
of Federal Regulations publication program is under the direction of
John Hyrum Martinez, assisted by Stephen J. Frattini.
[[Page 1]]
TITLE 26--INTERNAL REVENUE
(This book contains parts 40 to 49)
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Part
chapter i--Internal Revenue Service, Department of the
Treasury (Continued)...................................... 40
[[Page 3]]
CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
(CONTINUED)
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Editorial Note: IRS published a document at 45 FR 6088, Jan. 25, 1980,
deleting statutory sections from their regulations. In Chapter I cross
references to the deleted material have been changed to the
corresponding sections of the IRS Code of 1954 or to the appropriate
regulations sections. When either such change produced a redundancy, the
cross reference has been deleted. For further explanation, see 45 FR
20795, Mar. 31, 1980.
SUBCHAPTER D--MISCELLANEOUS EXCISE TAXES
Part Page
40 Excise tax procedural regulations........... 5
41 Excise tax on use of certain highway motor
vehicles................................ 15
43 Excise tax on transportation by water....... 36
44 Taxes on wagering; effective January 1, 1955 37
46 Excise tax on certain insurance policies,
self-insured health plans, and
obligations not in registered form...... 51
48 Manufacturers and retailers excise taxes.... 67
49 Facilities and services excise taxes........ 260
Supplementary Publications: Internal Revenue Service Looseleaf
Regulations System.
Additional supplementary publications are issued covering Alcohol,
Tobacco and Firearms Regulations, and Regulations Under Tax Conventions.
[[Page 5]]
SUBCHAPTER D_MISCELLANEOUS EXCISE TAXES
PART 40_EXCISE TAX PROCEDURAL REGULATIONS--Table of Contents
Sec.
40.0-1 Introduction.
40.6011(a)-1 Returns.
40.6011(a)-2 Final returns.
40.6060-1 Reporting requirements for tax return preparers.
40.6071(a)-1 Time for filing returns.
40.6071(a)-3 Time for an eligible air carrier to file a return for the
third calendar quarter of 2001.
40.6091-1 Place for filing returns.
40.6101-1 Period covered by returns.
40.6107-1 Tax return preparer must furnish copy of return to taxpayer
and must retain a copy or record.
40.6109-1 Tax return preparers furnishing identifying numbers for
returns or claims for refund.
40.6109(a)-1 Identifying numbers.
40.6151(a)-1 Time and place for paying tax shown on return.
40.6302(a)-1 Voluntary payments of excise taxes by electronic funds
transfer.
40.6302(c)-1 Deposits.
40.6302(c)-2 Special rules for use of Government depositaries under
section 4681.
40.6302(c)-3 Deposits under chapter 33.
40.6694-1 Section 6694 penalties applicable to tax return preparer.
40.6694-2 Penalties for understatement due to an unreasonable position.
40.6694-3 Penalty for understatement due to willful, reckless, or
intentional conduct.
40.6694-4 Extension of period of collection when tax return preparer
pays 15 percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
40.6695-1 Other assessable penalties with respect to the preparation of
tax returns for other persons.
40.6696-1 Claims for credit or refund by tax return preparers.
40.7701-1 Tax return preparer.
Authority: 26 U.S.C. 7805.
Section 40.6011(a)-1 also issued under 26 U.S.C. 6011(a).
Section 40.6011(a)-2 also issued under 26 U.S.C. 6011(a).
Section 40.6060-1 also issued under 26 U.S.C. 6060(a).
Section 40.6071(a)-1 also issued under 26 U.S.C. 6071(a).
Section 40.6071(a)-3 also issued under 26 U.S.C. 6071(a).
Section 40.6091-1 also issued under 26 U.S.C. 6091.
Section 40.6101-1 also issued under 26 U.S.C. 6101.
Section 40.6109-1 also issued under 26 U.S.C. 6109(a).
Section 40.6109-2 also issued under 26 U.S.C. 6109(a).
Section 40.6302(a)-1 also issued under 26 U.S.C. 6302 (a) and (h).
Section 40.6302(c)-1 also issued under 26 U.S.C. 6302(a) and (h).
Section 40.6302(c)-2 also issued under 26 U.S.C. 6302(a).
Section 40.6302(c)-3 also issued under 26 U.S.C. 6302(a).
Section 40.6695-1 also issued under 26 U.S.C. 6695(b).
Source: T.D. 8442, 57 FR 48177, Oct. 22, 1992, unless otherwise
noted.
Sec. 40.0-1 Introduction.
(a) In general. The regulations in this part 40 are designated
``Excise Tax Procedural Regulations.'' The regulations set forth
administrative provisions relating to the excise taxes imposed by
chapters 31, 32, 33, 34, 36, 38, 39, and 49 (except for the chapter 32
tax imposed by section 4181 (firearms tax) and the chapter 36 taxes
imposed by sections 4461 (harbor maintenance tax) and 4481 (heavy
vehicle use tax)), and to floor stocks taxes imposed on articles subject
to any of these taxes. Chapter 31 relates to retail excise taxes;
chapter 32 to manufacturers' excise taxes; chapter 33 to taxes imposed
on communications services and air transportation; chapter 34 to taxes
imposed on certain insurance policies; chapter 36 to taxes imposed on
transportation by water; chapter 38 to environmental taxes; chapter 39
to taxes imposed on registration-required obligations; and chapter 49 to
taxes imposed on indoor tanning services. References in this part to
``taxes'' also include references to the fees imposed by sections 4375
and 4376. See parts 43, 46, 48, 49, and 52 of this chapter for
regulations relating to the imposition of tax.
(b) References to forms. Any reference to a form in this part is
also a reference to any other form designated for the same use by the
Commissioner after October 22, 1992.
(c) Definition of semimonthly period. The term ``semimonthly
period'' means the first 15 days of a calendar month (the ``first
semimonthly period'') or the
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portion of a calendar month following the 15th day of the month (the
``second semimonthly period'').
(d) Effective/applicability date. This part applies to returns that
relate to periods beginning after March 31, 2013. For rules that apply
before that date, see 26 CFR part 40 (revised as of April 1, 2013).
[T.D. 8442, 57 FR 48177, Oct. 22, 1992; 58 FR 6575, Jan. 29, 1993, as
amended by T.D. 8887, 65 FR 36326, June 8, 2000; T.D. 8963, 66 FR 41776,
Aug. 9, 2001; T.D. 9486, 75 FR 33686, June 15, 2010; T.D. 9602, 77 FR
72728, Dec. 6, 2012; T.D. 9621, 78 FR 34876, June 11, 2013]
Sec. 40.6011(a)-1 Returns.
(a) In general--(1) Return required. The return of any tax to which
this part 40 applies must be made on Form 720, Quarterly Federal Excise
Tax Return, according to the instructions applicable to the form. The
requirement for filing a return under this part 40 applies separately to
each tax listed by IRS Number on Form 720. Except as provided in this
paragraph (a)(1), an entry must be made on the line for the IRS Number
in order to file a return of the tax corresponding to that number. The
entry on an IRS Number line of the word ``none,'' ``zero,'' or
comparable entry clearly indicating a denial of liability constitutes a
return of that tax. The entry of the word ``none'' across the return or
in the summary portion, provided it clearly indicates a denial of
liability for all taxes, constitutes a return of all taxes listed on
Form 720.
(2) Period covered by return--(i) In general. Except as provided in
paragraphs (b) and (c) of this section, the return must be made for a
period of one calendar quarter. A return must be filed for the first
calendar quarter in which liability for tax is incurred (or in which tax
must be collected and paid over) and for each subsequent calendar
quarter, whether or not liability is incurred (or tax must be collected
and paid over) during that subsequent quarter, until a final return
under Sec. 40.6011(a)-2 is filed. In the case of one-time filings (as
defined in Sec. 40.6011(a)-2(b)) and returns of floor stocks taxes
under Sec. 40.6011(a)-2(c), a first return is also a final return.
(ii) First return. A person's return is a first return if the person
was not required under this part 40 to file a return (other than a final
return) for the preceding period.
(iii) Floor stocks tax return. A return reporting liability for a
floor stocks tax described in Sec. 40.0-1(a) is a return for the
calendar quarter in which the tax payment is due and not the calendar
quarter in which the liability for tax is incurred.
(3) Person required to file the return. Except in the case of a tax
required to be collected and paid over, the person incurring liability
for tax must file the return. In the case of a tax required to be
collected and paid over, the person required to collect the tax (and not
the person incurring liability) must file the return.
(b) Monthly and semimonthly returns--(1) In general. If the district
director determines that any person that is required under this section
to file returns has failed to comply in a timely manner with the
requirements of this part 40 relating to returns, payments, and deposits
of tax, that person will be required, if so notified in writing by the
district director, to make a return for a monthly or semimonthly period
(as defined in Sec. 40.0-1(c)). Each person so notified by the district
director must make a return for the calendar month or semimonthly period
in which the notice is received and for each calendar month or
semimonthly period thereafter until the person has filed a final return
or until the person is notified by the district director to resume
making quarterly returns.
(2) Certain persons liable for tax on taxable fuel. The district
director may require a person to make a return of tax for a monthly or
semimonthly period in the manner prescribed in paragraph (b)(1) of this
section if the person--
(i) Is a bonded registrant (as defined in Sec. 48.4101-1(b) of this
chapter) at any time during the period;
(ii) Has been registered under section 4101 for less than one year
at the beginning of the period;
(iii) Meets the acceptable risk test of Sec. 48.4101-1(f)(3) of
this chapter by reason of Sec. 48.4101-1(f)(3)(i)(B) of this chapter at
any time during the period;
(iv) Has failed to comply with the applicable provisions of Sec.
48.4101-1(h) of this chapter (relating to the terms and conditions of
registration);
[[Page 7]]
(v) Is liable for tax under Sec. 48.4082-4(a) of this chapter
(relating to the back-up tax on diesel fuel and kerosene) at any time
during the period; or
(vi) Is liable for tax under section 4081 (relating to the tax on
taxable fuel) at any time during the period and is not registered under
section 4101 at that time.
(c) Fees on health insurance policies and self-insured health
plans--(1) In general. A return that reports liability imposed by
section 4375 or 4376 is a return for policies or plans with policy or
plan years ending in the previous calendar year, and, for issuers that
determine the average number of lives covered under a policy for
purposes of section 4375 using the member months method under Sec.
46.4375-1(c)(2)(v) or the state form method under Sec. 46.4375-
1(c)(2)(vi) of this chapter, the return is for all policies in effect
during the previous calendar year. The second sentence of paragraph
(a)(2)(i) of this section (relating to filing quarterly returns
regardless of whether liability is incurred) does not apply to a person
that files a Form 720, ``Quarterly Federal Excise Tax Return,'' only to
report liability imposed by section 4375 or 4376.
(2) Applicability date. This paragraph (c) applies to returns that
report liability imposed by section 4375 or 4376.
[T.D. 8442, 57 FR 48177, Oct. 22, 1992, as amended by T.D. 8659, 61 FR
10452, Mar. 14, 1996; 61 FR 58005, Nov. 12, 1996; T.D. 8748, 63 FR 25,
Jan. 2, 1998; T.D. 8879, 65 FR 17153, Mar. 31, 2000; T.D. 8887, 65 FR
36326, June 8, 2000; T.D. 8963, 66 FR 41776, Aug. 9, 2001; T.D. 9602, 77
FR 72728, Dec. 6, 2012]
Sec. 40.6011(a)-2 Final returns.
(a) In general--(1) Permanent cessation of operations. Any person
that is required under Sec. 40.6011(a)-1 to make returns and that
permanently ceases all operations with respect to which liability for
tax was incurred (or with respect to which tax had to be collected and
paid over) must make a final return in accordance with the instructions
applicable to the form on which the return is made. A person does not
make a final return if only a temporary or partial cessation of such
operations occurs and must continue to file returns as required under
Sec. 40.6011(a)-1.
(2) Change in law without cessation of operations. Any person that
is required under Sec. 40.6011(a)-1 to make returns must make a final
return in accordance with the instructions applicable to the form on
which the return is made if, by reason of a change in law, that person
is no longer liable for any tax (or, in the case of a collected tax, is
no longer responsible for collecting and paying over any tax). For
example, if the tax on a product is changed from a retail tax to a
manufacturers tax, a retailer formerly liable for the tax but now buying
the product tax-paid from its supplier must make a final return
(assuming that the retailer has no other tax liability reportable on the
return).
(b) Special rule for one-time filings--(1) In general. A first
return is also a final return if it is a one-time filing. A return is a
one-time filing if the person reporting tax does not engage in any
activity with respect to which tax is reportable on the return in the
course of a trade or business.
(2) Deposits not required. See Sec. 40.6302(c)-1(e)(2) for a rule
providing that no deposit of taxes reported on a one-time filing is
required.
(c) Special rule for floor stocks taxes. A first return reporting
only floor stocks taxes under this part 40 is also a final return.
[T.D. 8442, 57 FR 48177, Oct. 22, 1992, as amended by T.D. 8685, 61 FR
58005, Nov. 12, 1996; T.D. 8963, 66 FR 41776, Aug. 9, 2001]
Sec. 40.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of any tax to which
this part 40 applies other than for the person, at any time during a
return period, shall satisfy the recordkeeping and inspection
requirements in the manner stated in Sec. 1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78454, Dec. 22, 2008; 74 FR 5105, Jan. 29, 2009]
Sec. 40.6071(a)-1 Time for filing returns.
(a) Quarterly returns. Each quarterly return required under Sec.
40.6011(a)-1(a)(2)
[[Page 8]]
must be filed by the last day of the first calendar month following the
quarter for which it is made.
(b) Monthly and semimonthly returns--(1) Monthly returns. Each
monthly return required under Sec. 40.6011(a)-1(b) must be filed by the
fifteenth day of the month following the month for which it is made.
(2) Semimonthly returns. Each semimonthly return required under
Sec. 40.6011(a)-1(b) must be filed by the last day of the semimonthly
period (as defined in Sec. 40.0-1(c)) following the semimonthly period
for which it is made.
(c) Fees on health insurance policies and self-insured health
plans--(1) Specified health insurance policies. A return that reports
liability for the fee imposed by section 4375 must be filed by July 31
of the calendar year immediately following the last day of the policy
year. For issuers that determine the average number of lives covered
under the policy for section 4375 using the member months method under
Sec. 46.4375-1(c)(2)(v) or the state form method under Sec. 46.4375-
1(c)(2)(vi), the return must be filed by July 31 of the immediately
following calendar year. Thus, for example, a return that reports
liability for the fee imposed by section 4375 for the year ending on
December 31, 2012, must be filed by July 31, 2013.
(2) Applicable self-insured health plans. A return that reports
liability for the fee imposed by section 4376 for a plan year must be
filed by July 31 of the calendar year immediately following the last day
of the plan year. Thus, for example, a return that reports liability for
the fee imposed by section 4376 for the plan year ending on January 31,
2013, must be filed by July 31, 2014.
(d) Effective/Applicability date. Paragraphs (a) and (b) of this
section apply to returns for calendar quarters beginning on or after
October 1, 2001, and paragraph (c) of this section applies to returns
that report liability imposed by section 4375 or 4376.
[T.D. 8442, 57 FR 48177, Oct. 22, 1992, as amended by T.D. 8963, 66 FR
41776, Aug. 9, 2001; T.D. 9602, 77 FR 72728, Dec. 6, 2012]
Sec. 40.6071(a)-3 Time for an eligible air carrier to file a
return for the third calendar quarter of 2001.
(a) In general. If, in the case of an eligible air carrier, the
quarterly return required under Sec. 40.6011(a)-1(a) for the third
calendar quarter of 2001 includes tax imposed by subchapter C of chapter
33--
(1) The requirements of Sec. 40.6071(a)-2 as in effect on August 7,
2001, do not apply to the return; and
(2) The return must be filed by January 15, 2002.
(b) Definition of eligible air carrier. Eligible air carrier has the
same meaning as provided in section 301(a)(2) of the Air Transportation
Safety and System Stabilization Act; that is, any domestic corporation
engaged in the trade or business of transporting (for hire) persons by
air if such transportation is available to the general public.
(c) Effective date. This section is applicable with respect to
returns that relate to the third calendar quarter of 2001.
[T.D. 8983, 67 FR 5471, Feb. 6, 2002]
Sec. 40.6091-1 Place for filing returns.
(a) Quarterly returns. Except as provided in paragraphs (b) and (c)
of this section, returns must be filed in accordance with the
instructions applicable to the form on which the return is made.
(b) Hand-carried returns--(1) Persons other than corporations.
Returns of persons other than corporations that are filed by hand
carrying must be filed with any person assigned the responsibility to
receive hand-carried returns in the local Internal Revenue Service
office that serves the principal place of business or legal residence of
the person.
(2) Corporations. Returns of corporations that are filed by hand
carrying must be filed with any person assigned the responsibility to
receive hand-carried returns in the local Internal Revenue Service
office that serves the principal place of business or principal office
or agency of the corporation.
(c) Monthly and semimonthly returns. Monthly and semimonthly returns
required under Sec. 40.6011(a)-1(b) must be filed in accordance with
the forms and
[[Page 9]]
instructions, or other published guidance.
[T.D. 8442, 57 FR 48177, Oct. 22, 1992, as amended by T.D. 8968, 66 FR
41776, Aug. 9, 2001; T.D. 9158, 69 FR 55744, Sept. 16, 2004; T.D. 9602,
77 FR 72728, Dec. 6, 2012]
Sec. 40.6101-1 Period covered by returns.
See Sec. 40.6011(a)-1(a)(2) for the rules relating to the period
covered by the return.
[T.D. 8963, 66 FR 41776, Aug. 9, 2001]
Sec. 40.6107-1 Tax return preparer must furnish copy of return to
taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of any
return or claim for refund of any tax to which this part 40 applies
shall furnish a completed copy of the return or claim for refund to the
taxpayer and retain a completed copy or record in the manner stated in
Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78454, Dec. 22, 2008; 74 FR 5105, Jan. 29, 2009]
Sec. 40.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each return or claim for refund of any tax to which
this part 40 applies prepared by one or more signing tax return
preparers must include the identifying number of the preparer required
by Sec. 1.6695-1(b) of this chapter to sign the return or claim for
refund in the manner stated in Sec. 1.6109-2 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78454, Dec. 22, 2008; 74 FR 5105, Jan. 29, 2009]
Sec. 40.6151(a)-1 Time and place for paying tax shown on return.
Except as provided by statute, the tax must be paid at the time
prescribed in Sec. 40.6071(a)-1 for filing the return, and at the place
prescribed in Sec. 40.6091-1 for filing the return.
[T.D. 8968, 66 FR 41776, Aug. 9, 2001]
Sec. 40.6302(a)-1 Voluntary payments of excise taxes by electronic
funds transfer.
Any person may voluntarily remit by electronic funds transfer any
payment of tax to which this part 40 applies. Such payment must be made
in accordance with procedures prescribed by the Commissioner.
[T.D. 8828, 64 FR 37677, July 13, 1999]
Sec. 40.6302(c)-1 Deposits.
(a) In general--(1) Semimonthly deposits required. Except as
provided by statute, or by paragraph (e) of this section, each person
required under Sec. 40.6011(a)-1(a)(2) to file a quarterly return must
make a deposit of tax for each semimonthly period (as defined in Sec.
40.0-1(c)) in which tax liability is incurred.
(2) Treatment of taxes imposed by chapter 33. For purposes of this
part 40, tax imposed by chapter 33 (relating to communications and air
transportation) is treated as a tax liability incurred during the
semimonthly period--
(i) In which that tax is collected; or
(ii) In the case of the alternative method, in which that tax is
considered as collected.
(3) Definition of net tax liability. Net tax liability means the tax
liability for the specified period plus or minus any adjustments
allowable in accordance with the instructions applicable to the form on
which the return is made.
(4) Computation of net tax liability for a semimonthly period. The
net tax liability for a semimonthly period may be computed by--
(i) Determining the net tax liability incurred during the
semimonthly period; or
(ii) Dividing by two the net tax liability incurred during the
calendar month that includes that semimonthly period, provided that this
method of computation is used for all semimonthly periods in the
calendar quarter.
(b) Amount of deposit--(1) In general. The deposit of tax for each
semimonthly period must be not less than 95 percent of the amount of net
tax liability incurred during the semimonthly period.
(2) Safe harbor rules--(i) Applicability. The safe harbor rules of
this paragraph (b)(2) are applied separately to taxes
[[Page 10]]
deposited under the alternative method provided in Sec. 40.6302(c)-3
(alternative method taxes) and to the other taxes for which deposits are
required under this section (regular method taxes).
(ii) Regular method taxes. Any person that made a return of tax
reporting regular method taxes for the second preceding calendar quarter
(the look-back quarter) is considered to have complied with the
requirement of this part 40 for deposit of regular method taxes for the
current calendar quarter if--
(A) The deposit of regular method taxes for each semimonthly period
in the current calendar quarter is not less than \1/6\ of the net tax
liability for regular method taxes reported for the look-back quarter;
(B) Each deposit is made on time;
(C) The amount of any underpayment of regular method taxes is paid
by the due date of the return; and
(D) The person's liability does not include any regular method tax
that was not imposed at all times during the look-back quarter or a tax
on a chemical not subject to tax at all times during the look-back
quarter.
(iii) Alternative method taxes. Any person that made a return of tax
reporting alternative method taxes for the look-back quarter is
considered to have complied with the requirement of this part 40 for
deposit of alternative method taxes for the current calendar quarter
if--
(A) The deposit of alternative method taxes for each semimonthly
period in the current calendar quarter is not less than \1/6\ of the net
tax liability for alternative method taxes reported for the look-back
quarter;
(B) Each deposit is made on time;
(C) The amount of any underpayment of alternative method taxes is
paid by the due date of the return; and
(D) The person's liability does not include any alternative method
tax that was not imposed at all times during the look-back quarter and
the month preceding the look-back quarter.
(iv) Modification for tax rate increase. The safe harbor rules of
this paragraph (b)(2) do not apply to regular method taxes or
alternative method taxes for the first and second calendar quarters
beginning on or after the effective date of an increase in the rate of
any tax to which this part 40 applies unless the deposit of those taxes
for each semimonthly period in the calendar quarter is not less than \1/
6\ of the tax liability the person would have had with respect to those
taxes for the look-back quarter if the increased rate of tax had been in
effect for the look-back quarter.
(v) Failure to comply with deposit requirements. If a person fails
to make deposits as required under this part 40, the IRS may withdraw
the person's right to use the safe harbor rules of this paragraph
(b)(2).
(c) Time to deposit--(1) In general. The deposit of tax for any
semimonthly period must be made by the 14th day of the following
semimonthly period unless such day is a Saturday, Sunday, or legal
holiday in the District of Columbia in which case the immediately
preceding day which is not a Saturday, Sunday, or legal holiday in the
District of Columbia is treated as the 14th day. Thus, generally, the
deposit of tax for the first semimonthly period in a month is due by the
29th day of that month and the deposit of tax for the second semimonthly
period in a month is due by the 14th day of the following month.
(2) Exceptions. See Sec. 40.6302(c)-2 for the special rules for
September. See Sec. 40.6302(c)-3 for the special rules for deposits
under the alternative method.
(d) Deposits required by electronic funds transfer. All deposits
required by this part must be made by electronic funds transfer, as that
term is defined in Sec. 31.6302-1(h)(4) of this chapter.
(e) Exceptions--(1) Taxes excluded. No deposit is required in the
case of the taxes imposed by--
(i) Section 4042 (relating to fuel used on inland waterways);
(ii) Section 4161 (relating to sport fishing equipment and bows and
arrow components);
(iii) Section 4682(h) (relating to floor stocks tax on ozone-
depleting chemicals);
(iv) Sections 4375 and 4376 (relating to fees on health insurance
policies and self-insured health plans); and
(v) Section 5000B (relating to indoor tanning services).
[[Page 11]]
(2) One-time filings. No deposit is required in the case of any
taxes reportable on a one-time filing (as defined in Sec. 40.6011(a)-
2(b)).
(3) De minimis exception. For any calendar quarter, no deposit is
required if the net tax liability for the quarter does not exceed
$2,500.
(f) Effective/applicability date. This section applies to deposits
and payments made after March 31, 2013. For rules that apply before that
date, see 26 CFR part 40 (revised as of April 1, 2013).
[T.D. 8963, 66 FR 41776, Aug. 9, 2001, as amended by T.D. 9486, 75 FR
33686, June 15, 2010; T.D. 9507, 75 FR 75903, Dec. 7, 2010; T.D. 9602,
77 FR 72728, Dec. 6, 2012; T.D. 9621, 78 FR 34846, June 11, 2013]
Sec. 40.6302(c)-2 Special rules for September.
(a) In general--(1) Separate deposits required for the second
semimonthly period. In the case of deposits of taxes not deposited under
the alternative method (regular method taxes) for the second semimonthly
period in September, separate deposits are required for the period
September 16th through 26th and for the period September 27th through
30th.
(2) Amount of deposit--(i) In general. The deposits of regular
method taxes for the period September 16th through 26th and the period
September 27th through 30th must be not less than 95 percent of the net
tax liability for regular method taxes incurred during the respective
periods. The net tax liability for regular method taxes incurred during
these periods may be computed by--
(A) Determining the amount of net tax liability for regular method
taxes reasonably expected to be incurred during the second semimonthly
period in September;
(B) Treating \11/15\ of the amount determined under paragraph
(a)(2)(i)(A) of this section as the net tax liability for regular method
taxes incurred during the period September 16th through 26th; and
(C) Treating the remainder of the amount determined under paragraph
(a)(2)(i)(A) of this section (adjusted to reflect the amount of net tax
liability for regular method taxes actually incurred through the end of
September) as the net tax liability for regular method taxes incurred
during the period September 27th through 30th.
(ii) Safe harbor rules. The safe harbor rules in Sec. 40.6302(c)-
1(b)(2) do not apply for the third calendar quarter unless--
(A) The deposit of taxes for the period September 16th through 26th
is not less than \11/90\ of the net tax liability for regular method
taxes reported for the look-back quarter; and
(B) The total deposit of taxes for the second semimonthly period in
September is not less than \1/6\ of the net tax liability for regular
method taxes reported for the look-back quarter.
(3) Time to deposit. (i) The deposit required for the period
beginning September 16th must be made by September 29th unless--
(A) September 29th is a Saturday, in which case the deposit must be
made by September 28th; or
(B) September 29th is a Sunday, in which case the deposit must be
made by September 30th.
(ii) The deposit required for the period ending September 30th must
be made at the time prescribed in Sec. 40.6302(c)-1(c).
(b) Persons not required to use electronic funds transfer. The rules
of this section are applied with the following modifications in the case
of a person not required to deposit taxes by electronic funds transfer.
(1) Periods. The deposit periods for the separate deposits required
under paragraph (a) of this section are September 16th through 25th and
September 26th through 30th.
(2) Amount of deposit. In computing the amount of deposit required
under paragraph (a)(2)(i)(B) of this section, the applicable fraction is
\10/15\. In computing the amount of deposit required under paragraph
(a)(2)(ii)(A) of this section, the applicable fraction is \10/90\.
(3) Time to deposit. In the case of the deposit required under
paragraph (a) of this section for the period beginning September 16th,
the deposit must be made by September 28th unless--
(i) September 28th is a Saturday, in which case the deposit must be
made by September 27th; or
(ii) September 28th is a Sunday, in which case the deposit must be
made by September 29th.
[[Page 12]]
(c) Effective date. This section is applicable with respect to
deposits that relate to calendar quarters beginning on or after October
1, 2001, except that paragraph (b) of this section does not apply after
December 31, 2010.
[T.D. 8963, 66 FR 41777, Aug. 9, 2001, as amended by T.D. 9507, 75 FR
75904, Dec. 7, 2010]
Sec. 40.6302(c)-3 Deposits under chapter 33.
(a) Overview. This section sets forth an alternative method for
computing the amount of deposits of taxes imposed by chapter 33, and
provides rules relating to the time for making a deposit and the amount
of tax to be reported on the return of tax for each quarter by persons
using the alternative method. The safe harbor rules for computing
deposits of tax using the alternative method and the general rules
relating to deposits are set forth in Sec. 40.6302(c)-1 and apply
unless inconsistent with the rules set forth below.
(b) Alternative method for computing deposits--(1) In general--(i)
Alternative method. Any person required to collect and pay over any tax
imposed by chapter 33 may compute the amount of that tax to be deposited
on the basis of amounts considered as collected (the ``alternative
method'') instead of on the basis of actual collections of tax.
(ii) Using more than one method to compute deposits. A person may
compute deposits of tax imposed by one or more sections of chapter 33
using the alternative method provided by this section and compute
deposits of taxes imposed by other sections of chapter 33 on the basis
of amounts actually collected using the rule of Sec. 40.6302(c)-
1(c)(1). For purposes of this paragraph (b)(1)(ii), the taxes imposed by
section 4261(a) and (b) are treated as taxes imposed by the same
section.
(2) Applicability--(i) In general. A person may use the alternative
method with respect to a tax only if the person--
(A) Separately accounts for the tax in accordance with paragraph
(b)(2)(ii) of this section; and
(B) Makes a return of the tax on the basis of the amount of the tax
that is considered as collected.
(ii) Separate account. The account required under paragraph
(b)(2)(i)(A) of this section (the separate account)--
(A) Must reflect for each month all items of tax that are included
in amounts billed or tickets sold to customers during the month;
(B) May not reflect an item of adjustment for any month during a
quarter if the adjustment results from a refusal to pay or inability to
collect the tax and the uncollected tax has not been reported under
Sec. 49.4291-1 of this chapter on or before the due date of the return
for that quarter; and
(C) Must reflect for each month items of adjustment (including bad
debts and errors) relating to the tax for prior months within the period
of limitations on credits or refunds.
(iii) Change of method. The method of computing deposits of tax
imposed by a section of chapter 33 (as described in paragraph (b)(1)(ii)
of this section) may be changed only at the beginning of a calendar
quarter. Before a person changes the method used to compute the amount
of tax to be deposited and reported for a calendar quarter, the person
must notify the Commissioner so that proper adjustments may be made in
order to properly reflect that person's collections of excise tax.
(3) Period during which tax is considered as collected. For purposes
of this section, the tax included in amounts billed or tickets sold
during a semimonthly period (as defined in Sec. 40.0-1(c)) is
considered as collected during the first seven days of the second
following semimonthly period. Thus, the tax included in amounts billed
or tickets sold during the first semimonthly period of a calendar month
is considered as collected during the period of the 1st day through the
7th day of the following month; the tax included in amounts billed or
tickets sold during the second semimonthly period of a calendar month is
considered as collected during the period of the 16th day through the
22nd day of the following month.
(4) When amounts are billed. For purposes of this section, an amount
is billed on the earlier of the date the amount is received or the date
a bill for the amount is rendered.
[[Page 13]]
(c) Time to deposit. Under the alternative method, the deposit of
tax for any semimonthly period must be made by the third business day
after the seventh day of that semimonthly period. For purposes of this
paragraph (c), a ``business day'' is any calendar day other than a
Saturday, Sunday, or legal holiday. The term legal holiday means a legal
holiday in the District of Columbia as defined in section 7503. Thus,
for example, the deposit for the semimonthly period beginning on January
1, 2011 (relating to amounts billed between December 1st and December
15, 2010) is due by January 12, 2011, three business days after January
7, the seventh day of the semimonthly period. The deposit for the
semimonthly period beginning on October 1, 2011 (relating to amounts
billed between September 1st and September 15, 2011), is due by October
13, 2011, due to the October 10, 2011, Columbus Day holiday.
(d) Computation of net amount of tax that is considered as collected
during a semimonthly period. The net amount of tax that is considered as
collected during the semimonthly period must be either the net amount of
tax reflected in the separate account for the corresponding semimonthly
period of the preceding month or one-half the net amount of tax
reflected in the separate account for the preceding month.
(e) Reporting of tax. If a tax is deposited under the alternative
method for a calendar quarter, the return of tax for the quarter must
report the net amount of the tax that is considered as collected during
the quarter and not the amount of the tax that is actually collected
during the quarter. The amount to be reported for each month is the net
amount of tax reflected in the separate account for the preceding month.
For example, amounts billed in December, January, and February are
considered as collected during January, February, and March, and are
reported as the collections of tax for January, February, and March (the
first calendar quarter). Thus, the net amount of tax reflected in the
separate accounts for December, January, and February is the amount
reported as collections for the first quarter.
(f) Special rules for September--(1) Deposits required. In the case
of alternative method taxes charged (that is, included in amounts billed
or tickets sold) during the first semimonthly period in September,
separate deposits are required for the taxes charged during the period
September 1st-11th and the period September 12th-15th.
(2) Time to deposit--(i) In general. The deposit required for
alternative method taxes charged during the period beginning September
1st must be made by September 29. The deposit required for alternative
method taxes charged during the period ending September 15th must be
made at the time prescribed in paragraph (c) of this section for making
deposits for the first semimonthly period in October.
(ii) Due date on Saturday or Sunday. A deposit that would otherwise
be due on September 29 must be made by September 28 if September 29 is a
Saturday and by September 30 if September 29 is a Sunday.
(3) Amount of deposit. The deposits of alternative method taxes
required for the period September 1st-11th and the period September
12th-15th must be not less than the amount of alternative method taxes
charged during the respective periods. The amount of alternative method
taxes charged during these periods may be computed by--
(i) Determining the net amount of alternative method taxes reflected
in the separate account for the first semimonthly period in September
(or one-half of the net amount of alternative method taxes reasonably
expected to be reflected in the separate account for the month of
September);
(ii) Treating \11/15\ of that amount as the amount of taxes charged
during the period September 1st-11th; and
(iii) Treating the remainder of the amount determined under
paragraph (f)(3)(i) of this section (adjusted, if that amount is based
on reasonable expectations, to reflect actual taxes charged through the
end of September) as the amount charged during the period September
12th-15th.
(4) Safe harbor rule based on look-back quarter liability. The safe
harbor rule of Sec. 40.6302(c)-1(b)(2) does not apply for the fourth
calendar quarter unless--
(i) The deposit for alternative method taxes charged during the
period September 1st-11th is not less than \11/90\ of
[[Page 14]]
the net tax liability reported for alternative method taxes for the
look-back quarter; and
(ii) The total deposit for alternative method taxes charged during
the first semimonthly period in September is not less than \1/6\ of the
net tax liability reported for alternative method taxes for the look-
back quarter.
(5) Persons not required to use electronic funds transfer. In the
case of a person that is not required to deposit excise taxes by
electronic funds transfer (a non-EFT depositor), the rules of this
paragraph (f) apply with the following modifications:
(i) The taxes for which separate deposits must be made are the taxes
charged during the periods September 1st-10th and September 11th-15th.
(ii) The deposit required for taxes charged during the period
beginning September 1st must be made by September 28. A deposit that
would otherwise be due on September 28 must be made by September 27 if
September 28 is a Saturday and by September 29 if September 28 is a
Sunday.
(iii) The generally applicable fractions and percentage are modified
to reflect the different deposit periods in accordance with the
following table:
------------------------------------------------------------------------
Generally applicable fractions and Modifications for non-EFT
percentage depositors
------------------------------------------------------------------------
11/15.................................. 10/15.
11/90.................................. 10/90.
69.67 percent.......................... 63.33 percent.
------------------------------------------------------------------------
(g) Effective date. This section is applicable with respect to
deposits and returns that relate to taxes that are considered as
collected in calendar quarters beginning on or after October 1, 2001,
except that paragraph (b)(2)(ii)(B) of this section is applicable
October 1, 2004, and except that paragraph (f)(5) of this section does
not apply after December 31, 2010.
[T.D. 8442, 57 FR 48177, Oct. 22, 1992, as amended by T.D. 8685, 61 FR
58006, Nov. 12, 1996; 63 FR 15292, Mar. 31, 1998; T.D. 8963, 66 FR
41778, Aug. 9, 2001; T.D. 9051, 68 FR 15941, Apr. 2, 2003; T.D. 9149, 69
FR 48394, Aug. 10, 2004; T.D. 9221, 70 FR 49869, Aug. 25, 2005; T.D.
9507, 75 FR 75904, Dec. 7, 2010; 76 FR 709, Jan. 6, 2011]
Sec. 40.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of returns or claims for refund of any
tax to which this part 40 applies, see Sec. 1.6694-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78454, Dec. 22, 2008; 74 FR 5106, Jan. 29, 2009]
Sec. 40.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of any tax to which this part 40 applies shall be
subject to penalties under section 6694(a) in the manner stated in Sec.
1.6694-2 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78455, Dec. 22, 2008; 74 FR 5106, Jan. 29, 2009]
Sec. 40.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of any tax to which this part 40 applies shall be
subject to penalties under section 6694(b) in the manner stated in Sec.
1.6694-3 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78455, Dec. 22, 2008; 74 FR 5106, Jan. 29, 2009]
Sec. 40.6694-4 Extension of period of collection when tax return
preparer pays 15 percent of a penalty for understatement of
taxpayer's liability and certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared return or claim for
refund of excise tax of any tax to which this part 40 applies pays 15
percent of a penalty for understatement of taxpayer's liability
[[Page 15]]
and procedural matters relating to the investigation, assessment and
collection of the penalties under section 6694(a) and (b), the rules
under Sec. 1.6694-4 of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78455, Dec. 22, 2008]
Sec. 40.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of any tax to which this part 40 applies shall be
subject to penalties for failure to furnish a copy to the taxpayer under
section 6695(a) of the Internal Revenue Code (Code), failure to sign the
return under section 6695(b) of the Code, failure to furnish an
identification number under section 6695(c) of the Code, failure to
retain a copy or list under section 6695(d) of the Code, failure to file
a correct information return under section 6695(e) of the Code, and
negotiation of a check under section 6695(f) of the Code, in the manner
stated in Sec. 6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78455, Dec. 22, 2008; 74 FR 5106, Jan. 29, 2009]
Sec. 40.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. The rules under Sec. 1.6696-1 of this chapter will
apply for claims for credit or refund by a tax return preparer who
prepared a return or claim for refund of any tax to which this part 40
applies.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78455, Dec. 22, 2008; 74 FR 5106, Jan. 29, 2009]
Sec. 40.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78455, Dec. 22, 2008]
PART 41_EXCISE TAX ON USE OF CERTAIN HIGHWAY MOTOR VEHICLES
--Table of Contents
Subpart A_Introduction
Sec.
41.0-1 Introduction.
Subpart B_Tax on Use of Certain Highway Motor Vehicles
41.4481-1 Imposition and computation of tax.
41.4481-2 Persons liable for tax.
41.4481-3 Registration.
41.4482(a)-1 Definition of highway motor vehicle.
41.4482(b)-1 Definition of taxable gross weight.
41.4482(c)-1 Definition of State, taxable period, use, and customarily
used.
41.4483-1 State exemption.
41.4483-2 Exemption for certain transit-type buses.
41.4483-3 Exemption for trucks used for 5,000 or fewer miles and
agricultural vehicles used for 7,500 or fewer miles on public
highways.
41.4483-4 Application of exemptions.
41.4483-6 Reduction in tax for trucks used in logging.
Subpart C_Administrative Provisions of Special Application to Tax on Use
of Certain Highway Motor Vehicles
41.6001-1 Records.
41.6001-2 Proof of payment for State registration purposes.
41.6001-3 Proof of payment for entry into the United States.
41.6011(a)-1 Returns.
41.6060-1 Reporting requirements for tax return preparers.
41.6071(a)-1 Time for filing returns.
41.6091-1 Place for filing returns.
41.6101-1 Period covered by returns.
41.6107-1 Tax return preparer must furnish copy of return to taxpayer
and must retain a copy or record.
41.6109-1 Identifying numbers.
41.6109-2 Tax return preparers furnishing identifying numbers for
returns or claims for refund filed after December 31, 2008.
41.6151(a)-1 Time and place for paying tax.
41.6694-1 Section 6694 penalties applicable to tax return preparer.
[[Page 16]]
41.6694-2 Penalties for understatement due to an unreasonable position.
41.6694-3 Penalty for understatement due to willful, reckless, or
intentional conduct.
41.6694-4 Extension of period of collection when preparer pays 15
percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
41.6695-1 Other assessable penalties with respect to the preparation of
tax returns for other persons.
41.6696-1 Claims for credit or refund by tax return preparers.
41.7701-1 Tax return preparer.
Authority: 26 U.S.C. 7805.
Section 41.4482(b)-1 also issued under 26 U.S.C. 4482(b).
Section 41.4483-1 also issued under 26 U.S.C. 4483(a).
Section 41.4483-2 also issued under 26 U.S.C. 4483(c).
Section 41.4483-3 also issued under 26 U.S.C. 4483(d).
Section 41.6001-1 also issued under 26 U.S.C. 6001.
Section 41.6001-2 also issued under 26 U.S.C. 6001.
Section 41.6001-3 also issued under sec. 507, Public Law 100-17 (101
Stat. 260).
Section 41.6011(a)-1 also issued under 26 U.S.C. 6011(a).
Section 41.6060-1 also issued under 26 U.S.C. 6060(a).
Section 41.6071(a)-1 also issued under 26 U.S.C. 6071 (a).
Section 41.6091-1 also issued under 26 U.S.C. 6091(a).
Section 41.6101-1 also issued under 26 U.S.C. 6101.
Section 41.6109-1 also issued under 26 U.S.C. 6109(a).
Section 41.6109-2 also issued under 26 U.S.C. 6109(a).
Section 41.6151(a)-1 also issued under 26 U.S.C. 6151(a).
Section 41.6695-1 also issued under 26 U.S.C. 6695(b)
Source: T.D. 6216, 21 FR 9645, Dec. 6, 1956; 25 FR 14021, Dec. 31,
1960, unless otherwise noted.
Subpart A_Introduction
Sec. 41.0-1 Introduction.
The regulations in this part are designated ``Highway Use Tax
Regulations.'' The regulations in this part relate to the tax on the use
of certain highway vehicles imposed by section 4481 and to certain
associated administrative provisions.
[T.D. 8879, 65 FR 17153, Mar. 31, 2000]
Subpart B_Tax on Use of Certain Highway Motor Vehicles
Sec. 41.4481-1 Imposition and computation of tax.
(a) In general. Tax is imposed on the use during a taxable period of
any registered highway motor vehicle that (together with the
semitrailers and trailers customarily used in connection with highway
motor vehicles of the same type as such highway motor vehicle) has a
taxable gross weight of at least 55,000 pounds.
(b) Rate of tax. For the rate of tax generally, see section 4481(a).
For the rate of tax for certain vehicles used in logging, see section
4483(e). For a special rule for the taxable period in which the tax
terminates, see section 4482(d).
(c) Computation of tax--(1) In general. Except as otherwise provided
in this paragraph (c), the tax on the use of a particular highway motor
vehicle for a taxable period is computed as follows:
(i) For vehicles with a taxable gross weight of at least 55,000
pounds, but not over 75,000 pounds, add to $100 an amount equal to $22
for each 1,000 pounds (or fraction thereof) in excess of 55,000 pounds;
and
(ii) For vehicles with a taxable gross weight over 75,000 pounds,
the tax is $550.
(2) Certain prorated taxable periods. If the first taxable use of a
particular highway motor vehicle is made after the first month of the
taxable period, the tax on the use of such vehicle for such taxable
period is computed by multiplying the amount of tax that would be due
for a full taxable period as computed under paragraph (c)(1) of this
section, by a fraction. Such fraction shall have as its numerator the
number of months in the taxable period beginning with the month of first
taxable use and as its denominator the number of months in the entire
taxable period. For purposes of determining the fraction, any part of a
month is counted as a full month. (See example (2) of paragraph (e) of
this section.)
(3) Increase in taxable gross weight during the taxable period. If
the taxable gross weight of a vehicle increases during the month in
which the vehicle is first used in a taxable period, the tax
[[Page 17]]
for the vehicle for the taxable period is computed on the basis of the
increased weight. If the taxable gross weight of a vehicle increases
after the month in which the vehicle was first used in a taxable period,
the additional tax liability, if any, that results from the increased
weight is calculated according to the following formula:
[GRAPHIC] [TIFF OMITTED] TC14NO91.110
where:
T1 = Tax imposed for a full taxable period (or partial
taxable period as determined under paragraph (c)(2) of this
section) at the vehicle's previously reported taxable gross
weight.
T2 = Tax imposed for the same taxable period as used in
T1 at the vehicle's increased taxable gross weight.
P = The number of months in the taxable period during which the
vehicle's taxable gross weight was as previously reported for
such taxable period. This number does not include the month in
which the vehicle's taxable gross weight increased.
R = The number of months remaining in the taxable period including the
month in which the vehicle's taxable gross weight was
increased.
If tax was imposed for a partial taxable period as determined under
paragraph (c)(2) of this section, the additional tax is determined by
substituting the number of months in such partial taxable period for
``12'' in the above formula.
(4) Prorated taxable period for sold, destroyed, or stolen
vehicles--(i) In general. The tax on a taxpayer's use of a highway
vehicle for a taxable period is determined under paragraph (c)(4)(ii) of
this section if--
(A) The vehicle is destroyed or stolen before the first day of the
last month in the taxable period and is not later used by the taxpayer
during the period; or
(B) The taxpayer sells the vehicle before the first day of the last
month in the taxable period and does not later use the vehicle during
the period.
(ii) Computation of tax. If the tax on a taxpayer's use of a highway
vehicle for a taxable period is determined under this paragraph
(c)(4)(ii), the tax is computed by multiplying the amount of tax that
would be due for a full taxable period, as computed under paragraph
(c)(1) of this section, by a fraction. The fraction has as its numerator
the number of months in the period from the first day of the month in
the period in which the first taxable use of the highway motor vehicle
occurs to and including the last day of the month in which the highway
motor vehicle was sold, destroyed, or stolen, and as its denominator the
number of months in the entire taxable period. (See paragraph (d)
Example (3)(i) of this section.)
(iii) Overpayment. If a taxpayer's liability for the tax on the use
of a highway vehicle for a taxable period is determined under paragraph
(c)(4)(ii) of this section, any tax the taxpayer paid under section
4481(a) on the use of the vehicle for such period in excess of the tax
calculated under paragraph (c)(4)(ii) of this section is an overpayment
of tax.
(iv) Definition of destroyed vehicle. For purposes of this paragraph
(c)(4), a highway motor vehicle is destroyed if the vehicle is damaged
due to an accident or other casualty to such an extent that it is not
economical to rebuild.
(v) Form and content of claim. A claim for refund of an overpayment
described in paragraph (c)(4)(iii) of this section must be made on Form
8849, ``Claim for Refund of Excise Taxes'' (or such other form as the
Commissioner may designate) in accordance with the instructions for that
form. A claim for a credit must be made on Form 2290, ``Heavy Highway
Vehicle Use Tax Return'' (or such other form as the Commissioner may
designate) in accordance with the instructions for that form. A claim
for refund or credit for any vehicle must include--
(A) The vehicle identification number and taxable gross weight of
the vehicle;
(B) The date of the sale, destruction, or theft of the vehicle; and
(C) If the vehicle was sold, the name and address of the purchaser
of the vehicle.
(vi) Tax on buyer's use of second-hand vehicles. If a vehicle is
sold during the taxable period and a credit or refund of the tax imposed
by section 4481 is allowable upon the sale under paragraph (c)(4)(iii)
of this section, tax is imposed on the use of the vehicle after the sale
[[Page 18]]
and before the end of the taxable period. (See paragraph (c)(4)(vii) of
this section for the rules regarding the computation of tax after the
sale and before the end of the taxable period.)
(vii) Computation of tax on second-hand vehicles. The tax under
paragraph (c)(4)(vi) of this section on the use of a vehicle after a
sale upon which a credit or refund is allowable is computed by
multiplying the amount of tax that would be due for a full taxable
period as computed under paragraph (c)(1) of this section by a fraction.
The fraction has as its numerator the number of months in the period
from the first day of the month in which the first taxable use of the
vehicle after the sale occurs (the first day of the month after such
month if the first taxable use after the sale occurs in the month of the
sale) through the end of the taxable period, and as its denominator the
number of months in the entire taxable period. (See paragraph (d)
Example (3)(ii) of this section.)
(5) Decrease in taxable gross weight, discontinued use, or converted
use. The computation of the tax is not affected, and no right to a
credit or refund of any tax paid under section 4481 arises, if in any
taxable period--
(i) The taxable gross weight of a highway motor vehicle is
decreased;
(ii) The use of a highway motor vehicle is discontinued (for reasons
other than sale, destruction, or theft as described in paragraph (c)(4)
of this section); or
(iii) The highway motor vehicle is converted to a use that is exempt
from the tax imposed by section 4481(a).
(d) Examples. The application of Sec. Sec. 41.4481-1, 41.4481-2,
and 41.4482(c)-1(c) may be illustrated by the following examples:
Example (1). In the taxable period beginning July 1, 1984, the first
taxable use of a particular highway motor vehicle, a bus, having a
taxable gross weight of 56,000 pounds, occurs on July 10, 1984, at which
time the vehicle is registered in the name of X. A tax of $122 ($100 +
$22) is imposed on X for the use of such vehicle for such taxable
period.
Example (2). On July 1, 1984, X has registered in his name a highway
motor vehicle having a taxable gross weight of 60,000 pounds. The
vehicle is in ``dead storage'' until August 10, 1984, at which time X
starts using the vehicle on the public highways in carrying on his
trucking business. On August 10, 1984, the vehicle is still registered
in X's name. Since the first taxable use of this highway motor vehicle
during the taxable period occurred on August 10, 1984, X is required to
pay a tax of $192.50 ([$100 + (5 x $22)] x 11/12) for such taxable
period.
Example (3). (i) In July, X uses a vehicle that is registered in X's
name and has a taxable gross weight of 70,000 pounds. The vehicle is not
a logging vehicle. X pays the $430 of tax imposed by section 4481 for
the taxable period. On September 2 of the same calendar year, X sells
the vehicle to Y. X's tax is calculated under paragraph (c)(4)(ii) by
multiplying the amount of tax that would be due for a full taxable
period by a fraction that has as its numerator the number of months in
the period from the first day of the month in which X's first taxable
use of the highway motor vehicle occurs to and including the last day of
the month in which the vehicle was sold, and as its denominator the
number of months in the entire taxable period. Thus, X's tax for the
period is $107.50 (3/12 of $430), and X may claim a credit or refund of
$322.50 ($430.00-$107.50) in accordance with Sec. 41.4481-1(c)(4)(v)
after X sells the vehicle.
(ii) On September 23, Y uses the vehicle. Y is liable for tax on the
use of the vehicle during the taxable period ending June 30 of the
following calendar year. Y's tax is calculated under paragraph
(c)(4)(vii) by multiplying the amount of tax that would be due for a
full taxable period by a fraction that has as its numerator the number
of months in the period from the first day of the month in which Y's
first taxable use of the vehicle after the sale occurs (the first day of
the month after such month if the first taxable use after the sale
occurs in the month of the sale) through the end of the taxable period,
and as its denominator the number of months in the entire taxable
period. Y's first use of the vehicle occurs in the month of the sale.
Accordingly, Y's tax is based on the number of months in the period from
the first day of October (the month following the month of the first
taxable use) through the end of June, and Y owes a section 4481 tax of
$322.50 (9/12 of $430) for the taxable period.
Example (4). Assume the same facts as in Example (3)(i), except that
on September 2, X sells the vehicle to Dealer, a dealer in highway motor
vehicles. X may claim a credit or refund of $322.50. Dealer operates the
vehicle exclusively for the purpose of demonstration, which is not a
``use'' of the vehicle under Sec. 41.4482(c)-1(c). On May 2 of the
following calendar year, Dealer sells the vehicle to Y. Dealer does not
owe a section 4481 tax and may not claim a refund. Y's first taxable use
of the vehicle occurs on May 3. Y's first taxable use of the vehicle
does not occur in the
[[Page 19]]
month of a sale upon which a credit or refund is allowable. Accordingly,
Y's tax is calculated under paragraph (c)(2) by multiplying the amount
of tax that would be due for a full taxable period by a fraction which
has as its numerator the number of months in the taxable period
beginning with the month of first taxable use and as its denominator the
number of months in the entire taxable period. The numerator is the
number of months in the period from the first day of May (the month of
Y's first taxable use after the sale) through the end of June, and Y
owes a section 4481 tax of $71.67 (2/12 of $430) for the taxable period.
(e) Effective/applicability date. This section applies on and after
July 1, 2015. For rules applicable before that date, see 26 CFR 41.4481-
1 (revised as of April 1, 2014).
[T.D. 8027, 50 FR 21246, May 23, 1985, as amended by T.D. 8159, 52 FR
33584, Sept. 4, 1987; T.D. 8177, 53 FR 6626, Mar. 2, 1988; T.D. 8879, 65
FR 17153, Mar. 31, 2000; T.D. 9698, 79 FR 64314, Oct. 29, 2014]
Sec. 41.4481-2 Persons liable for tax.
(a) In general. (1)(i) A person is liable for the tax imposed by
section 4481 with respect to the use of a highway motor vehicle in a
taxable period if the vehicle is registered in the person's name--
(A) At the time of the first use of the vehicle in the taxable
period;
(B) In the case of a vehicle under a suspension of tax described in
Sec. 41.4483-3(a), at the time the use on the public highways during
the taxable period exceeds 5,000 miles (7,500 miles for agricultural
vehicles);
(C) At the time that an increase in the taxable gross weight of the
vehicle results in an additional tax liability (as computed under Sec.
41.4481-1(c)(3)) if the increase occurs after the month in which the
vehicle was first used in the taxable period; or
(D) At the time of any use during the taxable period that is after
the first use during the period, but only to the extent that the tax has
not previously been paid.
(ii) In any case in which more than one person is liable for the tax
for a taxable period, the liability of all persons is satisfied to the
extent that the tax is paid by any person liable for the tax.
(2) If a vehicle is sold during the taxable period and a credit or
refund is allowable upon the sale under Sec. 41.4481-1(c)(4)(iii),
paragraph (a)(1) of this section is applied with the following
modifications:
(i) For purposes of determining the person liable for the tax
determined under Sec. 41.4481-1(c)(4)(ii), each reference to a taxable
period in paragraph (a)(1) of this section is treated as a reference to
the period that begins on the first day of the taxable period in which
the vehicle is sold and ends on the date of sale.
(ii) For purposes of determining the person liable for the tax
determined under Sec. 41.4481-1(c)(4)(vi), each reference to a taxable
period in paragraph (a)(1) of this section is treated as a reference to
the period that begins on the date of the sale and ends on the last day
of the taxable period in which the vehicle is sold.
(3) The application of paragraph (a) of this section may be
illustrated by Examples (3) and (4) in Sec. 41.4481-1(d).
(b) Evidence of prior use of second-hand vehicle. Every person who,
at any time in the taxable period, acquires and has registered in his
name a secondhand highway motor vehicle shall obtain and keep as a part
of his records evidence, which he believes to be true, showing whether
there was or was not a taxable use of such vehicle at any time in such
taxable period prior to the time when the vehicle was registered in his
name. Such person shall also obtain and keep as evidence a statement
from the transferor as to whether there was in effect, at the time the
vehicle was acquired, a suspension under Sec. 41.4483-3(a) of the tax
imposed by section 4481(a). The evidence may take the form of a written
statement, signed and dated by the person from whom the vehicle was
acquired, showing whether there was or was not a prior taxable use of
the vehicle and whether there was a suspension of tax in the taxable
period. If the vehicle is acquired from a dealer in highway motor
vehicles, the statement may be obtained from such dealer or from the
person from whom the dealer acquired such vehicle. If evidence is not
obtained showing whether there was or was not a prior taxable use of
such vehicle and whether there was a
[[Page 20]]
suspension of tax in the taxable period, such person shall keep as a
part of his records a written statement of the reason why he was unable
to obtain such evidence. For provisions relating to penalties for aiding
and abetting an understatement of tax liability, see section 6701 of the
Internal Revenue Code.
(c) Effective/applicability date. This section applies on and after
July 1, 2015. For rules applicable before that date, see 26 CFR 41.4481-
2 (revised as of April 1, 2014).
[T.D. 6743, 29 FR 7930, June 23, 1964, as amended by T.D. 8027, 50 FR
21247, May 23, 1985; T.D. 8879, 65 FR 17153, Mar. 31, 2000; T.D. 9698,
79 FR 64316, Oct. 29, 2014]
Sec. 41.4481-3 Registration.
(a) For purposes of the regulations in this part, the term
``registered'' when used in reference to a highway motor vehicle means--
(1) Registered under the law of any State or Territory of the United
States, the District of Columbia, or contiguous foreign country, or
(2) Required to be registered under the law of any State or
Territory of the United States or contiguous foreign country in which
such highway motor vehicle is operated or situated or, in case the
vehicle is operated or situated in the District of Columbia, under the
law of the District of Columbia.
Any highway motor vehicle which is operated under a dealer's tag,
license, or permit is considered to be registered in the name of such
dealer. A highway motor vehicle is not considered to be registered
solely by reason of the fact that there has been issued a special permit
for operation of the vehicle at particular times and under specified
conditions.
(b) Any highway motor vehicle which, at any time in the taxable
period, is registered both in the name of the owner of the vehicle and
in the name of any other person, is considered, for purposes of the
regulations in this part, to be registered, at such time, solely in the
name of the owner of the vehicle.
[T.D. 6216, 21 FR 9645, Dec. 6, 1956, as amended by T.D. 6743, 29 FR
7931, June 23, 1964; T.D. 8159, 52 FR 33584, Sept. 4, 1987]
Sec. 41.4482(a)-1 Definition of highway motor vehicle.
(a) Highway motor vehicle. The term ``highway motor vehicle'' means
any vehicle that is both:
(1) A vehicle propelled by means of its own motor, whether such
motor is powered by gasoline, diesel fuel, special motor fuels,
electricity, or otherwise, and
(2) A ``highway vehicle'' as defined in Sec. 48.4061(a)-1(d) of
this chapter.
(b) Treatment of certain excluded vehicles. Although trailers and
semitrailers used in combination with highway trucks or truck-tractors
are not vehicles the use of which is subject to the tax imposed by
section 4481(a), trailers and semitrailers customarily used in
combination with highway trucks or truck-tractors are taken into account
in determining the taxable gross weight of the highway motor vehicle
under Sec. 41.4482(b)-1, which is the base of the tax.
[T.D. 7461, 42 FR 2671, Jan. 13, 1977, as amended by T.D. 8879, 65 FR
17153, Mar. 31, 2000]
Sec. 41.4482(b)-1 Definition of taxable gross weight.
(a) Actual unloaded weight--(1) In general. Actual unloaded weight
means the empty (or tare) weight of the truck, truck-tractor, or bus,
fully equipped for service.
(2) Trucks and truck-tractors. A truck or truck-tractor fully
equipped for service includes the body (whether or not designed and
adapted primarily for transporting cargo, as for example, concrete
mixers); all accessories; all equipment attached to or carried on such
truck or truck-tractor for use in connection with the movement of the
vehicle by means of its own motor or for use in the maintenance of the
vehicle; and a full complement of lubricants, fuel, and water. It does
not include the driver, any equipment (not including the body) attached
to or carried on the vehicle for use in handling, protecting, or
preserving cargo, or any special equipment (such as an air compressor,
crane, specialized oilfield machinery, etc.) mounted on the vehicle for
use on construction jobs, in oilfield operations, etc.
[[Page 21]]
(3) Buses. A bus fully equipped for service includes the body; all
accessories; all equipment attached to or carried on such bus for use in
connection with the movement of the vehicle by means of its own motor,
for use in the maintenance of the vehicle, or for the accommodation of
passengers or others (such as air conditioning equipment and sanitation
facilities, etc.); and a full complement of lubricants, fuel, and water.
It does not include the driver.
(b) Determination of taxable gross weight--(1) In general. The
taxable gross weight of a highway motor vehicle is the sum of the actual
unloaded weight of the vehicle fully equipped for service, the actual
unloaded weight of any semitrailers or trailers fully equipped for
service customarily used in combination with the vehicle, and the weight
of the maximum load customarily carried on the vehicle and on any
semitrailers or trailers customarily used in combination with the
vehicle. In the case of a highway motor vehicle that is registered in at
least one State that requires a declaration of gross weight to be stated
as a specific amount for any purpose (including proportional or prorate
registration or the payment of any other fees or taxes), the taxable
gross weight of such vehicle must be no less than the highest gross
weight declaration (or combined gross weight declaration in the case of
a tractor-trailer or truck-trailer combination) made by the registrant
in any State with respect to such vehicle. If a highway motor vehicle is
registered in at least one State that requires vehicles to register on
the basis of gross weight and such vehicle is not registered in any
State that requires a declaration of gross weight to be stated as a
specific amount by the registrant, the taxable gross weight of such
vehicle must fall within the highest gross weight category of such State
for which such vehicle is registered during the taxable period.
Declarations of weight made in order to obtain special temporary travel
permits which allow a vehicle to, (i) operate in a State in which the
vehicle is not registered or prorated, (ii) operate at more than a
State's maximum statutory weight limit, or (iii) operate at more than
the weight that the vehicle is registered in a State, shall not be
considered in determining the taxable gross weight of a vehicle.
(2) Buses. For purposes of the tax imposed by section 4481(a), the
taxable gross weight of a bus shall be the sum of the weights referred
to in paragraph (b)(1) of this section except that ``the weight of the
maximum load customarily carried'' on a bus shall be equal to 150 pounds
times the number of units of seating capacity provided for passengers
and driver.
(c) Examples. The provisions of this section may be illustrated by
the following examples:
Example (1). A is the owner of a truck-tractor. On January 1, 1985,
A registers the truck-tractor in three states--X, Y, and Z. For purposes
of registering the vehicle in State X, A declares the gross operating
weight of his truck-tractor to be 60,000 pounds. The declaration of the
gross weight of the vehicle at 50,000 pounds places A's truck-tractor in
the State X registration category of 55,000 to 62,000 pounds gross
weight. Thus, the registered weight of A's vehicle in State X is 62,000
pounds. At the same time as A registers the vehicle in State X, A also
proportionally registers the vehicle under the IRP in State Y. A uses
the same declared gross weight of 60,000 pounds for purposes of the
State Y proportional registration. Registration in State Y at this
declared gross weight places A's truck-tractor in the State Y gross
weight registration category of 58,000 to 68,000 pounds. Finally, A
registers the truck-tractor in State Z. Registration of vehicles in
State Z is based on the unladen weight of the vehicle. During the
taxable period beginning on July 1, 1985, A's truck-tractor is not
registered in any other state. For the taxable period beginning on July
1, 1985, A must declare a taxable gross weight of no less than 60,000
pounds for purposes of the tax imposed by section 4481(a) because that
is the highest declared gross weight for state registration or other
purposes. Should A declare to any State agency a higher gross operating
weight with respect to the truck-tractor during the same taxable period
(except for a special temporary permit), A would then be liable for
additional tax as determined under paragraph (c)(3) of Sec. 41.4481-1.
Example (2). Assume the same facts as in example (1), except that on
one occasion during the taxable period, A was issued a special 2-day
permit to use his truck-tractor in State Y to haul a load which would
give A's unit a total gross weight of 80,000 pounds. A may still declare
the taxable gross weight of
[[Page 22]]
his unit to be no less than 60,000 pounds because special permits to
haul heavier loads on a temporary basis are not considered in
determining the taxable gross weight of a vehicle.
Example (3). C owns and has registered in his name 2 trucks which
are identical in all respects and which are used to carry the same type
of load. The first vehicle is registered only in State X at a registered
weight of 73,000 pounds based on a declared gross weight of 70,000
pounds. The second vehicle is registered only in State Y at a registered
weight of 68,000 pounds based on a declared gross weight of 65,000
pounds. No other declarations of gross weight are made with respect to
either vehicle. For purposes of the Federal heavy vehicle use tax, the
taxable gross weight of the vehicle registered in State X may be
declared at no less than 70,000 pounds and the taxable gross weight of
the vehicle registered in State Y may be declared at no less than 65,000
pounds even though the vehicles are identical.
[T.D. 6216, 21 FR 9645, Dec. 6, 1956, as amended by T.D. 6743, 29 FR
7931, June 23, 1964; T.D. 7011, 34 FR 7448, May 8, 1969; T.D. 8027, 50
FR 21247, May 23, 1985; T.D. 8879, 65 FR 17153, Mar. 31, 2000]
Sec. 41.4482(c)-1 Definition of State, taxable period, use,
and customarily used.
(a) State. State includes any State, any political subdivision of a
State, the District of Columbia, and, to the extent provided by section
7871, any Indian tribal government.
(b) Taxable period. For the definition of taxable period, see
section 4482(c).
(c) Use. The term ``use'', as used in the regulations in this part
with reference to a highway motor vehicle, means the use of the highway
motor vehicle on the public highways in the United States, that is,
operation of the vehicle, by means of its own motor, on any roadway
(whether a Federal highway, State highway, city street, or otherwise) in
the United States which is not a private roadway. Thus, for purposes of
the tax, there is no use of a highway motor vehicle while the vehicle is
in ``dead storage''. The term ``use'' does not include operation of a
new highway motor vehicle on a public highway in the United States if
such operation is merely for the purpose of transporting the vehicle
from the point of manufacture or assembly to the consumer, whether
direct or with intermediate deliveries to such points as are involved in
the distribution process. For example, operation of a new vehicle for
the purpose of delivering it from the factory to a branch establishment
of the manufacturer, or from the factory or branch establishment to a
dealer, distributor, or consumer, does not constitute use of the vehicle
within the meaning of the regulations in this part; likewise, the
further operation of the vehicle by a dealer or distributor for the
purpose of delivering the vehicle to a consumer does not constitute use
of the vehicle. Similarly, the operation of a secondhand highway motor
vehicle by a dealer or distributor for the purpose of delivering the
vehicle to a purchaser does not constitute use of the vehicle within the
meaning of the regulations in this part. Furthermore, the term ``use''
does not include operation of a new or secondhand highway motor vehicle,
if such operation is exclusively for the purpose of demonstration of the
vehicle by a dealer in, or distributor of, new or secondhand highway
motor vehicles. Operation of a highway motor vehicle on a private
roadway, or other private property, does not constitute use of the
vehicle within the meaning of the regulations in this part.
(d) Customarily used. A semitrailer or trailer is treated as
customarily used in connection with a highway motor vehicle if the
vehicle is equipped to tow the semitrailer or trailer.
[T.D. 7409, 41 FR 9877, Mar. 8, 1976, as amended by T.D. 7505, 42 FR
42856, Aug. 25, 1977; T.D. 8027, 50 FR 21248, May 23, 1985; T.D. 8159,
52 FR 33584, Sept. 4, 1987; T.D. 8879, 65 FR 17154, Mar. 31, 2000]
Sec. 41.4483-1 State exemption.
Use of a highway motor vehicle by a State is exempt from the tax
imposed by section 4481. For this purpose, the term use by a State means
the operation by a State on the public highways in the United States of
any highway motor vehicle, whether or not such highway motor vehicle is
owned by the State.
[T.D. 8879, 65 FR 17154, Mar. 31, 2000]
Sec. 41.4483-2 Exemption for certain transit-type buses.
(a) In general. Use in any taxable period, or part thereof, of any
bus of the
[[Page 23]]
transit type by any person who is engaged in the operation of a transit
system is exempt from the tax, if such person meets the 60-percent
passenger fare revenue test provided for in paragraph (e) of this
section, for the applicable period prescribed in paragraph (c) of this
section as the test period for such person for such system for such
taxable period, or part thereof.
(b) Buses of the transit type. The term ``transit type'', when used
in the regulations in this part with reference to a bus, means the type
of bus which is designed for the mass transportation of persons within
an urban area, as distinguished from the intercity-type bus. A transit-
type bus is ordinarily distinguishable from an intercity-type bus by
comparison of seats, doors, and baggage facilities. The transit-type bus
usually has straight-back seats of the bench type, while the intercity-
type bus generally has seats which either can be reclined or are in fact
permanently fixed in a reclining position. The transit-type bus is more
likely to have an accordion or folding-type door at the front of the
bus, and often has a second door in the middle or at the rear for
passengers to leave the bus, as opposed to the emergency-type rear door
which may or may not be included in the intercity-type bus. The typical
transit-type bus does not have facilities for storing baggage whereas
the typical intercity-type bus has facilities for storing baggage in a
compartment underneath the floor of the bus or in overhead racks, or
both. Other characteristics which may be taken into account in
distinguishing a transit-type bus from an intercity-type bus include
gear ratios, acceleration and maximum speed, and aisle space for
standees. The transit-type bus ordinarily has a lower gear ratio to
provide for quick starts and because, in general, buses of this type are
operated at low speeds. The intercity-type bus ordinarily has a higher
gear ratio and can be operated at much higher speeds. The transit-type
bus usually has wider aisles, with overhead straps or bars to
accommodate standees.
(c) Test period. (1) In the case of any person who is engaged in the
operation of a transit system at any time in the calendar quarter
immediately preceding July 1 of any taxable period, the test period for
such system for such taxable period shall be such calendar quarter.
However, if passenger fare revenue from scheduled service described in
paragraph (e) of this section was derived on less than 30 days during
such calendar quarter from operation of such system, the test period for
such system for such taxable period shall be the last preceding test
period for such system. If such system has no preceding test period,
then the test period for such system for such taxable period shall be
the calendar quarter beginning with July 1 of such taxable period.
(2) Except as otherwise provided in subparagraph (3) of this
paragraph, in the case of any person who commences operation of a
transit system at any time on or after July 1 of any taxable period the
test period for such system for that part of such taxable period
beginning with the first day on which such operation was commenced shall
be the calendar quarter in which falls such first day. However, if
passenger fare revenue from scheduled service described in paragraph (e)
of this section was derived on less than 30 days during such calendar
quarter from operation of such system, the test period for such system
for such taxable period shall be the following calendar quarter.
(3) In the case of any person who commences operation of a transit
system at any time in the last calendar quarter to which the tax imposed
by section 4481 applies, such last calendar quarter shall be the test
period for such transit system regardless of the number of days in which
passenger fare revenue is derived in such calendar quarter.
(d) Transit system. The term ``transit system'', as used in the
regulations in this part, means any system for furnishing scheduled
common carrier public passenger land transportation service along
regular routes.
(e) 60-percent passenger fare revenue test. For purposes of this
section, a person engaged in the operation of a transit system meets the
60-percent passenger fare revenue test, for the applicable test period
prescribed in this section, if:
[[Page 24]]
(1) During such test period such person derived passenger fare
revenue from the operation of such system, and
(2) At least 60 percent of the total of such passenger fare revenue
derived by such person during such test period was attributable to (i)
amounts paid for transportation which do not exceed 60 cents, (ii)
amounts paid for commutation or season tickets for single trips of less
than 30 miles, or (iii) amounts paid for commutation tickets for one
month or less. In determining the total of such passenger fare revenue,
revenue from sources such as charter fees, rentals of property,
advertising receipts, etc., is not taken into account.
(f) Examples. Application of this section may be illustrated by the
following examples:
Example (1). The X Transit Company is engaged in the operation of a
transit system in the city of A and surrounding area throughout April,
May, and June of 1984 and the taxable period beginning July 1, 1984. It
derives passenger fare revenue from the operation of such system for 15
days in April and for the entire months of May and June of 1984. On July
1, 1984, the Company is using 60 buses of the transit type and 40 buses
of the intercity type. Each of 20 of the transit-type buses and each of
10 of the intercity-type buses has a taxable gross weight of less than
55,000 pounds. (No tax is imposed on the use of either a transit-type
bus or an intercity-type bus having a taxable gross weight of less than
55,000 pounds. See Sec. 41.4481-1.) Use of the 10 intercity-type buses
is subject to the tax for the taxable period beginning with July 1,
1984, since the exemption, if any, applies only to transit-type buses.
Use of the 20 transit-type buses is not subject to the tax for such
taxable period if at least 60 percent of the total passenger fare
revenue derived by the X Transit Company during April, May, and June of
1984 (the test period prescribed in paragraph (c) (1) of this section)
from operation of such system was from fares attributable to (i) amounts
paid for transportation which do not exceed 60 cents, (ii) amounts paid
for commutation or season tickets for single trips of less than 30
miles, or (iii) amounts paid for commutation tickets for one month or
less. If the X Transit Company does not meet the 60-percent passenger
fare revenue test for April, May, and June of 1984, the tax attaches for
the taxable period beginning with July 1, 1984, with respect to the use
of each of the 20 transit-type buses having a taxable gross weight of
more than less than 55,000 pounds.
Example (2). Assume the same facts as those stated in Example (1),
except that the X Transit Company commences operation of the transit
system on July 15, 1984, and derives passenger fare revenue from
operation of the system throughout the following August and September.
In such case, the test period is July, August, and September of 1984,
and if the test is met for this period, no tax is imposed on the use by
the Company of any bus of the transit type in the period July 15, 1984,
through June 30, 1985.
Example (3). Assume the same facts as those stated in Example (1),
except that the X Transit Company commences operation of the transit
system on April 15, 1985, and derives passenger fare revenue from
operation of the system throughout the following May and June. In such
case the test period is April, May, and June of 1985, and if the test is
met for this period, no tax is imposed on the use by the Company of any
bus of the transit type in the period April 15 through June of 1985, or
in the taxable period beginning on July 1, 1985.
[T.D. 6216, 21 FR 9645, Dec. 6, 1956, as amended by T.D. 6743, 29 FR
7931, June 23, 1964; T.D. 8027, 50 FR 21248, May 23, 1985; T.D. 8879, 65
FR 17154, Mar. 31, 2000]
Sec. 41.4483-3 Exemption for trucks used for 5,000 or fewer miles
and agricultural vehicles used for 7,500 or fewer miles on public
highways.
(a) Suspension of tax--(1) In general. Liability for the tax imposed
by section 4481(a) is suspended during a taxable period if it is
reasonable to expect that the vehicle will be used for 5,000 or fewer
miles on public highways during such taxable period and the owner
furnishes in the time and manner required the information required under
paragraph (a)(2) of this section. See paragraph (g) of this section
regarding special rules for agricultural vehicles. See Sec. 41.4482(c)-
1(c) for the meaning of ``use'' on the public highways.
(2) Information to be supplied in support of suspension of tax. The
owner of a highway motor vehicle who reasonably expects that the vehicle
will be used for 5,000 or fewer miles on public highways during a
taxable period shall furnish on the first Form 2290 filed during the
taxable period for such motor vehicle, such information as is required
by the Form in order to support the suspension of tax under paragraph
(a) of this section.
(b) Cessation of suspension from tax. If a highway motor vehicle on
which the
[[Page 25]]
tax under section 4481(a) is suspended for a particular taxable period
under paragraph (a)(1) of this section is used for more than 5,000 miles
on public highways during such taxable period, the owner of the vehicle
is liable for the tax for the entire taxable period in accordance with
section 4481(a).
(c) Exemption. If at the end of any taxable period during which the
tax under section 4481(a) on a highway motor vehicle was suspended under
paragraph (a)(1) of this section the vehicle has not been used for more
than 5,000 miles on public highways, the vehicle shall be exempt from
the tax for that taxable period. The owner of the vehicle shall verify
that the vehicle was used for less than 5,000 miles in such ended
taxable period on the first Form 2290 filed for the next taxable period.
(d) Examples. The provisions of this section may be illustrated by
the following examples:
Example (1). A is the owner of 6 highway motor vehicles, each of
which has a taxable gross weight in excess of 55,000 pounds. None of
these 6 vehicles are agricultural vehicles. The vehicles are placed in
use during July 1984. Because of the nature of his business, A reports
on the first Form 2290 filed after June 30, 1984, that he reasonably
expects that none of the vehicles will be used for more than 5,000 miles
on public highways. Accordingly, the tax imposed by section 4481(a) is
suspended for A's 6 vehicles for the taxable priod July 1, 1984, through
June 30, 1985.
Example (2). Assume the same facts as in example (1) except that
during the month of February 1985, the use of one of A's vehicles
exceeds 5,000 miles on public highways. A is liable for the full tax for
the taxable period July 1, 1984, through June 30, 1985, for that vehicle
at the rate set forth in Sec. 41.4481-1(b), and must so report on a
Form 2290 filed on or before March 31, 1985, the last day of the month
following the month in which the use exceeds 5,000 miles.
(e) Credit or refund of tax for highway motor vehicle used 5,000 or
fewer miles. (1) If a highway motor vehicle on which the tax imposed by
section 4481(a) has been paid for a given taxable period is used for
5,000 or fewer miles on public highways during such taxable period, the
person who paid the tax may file a claim for refund of an overpayment of
the tax at the end of the taxable period. Claims for refunds of tax made
under this paragraph (e) shall be filed in the same manner as claims for
refunds filed under Sec. 41.4481-1(d). Refunds of tax made under this
paragraph (e) shall be without interest.
(2) Any person entitled to claim a refund of tax under paragraph
(e)(1) of this section may, in lieu of claiming a refund of such tax,
claim credit for such tax on the first Form 2290 filed for the next
taxable period.
(f) Relief from liability for tax under certain circumstances. If
the tax imposed by section 4481(a) on a highway motor vehicle is
suspended for any taxable period under paragraph (a) of this section and
the vehicle is transferred while the suspension is in effect, the
transferor will not be liable for any tax on such vehicle for such
taxable period if such transferor furnishes a statement to the
transferee on which is included the transferor's name, address and
taxpayer identification number, the vehicle identification number, the
date of transfer of the vehicle, the number of miles the vehicle has
been used on the public highways during the taxable period, the odometer
reading at the time of the transfer, and the name, address and taxpayer
identification number of the transferee. The suspension from tax under
paragraph (a) continues until the vehicle is used on the public highways
for more than 5,000 miles during the taxable period (including use by
the transferor for the portion of the taxable period prior to the
transfer). If the transferor has furnished the statement required in
this paragraph (f), the transferee and not the transferor is liable for
the entire tax under section 4481(a) for the taxable period in which the
transfer was made. If the transferor has not furnished such statement to
the transferee, then the transferor is also liable for the tax on the
use of such vehicle for such taxable period (determined in the case of a
transfer described in Sec. 41.4481-1(c)(4)(i) under Sec. 41.4481-
1(c)(4)(ii)) to the extent that the tax has not been previously paid.
See paragraph (b) of this section relating to cessation of suspension
from tax and Sec. 41.6011(a)-1(a)(3) for a requirement that certain
transferees described in this paragraph (f) must file a return.
[[Page 26]]
(g) Special rule for agricultural vehicles--(1) In general. In
applying the provisions of this section to an agricultural vehicle,
``7,500'' shall be substituted for ``5,000'' each place it appears in
paragraphs (a) through (f) of this section.
(2) Meaning of terms--(i) Agriculture vehicle. An agricultural
vehicle is any highway motor vehicle--
(A) Used (or expected to be used) primarily for farming purposes,
and
(B) Registered (under the laws of the State or States in which such
vehicle is required to be registered) as a highway motor vehicle used
for farming purposes.
A highway motor vehicle is used primarily for farming purposes if more
than one-half of such vehicle's use (determined on the basis of mileage)
during the taxable period is for farming purposes. Further, the highway
motor vehicle must be registered (under the laws of the State or States
where such vehicle is required to be registered) as a highway motor
vehicle used for farming purposes for the entire taxable period in order
to qualify as an agricultural vehicle. See Sec. 41.4482(a)-(1) for the
definition of ``highway motor vehicle''. A vehicle will be considered to
be registered under the laws of the State as a highway motor vehicle
used for farming purposes if such vehicle is so registered under a State
statute or legally valid regulations. In addition, no special tag or
license plate identifying a vehicle as being used for farming purposes
is required.
(ii) Farming purposes. For purposes of this section, ``farming
purposes'' means the transporting of any farm commodity to or from a
farm, or the use directly in agricultural production.
(iii) Farm commodity. A ``farm commodity'' is any agricultural or
horticultural commodity, feed, seed, fertilizer, livestock, bees,
poultry, fur-bearing animals, or wildlife. A farm commodity does not
include a commodity which has been changed by a processing operation
from its raw or natural state. For example, juice which has been
extracted from fruits or vegetables is not a farm commodity for purposes
of this paragraph (g).
(iv) Farm. The term ``farm'' includes stock (including feed yards
for fattening cattle), dairy, poultry, fruit, fur-bearing animal, and
truck farms, plantations, ranches, nurseries, ranges, orchards, and such
greenhouses and other similar structures as are used primarily for the
raising of any agricultural or horticultural commodity. Greenhouses and
other similar structures used primarily for purposes other than the
raising of agricultural or horticultural commodities (for example,
display, storage, or fabrication of wreaths, corsages, and bouquets) do
not constitute ``farms''.
(v) Agricultural production--(A) In general. A highway motor vehicle
is considered to be used directly in agricultural production only if it
is used as indicated in the following paragraphs.
(B) Use of a highway motor vehicle in connection with cultivating,
raising, and harvesting. A highway motor vehicle is considered to be
used directly in agricultural production if such vehicle is used in
connection with cultivating the soil, or raising or harvesting any
agricultural or horticultural commodity, including the raising,
shearing, feeding, caring for, training and management of livestock,
bees, poultry, and fur-bearing animals and wildlife. A highway motor
vehicle which is used in connection with operations such as canning,
freezing, packaging, or other processing operations will not be
considered to be used directly in agricultural production.
(C) Use of a highway motor vehicle in connection with planting,
cultivation, caring for, cutting, etc., of trees. A highway motor
vehicle is used directly for agricultural production if it is used in
connection with planting, cultivating, caring for, or cutting of trees,
or in connection with the preparation (other than milling) of trees for
market; but only if such operations are incidental to farming
operations. These farming operations include felling trees and cutting
them into logs or firewood, but do not include sawing logs into lumber,
chipping, or other milling operations. The operations specified in this
paragraph (g)(2)(v)(C) will be considered ``incidental to farming
operations'' only if they are of a minor nature in comparison with the
total farming operations involved. Therefore, a treefarmer or
timbergrower may not
[[Page 27]]
claim that a highway motor vehicle used in that trade or business is
used directly in agricultural production.
(D) Use of a highway motor vehicle in connection with the operation,
management, conservation, improvement, or maintenance of a farm. A
highway motor vehicle is used directly for agricultural production if it
is used in connection with the operation, management, conservation,
improvement, or maintenance of a farm and its tools and equipment.
Examples of these operations include clearing land, repairing fences and
farm buildings, building terraces or irrigation ditches, cleaning tools
or farm machinery, painting, and other activities which contribute in
any way to the conduct of a farm as such, as distinguished from any
other enterprise in which the owner of the highway motor vehicle may be
engaged.
(3) Mileage on farm not counted toward 7,500 mile limit. For
purposes of this section, the number of miles which a highway motor
vehicle is driven on a farm and not on the public highways shall not be
taken into account when determining whether the vehicle's mileage is in
excess of 7,500 miles. Accurate records should be kept by taxpayers of
the number of miles that a highway motor vehicle is operated on a farm.
(h) Owner. For purposes of this section the term ``owner'' means,
with respect to any highway motor vehicle, the person described in
section 4481(b).
(i) Effective/applicability date. This section applies on and after
July 1, 2015. For rules applicable before that date, see 26 CFR 41.4483-
3 (revised as of April 1, 2014).
[T.D. 8027, 50 FR 21248, May 23, 1985, as amended by T.D. 8879, 65 FR
17154, Mar. 31, 2000; T.D. 9698, 79 FR 64316, Oct. 29, 2014]
Sec. 41.4483-4 Application of exemptions.
Any exemption from the tax on the use of a highway motor vehicle has
application only with respect to the use of such highway motor vehicle
and not with respect to the highway motor vehicle as such. Furthermore,
such exemption is subject to those provisions of paragraph (c) of Sec.
41.4481-1 relating to proration of the tax and to the effect of an
exempt use of a highway motor vehicle after a taxable use has been made.
Thus, if a taxable use is made of a highway motor vehicle at any time in
a taxable period, the tax is imposed on the use of such vehicle for such
taxable period, computed from the first day of the month in which such
taxable use occurred, even though at some time in the same taxable
period, before or after such taxable use occurred, the use of the
vehicle may have been, or may be, exempt. For example, if a highway
motor vehicle is operated exclusively by a State in the period July 1
through September 10 of a taxable period, use of such vehicle in such
period is exempt from the tax. However, if a taxable use of the vehicle
is made on September 11 of such taxable period, the tax imposed on the
use of such vehicle for such taxable period is computed from September
1. On the other hand, if a taxable use of the vehicle is made at any
time in July of the taxable period, the tax imposed on the use of such
vehicle for such taxable period is computed from July 1, even though the
vehicle may be operated exclusively by a State in every other month of
such period.
[T.D. 6743, 29 FR 7931, June 23, 1964. Redesignated by T.D. 8027, 50 FR
21248, May 23, 1985]
Sec. 41.4483-6 Reduction in tax for trucks used in logging.
(a) In general. The tax imposed by section 4481 shall be reduced by
25 percent in the case of a truck used in logging.
(b) Truck used in logging. The term ``truck used in logging'' means
any highway motor vehicle which--
(1) Is used exclusively during the taxable period for the
transportation, to and from a point located on a forested site, of
products harvested from such forested site, and
(2) Is registered (under the laws of the State or States in which
such vehicle is required to be registered) as a highway motor vehicle
used exclusively in the transportation of harvested forest products.
Products harvested from the forested site may include timber which has
been processed for commercial use by sawing into lumber, chipping or
other milling operations if such processing occurs prior to
transportation from the forested site. A vehicle will be considered to
be registered under the laws of
[[Page 28]]
a state as a highway motor vehicle used exclusively in the
transportation of harvested forest products if such vehicle is so
registered under a state statute or legally valid regulations. In
addition, no special tag or license plate identifying a vehicle as being
used in the transportation of harvested forest products is required.
[T.D. 8027, 50 FR 21250, May 23, 1985]
Subpart C_Administrative Provisions of Special Application to Tax On Use
of Certain Highway Motor Vehicles
Sec. 41.6001-1 Records.
(a) Records to be kept. Every person in whose name a highway motor
vehicle having a taxable gross weight of at least 55,000 pounds is
registered or required to be registered at any time during the taxable
period shall keep records sufficient to enable the Commissioner to
determine whether such person is liable for the tax and, if so, the
amount thereof. See Sec. 41.4482(b)-1 for the definition of taxable
gross weight. Such records shall show with respect to each such vehicle:
(1) A description of the vehicle (including serial number or
manufacturer's number) in sufficient detail to permit positive
identification of the vehicle.
(2) The weight of the loads carried by the vehicle in such form as
is required under the laws of any State in which the vehicle is
registered or required to be registered, in order to permit verification
of such vehicle's taxable gross weight.
(3) The date on which such person acquired such vehicle and the name
and address of the person from whom the vehicle was acquired.
(4) The first month of each taxable period in which occurred a
taxable use of each such vehicle while the vehicle was registered in the
name of such person; information showing whether such vehicle was
operated, while registered in the name of such person, in any prior
month in such taxable period; and if such vehicle was so operated,
evidence establishing that such operation was not a taxable use.
(5) The date of sale or other transfer to another of any such
vehicle, together with the name and address of the person to whom
transferred.
(6) In the case of any such vehicle disposed of otherwise than by
sale or other transfer (including disposition by theft or destruction),
the date and method of disposition of the vehicle.
(7) In the case of a secondhand highway motor vehicle acquired at
any time in the taxable period, evidence showing whether there was a
prior taxable use in such taxable period of the highway motor vehicle
(see paragraph (b) of Sec. 41.4481-2) or whether there was a suspension
of tax in effect (see Sec. 41.4483-3).
(8) A copy of each return, schedule, statement, or other document
filed, pursuant to the regulations in this part or in accordance with
the instructions applicable to any form prescribed thereunder, by the
person required to keep such records.
(b) Transit systems. Every person engaged in the operation of a
transit system who claims exemption from tax with respect to a transit-
type bus shall keep records sufficient to show, with respect to each
taxable period, whether it meets the 60-percent passenger fare revenue
test (see paragraph (e) of Sec. 41.4483-2) for the period prescribed as
the test period (see paragraph (c) of Sec. 41.4483-2) for such system
for such taxable period.
(c) Exemption for vehicles used 5,000 miles or less. The owner of a
highway motor vehicle who reasonably expects the vehicle to be exempt
from the tax under section 4481(a) by reason of Sec. 41.4483-3(c) for a
given taxable period shall keep records which indicate the reason that
the use of the vehicle is not expected to exceed 5,000 miles on public
highways.
(d) Records of claimants. Any person claiming refund, credit, or
abatement of the tax, interest, additional amount, addition to the tax,
or assessable penalty, shall keep a complete and detailed record with
respect to the claim.
(e) Place and period for keeping records. (1) All records required
by the regulations in this part shall be kept, by the person required to
keep them, at a convenient and safe location within the United States
which is accessible
[[Page 29]]
to internal revenue officers. Such records shall at all times be
available for inspection by such officers. If such person has a
principal place of business in the United States, the records shall be
kept at such place of business.
(2) Records required by paragraph (a) of this section shall be
maintained for a period of at least 3 years after the date the tax
becomes due or the date the tax is paid, whichever is the later. Records
required by paragraphs (b) and (c) of this section shall be maintained
for a period of at least 3 years after the end of the taxable period for
which such exemption applies. Records required by paragraph (d) of this
section (including any record required by paragraphs (a), (b), or (c) of
this section which relates to a claim) shall be maintained for a period
of at least 3 years after the date the claim is filed.
[T.D. 6216, 21 FR 9645, Dec. 6, 1956, as amended by T.D. 6743, 29 FR
7932, June 23, 1964; T.D. 8027, 50 FR 21250, May 23, 1985; T.D. 8879, 65
FR 17154, Mar. 31, 2000; T.D. 9698, 79 FR 64316, Oct. 29, 2014]
Sec. 41.6001-2 Proof of payment for State registration purposes.
(a) In general. This section sets forth the circumstances under
which a State must require proof of payment of the tax imposed by
section 4481(a), and the required manner in which such proof of payment
is to be received by the State as a condition of issuing a registration
for a highway motor vehicle. A State must either comply with the
provisions of this section or, in the alternative, comply with such
other rules regarding the satisfaction of this proof of payment
requirement as may be prescribed by the Commissioner (by Revenue
Procedure or otherwise), in order to avoid a reduction of Federal-aid
highway funds apportioned under 23 U.S.C. 104(b)(4). For purposes of
this section, the rules of section 7502 and Sec. 301.7502-1 of this
chapter (relating to timely mailing treated as timely filing) determine
when an application for registration is considered to be received by a
State.
(b) Proof of payment required--(1) In general.-- A State to which an
application is made to register a highway motor vehicle must receive
from the registrant proof of payment of the tax imposed by section
4481(a) (or proof of suspension of such tax under Sec. 41.4483-3)
unless otherwise provided in this paragraph (b)(1), or paragraph (b)(2)
or (5) of this section. See paragraph (c) of this section for the
meaning of ``proof of payment''. Such proof of payment must be received
by the State before the State issues a registration for such vehicle
unless the State is using a system of registration provided in paragraph
(b)(3) of this section. The term ``proof of payment'', when used in this
section, shall be considered to refer in appropriate cases to proof of
suspension of the tax imposed by section 4481(a). Except as provided in
paragraph (b)(4) of this section, any proof of payment presented to a
State must relate to tax paid (or suspended under Sec. 41.4483-3) for
the taxable period which includes the date that the State receives the
application for registration. A ``base state'' must be presented proof
of payment when issuing an ``apportioned plate'' under the International
Registration Plan (IRP) (or similar agreement) for a highway motor
vehicle, but no proof of payment of the tax imposed by section 4481(a)
is required to be presented to the other states for which the vehicle is
proportionally registered and which are listed on the IRP cab card
issued by the base state. Further, a State is not required to receive
proof of payment in order to issue special temporary travel permits
which allow a vehicle to, (i) operate in a State in which the vehicle is
not registered (including proportional or prorate registration), (ii)
operate at more than the State's maximum statutory weight limit, or
(iii) operate at more than the weight that the vehicle is registered in
a State. Further, a State may register a highway motor vehicle without
proof of payment if the person registering the vehicle presents the
original or a photocopy of a bill of sale (or other document evidencing
transfer) indicating that the vehicle was purchased by the owner either
as a new or used vehicle during the preceding 60 days before the date
that the State receives the application for registration of such
vehicle.
(2) States required to receive proof of payment with respect to
vehicles subject to tax--(i) Registration in States that register
vehicles on the basis of gross weight.
[[Page 30]]
A State that registers vehicles on the basis of gross weight must
require proof of payment with respect to any highway motor vehicle that
has a declared gross weight in that State of 55,000 pounds or more. If
no declaration of a specific gross weight is made with respect to a
highway motor vehicle registered on the basis of gross weight, then the
State must require proof of payment with respect to such vehicle if the
minimum weight of the registered weight category for such vehicle is
55,000 pounds or more. No such proof of payment is required for any
vehicle that does not have a declared gross weight in that State of
55,000 pounds or more.
(ii) Registration in States that register vehicles other than on the
basis of gross weight. A State that registers vehicles other than on the
basis of gross weight must require proof of payment in order to register
a highway motor vehicle unless the State receives a written statement
stating that during the taxable period which includes the date on which
the State receives the application for registration, such vehicle had a
taxable gross weight of less than 55,000 pounds. The written statement
must state the number of vehicles being registered that have a taxable
gross weight of less than 55,000 pounds and must be signed by the person
registering the vehicles. A State may register a highway motor vehicle
without receiving either proof of payment or a written statement as
described above if such vehicle has an unladen weight of 8,000 pounds or
less. However, the State must require proof of payment when issuing a
``base plate'' registration for a vehicle if a gross weight declaration
of 55,000 pounds or more is made to the State with respect to such
vehicle in order to proportionally register the vehicle in another State
under the IRP.
(iii) State may require additional proof. Nothing contained in this
section shall prohibit a State from refusing to register a highway motor
vehicle without additional proof that the vehicle is not subject to tax
under section 4481(a) even though the person registering the vehicle
submits a written statement declaring that the taxable gross weight of
such vehicle is less than 55,000 pounds.
(3) Suspension registration system. A State may issue a registration
with respect to any or all highway motor vehicles subject to tax under
section 4481(a) without receiving proof of payment if such vehicles are
registered under a ``suspension'' registration system. Registration of a
vehicle subject to tax under a suspension system must be on the
condition that, (i) the State receive proof of payment with respect to
such vehicle no later than 4 months (or any lesser time to be determined
by the State) after the beginning of the vehicle's registration period,
and (ii) the State's system provides for the automatic suspension (e.g.
through the use of computer-generated notices) of such vehicle's
registration if no proof of payment is received within the required
time. Following such a suspension of registration, the State must not
allow the vehicle to be registered until valid proof of payment is
received. A State may either register all vehicles subject to tax under
section 4481(a) in the manner described in this paragraph (b)(3) or
adopt this manner of registration only in situations which the State
deems appropriate. A State that registers vehicles other than on the
basis of gross weight may also register vehicles not subject to tax
under a suspension registration system for purposes of receiving the
written statement described in paragraph (b)(2)(ii).
(4) Registration during certain months. In the case of a highway
motor vehicle subject to tax under section 4481(a) for which a State
receives an application for registration during the months of July,
August or September, proof of payment for the immediately preceding
taxable period may be used to verify payment of the tax imposed by
section 4481(a).
(5) Registration in a State several times during the taxable period.
A State is required to receive proof of payment with respect to a
highway motor vehicle subject to tax under section 4481(a) only once
during a taxable period. Thus, in the case of a State that allows a
highway motor vehicle to be registered on a quarterly basis, rather than
annually, proof of payment will be required to be presented to the State
only once during the taxable period. The State may designate any one
[[Page 31]]
of the four quarterly registration periods as the time for submitting
proof of payment.
(6) Proof of payment records. See 23 CFR part 669 for a description
of the supporting documentation and records that will be required by the
Federal Highway Administration (FHWA) in order to allow the FHWA to
verify that the State is in compliance with the rules of this section.
(c) Proof of payment--(1) In general. The proof of payment required
in paragraph (b) of this section consists of a receipted Schedule 1
(Form 2290 ``Heavy Highway Vehicle Use Tax Return'') that is returned by
the Internal Revenue Service, by mail or electronically, to a taxpayer
that files a return of tax under section 4481(a), meets the requirements
of Sec. 41.6011(a)-1, and pays the amount of tax due with such return.
A photocopy of such receipted Schedule 1 also serves as proof of
payment. Such Schedule 1 serves as proof of suspension of such tax under
Sec. 41.4483-3 for the number of vehicles entered in that part of the
Schedule 1 designated for vehicles for which tax has been suspended. The
vehicle identification number of the vehicle being registered must
appear on the Schedule 1 (or an attached page) in order for the Schedule
1 to be a valid proof of payment for such vehicle.
(2) Acceptable substitute for receipted Schedule 1. For purposes of
this section, a State must accept as proof of payment a photocopy of the
Form 2290 (with the Schedule 1 attached) that was filed with the
Internal Revenue Service for the vehicle being registered with
sufficient documentation of payment of tax due at the time the Form 2290
was filed (such as a photocopy of both sides of a cancelled check). This
substitute proof of payment may be used to register a vehicle when, for
example, the receipted Schedule 1 has been lost, or when at the time
required for registration of a vehicle, a receipted Schedule 1 has not
been received by a taxpayer who has filed a Form 2290 with respect to
such vehicle.
(d) Examples. The application of this section may be illustrated by
the following examples:
Example (1). A applies to register a 3-axle single unit truck in
State R, a member of the International Registration Plan, on November 1,
1985. State R registers vehicles based on unladen weight. At the same
time, A applies for a proportional registration under the IRP to use the
truck in State S. State S does not register vehicles on the basis of
unladen weight. For purposes of the proportional registration in State
S, A declares the gross weight of his truck at 50,000 pounds. A does not
register the truck in any other states. A's truck has a taxable gross
weight, as determined under Sec. 41.4482(b)-1, of less than 55,000
pounds and therefore is not subject to tax under section 4481(a). A
submits a written statement along with his application for registration
in State R. The written statement states that A's vehicle has a taxable
gross weight of less than 55,000 pounds and is signed by A. State R may
register A's truck and issue a proportional registration for A to use
his truck in State S without receiving proof of payment.
Example (2). Assume the same facts as in example (1) except that A
applies for proportional registration under the IRP in State S and
declares the truck to have a gross weight of 60,000 pounds. The taxable
gross weight of A's truck, as determined under Sec. 41.4482(b)-1 is
60,000 pounds. State R may not register A's truck unless it receives
proof of payment within the meaning of paragraph (c) of this section.
Example (3). On October 10, 1985, C applies to register 9 vehicles
in State U and declares the gross weight of each vehicle to be 70,000
pounds. C has not applied for registration in any other states. At the
time of applying for registration, C presents a photocopy of a receipted
Schedule 1 (Form 2290) that shows a total of 9 vehicles which are
subject to tax under section 4481(a) and for which tax is not suspended
under Sec. 41.4483-3(a). The vehicle identification numbers of the
vehicles that C is seeking to register must be listed on the Schedule 1
in order for State U to register the vehicles.
(e) Effective/applicability date. Paragraph (c) of this section
applies to registrations of highway motor vehicles pursuant to
applications that are received by a State on or after July 1, 2015. The
rules of section 7502 and Sec. 301.7502-1 of this chapter (relating to
timely mailing treated as timely filing) determine when an application
for registration is considered to be received by a State. For rules
applicable to applications before that date, see 26 CFR 41.6001-2
(revised as of April 1, 2014).
[T.D. 8027, 50 FR 21251, May 23, 1985, as amended by T.D. 8879, 65 FR
17154, Mar. 31, 2000; T.D. 9537, 76 FR 43122, July 20, 2011; T.D. 9698,
79 FR 64316, Oct. 29, 2014]
[[Page 32]]
Sec. 41.6001-3 Proof of payment for entry into the United States.
(a) In general. (1) Except as otherwise provided in paragraph (a)(2)
of this section, proof of payment of the tax imposed by section 4481(a)
must be presented to United States Customs officials with respect to any
highway motor vehicle subject to the tax imposed by section 4481(a) that
has a base for registration purposes in a contiguous foreign country
upon entry of such vehicle into the United States during any taxable
period to which this section applies. Such proof of payment must relate
to tax paid (or suspended under Sec. 41.4483-3) for the taxable period
that includes the date of entry into the United States. See paragraph
(c) of this section for the definition of the term ``proof of payment.''
(2) No proof of payment is required upon entry of a highway motor
vehicle described in paragraph (a)(1) of this section into the United
States if, as of the date of such entry, the period of time for filing a
return of the tax imposed on such vehicle by section 4481(a) for the
taxable period that includes the date of such entry has not expired and
a written declaration is presented to United States Customs officials.
Such declaration must state that, as of the date of such entry, the
period of time for filing a return of the tax imposed on such vehicle by
section 4481(a) for the taxable period that includes the date of such
entry has not expired. The written declaration must include (i) the
name, address, and taxpayer identification number of the person liable
under Sec. 41.4481-2 for the tax imposed on such vehicle; (ii) the
vehicle identification number of such vehicle; (iii) the date on which
such vehicle was first used on the public highways in the United States
during the taxable period (or a statement that the current entry is the
first use on the public highways in the United States during the taxable
period); (iv) an acknowledgment by the person liable for the tax imposed
on such vehicle that the willful use of the declaration to evade or
defeat the tax otherwise applicable under section 4481(a) will subject
such person to a fine or imprisonment or both; and (v) the signature of
the person liable for the tax imposed on such vehicle. A copy of the
written declaration shall be retained in the records of the person
liable for the tax imposed on such vehicle under the rules of Sec.
41.6001-1. See Sec. 41.6071(a)-1 for rules regarding the time for
filing a return of the tax imposed by section 4481(a).
(b) Failure to provide proof of payment. If, upon attempting to
enter the United States, the operator of a highway motor vehicle
described in paragraph (a) of this section is unable to present proof of
payment of the tax imposed by section 4481(a), or documentation
described in paragraph (a)(2) of this section, with respect to such
vehicle, then such vehicle may be denied entry into the United States.
(c) Proof of payment--(1) In general. For purposes of this section,
the proof of payment required in paragraph (a) of this section shall
consist of a receipted Schedule 1 (Form 2290) that is returned by the
Internal Revenue Service to a taxpayer that files a return of tax under
section 4481(a) and pays the amount of tax (or installment thereof) due
with such return. A photocopy of such receipted Schedule 1 shall also
serve as proof of payment. Such proof of payment shall also serve as
proof or suspension of the tax under Sec. 41.4483-3 for the number of
vehicles entered in that part of the Schedule 1 designated for vehicles
for which tax has been suspended. The vehicle identification number of
any vehicle for which a return is being filed, whether tax is being paid
with respect to such vehicle or tax is suspended on such vehicle, must
appear on the Schedule 1 (or an attached page) in order for the Schedule
1 to be a valid proof of payment for such vehicle.
(2) Acceptable substitute for receipted Schedule 1. For purposes of
this section, a photocopy of the Form 2290 (with the Schedule 1
attached) that is filed with the Internal Revenue Service for a vehicle
being entered into the United States with sufficient documentation of
payment of tax due at the time the Form 2290 is filed (such as a
photocopy of both sides of a cancelled check) shall be accepted as proof
of payment. No documentation of payment of tax is required with the
substitute proof of payment if at the time the Form 2290 is filed the
tax imposed by section 4481(a)
[[Page 33]]
is suspended under Sec. 41.4483-3 with respect to the vehicle entering
the United States. This substitute proof of payment may be used to enter
a vehicle into the United States when, for example, the receipted
Schedule 1 has been lost, or if the taxpayer that filed a Form 2290 with
respect to such vehicle has not received a receipted Schedule 1 at the
time such vehicle enters the United States.
(d) Taxable periods to which this section applies. This section
shall apply to any taxable period beginning on or after July 1, 1987.
[T.D. 8159, 52 FR 33585, Sept. 4, 1987, as amended by T.D. 8177, 53 FR
6626, Mar. 2, 1988]
Sec. 41.6011(a)-1 Returns.
(a) In general. (1) A person that is liable for tax under Sec.
41.4481-2(a)(1)(i)(A), (B), or (C) must file a return for the taxable
period with respect to the tax imposed by section 4481.
(2) A person that is liable for tax under Sec. 41.4481-
2(a)(1)(i)(D) must file a return for a taxable period with respect to
the tax imposed by section 4481 if the Commissioner notifies the person
that the tax for the taxable period has not been paid in full.
(3) A transferee of a vehicle that receives a statement described in
the first sentence of Sec. 41.4483-3(f) must file a return with the
statement attached.
(4) A person that is liable for tax under Sec. 41.4481-
2(a)(1)(i)(A), (B), (C), or (D), after taking into account the
modification required under Sec. 41.4481-2(a)(2), is treated as liable
for tax by the same provision of Sec. 41.4481-2(a)(1)(i) for purposes
of this section and must file a return.
(b) Form 2290. The return required under paragraph (a) of this
section is Form 2290, ``Heavy Highway Vehicle Use Tax Return,'' or such
other return as the Commissioner may prescribe. The return is made in
accordance with the instructions applicable to the form.
(c) Required use of electronic filing--(1) In general. A person that
files any return reporting 25 or more vehicles must file the return
electronically, as prescribed by the Commissioner. For this purpose, the
number of vehicles reported on a return is the total number of vehicles
for which tax is reported and does not include vehicles for which a
suspension of tax is claimed.
(2) Examples. The application of this paragraph (c) may be
illustrated by the following examples:
Example 1. A has 100 vehicles registered in its name, all of which
have a taxable gross weight in excess of 55,000 pounds. Seventy-five of
the vehicles are in use on July 1. Twenty-five are in dead storage as
described in Sec. 41.4482(c)-1(c). The vehicles in dead storage are not
in use and they are not listed on the Schedule 1. A files Form 2290
electronically for the 75 vehicles in use on July 1 and receives a
receipted Schedule 1. On August 23 of the same calendar year, A uses the
remaining 25 vehicles. A does not file Form 2290 electronically but uses
a paper Form 2290. A has failed to meet the requirements of section
4481(e) for the remaining 25 vehicles.
Example 2. Assume the same facts as in Example 1 except that on
August 23, A uses 15 of the vehicles that were not used in July. The
remaining 10 vehicles are not used in August. A does not file Form 2290
electronically but uses a paper Form 2290. A has correctly filed a
return as required by section 4481(e).
(d) Effective/applicability date. Paragraphs (a)(4) and (c) of this
section apply to returns filed on and after July 1, 2015. For rules
applicable before that date, see 26 CFR 41.6011(a)-1 (revised as of
April 1, 2014).
[T.D. 8879, 65 FR 17154, Mar. 31, 2000, as amended by T.D. 9698, 79 FR
64317, Oct. 29, 2014]
Sec. 41.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of excise tax under
section 4481, other than for the person, at any time during a return
period, shall satisfy the record keeping and inspection requirements in
the manner stated in Sec. 1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78455, Dec. 22, 2008]
Sec. 41.6071(a)-1 Time for filing returns.
(a) In general. Except as provided in paragraph (b) of this section,
a return described in Sec. 41.6011(a)-1 must be filed
[[Page 34]]
by the last day of the month following the month in which--
(1) A person becomes liable for tax under Sec. 41.4481-
2(a)(1)(i)(A), (B), or (C);
(2) A person that is liable for tax under Sec. 41.4481-
2(a)(1)(i)(D) is notified by the Commissioner that the tax has not been
paid in full; or
(3) A transferee described in Sec. 41.4483-3(f) acquires the
vehicle.
(b) Certain transit-type buses. In the case of any bus of the
transit type, the first taxable use of which in any taxable period
occurs prior to the close of the test period (see paragraph (c) of Sec.
41.4483-2) with reference to which liability for the tax on the use of
such transit-type bus for such taxable period is determined, the person
in whose name the bus is registered at the time of such use shall, after
such test period and on or before the last day of the following month
make a return of such tax for such taxable period on the use of such
transit-type bus.
(c) Effect of sale during taxable period. A person that is liable
for tax under Sec. 41.4481-2(a)(1)(i)(A), (B), (C), or (D) after taking
into account the modification required under Sec. 41.4481-2(a)(2) is
treated as liable for tax under the same provision of Sec. 41.4481-
2(a)(1)(i) for purposes of this section.
(d) Effective/applicability date. Paragraph (c) of this section
applies on and after July 1, 2015. For rules applicable before that
date, see 26 CFR 41.6071(a)-1 (revised as of April 1, 2014).
[T.D. 6216, 21 FR 9645, Dec. 6, 1956, as amended by T.D. 6743, 29 FR
7932, June 23, 1964; T.D. 8879, 65 FR 17155, Mar. 31, 2000; T.D. 9537,
76 FR 43123, July 20, 2011; T.D. 9698, 79 FR 64317, Oct. 29, 2014]
Sec. 41.6091-1 Place for filing returns.
(a) In general. Except as provided in paragraph (b) of this section,
returns must be filed in accordance with the instructions applicable to
the form on which the return is made.
(b) Hand-carried returns--(1) Persons other than corporations.
Returns of persons other than corporations that are filed by hand
carrying must be filed with any person assigned the responsibility to
receive hand-carried returns in the local Internal Revenue Service
office that serves the principal place of business or legal residence of
the person.
(2) Corporations. Returns of corporations that are filed by hand
carrying must be filed with any person assigned the responsibility to
receive hand-carried returns in the local Internal Revenue Service
office that servesthe principal place of business or principal office or
agency of the corporation.
[T.D. 8879, 65 FR 17155, Mar. 31, 2000, as amended by T.D. 9156, 69 FR
55746, Sept. 16, 2004]
Sec. 41.6101-1 Period covered by returns.
Each return is for a taxable period as defined in section 4482.
[T.D. 8879, 65 FR 17155, Mar. 31, 2000]
Sec. 41.6107-1 Tax return preparer must furnish copy of return to
taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of any
return or claim for refund of excise tax under section 4481 shall
furnish a completed copy of the return or claim for refund to the
taxpayer and retain a completed copy or record in the manner stated in
Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78455, Dec. 22, 2008]
Sec. 41.6109-1 Identifying numbers.
Every person required under Sec. 41.6011(a)-1 to make a return must
provide the identifying number required by the instructions to the form
on which the return is made.
[T.D. 8879, 65 FR 17155, Mar. 31, 2000]
Sec. 41.6109-2 Tax return preparers furnishing identifying numbers
for returns or claims for refund filed after December 31, 2008.
(a) In general. Each excise tax return or claim for refund under
section 4481 prepared by one or more signing tax return preparers must
include the identifying number of the preparer required by Sec. 1.6695-
1(b) of this chapter to sign the return or claim for refund in the
manner stated in Sec. 1.6109-2 of this chapter.
[[Page 35]]
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78455, Dec. 22, 2008]
Sec. 41.6151(a)-1 Time and place for paying tax.
(a) In general. The tax must be paid at the time prescribed in Sec.
41.6071(a)-1 for filing the return and at the place prescribed in Sec.
41.6091-1 for filing the return.
(b) Effective/applicability date. This section applies on and after
July 1, 2015. For rules applicable before that date, see 26 CFR
41.6151(a)-1 and 41.6151(a)-1T (revised as of April 1, 2014).
[T.D. 9698, 79 FR 64317, Oct. 29, 2014]
Sec. 41.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of tax returns or claims for refund,
see Sec. 1.6694-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78455, Dec. 22, 2008]
Sec. 41.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of excise tax under section 4481 shall be subject to
penalties under section 6694(a) in the manner stated in Sec. 1.6694-2
of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78456, Dec. 22, 2008]
Sec. 41.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of excise tax under section 4481 shall be subject to
penalties under section 6694(b) in the manner stated in Sec. 1.6694-3
of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78456, Dec. 22, 2008]
Sec. 41.6694-4 Extension of period of collection when preparer pays
15 percent of a penalty for understatement of taxpayer's liability and
certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim for
refund for excise tax under section 4481 pays 15 percent of a penalty
for understatement of taxpayer's liability, and procedural matters
relating to the investigation, assessment and collection of the
penalties under section 6694(a) and (b), the rules under Sec. 1.6694-4
of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78456, Dec. 22, 2008]
Sec. 41.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of excise tax under section 4481 of the Internal
Revenue Code (Code) shall be subject to penalties for failure to furnish
a copy to the taxpayer under section 6695(a) of the Code, failure to
sign a return under section 6695(b) of the Code, failure to furnish an
identification number under section 6695(c) of the Code, failure to
retain a copy or list under section 6695(d) of the Code, failure to file
a correct information return under section 6695(e) of the Code, and
negotiation of a check under section 6695(f) of the Code, in the manner
stated in Sec. 6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78456, Dec. 22, 2008; 74 FR 5106, Jan. 29, 2009]
[[Page 36]]
Sec. 41.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for excise tax
under section 4481, the rules under Sec. 1.6696-1 of this chapter will
apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78456, Dec. 22, 2008]
Sec. 41.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78456, Dec. 22, 2008]
PART 43_EXCISE TAX ON TRANSPORTATION BY WATER--Table of Contents
Sec.
43.0-1 Introduction.
43.4471-1 Imposition of tax.
43.4472-1 Definitions.
Authority: 26 U.S.C. 7805.
Source: T.D. 8314, 55 FR 41520, Oct. 12, 1990, unless otherwise
noted.
Sec. 43.0-1 Introduction.
The regulations in this part 43 are designated ``Excise Tax on
Transportation by Water.'' The regulations relate to the taxes on
transportation by water imposed by section 4471 of the Internal Revenue
Code. See part 40 of this chapter for regulations relating to returns,
payments, and deposits of taxes imposed by section 4471.
[T.D. 8442, 57 FR 48185, Oct. 22, 1992]
Sec. 43.4471-1 Imposition of tax.
(a) In general. Section 4471 imposes a tax of $3 per passenger on a
covered voyage as is defined in section 4472.
(b) By whom paid. The tax is imposed on the person providing the
covered voyage (the operator of the vessel).
[T.D. 8314, 55 FR 41520, Oct. 12, 1990. Redesignated by T.D. 8422, 57 FR
33636, July 30, 1992]
Sec. 43.4472-1 Definitions.
(a) In general. For definitions of the terms ``covered voyage'' and
``passenger vessel,'' see sections 4472 (1) and (2).
(b) Voyage. For purposes of this section, ``voyage'' means a journey
of a vessel that includes the outward and homeward trips or passages.
The voyage commences when the vessel begins to load passengers and
continues during the entire ensuing period until the vessel has made one
outward and one homeward passage (including intermediate passages, if
made). A voyage may be a covered voyage with respect to a passenger even
if the passenger does not make both an outward and homeward passage or
if the point of first embarkation or disembarkation by the passenger in
the United States is an intermediate stop of the vessel.
(c) Over 1 or more nights. A voyage is considered to extend over 1
or more nights if it extends for more than 24 hours.
(d) Engaged in gambling. A passenger is engaged in gambling aboard a
vessel if that person is participating as a player in any policy game or
other lottery, or any other game of chance, for money or other thing of
value, provided that the policy game, other lottery, or game of chance
is conducted, sponsored, or operated by the owner or operator of the
vessel, as either principal or agent, or by an employee, agent, or
franchisee of the owner or operator of the vessel. A passenger is not
engaged in gambling aboard a vessel if the passenger participates with
other passengers in a casual, ``friendly'' game of chance that is not
conducted, sponsored, or operated by the owner or operator of the vessel
or by an employee, agent, or franchisee of the owner or operator.
(e) Territorial waters. For purposes of sections 4471 and 4472, the
territorial waters of the United States are those waters within the
international boundary line between the United States and any contiguous
foreign country or within 3 nautical miles (3.45 statute miles) from low
tide on the coastline. No inference is intended as to the extent of the
territorial limits for other tax purposes.
[[Page 37]]
(f) Passenger. For purposes of sections 4471 and 4472, ``passenger''
means an individual carried on the vessel except--
(1) The Master; or
(2) A crew member or other individual engaged in the business of the
vessel or its owners. A person is engaged in the business of the vessel
or its owners if the person is an employee of the vessel or her owners
or has a duty, contractual or otherwise, to perform on the vessel on
behalf of the vessel or its owners. For example, a person engaged as an
entertainer, instructor, or lecturer for the benefit of the passengers
is not a passenger, but a person on a promotional trip such as a travel
agent or contest winner is a passenger even though the vessel or its
owners may derive some future benefit from the promotion.
[T.D. 8422, 57 FR 33636, July 30, 1992; 57 FR 45713, Oct. 5, 1992]
PART 44_TAXES ON WAGERING; EFFECTIVE JANUARY 1, 1955--Table of Contents
Subpart A_Introduction
Sec.
44.0-1 Introduction.
44.0-2 General definitions and use of terms.
44.0-3 Scope of regulations.
44.0-4 Extent to which the regulations in this part supersede prior
regulations.
Subpart B_Tax on Wagers
44.4401-1 Imposition of tax.
44.4401-2 Person liable for tax.
44.4401-3 When tax attaches.
44.4402-1 Exemptions.
44.4403-1 Daily record.
44.4404-1 Territorial extent.
Subpart C_Occupational Tax
44.4411-1 Imposition of tax.
44.4412-1 Registration.
44.4413-1 Certain provisions made applicable.
Subpart D_Miscellaneous and General Provisions Applicable to Taxes on
Wagering
Miscellaneous Provisions
44.4421-1 Definitions.
44.4422-1 Doing business in violation of Federal or State law.
General Provisions Relating to Occupational Taxes
44.4901-1 Payment of special tax.
44.4902-1 Partnership liability.
44.4905-1 Change of ownership.
44.4905-2 Change of address.
44.4905-3 Liability for failure to register change or removal.
44.4906-1 Cross reference.
Subpart E_Administrative Provisions of Special Application to the Taxes
on Wagering
44.6001-1 Record requirements.
44.6011(a)-1 Returns.
44.6060-1 Reporting requirements for tax return preparers.
44.6071-1 Time for filing return.
44.6091-1 Place for filing returns.
44.6107-1 Tax return preparer must furnish copy of return to taxpayer
and must retain a copy or record.
44.6109-1 Tax return preparers furnishing identifying numbers for
returns or claims for refund.
44.6151-1 Time and place for paying taxes.
44.6419-1 Credit or refund generally.
44.6419-2 Credit or refund on wagers laid off by taxpayer.
44.6694-1 Section 6694 penalties applicable to tax return preparer.
44.6694-2 Penalties for understatement due to an unreasonable position.
44.6694-3 Penalty for understatement due to willful, reckless, or
intentional conduct.
44.6694-4 Extension of period of collection when preparer pays 15
percent of a penalty for understatement of taxpayer's
liability and certain other procedural matters.
44.6695-1 Other assessable penalties with respect to the preparation of
tax returns for other persons.
44.6696-1 Claims for credit or refund by tax return preparers.
44.7262-1 Failure to pay special tax.
44.7701-1 Tax return preparer.
Authority: 26 U.S.C. 7805.
Section 44.6060-1 also issued under 26 U.S.C. 6060(a);
Section 44.6109-1 also issued under 26 U.S.C. 6109(a).
Section 44.6109-2 also issued under 26 U.S.C. 6109(a);
Section 44.6695-2 also issued under 26 U.S.C. 6695(g).
Source: T.D. 6370, 24 FR 2614, Apr. 4, 1959, unless otherwise noted.
[[Page 38]]
Subpart A_Introduction
Sec. 44.0-1 Introduction.
(a) In general. The regulations in this part are designated
``Wagering Tax Regulations.'' The regulations relate to the taxes
imposed by Chapter 35 of the Internal Revenue Code of 1954, as amended,
to certain general provisions of Chapter 40 of such Code, and to certain
related administrative provisions of Subtitle F of such Code. Chapter 35
imposes an excise tax on wagers and a special tax to be paid by each
person liable for the tax imposed on wagers and by each person engaged
in receiving wagers for or on behalf of any person liable for the tax
imposed on wagers. References in these regulations to the ``Internal
Revenue Code'' or the ``Code'' are references to the Internal Revenue
Code of 1954, as amended, unless otherwise indicated. References to a
section or other provision of law are references to a section or other
provision of the Internal Revenue Code, as amended, unless otherwise
indicated.
(b) Division of regulations. The regulations in this part are
divided into five subparts. Subpart A contains provisions relating to
the arrangement and numbering of the sections of the regulations in this
part, general definitions and use of terms, scope of the regulations,
and the extent to which the regulations in this part supersede prior
regulations relating to the taxes imposed by Chapter 35 of the Internal
Revenue Code. Subpart B relates to the tax on wagers. Subpart C relates
to the special tax. Subpart D relates to certain miscellaneous and
general provisions having application to taxes imposed by Chapter 35.
Subpart E relates to selected provisions of subtitle F of the Code
(Procedure and Administration) which have special application to the
taxes imposed by Chapter 35 of the Code.
(c) Arrangement and numbering. Each section of the regulations in
this part (other than subpart A) is designated by a number composed of
the part number followed by a decimal point (44.); the section of the
Internal Revenue Code which it interprets; a hyphen (-); and a number
identifying the section. By use of these designations one can ascertain
the sections of the regulations relating to a provision of the Code. For
example, the regulations pertaining to section 4401 of the Code are
designated Sec. Sec. 41.4401-1, 41.4401-2, and 41.4401-3.
[T.D. 6370, 24 FR 2614, Apr. 4, 1959, as amended by T.D. 7665, 45 FR
6090, Jan. 25, 1980]
Sec. 44.0-2 General definitions and use of terms.
As used in the regulations in this part, unless otherwise expressly
indicated:
(a) The terms defined in the provisions of law contained in the
regulations in this part shall have the meanings so assigned to them.
(b) The Internal Revenue Code of 1954 means the Act approved August
16, 1954 (68A Stat.), entitled ``An Act To revise the internal revenue
laws of the United States'', as amended.
(c) District director means district director of internal revenue.
(d) The cross references in the regulations in this part to other
portions of the regulations, when the word ``see'' is used, are made
only for convenience and shall be given no legal effect.
Sec. 44.0-3 Scope of regulations.
The regulations in this part apply to wagering activity on and after
January 1, 1955.
Sec. 44.0-4 Extent to which the regulations in this part supersede
prior regulations.
The regulations in this part, with respect to the subject matter
within the scope thereof, supersede Regulations 132, 26 CFR (1939) Part
325.
Subpart B_Tax on Wagers
Sec. 44.4401-1 Imposition of tax.
(a) In general. Section 4401 imposes a tax on all wagers, as defined
in section 4421. See section 4421 and Sec. 44.4421-1 for definition of
the term ``wager.''
(b) Rate of tax; amount of wager--(1) Rate of tax. The tax is
imposed at the rate of 10 percent of the amount of any taxable wager.
(2) Amount of wager. (i) The amount of the wager is the amount
risked by the bettor, including any charge or fee incident to the
placing of the wager as provided in subdivision (iv) of this
subparagraph, rather than the amount
[[Page 39]]
which he stands to win. Thus, if a bettor bets $5 against a bookmaker's
$7 with respect to the outcome of a prize fight, the amount of the wager
subject to tax is $5.
(ii) In the case of a ``parlay'' wager (i.e., a single wager made by
a bettor on the outcome of a series of events, usually horse races), the
amount of the taxable wager is the amount initially wagered by the
bettor irrespective of whether the parlay is successful. In the case of
an ``if'' wager, the amount of the taxable wager is the total of all
amounts wagered on each selection of the bettor. For example, A makes a
$10 wager on horse R with the understanding that if horse R wins, $5 is
to be wagered on horse S and $5 on horse T. If horse R wins, the taxable
wager is $20. If horse R loses, the taxable wager is $10. In determining
the amount of a taxable wager involving the features of, or a
combination of, ``parlay'' and ``if'' bets, such as wagers sometimes
referred to as a ``whipsaw'' or an ``if and reverse'' bet, the rules set
forth above relating to ``parlay'' and ``if'' bets are to be followed.
For example, assume B wagers $10 on horse R with the understanding that
if horse R wins, $5 is to be placed as a parlay wager on horses S and T.
In such a case, if horse R loses, the taxable wager is $10; if horse R
wins, there are two taxable wagers amounting in the aggregate to $15.
(iii) In the case of punchboards with prizes of merchandise, cash,
or free plays listed thereon, the amount of the taxable wager is the
amount risked by the bettor for all chances taken by him, including the
chances taken by the bettor in lieu of the acceptance of an equivalent
amount in cash or merchandise.
(iv) In determining the amount of any wager subject to tax there
shall be included any charge or fee incident to the placing of the
wager. For example, in the case of a wager with respect to a horse race,
any amount paid to a bookmaker for the purpose of guaranteeing the
bettor a pay-off based on actual track odds is to be included as a part
of the wager. Similarly, in the case of a lottery, any amount paid to
the operator thereof by the bettor for the privilege of making a
contribution to the pool or bank is also to be included in the amount of
the wager. However, the amount of the wager subject to tax shall not
include the amount of the tax where it is established by actual records
of the taxpayer that such amount of tax was collected from the bettor as
a separate charge.
Sec. 44.4401-2 Person liable for tax.
(a) In general. (1) Every person engaged in the business of
accepting wagers with respect to a sports event or a contest is liable
for the tax on any such wager accepted by him. Every person who operates
a wagering pool or lottery conducted for profit is liable for the tax
with respect to any wager or contribution placed in such pool or
lottery. To be liable for the tax, it is not necessary that the person
engaged in the business of accepting wagers or operating a wagering pool
or lottery physically receive the wager or contribution. Any wager or
contribution received by an agent or employee on behalf of such person
shall be considered to have been accepted by and placed with such
person.
(2) Any person required to register under section 4412 by reason of
having received wagers for or on behalf of another person, but who fails
to register the name and place of residence of such other person
(hereinafter in this subparagraph referred to as principal), shall be
liable for the tax on all wagers received by him during the period in
which he has failed to so register the name and place of residence of
such principal. Subsequent compliance with section 4412 by the person
receiving wagers for another does not relieve him of his liability and
duty to pay such tax, nor will the fact that such person incurs
liability with respect to the tax on such wagers, relieve his principal
of liability for the tax imposed under section 4401 with respect to such
wagers. Accordingly, both the person receiving the wagers and his
principal shall be liable for the tax on such wagers until the tax is
paid. Payment of the tax on such wagers shall not relieve the person
receiving wagers of any penalty for failure to register as required by
section 4412. This subparagraph has application only to wagers received
after September 2, 1958.
[[Page 40]]
(b) In business of accepting wagers. A person is engaged in the
business of accepting wagers if he makes it a practice to accept wagers
with respect to which he assumes the risk of profit or loss depending
upon the outcome of the event or the contest with respect to which the
wager is accepted. It is not intended that to be engaged in the business
of accepting wagers a person must be either so engaged to the exclusion
of all other activities or even primarily so engaged. Thus, for example,
an individual may be primarily engaged in business as a salesman, and
also for the purpose of the tax be engaged in the business of accepting
wagers.
(c) Lay-offs. If a person engaged in the business of accepting
wagers or conducting a lottery or betting pool for profits lays off all
or part of the wagers placed with him with another person engaged in the
business of accepting wagers or conducting a betting pool or lottery for
profit, he shall, notwithstanding such lay-off, be liable for the tax on
the wagers or contributions initially accepted by him. See Sec.
44.6419-2 for credit and refund provisions applicable with respect to
laid-off wagers.
Sec. 44.4401-3 When tax attaches.
The tax attaches when (a) a person engaged in the business of
accepting wagers with respect to a sports event or a contest, or (b) a
person who operates a wagering pool or lottery for profit, accepts a
wager or contribution from a bettor. In the case of a wager on credit,
the tax attaches whether or not the amount of the wager is actually
collected from the bettor. However, if an amount equivalent to the
amount of the wager is paid to the bettor prior to the close of the
calendar month in which such wager was accepted, either because of the
cancellation of the event upon which the wager was placed, or because
the wager was cancelled or rescinded by mutual agreement, the wager need
not be reported on the taxpayer's return for such month. Where such
cancellation or rescission takes place in a month subsequent to the
month in which the wager was accepted, credit or refund of the tax paid
with respect to such wager may be made subject to the provisions of
Sec. 44.6419-1.
Sec. 44.4402-1 Exemptions.
(a) Parimutuel wagering enterprises. Section 4402 provides that no
tax shall be imposed by section 4401 on any wager placed with, or on any
wager placed in a wagering pool conducted by, a parimutuel wagering
enterprise licensed under State law.
(b) Wagering machines--(1) In general. Section 4402 provides that no
tax shall be imposed by section 4401 on any wager placed in a coin-
operated device (as defined in section 4462 as in effect for years
beginning before July 1, 1980), or on any amount paid, in lieu of
inserting a coin, token, or similar object, to operate a device
described in section 4462(a)(2) (as so in effect). These devices
include:
(i) So-called ``slot'' machines that operate by means of the
insertion of a coin, token, or similar object and that, by application
of the element of chance, may deliver, or entitle the person playing or
operating the machine to receive cash, premiums, merchandise, or tokens;
and
(ii) Machines that are similar to machines described in paragraph
(b)(1)(i) of this section and are operated without the insertion of a
coin, token, or similar object.
(2) Examples. The following devices and machines are examples of the
devices referred to in paragraph (b)(1) of this section:
(i) A machine that is operated by means of the insertion of a coin,
token, or similar object and that, even though it does not dispense cash
or tokens, has the features and characteristics of a gaming device
whether or not evidence exists as to actual payoffs.
(ii) A so-called crane machine, claw, digger, or rotary
merchandising type device that is operated by the insertion of a coin
and adjustment of a control lever for the purpose or removing from the
machine, by gripping, pushing, or other manipulation articles such as
figurines, lighters, etc., in the machine.
(iii) A pinball machine equipped with a pushbutton for releasing
free plays and a meter for recording the plays so released, or equipped
with provisions
[[Page 41]]
for multiple coin insertion for increasing the odds.
(iv) Pinball machines in connection with which free plays are
redeemed in cash, tokens, or merchandise, or prizes are offered to any
person for the attainment of designated scores.
(v) A coin-operated machine that displays a poker hand or delivers a
ticket with a poker hand symbolized on it that entitles the player to a
prize if the poker hand displayed by the machine or symbolized on the
ticket constitutes a winning hand.
[T.D. 8328, 56 FR 188, Jan. 3, 1991; Redesignated and amended by T.D.
8442, 57 FR 48186, Oct. 22, 1992]
Sec. 44.4403-1 Daily record.
Every person liable for tax under section 4401 shall keep such
records as will clearly show as to each day's operations:
(a) The gross amount of all wagers accepted;
(b) The gross amount of each class or type of wager accepted on each
separate event, contest, or other wagering medium. For example, in the
case of wagers accepted on a horse race, the daily record shall show
separately the gross amount of each class or type of wagers (straight
bets, parlays, ``if'' bets, etc.) accepted on each horse in the race.
Similarly, in the case of the numbers game, the daily record shall show
the gross amount of each class or type of wager accepted on each number.
For additional provisions relating to records, see section 6001 and
Sec. 44.6001-1.
Sec. 44.4404-1 Territorial extent.
(a) In general. The tax imposed by section 4401 applies to wagers
(1) accepted in the United States, or (2) placed by a person who is in
the United States (i) with a person who is a citizen or resident of the
United States, or (ii) in a wagering pool or lottery conducted by a
person who is a citizen or resident of the United States. All wagers
made within the United States are taxable irrespective of the
citizenship or place of residence of the parties to the wager. Thus, the
tax applies to wagers placed within the United States, even though the
person for whom or on whose behalf the wagers are received is located in
a foreign country and is not a citizen or resident of the United States.
Likewise, a wager accepted outside the United States by a citizen or
resident of the United States is taxable if the person making such wager
is within the United States at the time the wager is made.
(b) Examples. The following examples illustrate the application of
paragraph (a) of this section:
Example 1. A syndicate which maintains its headquarters in a foreign
country has representatives in the United States who receive wagers in
the United States for or on behalf of such syndicate. For the purposes
of section 4404, such wagers are considered as accepted within the
United States, the syndicate is considered to be in the business of
accepting wagers within the United States, and such wagers are subject
to the tax. This is true regardless of the nationality or residence of
the members of the syndicate.
Example 2. A Canadian citizen employed in Detroit, Michigan,
telephones a horse race bet to a bookmaker who is a United States
citizen with his place of business located in Windsor, Canada. The wager
is taxable since it is made by a person within the United States with a
person who is a United States citizen.
Example 3. A United States citizen while visiting Tijuana, Mexico,
makes a wager on the outcome of a horse race with a bookmaker who is
also a United States citizen located and doing business in Tijuana. The
wager is not taxable since both parties to the wager, though United
States citizens, were outside the United States at the time the wager
was made.
Subpart C_Occupational Tax
Sec. 44.4411-1 Imposition of tax.
(a) In general. A special tax of $50 per year is required to be paid
by each person:
(1) Who is liable for the tax imposed by section 4401, or
(2) Who is engaged in receiving wagers for or on behalf of any
person who is liable for the tax imposed by section 4401.
(b) Examples. The application of paragraph (a) of this section may
be illustrated by the following examples:
Example 1. A, who is engaged in the business of accepting horse race
bets, employs ten persons to receive on his behalf wagers which are
transmitted by telephone. A also employs a secretary and a bookkeeper. A
and each of the ten persons who receives wagers
[[Page 42]]
by telephone on behalf of A are liable for the special tax. The
secretary and bookkeeper are not liable for the special tax unless they
also receive wagers for A.
Example 2. B operates a numbers game and has an arrangement with ten
persons, who are employed in various capacities, such as bootblacks,
elevator operators, news dealers, etc., to receive wagers from the
public on his behalf. B also employs C to collect from the ten persons
referred to, the wagers received by them on B's behalf and to deliver
such wagers to B. C performs no other services for B. B and the ten
persons who receive wagers on his behalf are liable for the special tax.
C is not liable for the special tax since he is not engaged in receiving
wagers for B.
(c) Cross references. For provisions relating to the payment of the
special tax (computation, manner of payment, etc.), see Subpart D of
this part.
Sec. 44.4412-1 Registration.
(a) In general. Every person required to pay the special tax imposed
by section 4411 shall register and file a return on Form 11-C. For
provisions relating to the general requirement for filing a return, see
Sec. 44.6011(a)-1.
(b) Information to be reported on Form 11-C. (1) Every person
required to make a return on Form 11-C shall report thereon his full
name and place of residence. A person doing business under an alias,
style, or trade name shall give his true name, followed by his alias,
style, or trade name. In the case of a partnership, association, firm,
or company, other than a corporation, the style or trade name shall be
given, also the true name of each member and his place of residence. In
the case of a corporation, the true name and title of each officer and
his place of residence shall be shown.
(2) Each person engaged in the business of accepting wagers on his
own account shall report on Form 11-C the name and address of each place
where such business will be conducted and the name, address, and number
appearing on the special (occupational) stamp of each agent or employee
who may receive wagers on his behalf. Thereafter, a return shall be
filed on Form 11-C, marked ``Supplemental'', each time an additional
employee or agent is engaged to receive wagers. Such supplemental return
shall be filed not later than 10 days after the date such additional
employee or agent is engaged to receive wagers and shall show the name,
address, and number appearing on the special (occupational) stamp of
each such agent or employee. As to a change of address, see Sec.
44.4905-2.
(3) Each agent or employee who receives wagers for or on behalf of a
person engaged in the business of accepting wagers on his own account
shall report on Form 11-C the name and residence address of each person
(i.e., individual, partnership, corporation, etc.) on whose behalf
wagers are to be received. Thereafter, the agent or employee shall file
a return on Form 11-C, marked ``Supplemental'', each time he is engaged
or employed to receive wagers for a person or persons other than the
person or persons previously reported on Form 11-C. Such supplemental
return shall be filed not later than 10 days after the date he is
engaged to receive wagers and shall show the name, business address, or,
if none, the residence address of the person or persons by whom he is
engaged to receive wagers. As to a change of address, see Sec. 44.4905-
2.
(c) Time and place for filing Form 11-C. For provisions relating to
the time for filing Form 11-C (other than Form 11-C marked
``Supplemental''), see section 6071 and Sec. 44.6071-1. For provisions
relating to the place for filing Form 11-C, see section 6091 and Sec.
44.6091-1.
Sec. 44.4413-1 Certain provisions made applicable.
For regulations under sections 4901, 4902, 4904, 4905, and 4906, as
extended and made applicable to the special tax imposed by section 4411
and to the persons upon whom such tax is imposed, see Subpart D of this
part.
Subpart D_Miscellaneous and General Provisions Applicable to Taxes on
Wagering
Miscellaneous Provisions
Sec. 44.4421-1 Definitions.
(a) Wager. The term ``wager'' means:
(1) Any wager placed with a person engaged in the business of
accepting wagers upon the outcome of a sports event or a contest;
(2) Any wager placed in a wagering pool with respect to a sports
event or a
[[Page 43]]
contest, if such pool is conducted for profit; and
(3) Any wager placed in a lottery conducted for profit.
(b) Lottery--(1) In general. The term ``lottery'' includes the
numbers game, policy, and similar types of wagering. In general, a
lottery conducted for profit includes any scheme or method for the
distribution of prizes among persons who have paid or promised a
consideration for a chance to win such prizes, usually as determined by
the numbers or symbols on tickets as drawn from a lottery wheel or other
receptacle, or by the outcome of an event: Provided, Such lottery is
conducted for profit. The term also includes enterprises commonly known
as ``policy'' or ``numbers'' and similar types of wagering where the
player selects a number, or a combination of numbers, and pays or agrees
to pay a certain amount in consideration of which the operator of the
lottery, policy, or numbers game agrees to pay a prize or fixed sum of
money if the selected number or combination of numbers appear or are
published in a manner understood by the parties. For example, the
winning number or combination of numbers may appear or be published as a
series of numbers in the payoff prices of a series of horse races at a
certain race track, or in the United States Treasury balance reports, or
the reports of a stock or commodity exchange. This description is not
intended to be restrictive; hence, the substitution of letters or other
symbols for numbers or a different arrangement for determining the
winning number or combination of numbers, does not alter the fundamental
nature of a game which otherwise would be considered a lottery. The
operation of a punch board or a similar gaming device for profit is also
considered to be the operation of a lottery.
(2) Certain games excluded--(i) Cards, dice, etc. Section 4421
specifically excludes from the term ``lottery'' any game of a type in
which usually (a) the wagers are placed, (b) the winners are determined,
and (c) the distribution of prizes or other property is made, in the
presence of all persons placing wagers in such game. Thus, for example,
no tax would be payable with respect to wagers made in a bingo or keno
game since such a game is usually conducted under circumstances in which
the wagers are placed, the winners are determined, and the distribution
of prizes is made in the presence of all persons participating in the
game. For the same reason, no tax would apply in the case of card games,
dice games, or games involving wheels of chance, such as roulette wheels
and gambling wheels of a type used at carnivals and public fairs.
(ii) Drawings conducted by an organization exempt from tax under
section 501 or 521. Section 4421 specifically excludes from the term
``lottery'' any drawing conducted by an organization exempt from tax
under section 501 or 521 if no part of the net proceeds derived from
such drawing inures to the benefit of any private shareholder or
individual. For provisions relating to exemption from income tax under
section 501 or 521, see the Income Tax Regulations (Part 1 of this
chapter).
(c) Other terms used--(1) Wagering pool. A wagering pool conducted
for profit includes any scheme or method for the distribution of prizes
to one or more winning bettors based upon the outcome of a sports event
or a contest, or a combination or series of such events or contests,
provided such wagering pool is managed and conducted for the purpose of
making a profit.
(2) Sports event. A sports event includes every type of sports
event, whether amateur, scholastic, or professional, such as horse
racing, auto racing, dog racing, boxing and wrestling matches and
exhibitions, baseball, football, and basketball games, tennis and golf
matches, track meets, etc.
(3) Contest. A contest includes any type of contest involving speed,
skill, endurance, popularity, politics, strength, appearances, etc.,
such as a general or primary election, the outcome of a nominating
convention, a dance marathon, a log-rolling, wood-chopping, weight-
lifting, corn-husking, beauty contest, etc.
(4) Conducted for profit. A wagering pool or lottery may be
conducted for profit even though a direct profit will not inure from the
operation thereof. A wagering pool or lottery operated with the
expectancy of a profit in the form
[[Page 44]]
of increased sales, increased attendance, or other indirect benefits is
conducted for profit for purposes of the wagering tax.
Sec. 44.4422-1 Doing business in violation of Federal or State law.
Payment of any special tax within the scope of the regulations in
this part in nowise authorizes the carrying on of any business in
violation of a law of the United States or the law of any State. The
special tax stamp is not a license or permit and affords no protection
from prosecution for violation of any Federal or State law. See also
section 4906.
General Provisions Relating to Occupational Taxes
Sec. 44.4901-1 Payment of special tax.
(a) Condition precedent to carrying on business. No persons shall
engage in the business of accepting wagers subject to the tax imposed by
section 4401 until he has filed a return on Form 11-C and paid the
special tax imposed by section 4411. Likewise, no person shall engage in
receiving wagers for or on behalf of any person engaged in the business
of accepting wagers until he has filed a return on Form 11-C and paid
the special tax imposed by section 4411. For provisions relating to the
tax imposed by section 4401 and the special tax imposed by section 4411,
see Subparts B and C of this part, respectively.
(b) Computation of special tax. (1) Section 4411 imposes a special
tax of $50 per year which is required to be paid by each person who is
liable for the tax imposed by section 4401 (tax on wagers) or who is
engaged in receiving wagers for or on behalf of any person who is liable
for the tax imposed by section 4401. A person engaged both in accepting
wagers on his own account and in receiving wagers for or on behalf of
some other person is required to purchase but one special tax stamp.
(2) The tax year begins July 1 and ends June 30 of the following
calendar year. Persons commencing business between August 1 and June 30
(both dates inclusive) shall pay a proportionate part of the annual tax.
``Commencing business'' means the initial acceptance by a person of a
wager subject to the tax imposed by section 4401 or the initial
receiving of a taxable wager by an agent or employee for or on behalf of
some other person. Persons in business for only a portion of a month are
liable for tax for the full month, i.e., a person first becoming subject
to the special tax on, for example, the 20th day of a month, is liable
for tax for the entire month.
(c) Tax payment evidenced by special tax stamp. (1) Upon receipt of
a return on Form 11-C, together with remittance of the full amount of
tax due, the district director will issue a special tax stamp as
evidence of payment of the special tax.
(2) District directors will distinctly write or print on the stamp
before it is delivered or mailed to the taxpayer the following
information: (i) The taxpayer's registered name, and (ii) the business
or office address of the taxpayer if he has one; if not, the residence
address. Special tax stamps will be transmitted by ordinary mail, unless
it is requested that they be transmitted by registered mail in which
case additional cost to cover registry fee shall be remitted with the
return.
(3) District directors and their collection officers are forbidden
to issue receipts in lieu of stamps representing the payment of special
taxes.
(d) Cross references. For provisions relating to registration and
information required to be reported on Form 11-C, see Sec. 44.4412-1.
For other provisions relating to Form 11-C, see Sec. Sec. 44.6011(a)-1
(relating to returns), 44.6071-1 (time for filing returns and other
documents), and 44.6091-1 (place for filing returns or other documents).
Sec. 44.4902-1 Partnership liability.
Any number of persons doing business in copartnership shall be
required to pay but one special tax. The district director may issue a
special tax stamp to a copartnership in a firm or trade name, provided
the names and addresses of all members of the partnership are disclosed
on Form 11-C.
Sec. 44.4905-1 Change of ownership.
(a) Changes through death. Whenever any person who has paid the
special tax imposed by section 4411 dies, the surviving spouse or child,
or executor or
[[Page 45]]
administrator, or other legal representative, may carry on such business
for the remainder of the term for which such special tax has been paid
without any additional payment, subject to the conditions hereinafter
stated. If the surviving spouse or child, or executor or administrator,
or other legal representative of the deceased taxpayer continues the
business, such person shall within 30 days after the date of the death
of the taxpayer execute a return on Form 11-C. Such return shall show
the name of the deceased taxpayer, together with all other data required
to be reported on Form 11-C (see Sec. 44.4412-1), and the stamp issued
to such taxpayer shall be submitted with the return for proper notation
by the district director.
(b) Changes from other causes. A receiver or trustee in bankruptcy
may continue the business under the stamp issued to the taxpayer at the
place and for the period for which the special tax was paid. An assignee
for the benefit of creditors may continue business under his assignor's
special tax stamp without incurring additional special tax liability. In
such cases the change shall be registered with the district director in
a manner similar to that required by paragraph (a) of this section.
(c) Changes in firm. When one or more members of a firm partnership
withdraw, the business may be continued by the remaining partner or
partners under the same special tax stamp for the remainder of the
period for which the stamp was issued to the old firm. The change shall,
however, be registered in the same manner as required in paragraph (a)
of this section. If new partners are taken into a firm the new firm so
constituted may not carry on business under the special tax stamp of the
old firm. The new firm shall make a return on Form 11-C and pay the
special tax imposed by section 4411 reckoned from the first day of the
month in which it began business, even though the name of such firm be
the same as that of the old. If the members of a partnership, which has
paid the special tax, form a corporation to continue the business a new
special tax stamp must be obtained in the name of the corporation.
(d) Change in corporation. If a corporation changes its name, no
additional tax is due, provided the change in name is registered with
the district director in the manner required by paragraph (a) of this
section. An increase in the capital stock of a corporation does not
create a new special tax liability if the laws of the State under which
it is incorporated permit such increase without the formation of a new
corporation. A stockholder in a corporation, who after its dissolution
continues the business, incurs liability for the special tax imposed by
section 4411 unless he already has a special tax stamp obtained in
respect of activities conducted as a sole proprietor.
Sec. 44.4905-2 Change of address.
(a) Procedure by taxpayer--(1) After June 30, 1963. Whenever, after
June 30, 1963, a taxpayer changes his business or residence address to a
location other than that specified in his last return on Form 11-C, he
shall register the change with the district director from whom the
special tax stamp was purchased by filing a new return, Form 11-C,
designated ``Supplemental Return'', setting forth the new address and
the date of change. He shall so register the change of address before:
(i) He engages in any wagering activity at the new address, or
(ii) The termination of a 30-day period which begins on the day
after the date of such change,
whichever occurs first. The taxpayer's special tax stamp shall accompany
the supplemental return for proper notation by the district director. As
to liability in case of failure to register a change of address, see
Sec. 44.4905-3.
(2) Before July 1, 1963. Whenever, before July 1, 1963, a taxpayer
changes his business or residence address to a location other than that
specified in his last return of Form 11-C, he shall, within 30 days
after the date of such change, register the change with the district
director from whom the special tax stamp was purchased by filing a new
return, Form 11-C, designated ``Supplemental Return'', setting forth the
new address and the date of change. The taxpayer's special tax stamp
shall accompany the supplemental return for
[[Page 46]]
proper notation by the district director. As to liability in case of
failure to register a change of address, see Sec. 44.4905-3.
(b) Procedure by district director; removal within district. When
registration of a change of address within the same district is made by
a taxpayer in the manner specified in paragraph (a) of this section, the
district director, if necessary, will enter on his records the new
address and the date of change. If the information disclosed on the
supplemental return is such as to require a change on the face of the
special tax stamp, the district director will make the proper change and
return the stamp to the taxpayer.
(c) Procedure by district director; removal to another district. In
case of removal of the taxpayer's office or principal place of business
(or residence address, if he has no office or principal place of
business) to another district, the district director, after noting the
transfer on his records, shall transmit the special tax stamp to the
district director for the district to which such office or business was
removed. The latter will make an entry on his records, as in the case of
an original registration in his district, correct the address on the
stamp, if necessary, and note also thereon his name, title, date, and
district, and then forward the stamp to the taxpayer.
[T.D. 6656, 28 FR 5720, June 12, 1963, as amended by T.D. 7087, 36 FR
505, Jan. 14, 1971]
Sec. 44.4905-3 Liability for failure to register change or removal.
Any person succeeding to and carrying on a business for which the
special tax imposed by section 4411 has been paid, and any taxpayer
changing his residence address or his place of business, without
registering such change as provided in Sec. Sec. 44.4905-1 and 44.4905-
2 shall be liable to an additional tax, and to the penalty prescribed in
section 6651 for failure to make a return. (For regulations under
section 6651, see the Regulations on Procedure and Administration (Part
301 of this chapter).)
Sec. 44.4906-1 Cross reference.
For provisions relating to the applicability of Federal and State
laws, see section 4422 and Sec. 44.4422-1.
Subpart E_Administrative Provisions of Special Application to the Taxes
on Wagering
Sec. 44.6001-1 Record requirements.
(a) In general. (1) In addition to all other records required
pursuant to Sec. 44.4403-1, every person required to pay tax under
section 4401 shall keep such records as will clearly show as to each
day's operation:
(i) Separately, the gross amount of wagers:
(a) Accepted directly by the taxpayer or at any registered place of
business of the taxpayer (other than laid-off wagers),
(b) Accepted for his account by agents at any place other than a
registered place of business of the taxpayer (other than laid-off
wagers), and
(c) Accepted as laid-off wagers from persons subject to the tax on
wagers;
(ii) With respect to wagers laid off with others, the name, address,
and registration number of each person with whom the laid-off wagers
were placed, and the gross amount laid off with each such person,
showing separately the gross amount of laid-off wagers with respect to
each event, contest, or other wagering medium, as, for example, the
gross amount laid off on each horse in a race; and
(iii) The gross amount of tax collected from or charged to bettors
as a separate item.
(2) If a taxpayer has any agents or employees receiving wagers on
his behalf, he shall maintain a separate record showing the name and
address of each agent or employee, the period of employment, and the
number of the special tax stamp issued to each such agent or employee.
(3) A duplicate copy of each return required by Sec. 44.6011(a)-1
shall be retained as part of the taxpayer's records.
(b) Records of agent or employee. Every person who is engaged in
receiving for or on behalf of another person (at any place other than a
registered place of
[[Page 47]]
business of such other person) wagers of a type subject to the tax
imposed by section 4401 shall keep a record showing for each day (1) the
gross amount of such wagers received by him, (2) the amount, if any,
retained as a commission or as compensation for receiving such wagers,
and (3) the amount turned over to the person on whose behalf the wagers
were received, and the name and address of such person.
(c) Record of claimants. Any person claiming a credit or refund
shall keep a complete and detailed record of each overpayment and of
each laid-off wager for which credit is taken or refund is claimed,
including a copy of the certificate required under paragraph (d) of
Sec. 44.6419-2.
(d) Place for keeping records. Every person required to pay the tax
imposed by section 4401 shall keep or cause to be kept, at his office or
principal place of business, or, if he has no office or principal place
of business, at his residence or some other convenient or safe location,
all such records as are required pursuant to paragraphs (a) and (c) of
this section and section 4403 and Sec. 44.4403-1.
(e) Period for retaining records. All records required by the
regulations in this part shall at all times be available for inspection
by internal revenue officers. Records required by Sec. 44.4403-1 and by
paragraph (a) of this section shall be maintained for a period of at
least three years from the date the tax became due. Records required by
paragraph (b) of this section shall be maintained for a period of at
least three years from the date the wager was received. Records required
by paragraph (c) of this section shall be maintained for a period of at
least three years from the date any credit is taken or refund is
claimed.
[T.D. 6370, 24 FR 2614, Apr. 4, 1959, as amended by T.D. 6568, 26 FR
7545, Aug. 15, 1961]
Sec. 44.6011(a)-1 Returns.
(a) In general. Every person required to pay the tax on wagers
imposed by section 4401 of the Code shall make for each month, from the
daily records required by Sec. Sec. 44.4403-1 and 44.6001-1, a return
on Form 730 in accordance with the instructions and regulations
applicable thereto. A return shall be made for each month whether or not
liability has been incurred for that month. If the taxpayer ceases
operations which make him liable for the tax, the last return shall be
marked ``Final Return''.
(b) Return on Form 11-C. Every person required to pay the special
tax imposed by section 4411 shall make a return on Form 11-C in
accordance with the instructions and regulations applicable thereto.
Sec. 44.6060-1 Reporting requirements for tax return preparers.
(a) In general. A person that employs one or more tax return
preparers to prepare a return or claim for refund of tax on wagers under
sections 4401 or 4411, other than for the person, at any time during a
return period, shall satisfy the record keeping and inspection
requirements in the manner stated in Sec. 1.6060-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78456, Dec. 22, 2008]
Sec. 44.6071-1 Time for filing return.
(a) Return on Form 730. Each return required to be made on Form 730
pursuant to Sec. 44.6011(a)-1 shall be filed on or before the last day
of the first calendar month following the period for which it is made.
For provisions relating to the time for filing a return when the
prescribed due date falls on Saturday, Sunday, or a legal holiday, see
the provisions of the Regulations on Procedure and Administration (part
301 of this chapter) under section 7503.
(b) Return on Form 11C. (1) The first return required to be made on
Form 11-C shall be filed to cover the period beginning with the first
day of the calendar month in which a person engages (or expects to
engage) in activities which make him liable for the special tax imposed
by section 4411 and ending with the following June 30. Thereafter, each
return required to be made on Form 11-C shall be filed on or before July
1 to cover a 1-year period (beginning July 1 and ending June 30 of the
following calendar year) during which taxable activity continues.
[[Page 48]]
(2) For additional provisions relating to the return on Form 11-C,
see Sec. 44.4412-1 and Sec. Sec. 44.4901-1 to 44.4905-3, inclusive.
Sec. 44.6091-1 Place for filing returns.
(a) In general. Except as provided in paragraph (b) of this section,
a return on Form 730 or Form 11-C shall be filed with any person
assigned the responsibility to receive returns in the local Internal
Revenue Service office that serves the legal residence or principal
place of business of the person making the return.
(b) Returns of individuals outside the United States. The returns on
Form 730 and Form 11-C of individuals (whether citizens of the United
States, citizens of possessions of the United States, or aliens) outside
the United States having no legal residence or principal place of
business in the United States shall be filed with the Internal Revenue
Service Center, Cincinnati, Ohio 45999, or as otherwise directed in the
applicable forms and instructions.
(c) Returns filed with service centers. Notwithstanding paragraphs
(a) and (b) of this section, whenever instructions applicable to returns
filed on Form 730 of Form 11-C provide that the returns be filed with a
service center, the returns shall be so filed in accordance with the
instructions.
(d) Hand-carried returns. Returns which are filed by hand carrying
shall be filed with any person assigned the responsibility to receive
hand-carried returns in the local Internal Revenue Service office as
provided in paragraph (a) of this section. See Sec. 301.6091-1(c) of
this chapter (Regulations on Procedure and Admininstration) for
provisions relating to the definition of hand carried.
[T.D. 6370, 24 FR 2614, Apr. 4, 1959, as amended by T.D. 7630, 44 FR
40498, July 11, 1979; T.D. 8442, 57 FR 48185, Oct. 22, 1992; T.D. 9156,
69 FR 55746, Sept. 16, 2004]
Sec. 44.6107-1 Tax return preparer must furnish copy of return
to taxpayer and must retain a copy or record.
(a) In general. A person who is a signing tax return preparer of any
return or claim for refund of tax on wagers under sections 4401 or 4411
shall furnish a completed copy of the return or claim for refund to the
taxpayer, and retain a completed copy or record in the manner stated in
Sec. 1.6107-1 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78456, Dec. 22, 2008]
Sec. 44.6109-1 Tax return preparers furnishing identifying numbers
for returns or claims for refund.
(a) In general. Each tax return or claim for refund of tax under
sections 4401 or 4411 prepared by one or more signing tax return
preparers must include the identifying number of the preparer required
by Sec. 1.6695-1(b) of this chapter to sign the return or claim for
refund in the manner stated in Sec. 1.6109-2 of this chapter.
(b) Effective/applicability date. This section is applicable for
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78456, Dec. 22, 2008]
Sec. 44.6151-1 Time and place for paying taxes.
The taxes imposed by sections 4401 and 4411 shall, without
assessment or notice and demand, be paid to the internal revenue officer
with whom the returns are required to be filed at the time fixed for
filing returns. For provisions relating to the time for filing returns,
see section 6071 and Sec. 44.6071-1. For provisions relating to the
place for filing returns, see section 6091 and Sec. 44.6091-1.
Sec. 44.6419-1 Credit or refund generally.
(a) Overpayment of wagering tax; in general. If a person overpays
the tax imposed under section 4401, he may either file a claim for
refund on Form 843 or take credit for such overpayment against the tax
due on a subsequent monthly return. A complete statement of the facts
involving the overpayment shall be attached either to the claim or to
the return on which the credit is claimed. Every claim for refund shall
be supported by evidence showing the name and address of the taxpayer,
the date of payment of the tax, and the amount of such tax. A credit
taken on
[[Page 49]]
a return shall be supported by evidence of the same character.
(b) Statement supporting credit or refund. No credit or refund shall
be allowed whether in pursuance of a court decision or otherwise unless
the taxpayer files a statement explaining satisfactorily the reason for
claiming the credit or refund and establishing (1) that he has not
collected (whether as a separate charge or otherwise) the amount of the
tax from the person who placed the wager on which the tax was imposed,
or (2) that he has either repaid the amount of the tax to the person who
placed the wager or has secured the written consent of such person to
the allowance of the credit or refund. In the latter case, the written
consent of the person who placed the wager shall accompany the statement
filed with the credit or refund claim. The statement supporting the
credit or refund claim shall also show whether any previous claim for
credit or refund covering the amount involved, or any part thereof, has
been filed. If the overpayment of tax relates to a laid-off wager
accepted by the taxpayer, no credit or refund shall be allowed or made
unless the taxpayer complies with the provisions of the first sentence
of this paragraph, not only as to the person who placed the laid-off
wager, but also with respect to the person who placed the original
wager.
(c) Limitation on credit or refund. No claim for credit or refund of
a tax shall be allowed unless presented within the period of limitations
prescribed in section 6511. (For regulations under section 6511, see the
Regulations on Procedure and Administration (part 301 of this chapter).)
Sec. 44.6419-2 Credit or refund on wagers laid off by taxpayer.
(a) Laid-off wagers; in general. If a taxpayer accepts a wager and
lays off all or a part thereof with another person who is liable for tax
under section 4401 with respect to such laid-off wager, a credit may be
allowed to such taxpayer in the amount of the tax due with respect to
the amount of the wager so laid off, provided there is attached to the
return for the month during which the wager was accepted and laid off by
him the certificate prescribed in paragraph (d) of this section.
(b) Claim for refund. If a taxpayer has paid the tax with respect to
a wager laid off by him, he may file a claim for refund of such tax on
Form 843 or take a credit for the tax paid by him against the tax shown
to be due on any subsequent monthly return. If a refund is claimed, Form
843 shall be completed in accordance with the instructions thereon and,
in addition, there shall be attached to such form a statement setting
forth the reason for claiming the refund, the month in which such tax
was paid, the date of payment, and whether any previous claim for refund
covering the amount involved or any part thereof has been filed. There
shall also be attached to the Form 843 the certificate prescribed below.
In the case of a credit, the statement and certificate shall be attached
to the monthly return on which the credit is claimed.
(c) Credit or refund not allowed. No credit or refund will be
allowed under this section if the wager is laid off with a person or
organization not liable for tax under section 4401 with respect to such
laid-off wager. No interest shall be allowed on any amount of tax
credited or refunded under this section.
(d) Certificate required. The certificate prescribed for use in
support of a credit or refund with respect to a laid-off wager shall be
in the following form:
Certificate
(In support of credit or refund with respect to laid-off wagers under
section 6419(b) of the Internal Revenue Code.)
I hereby certify that I, or the _____ (Corporation, partnership, or
syndicate) of which I am an officer or member, doing business at
____________, (Address) registered with the District Director of
Internal Revenue at __________, __________ under Registration No. ____
as a person accepting wagers within the meaning of section 4401 of the
Internal Revenue Code, accepted laid-off wagers, in the amounts and on
the dates indicated below, from _________, (Name) ________, (Address)
during the month of ________, 19__.
Subject of laid-
off wager
(Identify horse
Date Amount of laid-off and track,
wager particular
contest, or
contestant, etc.)
[[Page 50]]
(Attach supplemental sheets for additional entries, if necessary.)
The undersigned further certifies that he, or the corporation,
partnership, or syndicate of which he is a member will make return of
and account for the tax, under section 4401 of the Internal Revenue
Code, with respect to the laid-off wagers so accepted.
It is understood by the undersigned that this certificate is given
for the purpose of enabling the person from whom the laid-off wagers
were accepted to claim credit with respect to the tax due on such laid-
off wagers or to claim credit or refund of the tax, if any, paid on such
laid-off wagers.
It is further understood that the fraudulent use of this certificate
will subject the undersigned and all guilty parties to a fine of not
more than $10,000 or to imprisonment for not more than five years, or
both, together with costs of prosecution.
(Signed)________________________________________________________________
(Date)__________________________________________________________________
(Title)_________________________________________________________________
(Owner, President Partner, Member, etc.)
Sec. 44.6694-1 Section 6694 penalties applicable to tax return
preparer.
(a) In general. For general definitions regarding section 6694
penalties applicable to preparers of wagering tax returns or claims for
refund under sections 4401 or 4411, see Sec. 1.6694-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78456, Dec. 22, 2008]
Sec. 44.6694-2 Penalties for understatement due to an unreasonable
position.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax on wagers under sections 4401 or 4411 shall
be subject to penalties under section 6694(a) in the manner stated in
Sec. 1.6694-2 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78456, Dec. 22, 2008]
Sec. 44.6694-3 Penalty for understatement due to willful, reckless,
or intentional conduct.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax on wagers under sections 4401 or 4411 shall
be subject to penalties under section 6694(b) in the manner stated in
Sec. 1.6694-3 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78457, Dec. 22, 2008]
Sec. 44.6694-4 Extension of period of collection when preparer pays
15 percent of a penalty for understatement of taxpayer's liability and
certain other procedural matters.
(a) In general. For rules relating to the extension of period of
collection when a tax return preparer who prepared a return or claim for
refund for tax on wagers under sections 4401 or 4411 pays 15 percent of
a penalty for understatement of taxpayer's liability and procedural
matters relating to the investigation, assessment and collection of the
penalties under section 6694(a) and (b), the rules under Sec. 1.6694-4
of this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78457, Dec. 22, 2008]
Sec. 44.6695-1 Other assessable penalties with respect to the
preparation of tax returns for other persons.
(a) In general. A person who is a tax return preparer of any return
or claim for refund of tax on wagers under sections 4401 or 4411 of the
Internal Revenue Code (Code) shall be subject to penalties for failure
to furnish a copy to the taxpayer under section 6695(a) of the Code,
failure to sign the return under section 6695(b) of the Code, failure to
furnish an identification number under section 6695(c) of the Code,
failure to retain a copy or list under section 6695(d) of the Code,
failure to file a correct information return under section 6695(e) of
the Code, and negotiation of a check under section 6695(f) of
[[Page 51]]
the Code, in the manner stated in Sec. 6695-1 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed after December 31, 2008.
[T.D. 9436, 73 FR 78457, Dec. 22, 2008; 74 FR 5106, Jan. 29, 2009]
Sec. 44.6696-1 Claims for credit or refund by tax return preparers.
(a) In general. For rules for claims for credit or refund by a tax
return preparer who prepared a return or claim for refund for tax on
wagers under sections 4401 or 4411, the rules under Sec. 1.6696-1 of
this chapter will apply.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78457, Dec. 22, 2008]
Sec. 44.7262-1 Failure to pay special tax.
Any person liable for the special tax who does any act which makes
him liable for such tax, without having paid the tax, is, besides being
liable for the tax, subject to a fine of not less than $1,000 and not
more than $5,000.
Sec. 44.7701-1 Tax return preparer.
(a) In general. For the definition of a tax return preparer, see
Sec. 301.7701-15 of this chapter.
(b) Effective/applicability date. This section is applicable to
returns and claims for refund filed, and advice provided, after December
31, 2008.
[T.D. 9436, 73 FR 78457, Dec. 22, 2008]
PART 46_EXCISE TAX ON CERTAIN INSURANCE POLICIES, SELF-INSURED
HEALTH PLANS, AND OBLIGATIONS NOT IN REGISTERED FORM
--Table of Contents
Subpart A_Introduction
Sec.
46.0-1 Introduction.
Subpart B_Tax on Policies Issued by Foreign Insurers
46.4371-1 Applicability of subpart.
46.4371-2 Imposition of tax on policies issued by foreign insurers;
scope of tax.
46.4371-3 Rate and computation of tax.
46.4371-4 Records required with respect to foreign insurance policies.
46.4374-1 Liability for tax.
Subpart C_Fees on Insured and Self-insured Health Plans
46.4375-1 Fee on issuers of specified health insurance policies.
46.4376-1 Fee on sponsors of self-insured health plans.
46.4377-1 Definitions and special rules.
Subpart D_Excise Tax on Obligations Not in Registered Form
46.4701-1 Tax on issuer of registration-required obligation not in
registered form.
Authority: 26 U.S.C. 7805.
Source: T.D. 8497, 25 FR 6461, May 6, 1960, unless otherwise noted.
Subpart A_Introduction
Sec. 46.0-1 Introduction.
The regulations in this part 46 relate to the taxes on certain
insurance policies and self-insured health plans imposed by chapter 34
of the Internal Revenue Code and the tax on the issuer of registration-
required obligations not issued in registered form imposed by chapter 39
of the Internal Revenue Code. See part 40 of this chapter for
regulations relating to returns, payments, and deposits of taxes imposed
by chapters 34 and 39.
[T.D. 8442, 57 FR 48185, Oct. 22, 1992, as amended by T.D. 9602, 77 FR
72728, Dec. 6, 2012]
Subpart B_Tax on Policies Issued by Foreign Insurers
Sec. 46.4371-1 Applicability of subpart.
The provisions of this subpart apply only to premiums paid on or
after January 1, 1966. See subpart H, part 47 of this chapter for
provisions relating to premiums paid or charged before January 1, 1966.
If any portion of the tax imposed by section 4371 was paid on the basis
of the premium charged before January 1, 1966, in accordance with the
provisions of Sec. 47.4371-2 of this chapter (documentary stamp tax),
then, to the extent that such portion was paid by stamp, no further tax
is due under the provisions of this subpart.
[[Page 52]]
Sec. 46.4371-2 Imposition of tax on policies issued by foreign
insurers; scope of tax.
(a) Certain insurance policies, and indemnity, fidelity, or surety
bonds. Section 4371(1) imposes a tax upon each policy of insurance
(other than those referred to in paragraph (b) of this section), upon
each indemnity, fidelity, or surety bond, or upon each certificate,
binder, covering note, receipt, memorandum, cablegram, letter, or other
instrument by whatever name called, whereby a contract of insurance or
an obligation in the nature of an indemnity, fidelity, or surety bond is
made, continued, or renewed, if issued:
(1) By a nonresident alien individual, a foreign partnership, or a
foreign corporation, as insurer (unless the policy or other instrument
is signed or countersigned by an officer or agent of the insurer in a
State, Territory, or the District of Columbia in which the insurer is
authorized to do business); and either
(2) To or for, or in the name of, a domestic corporation, domestic
partnership, or an individual resident of the United States, against or
with respect to hazards, risks, losses, or liabilities wholly or partly
within the United States; or
(3) To or for, or in the name of, a foreign corporation, foreign
partnership, or nonresident individual, engaged in a trade or business
within the United States with respect to hazards, risks, or liabilities
wholly within the United States.
For definition of the term ``indemnity bond,'' see section 4372(c).
(b) Life insurance, sickness, and accident policies, and annuity
contracts. Unless the insurer is subject to tax under section 819,
section 4371(2) imposes a tax upon each policy of insurance or annuity
contract, or upon each certificate, binder, covering note, receipt,
memorandum, cablegram, letter, or other instrument by whatever name
called, whereby a contract of insurance or an annuity contract is made,
continued, or renewed, if issued:
(1) By a nonresident alien individual, a foreign partnership, or a
foreign corporation, as insurer (unless the policy or other instrument
is signed or countersigned by an officer or agent of the insurer in a
State, Territory, or the District of Columbia in which such insurer is
authorized to do business); and
(2) To any person with respect to the life or hazards to the person
of a citizen or resident of the United States.
(c) Reinsurance. Section 4371(3) imposes a tax upon each policy of
reinsurance, certificate, binder, covering note, receipt, memorandum,
cablegram, letter, or other instrument by whatever name called, whereby
a contract of reinsurance is made, continued, or renewed, if issued:
(1) By a nonresident alien individual, a foreign partnership, or a
foreign corporation, as reinsurer (unless the policy or other instrument
is signed or countersigned by an officer or agent of the reinsurer in a
State, Territory, or the District of Columbia in which such reinsurer is
authorized to do business); and
(2) To any person against, or with respect to, any of the hazards,
risks, losses, or liabilities covered by contracts of the type described
in section 4371 (1) or (2).
(d) Exempt indemnity bonds. The tax imposed by section 4371 does not
apply to any indemnity bond described in section 4373(2).
Sec. 46.4371-3 Rate and computation of tax.
(a) Rate of tax. (1) The tax under section 4371(1) is imposed at the
rate of 4 cents on each dollar, or fractional part thereof, of the
premium payment.
(2) The tax under section 4371 (2) and (3) is imposed at the rate of
1 cent on each dollar, or fractional part thereof, of the premium
payment.
(b) Meaning of premium payment. For purposes of this subpart, the
term ``premium payment'' means the consideration paid for assuming and
carrying the risk or obligation, and includes any additional assessment
or charge paid under the contract, whether payable in one sum or
installments.
Sec. 46.4371-4 Records required with respect to foreign insurance
policies.
(a) Each person required under the provisions of Sec. 46.4374-1 to
remit the tax imposed by section 4371 shall keep or cause to be kept
accurate records of all policies or other instruments subject
[[Page 53]]
to such tax upon which premiums have been paid. Such records must
identify each such policy or other instrument in such a manner as to
clearly establish the following: (1) The gross premium paid; (2) whether
such policy or other instrument is (i) a policy of casualty insurance or
an indemnity bond subject to tax under section 4371(1), (ii) a policy of
life, sickness, or accident insurance or an annuity contract subject to
tax under section 4371(2), or (iii) a policy of reinsurance subject to
tax under section 4371(3); (3) the identity of the insured (as defined
in section 4372(d)); (4) the identity of the foreign insurer or
reinsurer (as defined in section 4372(a)); and (5) the total premium
charged and, if the premium is to be paid in installments, the amount
and anniversary date of each such installment.
(b) The records required under the provisions of this section must
be kept on file at the place of business or at some other convenient
location, for a period of at least 3 years from the date any part of the
tax became due or the date any part of the tax is paid, whichever is
later, in such manner as to be readily accessible to authorized internal
revenue officers or employees. The person having control or possession
of a policy or other instrument subject to tax under section 4371 shall
retain such policy or other instrument for at least 3 years from the
date any part of the tax with respect to such policy was paid.
[T.D. 7023, 35 FR 1012, Jan. 24, 1970. Redesignated by T.D. 8328, 56 FR
189, Jan. 3, 1991, as amended by T.D. 8442, 57 FR 48186, Oct. 22, 1992]
Sec. 46.4374-1 Liability for tax.
(a) In general. Any person who makes, signs, issues, or sells any of
the documents and instruments subject to the tax, or for whose use or
benefit the same are made, signed, issued, or sold, shall be liable for
the tax imposed by section 4371. For purposes of this section, in the
case of a reinsurance policy that is subject to the tax imposed by
section 4371(3), other than assumption reinsurance, the insured person
on the underlying insurance policy, the risk of which is covered in
whole or in part by such reinsurance policy, shall not constitute a
person for whose use or benefit the reinsurance policy is made, signed,
issued, or sold.
(b) When liability for tax attaches. The liability for the tax
imposed by section 4371 shall attach at the time the premium payment is
transferred to the foreign insurer or reinsurer (including transfers to
any bank, trust fund, or similar recipient, designated by the foreign
insurer or reinsurer), or to any nonresident agent, solicitor, or
broker. A person required to pay tax under this section may remit such
tax before the time the tax attaches if he keeps records consistent with
such practice.
(c) Payment of tax. The tax imposed by section 4371 shall be paid on
the basis of a return by the person who makes payment of the premium to
a foreign insurer or reinsurer or to any nonresident agent, solicitor,
or broker. If the tax is not paid by the person who paid the premium,
the tax imposed by section 4371 shall be paid on the basis of a return
by any person who makes, signs, issues, or sells any of the documents or
instruments subject to the tax imposed by section 4371, or for whose use
or benefit such document or instrument is made, signed, issued, or sold.
(d) Penalty for failure to pay tax. Any person who fails to comply
with the requirements of this section with intent to evade the tax
shall, in addition to other penalties provided therefor, pay a fine of
double the amount of tax. (See section 7270.)
(e) Effective date. This section is applicable for premiums paid on
or after November 27, 2002.
[T.D. 9024, 67 FR 70846, Nov. 27, 2002]
Subpart C_Fees on Insured and Self-insured Health Plans
Source: T.D. 9602, 77 FR 72728, Dec. 6, 2012, unless otherwise
noted.
Sec. 46.4375-1 Fee on issuers of specified health insurance policies.
(a) In general. An issuer of a specified health insurance policy is
liable for a fee imposed by section 4375 for policy years ending on or
after October 1, 2012, and before October 1, 2019. Paragraph (b) of this
section provides definitions
[[Page 54]]
that apply for purposes of section 4375 and this section. Paragraph (c)
of this section provides rules for calculating the fee under section
4375. Paragraph (d) of this section provides the applicability date. For
rules relating to filing the required return and paying the fee, see
Sec. Sec. 40.6011(a)-1 and 40.6071(a)-1 of this chapter.
(b) Definitions. The following definitions apply for purposes of
section 4375 and this section. See also Sec. 46.4377-1 for additional
definitions.
(1) Specified health insurance policy--(i) In general. Except as
provided in paragraph (b)(1)(ii) of this section and Sec. 46.4377-1,
specified health insurance policy means any accident and health
insurance policy (including a policy under a group health plan) issued
with respect to individuals residing in the United States (as defined in
Sec. 46.4377-1(a)(2)), including prepaid health coverage arrangements
described in paragraph (b)(2) of this section. Specified health
insurance policy also includes any policy that provides accident and
health coverage to an active employee, former employee, or qualifying
beneficiary, as continuation coverage required under the Consolidated
Omnibus Budget Reconciliation Act of 1985 (COBRA) or similar
continuation coverage under other Federal law or state law.
(ii) Exceptions. The term specified health insurance policy does not
include--
(A) Any insurance policy if substantially all of its coverage is of
excepted benefits described in section 9832(c);
(B) Any group policy issued to an employer where the facts and
circumstances show that the group policy was designed and issued
specifically to cover primarily employees who are working and residing
outside of the United States (as defined in Sec. 46.4377-1(a)(3));
(C) Any stop loss or indemnity reinsurance policy; or
(D) Any insurance policy to the extent it provides an employee
assistance program, disease management program, or wellness program if
the program does not provide significant benefits in the nature of
medical care or treatment.
(iii) Stop loss policy. For purposes of paragraph (b)(1)(ii) of this
section, stop loss policy means an insurance policy in which--
(A) The insurer that issues the policy to a person establishing or
maintaining a self-insured health plan becomes liable for all, or an
agreed upon portion of, losses that person incurs in covering the
applicable lives in excess of a specified amount; and
(B) The person establishing or maintaining the self-insured health
plan retains its liability to, and its contractual relationship with,
the applicable lives covered.
(iv) Indemnity reinsurance policy. For purposes of paragraph
(b)(1)(ii) of this section, indemnity reinsurance policy means an
agreement between two or more insurance companies under which--
(A) The reinsuring company agrees to accept and to indemnify the
issuing company for all or part of the risk of loss under policies
specified in the agreement; and
(B) The issuing company retains its liability to, and its
contractual relationship with, the applicable lives covered.
(2) Prepaid health coverage arrangement. The term prepaid health
coverage arrangement means an arrangement under which fixed payments or
premiums are received as consideration for a person's agreement to
provide or arrange for the provision of accident and health coverage to
individuals residing in the United States, regardless of how such
coverage is provided or arranged to be provided. For example, any
hospital or medical service policy or certificate, hospital or medical
service plan contract, or health maintenance organization contract is a
specified health insurance policy.
(c) Calculation of fee--(1) In general. The amount of the fee for a
policy for a policy year is equal to the product of the average number
of lives covered under the policy for the policy year (determined in
accordance with paragraphs (c)(2) and (c)(3) of this section) and the
applicable dollar amount (determined in accordance with paragraph (c)(4)
of this section). For purposes of computing the fee under this paragraph
[[Page 55]]
(c), in the case of an issuer that determines the average number of
lives covered for all policies in effect during a calendar year using
the member months method under paragraph (c)(2)(v) of this section or
the state form method under paragraph (c)(2)(vi) of this section, the
applicable dollar amount with respect to such issuer's policies for such
calendar year is the applicable dollar amount for policy years ending on
December 31 of such calendar year (determined in accordance with
paragraph (c)(4) of this section), except that the applicable dollar
amount with respect to such an issuer's policies for calendar year 2019
is the applicable dollar amount for policy years ending on September 30,
2019. For more information, see the examples in paragraphs
(c)(2)(iii)(B), (c)(2)(iv)(B), (c)(2)(v)(B), and (c)(2)(vi)(B) of this
section.
(2) Determination of the average number of lives covered under a
policy--(i) In general. To determine the average number of lives covered
under a specified health insurance policy during a policy year, an
issuer must use one of the following methods--
(A) The actual count method (described in paragraph (c)(2)(iii) of
this section);
(B) The snapshot method (described in paragraph (c)(2)(iv) of this
section);
(C) The member months method (described in paragraph (c)(2)(v) of
this section); or
(D) The state form method (described in paragraph (c)(2)(vi) of this
section).
(ii) Consistency requirements. An issuer must use the same method of
calculating the average number of lives covered under a policy
consistently for the duration of the year. In addition, for all policies
for which a liability is reported on a Form 720, ``Quarterly Federal
Excise Tax Return,'' for a particular year, the issuer must use the same
method of computing lives covered. An issuer that determines the average
number of lives covered by using the actual count method described in
paragraph (c)(2)(iii) of this section or the snapshot method described
in paragraph (c)(2)(iv) of this section may change its method of
computing the average lives covered to the snapshot method or actual
count method, respectively, provided that the issuer uses the same
method for computing the average lives covered for all policies for
which a liability is reported on the Form 720 for that year. For
example, an issuer with a policy having a policy year that ends on June
30, Policy A, may determine the average number of lives covered under
Policy A for July 1, 2013, to June 30, 2014, using the actual count
method if the issuer uses the actual count method for all policies for
which a liability will be reported on the Form 720 due by July 31, 2015
(the due date for return that will include the liability for the July
2013 to June 2014 policy year for Policy A). The issuer may change its
method for determining the average number of lives covered under Policy
A to the snapshot method for the July 1, 2014, to June 30, 2015, policy
year, provided that the snapshot method is used for all policies for
which a liability will be reported on the Form 720 due by July 31, 2016
(the due date for return that will include the liability for the July
2014 to June 2015 policy year for Policy A). An issuer that determines
the average number of lives covered by using the member months method
under paragraph (c)(2)(v) of this section or the state form method under
paragraph (c)(2)(vi) of this section must use the same method for
calculating lives covered for all policy years for which the fee
applies.
(iii) Actual count method--(A) Calculation method. An issuer may
determine the average number of lives covered under a policy for a
policy year by adding the total number of lives covered for each day of
the policy year and dividing that total by the number of days in the
policy year.
(B) Example. The following example illustrates the principles of
paragraphs (c)(1) and (c)(2)(iii)(A) of this section:
Example. Insurance Company A issues three policies that are in
effect during 2014, Group Health Insurance Policy A, which has a policy
year from December 1 to November 30, Group Health Insurance Policy B,
which has a policy year from March 1 to February 28, and Group Health
Insurance Policy C, which has a policy year from January 1 to December
31. To calculate the average number of lives covered for 2014, Insurance
Company A must calculate the average number of lives covered for each of
its three policies
[[Page 56]]
for the policy year that ends in 2014. Insurance Company A chooses to
use the actual count method under paragraph (c)(2)(iii)(A) of this
section to determine average lives covered for policies having a policy
year that ends in 2014. Insurance Company A calculates the sum of lives
covered under Policy A for each day of the policy year ending November
30, 2014, as 3,285,000. The average number of lives covered under Policy
A for the policy year ending November 30, 2014, is 3,285,000 divided by
365, or 9,000. Insurance Company A calculates the sum of lives covered
under Policy B for each day of the policy year ending February 28, 2014,
as 547,500. The average number of lives covered under Policy B for the
policy year ending on February 28, 2014, is 547,500 divided by 365, or
1,500. Insurance Company A calculates the sum of lives covered under
Policy C for each day of the policy year ending December 31, 2014, as
4,380,000. The average number of lives covered under Policy C for the
policy year ending December 31, 2014, is 4,380,000 divided by 365, or
12,000. To calculate the section 4375 fee under paragraph (c)(1) of this
section for calendar year 2014, Insurance Company A must first determine
the applicable dollar amount for each policy under paragraph (c)(4) of
this section and multiply that amount by the average number of lives
covered for that policy. Insurance Company A then adds the total fees
for all three policies to determine the total fee under section 4375
that it must pay for calendar year 2014.
(iv) Snapshot method--(A) Calculation method. An issuer may
determine the average number of lives covered under a policy for a
policy year by adding the totals of lives covered on a date during the
first, second, or third month of each quarter (or more dates in each
quarter if an equal number of dates is used for each quarter), and
dividing that total by the number of dates on which a count is made. For
purposes of this paragraph (c)(2)(iv)(A), each date used for the second,
third and fourth quarters must be within three days of the date in that
quarter that corresponds to the date used for the first quarter, and all
dates used must be within the same policy year. If an issuer uses
multiple dates for the first quarter, the issuer must use dates in the
second, third, and fourth quarters that correspond to each of the dates
used for the first quarter or are within three days of such
corresponding dates, and all dates used must be within the same policy
year. The 30th and 31st day of a month are treated as the last day of
the month for purposes of determining the corresponding date for any
month that has fewer than 31 days (for example, if either March 30 or
March 31 is used as a counting date for a calendar year policy, June 30
is the corresponding date for the second quarter).
(B) Example. The following example illustrates the principles of
paragraphs (c)(1) and (c)(2)(iv)(A) of this section:
Example. (i) Insurance Company B issues three policies with 12-month
policy years that end in 2014, Group Health Insurance Policy A, which
has a policy year from December 1 to November 30, Group Health Insurance
Policy B, which has a policy year from March 1 to February 28, and Group
Health Insurance Policy C, which has a policy year from January 1 to
December 31. To calculate the average number of lives covered for 2014,
Insurance Company B must calculate the average number of lives covered
for each of its three policies for the policy year that ends in 2014.
Insurance Company B chooses to determine the average lives covered using
the snapshot method for all policies that have a policy year that ends
in 2014 and chooses to count lives covered on a single date of the first
month of each quarter of the policy years. Thus, for Policy A, Insurance
Company B must count lives covered on a single date falling in each of
December 2013, March 2014, June 2014 and September 2014; for Policy B,
Insurance Company B must count lives covered on a single date falling in
each of March 2014, June 2014, September 2014 and December 2014; and for
Policy C, Insurance Company B must count lives covered on a single date
falling in each of January 2014, April 2014, July 2014 and October 2014.
In addition, the date for each of the second, third, and fourth quarters
must fall within three days of the date in such quarter that corresponds
to the date used for the first quarter, and must fall within the same
policy year.
(ii) On December 6, 2013, Policy A covers 8,900 lives, on March 7,
2014, 9,100 lives, on June 6, 2014, 9,050 lives, and on September 5,
2014, 9,050 lives. Insurance Company B treats the average number of
lives covered under Policy A for the policy year ending November 30,
2014, as 36,100 (8,900 + 9,100 + 9,050 + 9,050) divided by 4, or 9,025.
(iii) On March 4, 2013, Policy B covers 1,500 lives, on June 7,
2013, 1,350 lives, on September 6, 2013, 1,400 lives, and on December 6,
2013, 1,550 lives. Insurance Company B treats the average number of
lives covered under Policy B for the policy year ending February 28,
2014, as 5,800 (1,500 + 1,350 + 1,400 + 1,550) divided by 4, or 1,450.
(iv) On January 6, 2014, Policy C covers 12,500 lives, on April 4,
2014, 12,250 lives, on July 7, 2014, 12,000 lives, and on October 3,
[[Page 57]]
2014, 11,250 lives. Insurance Company B treats the average number of
lives covered under Policy C for the policy year ending December 31,
2014, as 47,750 (12,500 + 12,250 + 12,000 + 11,250) divided by 4, or
12,000.
(v) To calculate the section 4375 fee under paragraph (c)(1) of this
section for calendar year 2014, Insurance Company B must first determine
the applicable dollar amount for each policy under paragraph (c)(4) of
this section and multiply that amount by the number of average lives
covered for that policy. Insurance Company B then adds the total fees
for all three policies to determine the total fee under section 4375
that it must pay for calendar year 2014.
(v) Member months method--(A) Calculation method. An issuer may
determine the average number of lives covered under all policies in
effect for a calendar year based on the member months (an amount that
equals the sum of the totals of lives covered on pre-specified days in
each month of the reporting period) reported on the National Association
of Insurance Commissioners (NAIC) Supplemental Health Care Exhibit filed
for that calendar year. Under this method, the average number of lives
covered under the policies in effect for the calendar year equals the
member months divided by 12.
(B) Example. The following example illustrates the principles of
paragraphs (c)(1) and (c)(2)(v)(A) of this section:
Example. Insurance Company C chooses to determine the average number
of lives covered for all years to which the section 4375 fee applies
using the member months method of paragraph (c)(2)(v)(A) of this
section. Insurance Company C reports 12,000,000 as its member months on
the NAIC Supplemental Health Care Exhibit filed for calendar year 2013.
Under the member months method, Insurance Company C calculates the
average number of lives covered for all its specified health insurance
policies in force during calendar year 2013 by dividing 12,000,000
(member months) by 12 (number of months in the reporting period), which
equals 1,000,000. To determine the section 4375 fee it must pay for
calendar year 2013, Insurance Company C multiplies 1,000,000 by the
applicable dollar amount that is in effect at the end of the calendar
year under paragraph (c)(4) of this section.
(vi) State form method--(A) Calculation method. An issuer that is
not required to file NAIC annual financial statements may determine the
number of lives covered under all policies in effect for the calendar
year using a form that is filed with the issuer's state of domicile and
a method similar to that described in paragraph (c)(2)(v) of this
section, if the form reports the number of lives covered in the same
manner as member months are reported on the NAIC Supplemental Health
Care Exhibit.
(B) Example. The following example illustrates the principles of
paragraphs (c)(1) and (c)(2)(vi)(A) of this section:
Example. Insurance Company D is not required to file the NAIC
Supplemental Health Care Exhibit, but files a form with its state of
domicile. Insurance Company D chooses to determine the average number of
lives covered for all years to which the section 4375 fee applies using
the state form method of paragraph (c)(2)(vi)(A) of this section. The
state form reports the number of lives covered in the same manner as
member months is reported on the NAIC Supplemental Health Care Exhibit.
For calendar year 2013, Insurance Company D reports 12,000,000 as its
equivalent member months on the state form. Under the state form method,
Insurance Company D calculates the average number of lives covered for
all of its specified health insurance policies in force during calendar
year 2013 by dividing 12,000,000 (equivalent member months) by 12
(number of months in the reporting period), which equals 1,000,000. To
determine the section 4375 fee it must pay for calendar year 2013,
Insurance Company D multiplies 1,000,000 by the applicable dollar amount
that is in effect at the end of the calendar year under paragraph (c)(4)
of this section.
(3) Special rules for the first year and the last year the fee is in
effect--(i) Calculation of the average number of lives covered under the
policy for the first year the fee is in effect. For issuers that
determine the average number of lives covered using data reported on the
2012 NAIC Supplemental Health Care Exhibit or a permitted state form
that covers the 2012 calendar year, the average number of lives covered
under all policies in effect for the 2012 calendar year equals the
average number of lives covered for that year (as determined under
paragraph (c)(2)(v) or (vi) of this section) multiplied by \1/4\. The
resulting number is deemed to be the average number of lives covered for
policies with policy years ending on or after October 1, 2012, and
before January 1, 2013. For policy years beginning before
[[Page 58]]
May 14, 2012, and ending on or after October 1, 2012, issuers that
determine the average number of lives covered using the actual count
method under paragraph (c)(2)(iii) of this section may calculate the
average number of lives covered using data from the period beginning May
14, 2012, through the end of the policy year. For policy years beginning
before May 14, 2012, and ending on or after October 1, 2012, issuers
that determine the average number of lives covered using the snapshot
method under paragraph (c)(2)(iv) of this section may calculate the
average number of lives covered using dates from the quarters remaining
in the policy year starting on or after May 14, 2012. If an abbreviated
year is used, the issuer will divide the number of lives covered by the
number of days from May 14, 2012, through the end of the policy year
(for the actual count method) or the number of days on which a count was
made (for the snapshot method).
(ii) Calculation of the average number of lives covered under the
policy for the last year the fee is in effect. For issuers that
determine the average number of lives covered using data reported on the
2019 NAIC Supplemental Health Care Exhibit or a permitted state form
that covers the 2019 calendar year, the average number of lives covered
for all policies in effect during the 2019 calendar year equals the
average number of lives covered for that year (as determined under
paragraph (c)(2)(v) or (vi) of this section) multiplied by \3/4\. The
resulting number is deemed to be the average number of lives covered for
policies with policy years ending on or after January 1, 2019, and
before October 1, 2019.
(iii) Examples. The following examples illustrate the principles of
paragraph (c)(3) of this section:
Example 1. Insurance Company E issues Group Health Insurance Policy
C, which has a policy year that ends on November 30, 2012. Insurance
Company E determines the average number of lives covered under a policy
by using the actual count method. Under that method, for that policy
year, Insurance Company E calculates the sum of lives covered under
Policy C for each day between May 14, 2012, and November 30, 2012, as
10,000. The average number of lives covered under Policy C for that
policy year is 10,000 divided by the number of days from May 14, 2012,
through November 30, 2012. Alternatively, Insurance Company E could have
counted the number of lives covered for the entire policy year and
divided the sum by 365.
Example 2. Insurance Company F reports 12,000,000 as its member
months on its NAIC Supplemental Health Care Exhibit filed for calendar
year 2012. Under the member months method, Insurance Company F
calculates the average number of lives covered for 2012 by dividing
12,000,000 (member months) by 12 (number of months in the reporting
period), and then multiplying the result (1,000,000) by \1/4\, which
equals 250,000. Accordingly, the average number of lives covered for
policies with policy years ending on or after October 1, 2012, and
before January 1, 2013, is 250,000.
(4) Applicable dollar amount. For policy years ending on or after
October 1, 2012, and before October 1, 2013, the applicable dollar
amount is $1. For policy years ending on or after October 1, 2013, and
before October 1, 2014, the applicable dollar amount is $2. For any
policy year ending in any Federal fiscal year beginning on or after
October 1, 2014, the applicable dollar amount is the sum of--
(i) The applicable dollar amount for the policy year ending in the
previous Federal fiscal year; plus
(ii) The amount equal to the product of--
(A) The applicable dollar amount for the policy year ending in the
previous Federal fiscal year; and
(B) The percentage increase in the projected per capita amount of
the National Health Expenditures most recently released by the
Department of Health and Human Services before the beginning of the
Federal fiscal year.
(d) Effective/Applicability date. This section applies for policies
with policy years ending on or after October 1, 2012, and before October
1, 2019.
Sec. 46.4376-1 Fee on sponsors of self-insured health plans.
(a) In general--(1) General rule. A plan sponsor of an applicable
self-insured health plan is liable for a fee imposed by section 4376 for
plans with plan years ending on or after October 1, 2012, and before
October 1, 2019. Paragraph (b) of this section provides the definitions
that apply for purposes of section 4376 and this section. Paragraph (c)
of this section provides the requirements
[[Page 59]]
for calculating the fee imposed by section 4376. Paragraph (d) of this
section provides the applicability date. For rules relating to filing
the required return and paying the fee, see Sec. Sec. 40.6011(a)-1 and
40.6071(a)-1.
(2) [Reserved]
(b) Definitions. The following definitions apply for purposes of
section 4376 and this section. See Sec. 46.4377-1 for additional
definitions.
(1) Applicable self-insured health plan--(i) In general. Except as
provided in paragraph (b)(1)(ii) of this section and Sec. 46.4377-1,
applicable self-insured health plan means a plan that provides for
accident and health coverage (within the meaning of Sec. 46.4377-1(a))
if any portion of the coverage is provided other than through an
insurance policy and the plan is established or maintained--
(A) By one or more employers for the benefit of their employees or
former employees;
(B) By one or more employee organizations for the benefit of their
members or former members;
(C) Jointly by one or more employers and one or more employee
organizations for the benefit of employees or former employees;
(D) By a voluntary employees' beneficiary association, as described
in section 501(c)(9);
(E) By an organization described in section 501(c)(6); or
(F) By a multiple employer welfare arrangement (as defined in
section 3(40) of the Employee Retirement Income Security Act of 1974
(ERISA)), a rural electric cooperative (as defined in section
3(40)(B)(iv) of ERISA), or a rural cooperative association (as defined
in section 3(40)(B)(v) of ERISA).
(ii) Exceptions. The term applicable self-insured health plan does
not include any of the following:
(A) A plan that provides benefits substantially all of which are
excepted benefits, as defined in section 9832(c). For example, a health
flexible spending arrangement (health FSA) (as described in section
106(c)(2)) that satisfies the requirements to be treated as an excepted
benefit under section 9832(c) and Sec. 54.9831-1(c)(3)(v) of this
chapter is not an applicable self-insured health plan. A health FSA that
is not treated as an excepted benefit under section 9832(c) and Sec.
54.9831-1(c)(3)(v) is an applicable self-insured health plan.
(B) An employee assistance program, disease management program, or
wellness program if the program does not provide significant benefits in
the nature of medical care or treatment.
(C) A plan that, as demonstrated by the facts and circumstances
surrounding the adoption and operation of the plan, was designed
specifically to cover primarily employees who are working and residing
outside the United States (as defined in Sec. 46.4377-1(a)(3)).
(iii) Multiple self-insured arrangements established or maintained
by the same plan sponsor. For purposes of section 4376, two or more
arrangements established or maintained by the same plan sponsor that
provide for accident and health coverage (within the meaning of Sec.
46.4377-1(a)) other than through an insurance policy and that have the
same plan year may be treated as a single applicable self-insured health
plan for purposes of calculating the fee imposed by section 4376. For
example, if a plan sponsor establishes or maintains a self-insured
arrangement providing major medical benefits, and a separate self-
insured arrangement with the same plan year providing prescription drug
benefits, the two arrangements may be treated as one applicable self-
insured health plan so that the same life covered under each arrangement
would count as only one covered life under the plan for purposes of
calculating the fee. Similarly, if a plan sponsor provides a Health
Reimbursement Arrangement (HRA) and another applicable self-insured
health plan that provides major medical coverage, the HRA and the major
medical plan may be treated as one applicable self-insured health plan
if the HRA and the self-insured plan have the same plan year.
(iv) Examples. The following examples illustrate the principle of
this paragraph (b)(1):
Example 1. (i) Plan Sponsor D sponsors and maintains three separate
plans to provide certain benefits to its employees--Plan 501, Plan 502,
and Plan 503.
(ii) Plan 501 is a calendar year plan that provides accident and
health benefits, other than through insurance (that is, on a self-
insured basis), to employees of Plan Sponsor D.
[[Page 60]]
Plan 502 is a calendar year HRA that can be used to pay for qualified
accident and medical expenses for employees of Plan Sponsor D and their
eligible dependents. Plan 503 provides dental and vision benefits for
employees of Plan Sponsor D and eligible dependents, other than through
insurance (that is, on a self-insured basis).
(iii) Because Plan 501 and Plan 502 provide accident and health
coverage (within the meaning of Sec. 46.4377-1(a)) and are maintained
by Plan Sponsor D for the benefit of its employees, Plans 501 and 502
are applicable self-insured health plans that are subject to the fee
imposed by section 4376. Because dental and vision benefits are excepted
benefits, as defined in section 9832(c), Plan 503 is not an applicable
self-insured health plan subject to the section 4376 fee. Under the
special rule set forth in Sec. 46.4376-2(b)(1)(iii), Plan Sponsor D may
treat Plans 501 and 502 (both self-insured plans with a calendar year
plan year) as a single plan for purposes of calculating the fee imposed
by section 4376.
Example 2. Same facts as Example 1, except Plan 503 is not a Plan
that provides dental and vision benefits, but rather a plan that
provides accident and health coverage solely to employees who are
working and residing outside the United States and does not provide any
benefits to employees who are not working and residing outside the
United States. Plan 503 is designed specifically to provide coverage to
employees working and residing outside the United States because it
limits coverage to these employees. Therefore, in accordance with the
exception described in Sec. 46.4376-1(b)(1)(ii)(C), Plan 503 is not an
applicable self-insured health plan.
(2) Plan sponsor--(i) In general. The term plan sponsor means--
(A) The employer, in the case of an applicable self-insured health
plan established or maintained by a single employer;
(B) The employee organization, in the case of an applicable self-
insured health plan established or maintained by an employee
organization;
(C) The joint board of trustees, in the case of a multiemployer plan
(as defined in section 414(f));
(D) The committee, in the case of a multiple employer welfare
arrangement (as defined in section 3(40) of ERISA);
(E) The cooperative or association that establishes or maintains an
applicable self-insured health plan established or maintained by a rural
electric cooperative (as defined in section 3(40)(B)(iv) of ERISA) or
rural cooperative association (as defined in section 3(40)(B)(v) of
ERISA);
(F) The trustee, in the case of an applicable self-insured health
plan established or maintained by a voluntary employees' beneficiary
association (meaning that the voluntary employees' beneficiary
association is not merely serving as a funding vehicle for a plan that
is established or maintained by an employer or other person); or
(G) In the case of an applicable self-insured health plan the plan
sponsor of which is not described in paragraphs (b)(2)(i)(A) through (F)
of this section, the person identified by the terms of the document
under which the plan is operated as the plan sponsor, or the person
designated by the terms of the document under which the plan is operated
as the plan sponsor for section 4376 purposes, provided that designation
is made in writing, and that person has consented to the designation in
writing, by no later than the date by which the return paying the fee
under section 4376 for that plan year is required to be filed, after
which date that designation for that plan year may not be changed or
revoked, and provided further that a person may be designated as the
plan sponsor only if the person is one of the persons establishing or
maintaining the plan (for example, one of the employers that establishes
or maintains the plan with one or more other employers or employee
organizations).
(H) In the case of an applicable self-insured health plan the
sponsor of which is not described in paragraphs (b)(2)(i)(A) through (F)
of this section, and for which no identification or designation of a
plan sponsor has been made pursuant to paragraph (b)(2)(i)(G) of this
section, each employer that establishes or maintains the plan (with
respect to employees of that employer), each employee organization that
establishes or maintains the plan (with respect to members of that
employee organization), and each board of trustees, cooperative, or
association that establishes or maintains the plan, meaning that each
plan sponsor must file a separate Form 720, ``Quarterly Federal Excise
Tax Return,'' reflecting
[[Page 61]]
its separate liability under section 4376.
(ii) Examples. The following examples illustrate the principles of
paragraph (b)(2) of this section:
Example 1. (i) Corporation XYZ is a holding company with no
employees that owns all the issued and outstanding shares of Employer X,
Employer Y, and Employer Z. Employer X, Employer Y, and Employer Z have
established the XYZ Group Health Plan to provide accident and health
coverage, provided other than through an insurance policy, for the
benefit of their employees. The XYZ Group Health Plan has a calendar
year plan year. In addition, there is no plan sponsor identified or
designated in the plan document.
(ii) Because the XYZ Group Health Plan provides accident and health
coverage other than through an insurance policy, and is established by
one or more employers for the benefit of their employees, the XYZ Group
Health Plan is an applicable self-insured health plan under section
4376(c)(2)(A) and paragraph (b)(1)(i)(A) of this section. Because a plan
sponsor is not identified or designated in the governing plan document,
the plan sponsor, for purposes of section 4376, is determined under
paragraph (b)(2)(i)(H) of this section as each employer that establishes
or maintains the plan (Employer X, Employer Y, and Employer Z), each
with respect to its employees covered under the plan. Accordingly,
Employer X, Employer Y, and Employer Z each must file a Form 720
reflecting their separate liabilities under section 4376, calculated
based on lives covered that are employees of that employer (or spouses,
dependents, or other beneficiaries of employees of that employer) and
the applicable dollar amount in effect for the plan year.
Example 2. The same facts as Example 1, except that the governing
plan document designates Employer X as the plan sponsor of the XYZ Group
Health Plan for purposes of the fee under section 4376 and Employer X
consents to this designation no later than the due date for paying the
fee under section 4376. Accordingly, the plan sponsor for purposes of
section 4376 is determined under paragraph (b)(2)(i)(G) of this section
as Employer X. Employer X must file a Form 720 reflecting liabilities
under section 4376, calculated based upon lives covered that are
employees of Employer X, Employer Y, or Employer Z, or spouses,
dependents, or other beneficiaries of employees of those employers and
the applicable dollar amount in effect for the plan year.
(c) Calculation of fee--(1) In general. The amount of the fee for a
plan year is equal to the product of the average number of lives covered
under the plan for the plan year (determined in accordance with
paragraph (c)(2) of this section) and the applicable dollar amount
(determined in accordance with paragraph (c)(3) of this section).
(2) Determination of the average number of lives covered under the
plan--(i) In general. To determine the average number of lives covered
under an applicable self-insured health plan during a plan year, a plan
sponsor must use one of the following methods--
(A) The actual count method (described in paragraph (c)(2)(iii) of
this section);
(B) The snapshot method (described in paragraph (c)(2)(iv) of this
section); or
(C) The Form 5500 method (described in paragraph (c)(2)(v) of this
section).
(ii) Consistency within plan year. A plan sponsor must use the same
method of calculating the average number of lives covered under the plan
consistently for the duration of the plan year. However, a plan sponsor
may use a different method from one plan year to the next.
(iii) Actual count method--(A) In general. A plan sponsor may
determine the average number of lives covered under a plan for a plan
year by adding the totals of lives covered for each day of the plan year
and dividing that total by the number of days in the plan year.
(B) Example. The following example illustrates the principles of
paragraphs (c)(1) and (c)(2)(iii)(A) of this section:
Example. Employer A is the plan sponsor of the Employer A Self-
Insured Health Plan, which has a calendar year plan year. Employer A
calculates the sum of lives covered under the plan for each day of the
plan year ending December 31, 2013 as 3,285,000. The average number of
lives covered under the plan for the plan year ending December 31, 2013,
is 3,285,000 divided by 365, or 9,000. To calculate the section 4376 fee
for the plan under paragraph (c)(1) of this section for the plan year
ending December 31, 2013, Employer A must determine the applicable
dollar amount under paragraph (c)(3) of this section and multiply that
amount by 9,000.
(iv) Snapshot method--(A) In general. A plan sponsor may determine
the average number of lives covered under an applicable self-insured
health plan for a plan year by adding the totals of lives covered on a
date during the first, second, or third month of each quarter
[[Page 62]]
of the plan year (or more dates in each quarter if an equal number of
dates is used in each quarter), and dividing that total by the number of
dates on which a count was made. For purposes of this paragraph
(c)(2)(iv), each date used for the second, third and fourth quarter must
be within three days of the date in that quarter that corresponds to the
date used for the first quarter, and all dates used must fall within the
same plan year. If a plan sponsor uses multiple dates for the first
quarter, the plan sponsor must use dates in the second, third, and
fourth quarters that correspond to each of the dates used for the first
quarter or are within three days of such corresponding dates, and all
dates used must fall within the same plan year. The 30th and 31st day of
a month are treated as the last day of the month for purposes of
determining the corresponding date for any month that has fewer than 31
days (for example, if either March 30 or March 31 is used for a calendar
year plan, June 30 is the corresponding date for the second quarter).
For purposes of this paragraph (c)(2)(iv), the number of lives covered
on a designated date may be determined using either the snapshot factor
method described in paragraph (c)(2)(iv)(B) of this section or the
snapshot count method described in paragraph (c)(2)(iv)(C) of this
section.
(B) Snapshot factor method. Under the snapshot factor method, the
number of lives covered on a date is equal to the sum of--
(i) The number of participants with self-only coverage on that date;
plus
(ii) The number of participants with coverage other than self-only
coverage on the date multiplied by 2.35.
(C) Snapshot count method. Under the snapshot count method, the
number of lives covered on a date equals the actual number of lives
covered on the designated date.
(D) Examples. The following examples illustrate the principles of
paragraphs (c)(1) and (c)(2)(iv) of this section:
Example 1. (i) Employer B is the plan sponsor of the Employer B
Self-Insured Health Plan, which has a calendar year plan year. Employer
B uses the snapshot method to determine the average number of lives
covered under the plan and uses the snapshot count method to determine
the number of lives covered on a day in the first month of each calendar
quarter of the plan year.
(ii) On January 4, 2013, the Employer B Self-Insured Health Plan
covers 2,000 lives, on April 5, 2013, 2,100 lives, on July 5, 2013,
2,050 lives, and on October 4, 2013, 2,050 lives. Under the snapshot
method, Employer B must determine the average number of lives covered
under the Employer B Self-Insured Health Plan for the plan year ending
December 31, 2013, as 8,200 (2,000 + 2,100 + 2,050 + 2,050) divided by
4, or 2,050. To calculate the section 4376 fee under paragraph (c)(1) of
this section for the plan year ending December 31, 2013, Employer B must
determine the applicable dollar amount under paragraph (c)(3) of this
section and multiply that amount by 2,050.
Example 2. (i) Same facts as Example 1, except that for the 2014
plan year Employer B determines the number of lives covered that are not
covered by self-only coverage using the snapshot factor method (that is,
based on the number of participants with coverage other than self-only
coverage multiplied by 2.35 (the factor set forth in (c)(2)(iv) of this
section)).
(ii) On January 10, 2014, Employer B Self-Insured Health Plan
provides self-only coverage to 600 employees and other than self-only
coverage to 800 employees. On April 11, 2014, Employer B Self-Insured
Health Plan provides self-only coverage to 608 employees and other than
self-only coverage to 800 employees. On July 11, 2014 and October 10,
2014, Employer B Self-Insured Health Plan provides self-only coverage to
610 employees and other than self-only coverage to 809 employees.
(iii) Under the snapshot factor method, Employer B must determine
the average number of lives covered under the Employer B Self-Insured
Health Plan for the plan year ending December 31, 2014 as 9,988 [(600 +
(800 x 2.35)) + (608 + (800 x 2.35)) + (610 + (809 x 2.35)) + (610 +
(809 x 2.35))] divided by 4, or 2,497. To calculate the section 4376 fee
under paragraph (c)(1) of this section for the plan year ending December
31, 2014, Employer B must determine the applicable dollar amount under
paragraph (c)(3) of this section and multiply that amount by 2,497.
(v) Form 5500 method--(A) Calculation method. A plan sponsor may
determine the average number of lives covered under a plan for a plan
year based on the number of participants reported on the Form 5500,
``Annual Return/Report of Employee Benefit Plan,'' or the Form 5500-SF,
``Short Form Annual Return/Report of Small Employee Benefit Plan,'' that
is filed for the applicable self-insured health plan for that plan year,
provided that the Form 5500 or Form 5500-SF is filed no later than
[[Page 63]]
the due date for the fee imposed by section 4376 for that plan year. For
purposes of this paragraph (c)(2)(v), the average number of lives
covered under the plan for the plan year for a plan offering only self-
only coverage equals the sum of the total participants covered at the
beginning and the end of the plan year, as reported on the Form 5500 or
Form 5500-SF for the applicable self-insured health plan, divided by 2.
For purposes of this paragraph (c)(2)(v), the average number of lives
covered under the plan for the plan year for a plan offering self-only
coverage and coverage other than self-only coverage equals the sum of
total participants covered at the beginning and the end of the plan
year, as reported on the Form 5500 or Form 5500-SF filed for the
applicable self-insured health plan.
(B) Examples. The following examples illustrate the principles of
paragraphs (c)(1) and (c)(2)(v)(A) of this section:
Example 1. Employer C is the plan sponsor of the Employer C Self-
Insured Health Plan, which has a calendar year plan year ending on
December 31, 2013. Employer C is required to file a Form 5500 for the
plan for the 2013 plan year by July 31, 2014. However, on July 30, 2014,
Employer C obtains an automatic 2\1/2\ month extension for filing the
2013 Form 5500. Employer C files the 2013 Form 5500 on September 30,
2014 (that is, before the October 15 extended due date). Employer C is
not eligible to use the Form 5500 method to determine the average number
of lives covered under Plan C for the plan year ending on December 31,
2013, because the 2013 Form 5500 was not filed by the original due date
(that is, by July 31, 2014) for the return that reports liability for
the fee imposed by section 4376 for the 2013 plan year.
Example 2. Same facts as Example 1, except that the Employer C Self-
Insured Health Plan has a fiscal year plan year ending on July 31, 2013,
and offers only self-only coverage. Employer C files a Form 5500 for the
Employer C Self-Insured Health Plan for the plan year ending July 31,
2013 (the 2012 Form 5500), on the extended due date for filing the 2012
Form 5500 (May 15, 2014). Employer C is eligible to use the Form 5500
method to determine the average number of lives covered under Plan C for
the plan year ending on July 31, 2013, because the 2012 Form 5500 had
been filed by the due date for the return that reports liability for the
fee imposed by section 4376 for that plan year (July 31, 2014).
Example 3. Same facts as Example 2, provided further that the
Employer C Self-Insured Health Plan 2012 Form 5500 reports 4,000 plan
participants on the first day of the plan year and 4,200 plan
participants on the last day of the 2012 plan year. For purposes of
calculating the fee under section 4376 using the Form 5500 method,
Employer C must treat the number of lives covered for the plan year
ending July 31, 2013, as equal to the sum of 4,000 and 4,200 or 8,200,
divided by 2, or 4,100. To calculate the section 4376 fee under
paragraph (c)(1) of this section for the plan year ending July 31, 2013,
Employer C must determine the applicable dollar amount under paragraph
(c)(3) of this section and multiply that amount by 4,100.
Example 4. Same facts as Example 3, except that the Employer C Self-
Insured Health plan offers self-only coverage and family coverage. For
purposes of calculating the fee under section 4376 using the Form 5500
method, Employer C must treat the number of lives covered for the plan
year ending July 31, 2013, as equal to the sum of 4,000 and 4,200, or
8,200. To calculate the section 4376 fee under paragraph (c)(1) of this
section for the plan year ending July 31, 2013, Employer C must
determine the applicable dollar amount under paragraph (c)(3) of this
section and multiply that amount by 8,200.
(vi) Special rule for health FSAs and HRAs. For purposes of this
section, if a plan sponsor does not establish or maintain an applicable
self-insured health plan other than a health flexible spending
arrangement (health FSA) (as described in section 106(c)(2)) or a health
reimbursement arrangement (as described in Notice 2002-45 (2002-2 CB
93)) (HRA), the plan sponsor may treat each participant's health FSA or
HRA as covering a single life (and therefore the plan sponsor is not
required to include as lives covered any spouse, dependent, or other
beneficiary of the individual participant in the health FSA or HRA, as
applicable). If a health FSA or HRA that is an applicable self-insured
health plan has the same plan sponsor and plan year as another
applicable self-insured health plan other than a health FSA or HRA, the
two arrangements may be treated as a single plan under paragraph
(b)(1)(iii) of this section. However, the special counting rule in this
paragraph applies only for purposes of the health FSA or HRA and,
therefore, applies only for purposes of the participants in the health
FSA or HRA that do not participate in the other applicable self-insured
health plan. The participants in the health FSA or HRA that participate
in the other applicable self-insured health plan will be counted in
accordance with
[[Page 64]]
the method applied for counting lives covered under that other plan as
described in paragraph (b)(2)(i) of this section. See Sec.
601.601(d)(2) of this chapter.
(vii) Special rule for lives covered solely by the fully-insured
options under an applicable self-insured health plan--(A) In general. If
an applicable self-insured health plan provides accident and health
coverage through fully-insured options and self-insured options, the
plan sponsor is permitted to disregard the lives that are covered solely
under the fully-insured options in determining the lives covered taken
into account for the actual count method (described in paragraph
(c)(2)(iii) of this section), the snapshot method (described in
paragraph (c)(2)(iv) of this section), and the Form 5500 method
(described in paragraph (c)(2)(v) of this section).
(B) Example. The following example illustrates the principles of
paragraph (c)(2)(vii) of this section:
Example. (i) Employer C is the plan sponsor of the Employer C Health
Plan (Plan P). The Plan offers self-only or family health and accident
coverage under fully-insured or self-insured options. On June 28, 2015,
Employer C files a Form 5500 for Plan P for the plan year ending
December 31, 2014 indicating: (1) a total of 4,000 plan participants on
the first day of the 2014 plan year; and (2) a total of 4,200 plan
participants on the last day of the plan year. Employer C determines
that there were 3,000 plan participants (and their families, as
applicable) covered under the fully-insured option offered under the
plan on the first day of the 2014 plan year, and 2,900 plan participants
(and their families, as applicable) covered under the fully-insured
option on the last day of the 2014 plan year. Employer C uses the Form
5500 method to calculate the number of lives covered for the 2014 plan
year.
(ii) Pursuant to paragraph (c)(2)(vii) of this section, Employer C
determines the number of lives covered for the 2014 plan year as: the
sum of 1,000 (4,000 total participants on the first day of the plan
year--3,000 participants covered by the specified health insurance
policy on the first day of the plan year) and 1,300 (4,200 total
participants--2,900 participants covered by the specified health
insurance policy on the first day of the plan year), or 2,300. To
calculate the section 4376 fee under paragraph (c)(1) of this section
for the 2014 plan year, Employer C must determine the applicable dollar
amount under paragraph (c)(3) of this section and multiply that amount
by 2,300.
(viii) Special rule for the first year the fee is in effect.
Notwithstanding paragraph (c)(2)(i) of this section, for a plan year
beginning before July 11, 2012, and ending on or after October 1, 2012,
a plan sponsor may determine the average number of lives covered under
the plan for the plan year using any reasonable method.
(3) Applicable dollar amount. For a plan year ending on or after
October 1, 2012, and before October 1, 2013, the applicable dollar
amount is $1. For a plan year ending on or after October 1, 2013, and
before October 1, 2014, the applicable dollar amount is $2. For any plan
year ending in any Federal fiscal year beginning on or after October 1,
2014, the applicable dollar amount is equal to the sum of--
(i) The applicable dollar amount for the plan year ending in the
previous Federal fiscal year; plus
(ii) The amount equal to the product of--
(A) The applicable dollar amount for the plan year ending in the
previous Federal fiscal year; and
(B) The percentage increase in the projected per capita amount of
the National Health Expenditures most recently released by the
Department of Health and Human Services before the beginning of the
Federal fiscal year.
(4) Examples. The following examples illustrate the principle of
paragraph (c)(3) of this section.
Example 1. (Calendar year plan). (i) Plan Sponsor C maintains Plan X
which has a calendar year plan year; the plan continues in operation for
the entire calendar years 2012 through 2019. Plan X is an applicable
self-insured health plan, within the meaning of Sec. 46.4376-1(b)(1),
and Plan Sponsor C is liable for the fee imposed by section 4376,
determined in accordance with these regulations, beginning with the 2012
plan year--the plan year beginning January 1, 2012, and ending December
31, 2012--and ending with the 2018 plan year--the plan year beginning
January 1, 2018, and ending December 31, 2018. In accordance with Sec.
40.6071(a)-1(c) of this chapter:
(ii) The first Form 720 that must be filed to report and pay the fee
imposed by section 4376 for Plan X covers the 2012 plan year (January 1,
2012, through December 31, 2012) and must be filed no later than July
31, 2013, and the fee reported on this form must be calculated by
multiplying the average number lives by $1 (the applicable dollar amount
in effect for plans with plan years beginning
[[Page 65]]
on or after October 1, 2012, and before October 1, 2013); and
(ii) The last Form 720 that must be filed to report and pay the fee
imposed by section 4376 for Plan X covers the 2018 plan year (January 1,
2018, through December 31, 2018) and must be filed no later than July
31, 2019, and the fee reported on this form must be calculated using the
applicable dollar amount in effect for plan years ending on or after
October 1, 2018, and before October 1, 2019.
Example 2. (Fiscal year plan). (i) Plan Sponsor B maintains Plan W,
which has a fiscal year plan year ending on July 31; the plan continues
in operation for the entire fiscal year plan years from August 1, 2012,
through July 31, 2019. Plan W is an applicable self-insured health plan,
within the meaning of Sec. 46.4376-1(b)(1), and Plan Sponsor B is
liable for the fee imposed by section 4376, determined in accordance
with these regulations, beginning with the 2012 plan year--the plan year
beginning on August 1, 2012, and ending on July 31, 2013--and ending
with the 2018 plan year--plan year beginning on August 1, 2018, and
ending July 31, 2019. In accordance with Sec. 40.6071(a)-1(c) of this
chapter:
(ii) The first Form 720 that must be filed to report and pay the fee
imposed by section 4376 for Plan X covers the 2012 plan year (August 1,
2012, through July 31, 2013) and must be filed no later than July 31,
2014, and the fee reported on this form must be calculated by
multiplying the average number lives by $1 (the applicable dollar amount
in effect for plans with plans years beginning on or after October 1,
2012, and before October 1, 2013); and
(iii) The last Form 720 that must be filed to report and pay the fee
imposed by section 4376 for Plan X covers the 2018 plan year (August 1,
2018, through July 31, 2019) and must be filed no later than July 31,
2020, and the fee must be calculated using the applicable dollar amount
in effect for plan years ending on or after October 1, 2018, and before
October 1, 2019.
(d) Effective/Applicability date. This section applies for plan
years that end on or after October 1, 2012, and before October 1, 2019.
Sec. 46.4377-1 Definitions and special rules.
(a) Definitions. The following definitions apply for purposes of
sections 4375 and 4376 and Sec. Sec. 46.4375-1 and 46.4376-1.
(1) Accident and health coverage. The term accident and health
coverage means any coverage that, if provided by an insurance policy,
would cause such policy to be a specified health insurance policy (as
defined in section 4375(c) and Sec. 46.4375-1(b)(1)). Accident and
health coverage also includes coverage for an active employee, a former
employee, or a qualifying beneficiary that is continuation coverage
required under the Consolidated Omnibus Budget Reconciliation Act of
1985 (COBRA) or similar continuation coverage under other federal law or
under state law.
(2) Individual residing in the United States--(i) The term
individual residing in the United States means an individual with a
place of abode in the United States.
(ii) Determination of place of abode. For purposes of paragraph
(a)(2) of this section, an issuer or a plan sponsor may rely on the most
recent address on file with the issuer or plan sponsor and may treat the
primary insured and the primary insured's spouse, dependents, or other
beneficiaries covered by the policy as having the same place of abode.
For this purpose, the primary insured is the individual covered by the
policy whose eligibility for coverage was not due to that individual's
status as the spouse, dependent, or other beneficiary of another covered
individual.
(3) United States. The term United States includes American Samoa,
Guam, the Northern Mariana Islands, Puerto Rico, the Virgin Islands, and
any other possession of the United States.
(4) Federal fiscal year. The term Federal fiscal year means the year
beginning on October 1 and ending on the following September 30.
(b) Treatment of exempt governmental programs--(1) In general. The
fees imposed by sections 4375 and 4376 do not apply to any covered life
under an exempt governmental program as defined in paragraph (b)(2) of
this section.
(2) Exempt governmental program. For purposes of this section,
exempt governmental program means any--
(i) Insurance program established under title XVIII of the Social
Security Act;
(ii) Medical assistance program established by title XIX or XXI of
the Social Security Act;
(iii) Program established by Federal law for providing medical care
(other than through insurance policies) to individuals (or their spouses
and dependents) by reason of such individuals
[[Page 66]]
being (or having been) members of the Armed Forces of the United States;
and
(iv) Program established by Federal law for providing medical care
(other than through insurance policies) to members of Indian tribes (as
defined in section 4(d) of the Indian Health Care Improvement Act).
(c) Effective/Applicability date. This section applies to all policy
and plan years that end on or after October 1, 2012, and before October
1, 2019.
Subpart D_Excise Tax on Obligations Not in Registered Form
Sec. 46.4701-1 Tax on issuer of registration-required obligation
not in registered form.
(a) In general. Section 4701 imposes a tax (determined under
paragraph (c) of this section) on any person (referred to as the issuer)
who issues an obligation that--
(1) Is a registration-required obligation, and
(2) Is not issued in registered form.
(b) Definitions--(1) Person. The term ``person'' includes all
governmental entities.
(2) Obligation. The term ``obligation'' includes bonds debentures,
notes, certificates and other evidences of indebtedness regardless of
how denominated.
(3) Registration-required obligation. The term ``registration-
required obligation'' has the same meaning as when used in section
163(f) (and the regulations thereunder) which relates to the denial of a
deduction for interest on certain obligations not in registered form.
However, the term ``registration-required obligation'' does not include
any obligation which would otherwise be exempt from Federal income tax
under section 103(a) or any other provision of law.
(4) Registered form. The term ``registered form'' has the same
meaning as when used in section 103(j) (and the regulations thereunder)
which relates to obligations which must be in registered form to be tax-
exempt.
(5) Issuer. Except as provided in Sec. 1.163-5T(d) (relating to
pass-through certificates) and Sec. 1.163-5T(e) (relating to REMICs),
the ``issuer'' is the person whose interest deduction would be
disallowed solely by reason of section 163(f)(1).
(6) Date of Issuance. (i) For obligations intended to be offered to
the public, the term ``date of issuance'' means the date the obligation
is first sold to the public at the issue price.
(ii) For an obligation which is privately placed, the term ``date of
issuance'' is the date the obligation is first sold by the issuer.
(7) Issue price. See section 1273 (b) and the regulations thereunder
for the definition of ``issue price''.
(c) Rate and computation of tax. The tax under section 4701(a) is
imposed in an amount equal to the product of--
(1) 1 percent of the principal amount of the obligation, multiplied
by
(2) The number of calendar years (or portions thereof) during the
period beginning on the date of issuance of the obligation and ending on
the date of maturity.
For purposes of this paragraph, the term ``principal amount'' for a
discounted obligation is the issue price, and for all other obligations,
including obligations sold at a premium, the term ``principal amount''
is the stated redemption price at maturity.
(d) Payment of tax. Every person who incurs liability for the tax
imposed by section 4701 is required to file a return in accordance with
section 6011 and Sec. 46.6011(a)-1 relating to the general requirement
of a return, statement or list.
(e) Effective date. The provisions of this section shall apply to
obligations issued after December 31, 1982, unless issued on the
exercise of a warrant or the conversion of a convertible obligation if
the warrant or obligation was offered or sold outside the United States
without registration under the Securities Act of 1933 and was issued
before August 10, 1982. See section 310(d)(3) of the Tax Equity and
Fiscal Responsibility Act of 1982.
[T.D. 8102, 51 FR 33594, Sept. 22, 1986; 51 FR 36392, Oct. 10, 1986, as
amended by T.D. 8300, 55 FR 19627, May 10, 1990]
[[Page 67]]
PART 48_MANUFACTURERS AND RETAILERS EXCISE TAXES--Table of Contents
Subpart A_Introduction
Sec.
48.0-1 Introduction.
48.0-2 General definitions and attachment of tax.
48.0-3 Exemption certificates.
Subparts B-E [Reserved]
Subpart F_Special Fuels
48.4041-0 Applicability of regulations relating to diesel fuel after
December 31, 1993.
48.4041-3 Application of tax on sales of special motor fuel for use in
motor vehicles and motorboats.
48.4041-4 Application of tax on sales of liquid for use as fuel in
aircraft in noncommercial aviation.
48.4041-5 Sales of diesel and special motor fuels and fuel for use in
aircraft; rules of general application.
48.4041-6 Application of tax on use of taxable liquid fuel.
48.4041-7 Dual use of taxable liquid fuel.
48.4041-8 Definitions.
48.4041-9 Exemption for farm use.
48.4041-10 Exemption for use as supplies for vessels or aircraft.
48.4041-11 Tax-free sales of fuel for use in noncommercial aviation only
if sellers and certain purchasers are registered.
48.4041-12 Sales by United States, etc.
48.4041-13 Other credits or refunds.
48.4041-14 Exemption for sale to or use by certain aircraft museums.
48.4041-15 Sales to States or political subdivisions thereof.
48.4041-16 Sales for export.
48.4041-17 Tax-free retail sales to certain nonprofit educational
organizations.
48.4041-18 [Reserved]
48.4041-19 Exemption for qualified methanol and ethanol fuel.
48.4041-20 Partially exempt methanol and ethanol fuel.
48.4041-21 Compressed natural gas (CNG).
Subpart G_Fuel Used on Inland Waterways
48.4042-1 Tax on fuel used in commercial waterway transportation.
48.4042-2 Special rules.
48.4042-3 Certain types of commercial waterway transportation excluded.
Subpart H_Motor Vehicles, Tires, Tubes, Tread Rubber, and Taxable Fuel
Automotive and Related Items
motor vehicles
48.4052-1 Heavy trucks and trailers; certification requirement.
48.4061(a) [Reserved]
48.4061(a)-1 Imposition of tax; exclusion for light-duty trucks, etc.
48.4061(a)-2 Bonding of importers.
48.4061(a)-3 Definitions.
48.4061(a)-4 Parts or accessories sold on or in connection with chassis,
bodies, etc.
48.4061(a)-5 Sale of automobile truck bodies and chassis.
48.4061(b) [Reserved]
48.4061(b)-1 Imposition of tax.
48.4061(b)-2 Definition of parts or accessories.
48.4061(b)-3 Rebuilt, reconditioned, or repaired parts or accessories.
48.4061-1 Temporary regulations with respect to floor stock refunds or
credits on cement mixers.
48.4062(a) [Reserved]
48.4062(a)-1 Specific parts or accessories.
48.4062(b) [Reserved]
48.4062(b)-1 Rebuilt parts or accessories sold on an exchange basis.
48.4063-1 Tax-free sales of bodies to chassis manufacturers.
48.4063-2 Tax-free sales of parts or accessories sold for resale on or
in connection with the first retail sale of a light-duty
truck.
48.4063-3 Other tax-free sales.
48.4064-1 Gas guzzler tax.
Tires, Tubes, and Tread Rubber
48.4071-1 Imposition and rates of tax.
48.4071-2 Determination of weight.
48.4071-3 Imposition of tax on tires and tubes delivered to
manufacturer's retail outlet.
48.4071-4 Original equipment tires on imported articles.
48.4072-1 Definitions.
48.4073 [Reserved]
48.4073-1 Exemption of tires of certain sizes.
48.4073-2 Exemption of tires with internal wire fastening.
48.4073-3 Exemption of tread rubber used for recapping nonhighway tires.
48.4073-4 Other tax-free sales.
Taxable Fuel
48.4081-1 Taxable fuel; definitions.
48.4081-2 Taxable fuel; tax on removal at a terminal rack.
48.4081-3 Taxable fuel; taxable events other than removal at the
terminal rack.
48.4081-4 Gasoline; special rules for gasoline blendstocks.
[[Page 68]]
48.4081-5 Taxable fuel; notification certificate of taxable fuel
registrant.
48.4081-6 Gasoline; gasohol.
48.4081-7 Taxable fuel; conditions for refunds of taxable fuel tax under
section 4081(e).
48.4081-8 Taxable fuel; measurement.
48.4082-1 Diesel fuel and kerosene; exemption for dyed fuel.
48.4082-1T Diesel fuel and kerosene; exemption for dyed fuel
(temporary).
48.4082-2 Diesel fuel and kerosene; notice required for dyed fuel.
48.4082-3 Diesel fuel and kerosene; visual inspection devices.
[Reserved]
48.4082-4 Diesel fuel and kerosene; back-up tax.
48.4082-5 Diesel fuel and kerosene; Alaska.
48.4082-6 Kerosene; exemption for aviation-grade kerosene.
48.4082-7 Kerosene; exemption for feedstock purposes.
48.4083-1 Taxable fuel; administrative authority.
48.4091-3 [Reserved]
48.4101-1 Taxable fuel; registration.
48.4101-1T Taxable fuel; registration (temporary).
48.4101-2 Information reporting.
48.4102-1 Inspection of records by State or local tax officers.
Subpart I_Coal
48.4121-1 Imposition and rate of tax on coal.
Subpart J [Reserved]
Subpart K_Sporting Goods
48.4161(a) [Reserved]
48.4161(a)-1 Imposition and rate of tax; fishing equipment.
48.4161(a)-2 Meaning of terms.
48.4161(a)-3 Parts and accessories.
48.4161(a)-4 Use considered sale.
48.4161(a)-5 Tax-free sales.
48.4161(b) [Reserved]
48.4161(b)-1 Imposition and rates of tax; bows and arrows.
48.4161(b)-2 Meaning of terms.
48.4161(b)-3 Use considered sale.
48.4161(b)-4 Tax-free sales.
48.4161(b)-5 Effective date.
Subpart L_Taxable Medical
48.4191-1 Imposition and rate of tax.
48.4191-2 Taxable medical device.
Subpart M_Special Provisions Applicable to Manufacturers Taxes
48.4216(a)-1 Charges to be included in sale price.
48.4216(a)-2 Exclusions from sale price.
48.4216(a)-3 Other items relating to tax on sale price.
48.4216(b)-1 Constructive sale price; scope and application.
48.4216(b)-2 Constructive sale price; basic rules.
48.4216(b)-3 Constructive sale price; special rule for arm's-length
sales.
48.4216(b)-4 Constructive sale price; affiliated corporations.
48.4216(c)-1 Computation of tax on leases and installment sales.
48.4216(d)-1 Sales of installment accounts.
48.4216(e)-1 Exclusion of local advertising charges from sale price.
48.4216(e)-2 Limitation on aggregate of exclusions and price
readjustments.
48.4216(e)-3 No exclusion or readjustment for other advertising charges
or reimbursements.
48.4216(f)-1 Value of used components excluded from price of certain
trucks.
48.4217-1 Lease considered as sale.
48.4217-2 Limitation on amount of tax applicable to certain leases.
Use by Manufacturer or Importer Considered Sale
48.4218-1 Tax on use by manufacturer, producer, or importer.
48.4218-2 Business or personal use of articles.
48.4218-3 Events subsequent to taxable use of article.
48.4218-4 Use in further manufacture.
48.4218-5 Computation of tax.
Application of Tax in Case of Sales by Other Than Manufacturer or
Importer
48.4219-1 Sales of taxable articles by a person other than the
manufacturer, producer, or importer.
Subpart N_Exemptions, Registration, Etc.
48.4221-1 Tax-free sales; general rule.
48.4221-2 Tax-free sale of articles to be used for, or resold for,
further manufacture.
48.4221-3 Tax-free sale of articles for export, or for resale by the
purchaser to a second purchaser for export.
48.4221-4 Tax-free sale of articles for use by the purchaser as supplies
for vessels or aircraft.
48.4221-5 Tax-free sale of articles to State and local governments for
their exclusive use.
48.4221-6 Tax-free sales of articles to non-profit educational
organizations.
48.4221-7 Tax-free sales of tires and tubes.
48.4221-8 Tax-free sales of tires, tubes, and tread rubber used on
intercity, local, and school buses.
48.4222(a)-1 Registration.
48.4222(b)-1 Exceptions to the requirement for registration.
48.4222(c)-1 Revocation or suspension of registration.
[[Page 69]]
48.4222(d)-1 Registration in the case of certain other exemptions.
48.4223-1 Special rules relating to further manufacture.
48.4225-1 Exemption of articles manufactured or produced by Indians.
Subpart O_Refunds and Other Administrative Provisions of Special
Application to Retailers and Manufacturers Taxes
48.6412-1 Floor stocks credit or refund.
48.6412-2 Definitions for purposes of floor stocks credit or refund.
48.6412-3 Amount of tax paid on each article.
48.6416(a)-1 Claims for credit or refund of overpayments of taxes on
special fuels and manufacturers taxes.
48.6416(a)-2 Credit or refund of tax on special fuels.
48.6416(a)-3 Credit or refund of manufacturers tax under chapter 32.
48.6416(b)(1)-1 Price readjustments causing overpayments of
manufacturers tax.
48.6416(b)(1)-2 Determination of price readjustments.
48.6416(b)(1)-3 Readjustment for local advertising charges.
48.6416(b)(1)-4 Supporting evidence required in case of price
readjustments.
48.6416(b)(2)-1 Certain exportations, uses, sales, or resales causing
overpayments of tax.
48.6416(b)(2)-2 Exportations, uses, sales, and resales included.
48.6416(b)(2)-3 Supporting evidence required in case of manufacturers
tax involving exportations, uses, sales, or resales.
48.6416(b)(2)-4 Supporting evidence required in case of special fuels
tax involving exportations, uses, sales, or resales of special
fuels.
48.6416(b)(3)-1 Tax-paid articles used for further manufacture and
causing overpayments of tax.
48.6416(b)(3)-2 Further manufacture included.
48.6416(b)(3)-3 Supporting evidence required in case of tax-paid
articles used for further manufacture.
48.6416(b)(5)-1 Return of installment accounts causing overpayments of
tax.
48.6416(c)-1 Credit for tax paid on tires or, prior to January 1, 1984,
inner tubes.
48.6416(e)-1 Refund to exporter or shipper.
48.6416(f)-1 Credit on returns.
48.6416(h)-1 Accounting procedures for like articles.
48.6420-1 Credits or payments to ultimate purchaser of gasoline used on
a farm.
48.6420-2 Time for filing claim for credit or payment.
48.6420-3 Exempt sales; other payments or refunds available.
48.6420-4 Meaning of terms.
48.6420-5 Applicable laws.
48.6420-6 Records to be kept in substantiation of credits or payments.
48.6420(a)-2 Gasoline includible in claim.
48.6421-0 Off-highway business use.
48.6421-1 Credits or payments to ultimate purchaser of gasoline used for
certain nonhighway purposes.
48.6421-2 Credits or payments to ultimate purchasers of gasoline used in
intercity, local, or school buses.
48.6421-3 Time for filing claim for credit or payment.
48.6421-4 Meaning of terms.
48.6421-5 Exempt sales; other payments or refunds available.
48.6421-6 Applicable laws.
48.6421-7 Records to be kept in substantiation of credits or payments.
48.6427-0 Off-highway business use.
48.6427-1 Credit or payments to purchaser of special fuels resold or
used for nontaxable, farming, or other purposes.
48.6427-2 Credits or payments to purchaser of diesel or special motor
fuels used in intercity, local, or school buses.
48.6427-3 Time for filing claim for credit or payment.
48.6427-4 Applicable laws.
48.6427-5 Records to be kept in substantiation of credits or payments.
48.6427-6 Limitation on credit or refund of tax paid on fuel used in
intercity, local or school buses after July 31, 1984.
48.6427-8 Diesel fuel and kerosene; claims by ultimate purchasers.
48.6427-9 Diesel fuel and kerosene; claims by registered ultimate
vendors (farming and State use).
48.6427-10 Kerosene; claims by registered ultimate vendors (blocked
pumps).
48.6427-11 Kerosene; claims by registered ultimate vendors (blending).
48.6715-1 Penalty for misuse of dyed fuel.
Authority: 26 U.S.C. 7805, unless otherwise noted.
Section 48.4052-1 also issued under 26 U.S.C. 4052(g).
Section 48.4064-1(b)(3) also issued under 26 U.S.C.
4064(b)(1)(C)(iii).
Section 48.4064-1(d)(3)(iii) also issued under 26 U.S.C. 4064(d)(1).
Section 48.4064-1(d)(5) also issued under 26 U.S.C. 4064(d)(2).
Section 48.4081-4 also issued under 26 U.S.C. 4083(a)(2).
Section 48.4081-6 also issued under 26 U.S.C. 4081(c);
Section 48.4081-7 also issued under 26 U.S.C. 4081(e).
Section 48.4082-1 also issued under 26 U.S.C. 4082.
Section 48.4082-1T also issued under 26 U.S.C. 4082(a).
Section 48.4082-2 also issued under 26 U.S.C. 4082.
Section 48.4082-5 also issued under 26 U.S.C. 4082.
[[Page 70]]
Section 48.4082-6 also issued under 26 U.S.C. 4082(d).
Section 48.4082-7 also issued under 26 U.S.C. 4082(d).
Section 48.4101-1 also issued under 26 U.S.C. 4101(a).
Section 48.4101-2 also issued under 26 U.S.C. 6071(a).
Section 48.4191-1 also issued under 26 U.S.C. 4191.
Section 48.4191-2 also issued under 26 U.S.C. 4191(b)(2).
Section 48.4221-3(e) also issued under 26 U.S.C. 4221(a).
Section 48.6416(b)(2)-2(b) also issued under 26 U.S.C. 6416(b).
Section 48.6427-8 also issued under 26 U.S.C. 6427(m).
Section 48.6427-9 also issued under 26 U.S.C. 6427(m).
Section 48.6427-10 also issued under 26 U.S.C. 6427(m).
Section 48.6427-11 also issued under 26 U.S.C. 6427(m).
Subpart A_Introduction
Sec. 48.0-1 Introduction.
The regulations in this part 48 are designated ``Manufacturers and
Retailers Excise Tax Regulations.'' The regulations relate to the excise
taxes imposed by chapter 31 and 32 of the Internal Revenue Code. Chapter
31 (relating to retail taxes) imposes tax on certain luxury items,
special fuels, fuel used in commercial transportation on inland
waterways, and heavy trucks and trailers. Chapter 32 (relating to
manufacturers taxes) imposes tax on gas guzzler automobiles, highway-
type tires, taxable fuel, aviation fuel, coal, certain vaccines,
sporting goods, and taxable medical devices. Although chapter 32 also
imposes a tax on firearms, this tax is under the jurisdiction of the
Bureau of Alcohol, Tobacco, and Firearms. See part 40 of this chapter
for regulations relating to returns, payments, and deposits of taxes
imposed by chapters 31 and 32 (other than the tax on firearms imposed by
section 4181).
[T.D. 8442, 57 FR 48186, Oct. 22, 1992, as amended by T.D. 8659, 61 FR
10453, Mar. 14, 1996; T.D. 9604, 77 FR 72934, Dec. 7, 2012]
Sec. 48.0-2 General definitions and attachment of tax.
(a) Meaning of terms. As used in the regulations in this part,
unless otherwise expressly indicated:
(1) The terms defined in the provisions of law contained in the
regulations in this part shall have the meanings so assigned to them.
(2) [Reserved]
(3) The term calendar quarter means a period of 3 calendar months
ending on March 31, June 30, September 30, or December 31.
(4)(i) The term manufacturer includes any person who produces a
taxable article from scrap, salvage, or junk material, or from new or
raw material, by processing, manipulating, or changing the form of an
article or by combining or assembling two or more articles. The term
also includes a ``producer'' and an ``importer''. An ``importer'' of a
taxable article is any person who brings such an article into the United
States from a source outside the United States, or who withdraws such an
article from a customs bonded warehouse for sale or use in the United
States. If the nominal importer of a taxable article is not its
beneficial owner (for example, the nominal importer is a customs broker
engaged by the beneficial owner), the beneficial owner is the
``importer'' of the article for purposes of chapter 32 and is liable for
tax on his sale or use of the article in the United States. See section
4219 and the regulations thereunder for the circumstances under which
sales by persons other than the manufacturer or importer are subject to
the manufacturers excise tax.
(ii) Under certain circumstances, as where a person manufactures or
produces a taxable article for another person who furnishes materials
under an agreement whereby the person who furnished the materials
retains title thereto and to the finished article, the person for whom
the taxable article is manufactured or produced, and not the person who
actually manufactures or produces it, will be considered the
manufacturer.
(iii) A manufacturer who sells a taxable article in a knockdown
condition is liable for the tax as a manufacturer. Whether the person
who buys such
[[Page 71]]
component parts and assembles a taxable article from them will also be
liable for tax as a further manufacturer of a taxable article will
depend on the relative amount of labor, material, and overhead required
to assemble the completed article and on whether the article is
assembled for a business or personal use. See section 4218 and the
regulations thereunder.
(5) The term sale means an agreement whereby the seller transfers
the property (that is, the title or the substantial incidents of
ownership) in goods to the buyer for a consideration called the price,
which may consist of money, services, or other things.
(6) The term taxable article means any article taxable under section
4041 or Chapter 32, Subtitle D, of the Code.
(7) The term vendor includes a lessor except that, with respect to
the manufacturers excise taxes, this rule applies only where the lessor
is also the manufacturer of the article.
(8) The term purchaser includes a lessee except that, with respect
to the manufacturers excise taxes, this rule applies only where the
lessor is also the manufacturer of the article.
(9) The term exporter means the person named as shipper or consignor
in the export bill of lading.
(10) The term exportation means the severance of an article from the
mass of things belonging within the United States with the intention of
uniting it with the mass of things belonging within some foreign country
or within a possession of the United States.
(11) The term possession of the United States includes Guam, the
Midway Islands, Palmyra, the Panama Canal Zone, the Commonwealth of
Puerto Rico, American Samoa, the Virgin Islands, and Wake Island.
(b) Attachment of tax. (1) For purposes of this part, the
manufacturers excise tax generally attaches when the title to the
article sold passes from the manufacturer to a purchaser, and the
retailers excise tax generally attaches when the title to the article
sold passes from the retailer to a purchaser.
(2) When title passes is dependent upon the intention of the parties
as gathered from the contract of sale and the attendant circumstances.
In the absence of expressed intention, the legal rules of presumption
followed in the jurisdiction where the sale is made govern in
determining when title passes.
(3) In the case of a sale on credit, the tax attaches whether or not
the purchase price is actually collected.
(4) Where a consignor (such as a manufacturer) consigns articles to
a consignee (such as a dealer), retaining ownership in them until they
are disposed of by the consignee, title does not pass, and the tax does
not attach, until sale by the consignee. Where the relationship between
a manufacturer and a dealer is that of principal and agent, title does
not pass, and the tax does not attach, until sale by the dealer.
(5) In the case of a lease, an installment sale, a conditional sale,
or a chattel mortgage arrangement or similar arrangement creating a
security interest, a proportionate part of the tax attaches to each
payment. See section 4217 and the regulations thereunder for a
limitation on the amount of tax payable on lease payments.
(6) In the case of use by the manufacturer, the tax attaches at the
time the use begins.
[T.D. 7536, 43 FR 13515, Mar. 31, 1978, as amended by T.D. 8879, 65 FR
17155, Mar. 31, 2000]
Sec. 48.0-3 Exemption certificates.
Several sections of the regulations in this part, relating to sales
exempt from retailers or manufacturers excise tax, require the retailer
or manufacturer (as the case may be) to obtain an exemption certificate
from the purchaser to substantiate the exempt character of the sale.
Many of these sections also contain specimen forms of acceptable
exemption certificates. However, any form of exemption certificate will
be acceptable if it includes all the information required to be
contained in such a certificate by the pertinent sections of the
regulations in this part. If it contains all the required information, a
form of exemption certificate that is processed by data processing
equipment is acceptable.
[T.D. 7536, 43 FR 13516, Mar. 31, 1978. Redesignated by T.D. 8043, 50 FR
32014, Aug. 8, 1985]
[[Page 72]]
Subparts B-E [Reserved]
Subpart F_Special Fuels
Source: T.D. 6505, 25 FR 11217, Nov. 26, 1960, unless otherwise
noted.
Sec. 48.4041-0 Applicability of regulations relating to diesel
fuel after December 31, 1993.
Sections 48.4041-3 through 48.4041-17 do not apply to sales or uses
of diesel fuel after December 31, 1993. For rules relating to the diesel
fuel tax imposed by section 4041 after that date, see Sec. 48.4082-4.
[T.D. 8659, 61 FR 10453, Mar. 14, 1996]
Sec. 48.4041-3 Application of tax on sales of special motor fuel
for use in motor vehicles and motorboats.
(a) In general. The tax imposed by paragraph (2)(A) of section 4041
(a), (or before April 1, 1983, paragraph (1) of section 4041 (b)),
applies to the taxable sale of special motor fuel by any person to an
owner, lessee, or other operator of a motor vehicle or motorboat, for
use as a fuel in the motor vehicle or motorboat. The tax does not apply
to special motor fuel sold for use on or after April 1, 1983, and before
October 1, 1988, in an off-highway business use.
(b) Liability for tax. The tax on the taxable sale of special motor
fuel is payable by the person who sells the special motor fuel to the
owner, lessee, or other operator of a motor vehicle or motorboat.
(c) Rate of tax--(1) In general. Tax is imposed on the sale of
special motor fuel at the rate applicable on the date on which the
special motor fuel is sold. See Sec. 48.4041-1(b)(2) for rates. The
test of taxability at the rates specified in Sec. 48.4041-1(b)(2)
(i)(A) and (ii)(A) is whether the fuel is to be used in a motor vehicle
or motorboat. For purposes of paragraphs (c) (2) and (3) of this
section, the term ``qualified business use'' has the same meaning as
that given to the term ``off-highway business use'' by section
6421(d)(2).
(2) Special motor fuel sold for use as a fuel in a motor vehicle.
Tax at the rates specified in paragraphs (b)(2) (i)(A) and (ii)(A) of
Sec. 48.4041-1 applies in the case of the sale of special motor fuel
for use as a fuel in a motor vehicle. Tax at the rates specified in that
section applies regardless of whether the motor vehicle is a highway
vehicle. However, a reduced rate of tax from that imposed by paragraphs
(b)(2)(i)(A) of Sec. 48.4041-1 is allowed by paragraph (b)(2)(i)(C) of
Sec. 48.4041-1 if special motor fuel is sold for use in a qualified
business use. An exemption from the tax imposed by paragraph
(b)(2)(ii)(A) of Sec. 48.4041-1 is allowed by paragraph (b)(2)(ii)(C)
of Sec. 48.4041-1 if the special motor fuel is sold for use in an off-
highway business use.
(3) Special motor fuel sold for use as fuel in a motorboat. Tax at
the rates specified in paragraphs (b)(2)(i)(A) and (ii)(A) of Sec.
48.4041-1 applies in the case of the sale of special motor fuel for use
as fuel in a motorboat. The qualified business use reduced rate of tax
set forth in paragraph (b)(2)(i)(C) of Sec. 48.4041-1 and the off-
highway business use exemption set forth in paragraph (b)(2)(ii)(C) of
Sec. 48.4041-1 are not applicable to motorboats unless the motorboat is
a vessel employed in the fisheries or whaling business. See section
6421(d)(2)(B).
(d) Example. Application of the tax to the sale of special motor
fuels may be illustrated by the following example.
Example. The N Company is engaged in the manufacture of ceramic
products. It has a vehicle which is used to haul clay from a clay pit to
its factory. This vehicle has not been registered for highway use and
under the applicable State law is not required to be registered for
highway use since none of the hauling of clay is done on public
highways. The N Company also uses a ditch digging machine in the
vicinity of the clay pit for the construction of drains. A fork lift
truck is used to move cartons of merchandise from place to place inside
the company's warehouse and to assist in the loading of merchandise onto
the company's highway trucks for delivery to purchasers. The highway
trucks are registered by the State for use on highways. Special motor
fuel is used for the operation of all of these items of equipment.
Before April 1, 1983, the special motor fuel sold for use as a fuel in
the registered highway trucks is subject to tax at the rate specified in
Sec. 48.4041-1(b)(2)(i)(A). On or after January 1, 1979, and before
April 1, 1983, the special motor fuel sold for use as a fuel in the
unregistered truck used to haul clay from the pit to the factory and in
the fork lift truck, assuming both of these are used in qualified
business uses, is subject to tax at
[[Page 73]]
the rate specified in Sec. 48.4041-1(b)(2)(i)(C). If the unregistered
truck and forklift are not used in qualified business uses, then the
special motor fuel sold for use in these vehicles is taxable at the rate
specified in Sec. 48.4041-1(b)(2)(i)(A) since both are motor vehicles.
No tax is payable with respect to the special motor fuel sold for use in
the ditch digging machine since that machine is not a motor vehicle. On
and after April 1, 1983, and before October 1, 1988, special motor fuel
sold for use in the registered trucks is taxable at the rate specified
in Sec. 48.4041-1(b)(2)(ii)(A) because the trucks are motor vehicles.
On and after April 1, 1983, and before October 1, 1988, special motor
fuel sold for use in the unregistered truck and the fork lift, assuming
that both vehicles are used in off-highway business uses, is exempt from
tax as specified in Sec. 48.4041-1(b)(2)(ii)(C). If the unregistered
truck and fork lift are not used in off-highway business uses, then the
special motor fuel sold for use in these vehicles is taxable at the rate
specified in Sec. 48.4041-1(b)(2)(ii)(A) since both are motor vehicles.
No tax is payable with respect to the special motor fuel sold for use in
the ditch digging machine since that machine is not a motor vehicle.
(e) Cross reference. (1) For the tax applicable in certain cases
based on the use of special motor fuel as a fuel in a motor vehicle or
motorboat, see Sec. 48.4041-6.
(2) For the definition of the terms ``highway'', ``motor vehicle'',
``special motor fuel'', and ``registered'', see paragraphs (a), (c),
(f), and (i) of Sec. 48.4041-8. For the definition of the term ``off-
highway business use'', see section 6421(d)(2).
(3) For the exemption from tax with respect to special motor fuel
sold for use on a farm for farming purposes or as supplies for vessels,
see Sec. Sec. 48.4041-9 and 48.4041-10, respectively.
(4) For credit or refund of tax paid on special motor fuel resold or
used otherwise than for the purpose for which purchased, see section
6427(a).
[T.D. 8066, 51 FR 14, Jan. 2, 1986]
Sec. 48.4041-4 Application of tax on sales of liquid for use as
fuel in aircraft in noncommercial aviation.
(a) In general. The taxes imposed by subparagraphs (1)(A) and (2)(A)
of section 4041(c) apply to the taxable sale of any liquid by any person
to an owner, lessee, or other operator of an aircraft, for use as a fuel
in the aircraft in noncommercial aviation.
(b) Liability of tax. The tax on the taxable sale of any liquid used
as fuel in aircraft in noncommercial aviation is payable by the person
who sells the liquid to the owner, lessee, or operator of an aircraft in
noncommercial aviation.
(c) Rate of tax. Tax is imposed on the sale of liquids used as fuel
in aircraft in noncommercial aviation at the rate applicable on the date
on which the liquid is sold. See Sec. 48.4041-1(b)(3) for rates.
(d) Cross references. (1) For the tax applicable on the basis of the
use of fuel in an aircraft in noncommercial aviation, see Sec. 48.4041-
6.
(2) For the definition of the term ``noncommercial aviation'', see
paragraph (j) of Sec. 48.4041-8.
(3) For the exemption of tax with respect to liquids used as fuel in
aircraft in noncommercial aviation sold for use on a farm for farming
purposes or as supplies for vessels or aircraft, see Sec. Sec. 48.4041-
9 and 48.4041-10, respectively. For tax-free sales if sellers and
purchasers are registered, see Sec. 48.4041-11.
(4) For credit or refund of tax paid on fuel used in noncommercial
aviation that is resold or used otherwise than for the purpose for which
purchased, see section 6427(a).
(e) Effective date. The provisions of this section shall apply to
sales or uses occurring before October 1, 1980, and to sales or uses
occurring on or after September 1, 1982, and ending before January 1,
1988.
[T.D. 8066, 51 FR 15, Jan. 2, 1986]
Sec. 48.4041-5 Sales of diesel and special motor fuels and fuel
for use in aircraft; rules of general application.
(a) Taxability of liquid fuel delivered into purchaser's tanks--(1)
Fuel supply tanks. (i) The sale of diesel fuel to an owner, lessee, or
other operator of a diesel-powered highway vehicle, or of special motor
fuel to an owner, lessee, or other operator of a motor vehicle or
motorboat, or of fuel to an owner, lessee, or other operator of an
aircraft used in noncommercial aviation is considered a taxable sale of
the liquid fuel if the liquid fuel is delivered by the seller into the
fuel supply tank of the vehicle, motorboat, or aircraft. For purpose of
this paragraph (a), liquid fuel sold at a location unattended by
[[Page 74]]
the seller (such as under a cardlock or meter system) on or after
January 2, 1986, is considered to be delivered into the fuel supply tank
by the seller except as provided in paragraph (a)(1)(ii) of this
section. In this regard, see section 6427(a) for credit or refund of tax
if liquid fuel acquired in a transaction subject to tax is used in a
nontaxable use.
(ii) If the seller maintains special devices at the unattended
location to account accurately for sales of liquid fuel for nontaxable
uses (such as assigning a separate ``nontaxable'' meter or, in a
cardlock system, issuing a special ``nontaxable'' card to a customer who
regularly purchases fuel for nontaxable uses), then such sales of liquid
fuel shall be considered nontaxable. The seller must maintain sufficient
records of such nontaxable sales and include in these records the name
of the purchaser, the date of the purchase, and the quantity of fuel
purchased in each sale.
(2) Bulk tanks. The sale of diesel fuel to an owner, lessee, or
other operator of a diesel-powered highway vehicle, or of special motor
fuel to an owner, lessee, or other operator of a motor vehicle or
motorboat, or of fuel to an owner, lessee, or other operator of an
aircraft used in noncommercial aviation is considered a taxable sale of
the liquid fuel if--
(i) The liquid fuel is delivered by the seller into a bulk supply
tank (or other container) that is not the fuel supply tank of a vehicle,
motorboat, or aircraft; and
(ii) The purchaser furnishes a written statement to the seller
before or at the time of the sale stating that the entire quantity of
the liquid fuel covered by the sale is for a taxable purpose as a fuel
in such a vehicle, motorboat, or aircraft.
If the purchaser fails to provide the written statement required by
paragraph (a)(2)(ii) of this section, the purchaser is liable for the
tax on the later taxable sale or use. If a purchaser acquires both fuel
that is to be used for taxable purposes and fuel that is to be used for
nontaxable purposes, and the fuel that is to be used for taxable
purposes is stored in a different storage tank (or container) from the
tank used to store the fuel to be used for nontaxable purposes, the
written statement described in paragraph (a)(2)(ii) of this section will
relate to the fuel to be used for taxable purposes if proper records are
kept by the purchaser that sufficiently identify the tanks (or
containers) into which tax-paid fuel is delivered and the quantities of
fuel delivered into those tanks (or containers). If only occasional
sales for delivery into a bulk storage tank (or other container) are
made to a purchaser, a separate statement must be furnished for each
order. However, if sales are regularly or frequently made to a
purchaser, a written statement covering all orders for a specified
period not to exceed 12 calendar quarters is acceptable.
(b) Sales for resale and to consignees. (1) A sale to a dealer for
resale is not subject to tax even if it is known at the time of the sale
that the liquid fuel will be resold by the dealer for use as a fuel in a
diesel-powered highway vehicle, motor vehicle, motorboat, or aircraft.
(2) The tax is payable by the person who makes the taxable sale. If
a taxable liquid fuel is consigned to a person for sale and the
consignor retains ownership in the liquid fuel until it is disposed of
by the consignee, the consignor is the person liable for the tax when a
taxable sale of the liquid fuel is made by the consignee. If the
consignor transfers ownership in the taxable liquid fuel to the
consignee before sale of the liquid fuel by the consignee, the consignee
is the person liable for the tax upon a subsequent taxable sale of the
liquid. However, if ownership of the liquid fuel is transferred back to
the consignor or to another person before a taxable sale is made, as
described in paragraph (a) of this section, and thereafter a taxable
sale of the liquid fuel is made by such person or by another person
acting as the person's agent, such person is liable for the tax. See
paragraph (d) of Sec. 48.4041-8 for definition of the term ``taxable
liquid fuel.''
[T.D. 8066, 51 FR 15, Jan. 2, 1986, as amended by T.D. 8154, 52 FR
32008, Aug. 25, 1987]
[[Page 75]]
Sec. 48.4041-6 Application of tax on use of taxable liquid fuel.
(a) In general--(1) Diesel fuel. (i) If, before April 1, 1983, a
person acquires any diesel fuel by any means other than through a
transaction subject to tax under section 4041(a)(1) and uses it as a
fuel in a diesel powered highway vehicle, the person is liable for a tax
under section 4041(a)(2) on the quantity of diesel fuel so used at the
appropriate rate set forth in Sec. 48.4041-1(b)(1)(i). If a person
acquired any diesel fuel through a transaction which is subject to tax
at the rate set forth in paragraph (b)(1)(i) (C) or (D) of Sec.
48.4041-1, and uses it for a use described in paragraph (b) (1) (i) (A)
or (B) of Sec. 48.4041-1 the person is liable for an additional tax
uder section 4041(a)(2) on the quantity of diesel fuel so used. See
Sec. 48.4041-1(b)(1)(i)(E), (F), or (G) for the applicable rate of tax.
See section 6427(a) for credit or refund of tax where diesel fuel
acquired in a transaction subject to tax at the rate set forth in
paragraph (b)(1)(i) (A) or (B) of Sec. 48.4041-1 is used as described
in paragraph (b)(1)(i) (C) or (D) of Sec. 48.4041-1 or in a nontaxable
use.
(ii) On or after April 1, 1983, and before August 1, 1984, if a
person acquires any diesel fuel by any means other than through a
transaction subject to tax under section 4041(a)(1)(A) and uses it as a
fuel in a diesel-powered highway vehicle, the person is liable for a tax
under section 4041(a)(1)(B) on the quantity of diesel fuel so used at
the appropriate rate set forth in paragraph (b)(1)(ii) of Sec. 48.4041-
1. If a person acquired any diesel fuel through a transaction for which
no tax is imposed by reason of paragraph (b)(1)(ii)(C) of Sec. 48.4041-
1 and uses it in other than a nontaxable use, the person is liable for a
tax under section 4041(a)(1)(B) on the quantity of fuel so used. See
paragraph (b)(1)(ii) (D) or (E) of Sec. 48.4041-1 for the applicable
rate of tax. See section 6427(a) for credit or refund of tax where
diesel fuel acquired in a transaction subject to tax at the rate set
forth in paragraph (b)(1)(ii)(A) of Sec. 48.4041-1 is used as described
in paragraph (b)(1)(ii)(C) of Sec. 48.4041-1 or in another nontaxable
use.
(iii) On or after August 1, 1984, and before October 1, 1988, if a
person acquires any diesel fuel by any means other than through a
transaction subject to tax under section 4041(a)(1)(A) and uses it as a
fuel in a diesel-powered highway vehicle, the person is liable for a tax
under section 4041(a)(1)(B) on the quantity of diesel fuel so used at
the appropriate rate set forth in paragraph (b)(1)(iii) of Sec.
48.4041-1. If a person acquired any diesel fuel through a transaction
for which no tax is imposed by reason of paragraph (b)(1)(iii)(C) of
Sec. 48.4041-1 and uses it in other than a nontaxable use, the person
is liable for a tax under section 4041(a)(1)(B) on the quantity of fuel
so used. See paragraph (b)(1)(iii)(D) of Sec. 48.4041-1 for the
applicable rate of tax. See section 6427(a) for credit or refund of tax
where diesel fuel acquired in a transaction subject to tax at the rate
set forth in paragraph (b)(1)(iii)(A) of Sec. 48.4041-1 is used as
described in paragraph (b)(1)(iii)(C) of Sec. 48.4041-1 or in another
nontaxable use.
(2) Special motor fuel. (i) On or after January 1, 1979, and before
April 1, 1983, if a person acquired any special motor fuel by any means
other than through a transaction subject to tax under section 4041(b)(1)
and uses it as a fuel in a motor vehicle or motorboat, the person is
liable for a tax under section 4041(b)(2) on the quantity of special
motor fuel so used at the appropriate rate set forth in Sec. 48.4041-
1(b)(2)(i). If a person acquired any special motor fuel through a
transaction with is subject to a tax at the rate set forth in paragraph
(b)(2)(i)(C) of Sec. 48.4041-1 and uses it in a use other than one for
which the reduced rate applies, the person is liable for an additional
tax under section 4041(b)(2) on the quantity of special motor fuel so
used. See Sec. 48.4041-1(b)(2)(i) (D) or (E) for the applicable rate of
tax. See section 6427(a) for credit or refund of tax where special motor
fuel acquired in a transaction subject to tax at the rate set forth in
paragraph (b)(2)(i)(A) of Sec. 48.4041-1 is used for a purpose
described in paragraph (b)(2)(i)(C) of Sec. 48.4041-1 or in a
nontaxable use.
(ii) On or after April 1, 1983, and before October 1, 1988, if a
person acquired any special motor fuel by any means other than through a
transaction subject to tax under section 4041(a)(2)(A) and uses it as a
fuel in a motor vehicle or motorboat, the person
[[Page 76]]
is liable for a tax under section 4041(a)(2)(B) on the quantity of
spcial motor fuel so used at the appropriate rate set forth in paragraph
(b)(2)(ii) of Sec. 48.4041-1. If a person acquired any special motor
fuel through a transaction for which no tax is imposed by reason of
paragraph (b)(2)(ii)(C) of Sec. 48.4041-1 and uses it in other than a
nontaxable use, the person is liable for a tax under section
4041(a)(2)(B) on the quantity of fuel so used. See paragraph
(b)(2)(ii)(D) of Sec. 48.4041-1 for the applicable rate of tax. See
section 6427(a) for credit or refund of tax where special motor fuel
acquired in a transaction subject to tax at the rate set forth in
paragraph (b)(2)(ii)(A) of Sec. 48.4041-1 is used for a purpose
described in paragraph (b)(2)(ii)(C) of Sec. 48.4041-1 or in another
nontaxable use.
(3) Noncommercial aviation. If a person acquires any liquid fuel by
any means other than through a transaction subject to tax under section
4041(c)(1)(A) or section 4041(c)(2)(A) and uses it as fuel in an
aircraft in noncommercial aviation, the person is liable for a tax under
section 4041(c)(1)(B) or section 4041(c)(2)(B) on the quantity of the
liquid fuel so used at the appropriate rate set forth in Sec. 48.4041-
1(b)(3).
(b) Bulk purchases by users. Taxpayers who purchase taxable liquid
fuel in bulk delivered into storage tanks or other containers and use it
for taxable or nontaxable purposes or in registered and nonregistered
vehicles must maintain adequate records of all fuel used for each
purpose to permit verification of the tax paid and of any credits,
refunds, or exemptions claimed.
[T.D. 8066, 51 FR 15, Jan. 2, 1986]
Sec. 48.4041-7 Dual use of taxable liquid fuel.
Tax applies to all taxable liquid fuel sold for use or used as a
fuel in the motor which is used to propel a diesel-powered vehicle or in
the motor used to propel a motor vehicle, motorboat, or aircraft, even
though the motor is also used for a purpose other than the propulsion of
the vehicle, motorboat, or aircraft. Thus, if the motor of a diesel-
powered highway vehicle or a motorboat operates special equipment by
means of a power take-off or power transfer, tax applies to all taxable
liquid fuel sold for this use or so used, whether or not the special
equipment is mounted on the vehicle or boat. For example, tax applies to
diesel fuel sold to operate the mixing unit on a concrete mixer truck if
the mixing unit is operated by means of a power take-off from the motor
of the vehicle. Similarly, tax applies to all taxable liquid fuel sold
for use or used in a motor propelling a fuel oil truck even though the
same motor is used to operate the pump (whether or not mounted on the
truck) for discharging the fuel into customers' storage tanks. However,
tax does not apply to liquid fuel sold for use or used in a separate
motor to operate special equipment (whether or not the equipment is
mounted on the vehicle). If the taxable liquid fuel used in a separate
motor is drawn from the same tank as the one which supplies fuel for the
propulsion of the vehicle, a reasonable determination of the quantity of
taxable liquid fuel used in such separate motor or during such period is
acceptable for purposes of application of the tax. This determination
must be based, however, on the operating experience of the person using
the taxable liquid fuel, and the taxpayer must maintain records which
support the allocation used. Devices to measure the number of miles the
vehicle has traveled, such as hubometers, may be used in making a
preliminary determination of the number of gallons of fuel used to
propel the vehicle. In order to make a final determination of the number
of gallons of fuel used to propel the vehicle, there must be added to
this preliminary determination the amount of fuel consumed while idling
or warming up the motor preparatory to propelling the vehicle.
[T.D. 8066, 51 FR 16, Jan. 2, 1986]
Sec. 48.4041-8 Definitions.
For purposes of the regulations in this subpart, unless otherwise
expressly indicated:
(a) Highway. The term ``highway'' includes any road (whether a
Federal highway, State highway, city street, rural road, or otherwise)
in the United States which is not a private roadway.
(b) Highway vehicle--(1) In general. The term ``highway vehicle''
means
[[Page 77]]
any self-propelled vehicle, or any trailer or semi-trailer, designed to
perform a function of transporting a load over highways, whether or not
also designed to perform other functions, but does not include a vehicle
described in paragraph (b)(2) of this section. For purposes of this
definition, a vehicle consists of a chassis, or a chassis and a body if
the vehicle has a body, but does not include the vehicle's load.
Therefore, in determining whether a vehicle is a ``highway vehicle'', it
is immaterial that the vehicle is designed to perform a highway
transportation function for only a particular kind of load, such as
passengers, furnishings and personal effects (as in a house, office, or
utility trailer), a special type of cargo, goods, supplies, or
materials, or, except to the extent otherwise provided in paragraph
(b)(2)(i) of this section, machinery or equipment specially designed to
perform some off-highway task unrelated to highway transportation. In
the case of specially designed machinery or equipment, it is also
immaterial, except as provided in paragraph (b)(2)(i) of this section,
that such machinery or equipment is permanently mounted on the vehicle.
For purposes of paragraph (b) of this section, the term ``transport''
includes the term ``tow''. A vehicle which is not a highway vehicle
within the meaning of this paragraph shall be treated as a non-highway
vehicle for purposes of section 4041. Examples of vehicles that are
designed to perform a function of transporting a load over the public
highways are passenger automobiles, motorcycles, buses, and highway-type
trucks, truck tractors, trailers, and semi-trailers.
(2) Exceptions--(i) Certain specially designed mobile machinery for
nontransportation functions. A self-propelled vehicle, or trailer or
semi-trailer, is not a highway vehicle if it (A) consists of a chassis
to which there has been permanentaly mounted (by welding, bolting,
riveting, or other means) machinery or equipment to perform a
construction, manufacturing, processing, farming, mining, drilling,
timbering, or other operation similar to any one of the foregoing
enumerated operations if the operation of the machinery or equipment is
unrelated to transportation on or off the public highways, (B) the
chassis has been specially designed to serve only as a mobile carriage
and mount (and a power source, where applicable) for the particular
machinery or equipment involved, whether or not such machinery or
equipment is in operation, and (C) by reason of such special design,
such chassis could not, without substantial structural modification, be
used as a component of a vehicle designed to perform a function of
transporting any load other than that particular machinery or equipment
or similar machinery or equipment requiring such a specially designed
chassis.
(ii) Certain vehicles specially designed for off-highway
transportation. A self-propelled vehicle, or a trailer or semi-trailer,
is not a highway vehicle if it is (A) specially designed for the primary
function of transporting a particular type of load other than over the
public highway in connection with a construction, manufacturing,
processing, farming, mining, drilling, timbering, or other operation
similar to any one of the foregoing enumerated operations, and (B) if by
reason of such special design, the use of such vehicle to transport such
load over the public highways is substantially limited or substantially
impaired. For purposes of applying the rule of clause (b) of this
paragraph (b)(2)(ii), account may be taken of whether the vehicle may
travel at regular highway speeds, requires a special permit for highway
use, is overweight, overheight or overwidth for regular use, and any
other relevant considerations. Solely for purposes of determinations
under this paragraph (b)(2)(ii), where there is affixed to the vehicle
equipment used for loading, unloading, storing, vending, handling,
processing, preserving, or otherwise caring for a load transported by
the vehicle over the public highways, the functions are related to the
transportation of a load over the public highways even though the
functions may be performed off the public highways.
(iii) Certain trailers and semi-trailers specially designed to
perform nontransportation functions off the public highways. A trailer
or semi-trailer is not a highway vehicle if it is specially designed to
serve no purpose other than
[[Page 78]]
providing an enclosed stationary shelter for the carrying on of a
function which is directly connected with and necessary to, and at the
off-highway site of, a construction, manufacturing, processing, mining,
drilling, farming, timbering, or other operation similar to any one of
the foregoing enumerated operations, such as a trailer specially
designed to serve as an office for such an operation.
(3) Optional application. For purposes of section 4041, if any rules
existing immediately prior to January 13, 1977, would, if applicable,
unequivocally resolve an issue involving the definition of a highway
vehicle with respect to a period prior to such date, at the option of
the taxpayer, such rules existing prior to such date shall be applied to
resolve the issue for all periods prior to such date, and the rules of
paragraph (b) (1) and (2) of this section, which define the term
``highway vehicle'', shall not apply with respect to such issue for all
periods prior to such date.
(4) Diesel-powered highway vehicle. The term ``diesel-powered
highway vehicle'' means any highway vehicle (within the meaning of
paragraph (b)(1) of this section) which is also a motor vehicle (as
defined in paragraph (c) of this section) and which uses diesel fuel (as
defined in paragraph (e) of this section) for propulsion purposes.
(c) Motor vehicles. The term ``motor vehicle'' includes all types of
vehicles propelled by motor that are designed for carrying or towing
loads from one place to another, regardless of the type of load or
material carried or towed and whether or not the vehicle is registered
or required to be registered for highway use. Included are fork lift
trucks used to carry loads at railroad stations, industrial plants,
warehouses, etc. The term does not include farm tractors, trench
diggers, power shovels, bulldozers, road graders or rollers, and similar
equipment which does not carry or tow a load; nor does it include any
vehicle which moves exclusively on rails. For periods prior to January
6, 1977, a vehicle which is designed for towing, but not carrying, loads
shall not be considered to be a motor vehicle.
(d) Taxable liquid fuel. The term ``taxable liquid fuel'' (or
``taxable liquid'') means any liquid which is either--
(1) Diesel fuel as defined in paragraph (e) of this section,
(2) Special motor fuel as defined in paragraph (f) of this section,
or
(3) Any liquid fuel used in an aircraft in ``noncommercial
aviation'', as defined in paragraph (h) of this section.
(e) Diesel fuel. The term ``diesel fuel'' means any liquid (other
than a product taxable as gasoline under the provisions of section 4081)
which is sold for use or used as a fuel in a diesel-powered highway
vehicle.
(f) Special motor fuel. (1) Except as provided in paragraph (f)(2)
of this section, special motor fuel means any liquid fuel, including--
(i) Any liquefied petroleum gas (such as propane, butane, pentane,
or mixtures of the same);
(ii) Liquefied natural gas; or
(iii) Benzol, benzene, naptha, or any other liquid, whether a
refined, partly refined, or unrefined product, 10 percent of which has
been recovered when the thermometer reads 347 [deg]F. (175 [deg]C.) or
95 percent of which has been recoverd when the thermometer reads 464
[deg]F. (240 [deg]C.) when subjected to distillation in accordance with
the ``Standard Method of Test for Distillation of Gasoline, Naptha,
Kerosene, and Similar Petroleum Products'' (A.S.T.M. designation: D86)
of the American Society for Testing Materials, regardless of the trade
name under which sold.
(2) The term ``special motor fuel'' does not include any product
taxable under the provisions of section 4081, nor does it include
``kerosene, gas oil, or fuel oil'', as defined in paragraph (g) of this
section.
(g) Kerosene, gas oil, or fuel oil. (1) The term ``kerosene, gas,
oil or fuel oil'' means any product (i) 10 percent of which has not been
recovered when the thermometer reads 347 [deg]F. (175 [deg]C.), and (ii)
95 percent of which has not been recovered when the thermometer reads
464 [deg]F. (240 [deg]C.), when subjected to distillation in accordance
with the ``Standard Method of Test for Distillation of Gasoline, Naptha,
Kerosene, and Similar Petroleum Products'' (A.S.T.M. designation: D86)
of the
[[Page 79]]
American Society for Testing Materials.
(2) Products designated as kerosene, gas, oil, or fuel oil which do
not fall within the specifications of both paragraphs (g)(1) (i) and
(ii) of this section are taxable as special motor fuel if sold or used
as a fuel in a motor vehicle or motorboat.
(h) Fuel used in the aircraft in noncommercial aviation. The term
``fuel used in an aircraft in noncommercial aviation'' means any liquid
(including any product taxable under section 4081) that is sold for use
or used as a fuel in an aircraft in noncommercial aviation (as defined
in paragraph (j) of this section).
(i) Registered. The term ``registered'', when used with reference to
a highway vehicle, means--
(1) Registered for highway use under the laws of any State, District
of Columbia, or foreign country, or
(2) Required to be registered for highway use under the law of the
State, District of Columbia, or foreign country in which it is operated
or situated. Any highway vehicle which is operated under a dealer's tag,
license, or permit is considered to be registered. A highway vehicle is
not considered to be ``registered'' solely because there has been issued
a special permit for operation of the vehicle at particular times and
under specified conditions. However, a highway vehicle which is required
to be registered and which also has been issued a special permit for
operation of the vehicle under specified conditions, such as carrying an
oversized load, is still considered to be ``registered''.
(j) Noncommercial aviation. The term ``noncommercial aviation''
means any use of an aircraft, other than in a business of transporting
persons or property for compensation or hire by air. The term also
includes any use of an aircraft, in a business described in the
preceding sentence, which is properly allocable to any transportation
exempt from taxes imposed by sections 4261 (transportation of persons)
and 4271 (transportation of property) by reason of section 4281 (use of
small aircraft on nonestablished lines) or 4282 (transportation of
members of affiliated group).
[T.D. 8066, 51 FR 17, Jan. 2, 1986, as amended by T.D. 8609, 60 FR
40081, Aug. 7, 1995]
Sec. 48.4041-9 Exemption for farm use.
(a) In general. The tax imposed by section 4041 does not apply to
diesel fuel or special motor fuel, or fuel used in noncommercial
aviation, sold for use or used on a farm in the United States for
farming purposes. The tax applies in the case of diesel fuel delivered
into the fuel supply tank of a highway vehicle, or special motor fuel
delivered into the fuel supply tank of a motor vehicle or motorboat,
even if it is known that the liquid fuel is to be used on a farm for
farming purposes. Credit or refund of the tax paid in such case may be
claimed as provided by section 6427(c) upon proof that the taxable
liquid was used on a farm for farming purposes. A tax-free sale of fuel
delivered into the fuel supply tank of an aircraft in noncommercial
aviation where such fuel is to be used on the farm for farming purposes
may be made only if the requirements of Sec. 48.4041-11 are met. The
terms ``used on a farm for farming purposes'', and related terms, have
the same meaning for purposes of the exemption in section 4041(f) and
the regulations in this section as these terms are defined in paragraphs
(1), (2), and (3) of section 6420(c) and the regulations contained in
Sec. 48.6420-4.
(b) Application of exemption. The exemption referred to in paragraph
(a) of this section does not apply with respect to diesel fuel or
special motor fuel or fuel used in noncommercial aviation sold for use
or used for nonfarming purposes, or diesel fuel or special motor fuel or
fuel used in noncommercial aviation sold for use or used off a farm,
regardless of the nature of the use. Thus, if a vehicle, motorboat, or
aircraft is used both on a farm and off the farm, or if it is used on a
farm both for farming and nonfarming purposes, the exemption applies
only with respect to that portion of the diesel fuel or special motor
fuel or fuel used in noncommercial aviation which is sold for use or
used ``on a farm for farming purposes''. For purposes of this exemption,
it is immaterial
[[Page 80]]
whether or not a vehicle is registered for highway use. However, the
actual use of the vehicle and the place where it is used are material.
For example, if a truck used on a farm for farming purposes is also used
on the highways (even though in connection with operating the farm), tax
applies to that diesel fuel or special motor fuel which is sold for use
or used in operating the truck on the highways, since the fuel was used
off the farm.
(c) Termination of exemption. The exemption referred to in paragraph
(a) of this section shall not apply on and after October 1, 1988.
[T.D. 8066, 51 FR 18, Jan. 2, 1986]
Sec. 48.4041-10 Exemption for use as supplies for vessels or aircraft.
(a) Application of exemption. The tax imposed by section 4041 does
not apply to any fuels which are sold for use or used as supplies for
vessels or aircraft within the meaning of section 4221(a)(3) and (d)(3),
and Sec. 48.4221-4. In the case of a liquid sold for use as fuel in an
aircraft, a tax-free sale may be made only if the requirements of Sec.
48.4041-11 are met. For credit or refund of tax paid on fuels which have
been sold or used as supplies for vessels or aircraft, see section
6416(b)(2)(B), section 6427, and paragraph (f) of this section.
(b) Evidence required to establish exemption. (1) In order to
establish exemption from tax in the case of a sale of fuels for use as
supplies for vessels or aircraft, it is necessary that the seller obtain
from the owner, charterer, or authorized agent of the vessel or aircraft
and retain in its possession a property executed exemption certificate
in the form prescribed by paragraph (c) of this section. If fuel is sold
tax free for use as supplies for civil aircraft employed in foreign
trade or in trade between the United States and any of its possessions,
the exemption certificate must show the name of the country in which the
aircraft is registered.
(2) If only occasional sales of fuels are made to a purchaser for
use which is exempt from tax as provided in this section, a separate
exemption certificate must be furnished for each order. However, if
sales are regularly or frequently made to a purchaser for such exempt
use, a certificate covering all orders for a specified period not to
exceed 12 calendar quarters is acceptable. Such certificates and proper
records of invoices, orders, etc., relative to tax-free sales must be
kept for inspection by the district director as provided in section
6001. If a seller's records with respect to any sale claimed to be tax
free do not include a proper certificate, with supporting invoices and
such other evidence as may be necessary to establish the exempt
character of the sale, tax is payable by the seller on the sale.
(c) Acceptable form of exemption certificate. The following form of
exemption certificate, which must be adhered to in substance, is
acceptable for the purposes of this section.
Exemption Certificate
(For use by purchasers of fuels for use as supplies for certain
vessels or aircraft (section 4041(g) of the Internal Revenue Code of
1954).)
(Date), 19--____________________________________________________________
The undersigned purchaser hereby certifies that he/she is the
________________________________________________________________________
(owner, charterer, or authorized agent of owner or charterer)
of______________________________________________________________________
(Name of company and vessel)
and that the fuel specified in the accompanying order, or as specified
below or on the reverse side hereof, will be used only as fuel supplies
for a vessel belonging to one of the following classes of vessels
(including aircraft) to which section 4041(g) of the Internal Revenue
Code applies: (Check class to which vessel belongs):
(1) Vessels (including aircraft) engaged in foreign trade.
(2) Vessels engaged in trade between the Atlantic and Pacific ports
of the United States.
(3) Vessels (including aircraft) engaged in trade between the United
States and any of its possessions.
(4) Vessels employed in the fisheries or whaling business.
(5) Vessels (including aircraft) of war of the United States or a
foreign nation.
The undersigned understands that if the fuels are sold or used
otherwise than as stated above and for a taxable purpose specified in
section 4041 of the Internal Revenue Code, the undersigned will be
liable for the tax upon such sale or use. It is also understood that
this certificate may not be used in purchasing fuels, if such fuels are
for use as
[[Page 81]]
fuels in pleasure vessels, or of any type of aircraft except--
(1) Civil aircraft employed in foreign trade or trade between the
United States and any of its possessions, and otherwise entitled to
exemption, and
(2) Aircraft owned by the United States or any foreign country and
constituting a part of the armed forces thereof.
The undersigned understands that the fraudulent use of this
certificate to secure exemption will subject the undersigned and all
others making fraudulent use to a penalty equivalent to the amount of
tax due on the sale of the fuel and, upon conviction, to a fine of not
more than $10,000, or to imprisonment for not more than 5 years, or
both, together with the costs of prosecution. The purchaser also
understands that it must be prepared to establish by satisfactory
evidence the purpose for which the fuel purchased under this certificate
was used.
(Signature)_____________________________________________________________
(Address)_______________________________________________________________
________________________________________________________________________
Registration Number if fuel used as supplies for civil aircraft engaged
in foreign trade or in trade between the United States and any of its
possessions.
(d) Exemption certificate not obtained prior to filing of seller's
excise tax return. If the exemption certificate is not obtained prior to
the time the seller files a return covering taxes due for the period
during which the sale was made, the seller must include the tax on the
sale in its return for that period. However, if the certificate is later
obtained, a claim for refund of the tax paid on the sale may be filed on
Form 843, or a credit for the tax paid may be taken upon a subsequent
return as provided by section 6416(b)(2)(B) and Sec. 48.6416(b)-2(c).
(e) Liability of purchaser. The person who purchases fuels tax free
as provided in this section is liable for the tax imposed by section
4041 if the person sells or uses such fuel in a sale or use that is not
exempt under any provision of law applicable to the taxes imposed by
section 4041.
(f) Credit or refund. (1) If diesel fuel or special motor fuel upon
which the tax imposed by section 4041(a) (1) or (2), has been paid, is
sold or used as supplies for vessels, a credit or refund of the tax is
available under section 6416(b)(2)(B) to the retail dealer who paid the
tax. As an alternative, a credit or refund of tax is available under
section 6427 to the operator of the vessel who used the fuel. Where the
retail dealer claims refund of the tax, the dealer, in accordance with
section 6416(a), must reimburse the operator of the vessel for the
amount of tax or obtain the written consent of the operator to the
filing of such claim.
(2) If aviation fuel upon which the tax imposed by section 4041(c)
has been paid is sold or used as supplies for aircraft, credit or refund
of the tax is available only as a payment under section 6427 to the
operator of the aircraft who uses the fuel or to the person who resells
the fuel for such use.
[T.D. 8066, 51 FR 18, Jan. 2, 1986]
Sec. 48.4041-11 Tax-free sales of fuel for use in noncommercial
aviation only if sellers and certain purchasers are registered.
(a) In general. Any sale of liquid fuel for delivery into a fuel
supply tank of an aircraft is presumed to be subject to tax under
section 4041(c), unless both the seller and purchaser of the liquid fuel
are registered as provided in paragraph (b) of this section or are
within one of he exceptions provided in paragraph (c) of this section.
(b) Form of registration. Except as provided in paragraph (c) of
this section (relating to exceptions for State and local governments,
for fuel purchased from customs bonded warehouses or continuous customs
custody, and for fuel purchased for use in certain aircraft of the
United States or of any foreign nation), tax-free sales under section
4041(c) may be made only if both the seller and the purchaser have
registered as required by section 4041(i) and this paragraph (b). If
fuel is purchased tax paid for use in noncommercial aviation but is used
for a nontaxable purpose, see section 6427(a) for provisions relating to
refunds or credits of tax for tax-paid fuels not used for the purpose
for which sold. Any person desiring to be registered in order to sell or
purchase fuel free of the tax imposed by section 4041(c) must, before
making any tax-free sale or purchase, file Form 637A, in duplicate. Form
637A must be filed with the District Director of Internal Revenue for
the district in which the principal place of business of
[[Page 82]]
the applicant is located (or if the applicant has no principal place of
business in the United States, with the Director of International
Operations, Internal Revenue Service, Washington, DC 20224). The person
who receives a validated Certificate of Registry (Validated Form 637A)
is considered to be registered for purposes of selling or purchasing
fuel tax free as provided in this section.
(c) Transactions excepted from registration. (1) A State or local
government purchasing fuel delivered into a fuel supply tank of an
aircraft it operates for its exclusive use may, but is not required to,
register as provided in this section.
(2) Any purchaser of aircraft fuel who purchases fuel from any
customs bonded warehouse or from continuous customs custody elsewhere
than in a bonded warehouse is not required to register to purchase
aircraft fuel from these sources tax free.
(3) Any purchaser of fuel for use in an aircraft which is owned by
the United States or any foreign country and constitutes a part of the
armed forces thereof is not required to register to purchase aircraft
fuel tax free.
(4) The exceptions from registration in paragraphs (c) (1), (2), and
(3) of this section do not relieve purchasers from the requirement of
furnishing an exemption certificate as required by paragraph (d) of this
section.
(d) Evidence of tax-free sale. (1) To establish the right of a
purchaser to purchase fuel delivered into the fuel supply tank of an
aircraft tax free, the seller must obtain from the purchaser and retain
in its possession a certificate, properly executed and signed by or on
behalf of the purchaser, containing the following information:
(i) Date of purchase,
(ii) The purchaser's registration number (or the exception from
registration which is relied upon), and
(iii) A brief statement of the intended tax-free use of the fuel
(for example, by an airline in the business of transporting persons or
property for hire).
(2) The following form of certificate, which must be adhered to in
substance, is acceptable for the purposes of this paragraph.
(Date) __________, 19__
The undersigned signifies that he/she, or the
________________________________________________________________________
(Name of purchaser if other than undersigned)
of which the undersigned is
________________________________________________________________________
(Title)
holds Certificate of Registry No. _____
or has not registered because
________________________________________________________________________
(Brief statement of exception from registration relied upon)
delivered into a supply tank of the subject aircraft may be purchased
free of tax because the fuel will be used
________________________________________________________________________
(Brief statement of tax-free use)
The undersigned understands that if the fuel is used otherwise than
as stated above and for a purpose taxable under section 4041 of the
Internal Revenue Code, the undersigned will be liable for the tax upon
such use, and that the undersigned must be prepared to establish by
satisfactory evidence the purpose for which the fuel purchased under
this certificate was used.
The undersigned also understands that the fraudulent use of this
certificate to secure exemption will subject the undersigned and all
others making fraudulent use to a penalty equivalent to the amount of
tax due on the sale of the fuel and, upon conviction, to a fine of not
more than $10,000, or to imprisonment for not more than 5 years, or
both, together with the costs of prosecution.
________________________________________________________________________
(Signature)
________________________________________________________________________
(Address)
(3) Except as provided in paragraph (d)(4) of this section, a
separate exemption certificate must be furnished for each sale of fuel
delivered into a fuel supply tank of an aircraft. If a portion of the
fuel is intended to be used for a nontaxable purpose, the entire amount
of the fuel may be sold tax free. Exemption certificates and proper
supporting records such as invoices, orders, etc., relative to tax-free
sales must be readily accessible for inspection by internal revenue
officers and retained as provided in section 6001 of the Code and the
regulations thereunder.
(4) If the purchaser of fuel to be used in an aircraft has
reasonable grounds
[[Page 83]]
to believe that 90 percent or more of the total of the fuel to be
purchased by it during a specified period not to exceed 12 calendar
quarters will be used in a tax-free use, it may furnish each of its
suppliers an exemption certificate covering all purchases for the
specified period. The certificate shall be substantially in the same
form as the certificate in paragraph (d)(2) of this section, except that
in place of the date the purchaser shall specify the period covered by
the certificate, and the purchaser shall give a brief explanation of its
grounds for belief that 90 percent or more of its total fuel will be
used in a tax-free use.
(5) The presumption under section 4041(i) that any liquid delivered
into a fuel supply tank of an aircraft is taxable places the duty on the
seller of the liquid fuel to use reasonable diligence to satisfy itself
that a tax-free sale of fuel to the purchaser is allowed by law. In the
absence of circumstances surrounding a sale that would raise a question
as to whether a tax-free sale is allowable, the requirement of
reasonable diligence is satisfied if the seller receives and retains the
required certificate evidencing the right of the purchaser to buy the
fuel tax free. However, if the circumstances are such as to indicate the
seller has failed to use reasonable diligence, it is not relieved of
liability for the tax imposed by section 4041(c). In addition, if the
seller fails to obtain and retain the evidence of tax-free sales as
required by this paragraph (d), it is not relieved of liability for the
tax imposed by section 4041(c).
[T.D. 8066, 51 FR 19, Jan. 2, 1986]
Sec. 48.4041-12 Sales by United States, etc.
The taxes imposed by section 4041 apply to the sale at retail of
taxable liquid fuels by the United States or by any agency or
instrumentality of the United States, unless by statute specifically
exempted from these taxes. However, the exemptions from these taxes
provided by section 4041 (f), (g), and (h) and the regulations
thereunder contained in this subpart F are available to the extent
therein provided.
[T.D. 8066, 51 FR 20, Jan. 2, 1986]
Sec. 48.4041-13 Other credits or refunds.
(a) In general. For provisions relating to credit or refund of tax
paid on taxable liquid fuel resold by the purchaser, or used otherwise
than for the purpose for which purchased, see section 6427 and the
regulations thereunder contained in subpart O of this part.
(b) Tax-paid liquid fuel used by local transit systems. For
provisions relating to credit or refund in the case of taxable liquid
fuel used in vehicles while engaged in furnishing scheduled common
carrier public passenger land transportation service along regular
routes, see section 6427(b) and the regulations thereunder contained in
subpart O of this part.
(c) Credit or refund of diesel fuel differential amount. For
provisions relating to an income tax credit or refund of the increased
diesel fuel tax for original purchasers of diesel-powered automobiles
and light trucks, see section 6427(g) and the regulations thereunder
contained in subpart O of this part.
[T.D. 8066, 51 FR 20, Jan. 2, 1986]
Sec. 48.4041-14 Exemption for sale to or use by certain aircraft
museums.
(a) In general. (1) The tax imposed by section 4041 does not apply
to liquids which are sold for use or used by an aircraft museum in an
aircraft or vehicle owned by such museum and used exclusively for the
procurement, care, and exhibition of aircraft of the type used for
combat or transport in World War II.
(2) In the case of liquid sold for use in an aircraft owned by an
aircraft museum and to be used for the pruposes described in paragraph
(a)(1) of this section, a tax-free sale may be made only if the
requirements of Sec. 48.4041-11 are met.
(b) Cross reference. For the definition of aircraft museum, see
section 4041(h)(2).
[T.D. 8066, 51 FR 20, Jan. 2, 1986]
Sec. 48.4041-15 Sales to States or political subdivisions thereof.
(a) Application of exemption. The taxes imposed by section 4041 do
not apply in the case of a sale of any liquid by any person for the
exclusive use of any State or any political subdivision
[[Page 84]]
thereof, the District of Columbia, or in the case of the use of any
liquid by any State or any political subdivision thereof, or the
District of Columbia, as a fuel in a motor vehicle, motorboat, or
aircraft.
(b) Evidence required to establish exemption. Any vendor claiming
exemption under this section shall be prepared to produce evidence that
will establish the right to exemption from the tax imposed by section
4041. Generally, orders or contracts of a State or a political
subdivision thereof, or the District of Columbia, when signed by an
authorized officer thereof will be accepted in support of the exemption.
However, in the absence of such orders or contracts, a certificate
signed by such an authorized officer that the liquid sold was purchased
for the exclusive use of a State or political subdivision thereof, or
the District of Columbia, will be acceptable. The certificate shall be
in substantially the following form:
Exemption Certificate
(For use by States and local governments. (section 4041(g)(2) of the
Internal Revenue Code).)
Date __________, 19__.
I hereby certify that I am _______ of _______ (State or local
government) that I am authorized to execute this certificate; and that
(Check applicable type of certificate)
___the liquid or liquids specified in the accompanying order, or on the
reverse side hereof, (or)
___all orders placed by the purchaser for the period commencing _____
(Date) and ending _____ (Date) (period not to exceed 12 calendar
quarters) are, or will be, purchased from _____ (Name of vendor) for the
exclusive use of _____ (Governmental unit) of __________ (State or local
government).
I understand that the exemption from tax in the case of sales of
liquids under this exemption certificate is limited to the sale of
articles purchased for the exclusive use of a State, etc. I understand
that the fraudulent use of this certificate for the purpose of securing
this exemption will subject me and all parties making such fraudulent
use of this certificate to a fine of not more than $10,000, or to
imprisonment for not more than 5 years, or both, together with costs of
prosecution.
Signature __________
Address __________
[T.D. 7536, 43 FR 13516, Mar. 31, 1978. Redesignated by T.D. 8066, 51 FR
14, Jan. 2, 1986]
Sec. 48.4041-16 Sales for export.
(a) General rule. In order for a sale to be exempt from tax under
section 4041 as a sale for export, it is necessary that the liquid be
(1) identified as having been sold by the retailer for export and (2)
exported in due course. To establish exemption from tax in the case of a
taxable article for export, it is necessary that the retailer maintain
adequate records and have in his possession documentary evidence showing
that the article was so sold.
(b) Proof of exportation. Exportation may be evidenced by any one of
(1) a copy of the export bill of lading issued by the delivering
carrier, (2) a certificate by the agent or representative of the export
carrier showing actual exportation of the liquid, (3) a certificate of
landing signed by a customs officer of the foreign country to which the
liquid is exported, or (4) a statement of the foreign consignee showing
receipt of the liquid.
(c) Shipment to possessions of the United States. The same
provisions as relate to sales for export and proof of exportation will
apply to sales for shipment to a possession of the United States, within
the meaning of Sec. 48.0-2.
[T.D. 7536, 43 FR 13516, Mar. 31, 1978. Redesignated by T.D. 8066, 51 FR
14, Jan. 2, 1986]
Sec. 48.4041-17 Tax-free retail sales to certain nonprofit
educational organizations.
(a) In general. The taxes imposed by section 4041 do not apply in
the case of a sale of any liquid by any person to a nonprofit
educational organization (as defined in paragraph (b) of this section)
for its exclusive use, or in the case of the use of any liquid by such
an organization. In the case of a school operated as an activity of an
organization described in section 501(c)(3), as referred to in paragraph
(b) of this section, the liquid must be sold for the exclusive use of
the school, or the liquid must be used exclusively by the school.
(b) Definition of nonprofit educational organization. For purposes
of section 4041(g)(4) and this section, the term ``nonprofit educational
organization''
[[Page 85]]
means an organization described in section 170(b)(1)(A)(ii), that is
exempt from income tax under section 501(a), whose primary function is
the presentation of formal instruction and which normally maintains a
regular faculty and curriculum and normally has a regularly enrolled
body of pupils or students in attendance at the place where its
educational activities are regularly carried on. The term also includes
a school operated as an activity of an organization described in section
501(c)(3) which is exempt from income tax under section 501 (a),
provided such school normally maintains a regular faculty and curriculum
and normally has a regularly enrolled body of pupils or students in
attendance at the place where its educational activities are regularly
carried on.
(c) Evidence required to establish tax-free sales to a nonprofit
educational organization; general rule. To establish the right to
exemption, the retailer must obtain from the purchaser and retain in its
possesson a properly executed certificate as set forth in paragraph (d)
of this section.
(d) Forms of exemption certificates. The following forms of
exemption certificates will be acceptable for the purpose of this
section and must be adhered to in substance.
(1) Form of certificate for exemption from retailers excise taxes
for use by a nonprofit educational organization, other than a school
operated as an activity of a church or other exempt organization that in
itself is not a nonprofit educational organization.
Exemption Certificate
(For use by a nonprofit educational organization (other than a
school operated as an activity of a church or other exempt organization
that in itself is not a nonprofit educational organization) purchasing
articles subject to retailers excise tax for its exclusive use)
_________, 19__ (Date) I hereby certify that I am _____ (Title) of _____
(Exempt organization); that I am authorized to execute this certificate;
and that the articles specified in the accompanying order or on the
reverse side hereof are purchased by such organization exclusively for
use in its educational activities.
I understand that this exemption certificate is for use only by a
nonprofit educational organization in the tax-free purchase for its
exclusive use of articles subject to the retailers excise tax; and it is
agreed that if any article purchased tax free under this exemption
certificate is used otherwise, such fact will be reported to the
retailer from whom the tax-free purchase was made.
The organization claiming exemption under this certificate has
received a determination letter (or a ruling) from the Internal Revenue
Service holding the organization to be exempt from income tax as an
organization described in section 170(b)(1)(A)(ii) that is exempt from
income tax under section 501(a) of the Internal Revenue Code (or has
received a determination letter (or ruling) under the corresponding
provisions of prior revenue laws). The date of such determination letter
(or ruling) is ___ and such determination letter (or ruling) has not
been withdrawn or revoked.
I understand that the fraudulent use of this certificate for the
purpose of securing this exemption will subject me and all parties
making such fraudulent use of this certificate to a fine of not more
than $10,000, or to imprisonment for not more than 5 years, or both,
together with costs of prosecution.
________________________________________________________________________
(Signature of authorized individual)
________________________________________________________________________
(Address)
(2) Form of certificate for exemption from retailers excise taxes
for use by a school operated as an activity of a church or other
organization described in section 501(c)(3) that in itself is not an
educational organization described in section 170(b)(1)(A)(ii) of the
Code:
Exemption Certificate
(For use by or for a school operated as an activity of a church or
other organization described in section 501(c)(3) of the Internal
Revenue Code of 1954, that is not, in itself, an educational
organization described in section 170(b)(1)(A)(ii), purchasing articles
subject to retailers excise tax for the exclusive use of the school) --
__________, 19__ (Date) I hereby certify that I am _____ (Title) of
_____ (School, church, parish, etc.); that I am authorized to execute
this certificate; and that the articles specified in the accompanying
order or on the reverse side hereof are purchased by such institution
exclusively for use in its educational activities.
I understand that this exemption certificate is for use only by a
school operated as an activity of a church or other organization
described in section 501(c)(3) of the Internal Revenue Code of 1954, in
the tax-free purchase for its exclusive use of articles subject to the
retailers excise tax; or by a church, or other organization in the tax-
free purchase of any such article for the exclusive use of
[[Page 86]]
its school which qualifies for the exemption; and it is agreed that if
any article purchased tax free under this exemption certificate is used
otherwise, such fact will be reported to the retailer from whom the tax-
free purchase was made.
The school operated as an activity of the church or other
organization described in section 501(c)(3) of the Internal Revenue Code
of 1954, normally maintains a regular faculty and curriculum and
normally has a regularly enrolled body of pupils or students in
attendance at the place where its educational activities are regularly
carried on.
I understand that the fraudulent use of this certificate for the
purpose of securing this exemption will subject me and all parties
making such fraudulent use of this certificate to a fine of not more
than $10,000, or to imprisonment for not more than 5 years, or both,
together with costs of prosecution.
________________________________________________________________________
(Signature of authorized individual)
________________________________________________________________________
(Address)
(e) Frequency of certificates. Where only occasional sales are made
by a retailer to a nonprofit educational organization, as defined in
paragraph (b) of this section, a separate exemption certificate should
be furnished for each order. However, where sales by the retailer to the
educational organization are regularly or frequently made, a certificate
covering all orders for a specified period not to exceed 12 calendar
quarters will be acceptable. Such certificate and proper records of
invoices, orders, etc., relative to tax-free sales must be readily
accessible for inspection by internal revenue officers and retained as
provided in section 6001 of the Code and the regulations thereunder.
(f) Prima facie evidence of exempt use. The exemption certificate
procured by the retailer from the purchasing nonprofit educational
organization will be acceptable as prima facie evidence that the article
is purchased for the exclusive use of such organization.
(g) Exemption certificate not obtained prior to filing of retailer's
excise tax return. If the sale is otherwise exempt but the exemption
certificate is not obtained prior to the time the retailer files a
return covering taxes due for the period in which the sale was made, the
retailer must include the tax on such sale in its return for that
period. However, if the certificate is later obtained, a credit may be
taken on a subsequent return or a claim for refund of the tax paid on
such sale may be filed, within the period of limitation prescribed by
section 6511(b) of the Code and Sec. 301.6511(b)-1 of this chapter.
[T.D. 7536, 43 FR 13516, Mar. 31, 1978. Redesignated by T.D. 8066, 51 FR
14, Jan. 2, 1986]
Sec. 48.4041-18 [Reserved]
Sec. 48.4041-19 Exemption for qualified methanol and ethanol fuel.
(a) In general. Under section 4041(b)(2), the tax imposed upon the
sale or use of motor fuels under section 4041(a) does not apply to the
sale or use of qualified methanol or ethanol fuel.
(b) Qualified methanol or ethanol fuel defined. For purposes of
section 4041(b)(2) and this section, qualified methanol or ethanol fuel
is liquid motor fuel, 85% of the volume of which consists of alcohol, as
defined in section 4081(c) and Sec. 48.4081-2(a)(4) of the regulations
as modified by the following sentence. For purposes of section
4041(b)(2) and this section, the alcohol contained in a qualified
methanol or ethanol fuel may be produced from coal. The actual gallonage
of each component of the mixture (without adjustment for temperature)
shall be used in determining whether the 85 percent alcohol has been
met. Further, in determining whether a particular mixture containing
less than 85 percent alcohol satisfies this percentage requirement, the
District Director shall take into account the existence of any facts and
circumstances, that establish that but for the commercial and
operational realities of the blending process, it may reasonably be
concluded that the mixture would have contained at least 85 percent
alcohol. The necessary facts and circumstances will not be found to
exist if over a period of time the mixtures blended by a blender show a
consistent pattern of failing to contain 85 percent alcohol.
(c) Mixtures which do not qualify as qualified methanol or ethanol
fuel. If a methanol or ethanol fuel does not qualify as qualified
methanol or ethanol
[[Page 87]]
fuel under this section, the entire mixture is taxed at the rate of tax
applicable to sales of special motor fuels under section 4041(a)(2) of
the Code.
(d) Refunds relating to fuels used to produce qualified fuels. See
section 6427 for rules which relate to the allowance of a refund or
credit to a person who uses tax-paid diesel, special motor or
noncommercial aviation fuels to produce a qualified methanol or ethanol
fuel and section 6416 for rules which relate to the allowance of a
refund or credit to a person who uses tax-paid gasoline to produce a
qualified methanol or ethanol fuel.
(e) Later blending. If a qualified methanol or ethanol fuel is
blended with other motor fuel in a mixture less than 85 percent of which
consists of alcohol, the subsequent sale or use of such alcohol mixture
fuel is taxable under the provisions of section 4041 or section 4081
subject to the requirements, limitations and exemptions of those
sections. Thus, if the alcohol mixture fuel is at least 10% alcohol by
volume, sale or use of the fuel is taxed at the rates provided in
section 4041(k) or section 4081(c), but if the fuel is less than 10%
alcohol, sale or use of the fuel is taxed at the rates provided in
section 4041(a) or section 4081(a).
(f) Effective date. Section 4041(b)(2) applies to sales or uses
after March 31, 1983, and before October 1, 1988.
[T.D. 8152, 52 FR 31617, Aug. 21, 1987]
Sec. 48.4041-20 Partially exempt methanol and ethanol fuel.
(a) In general. Under section 4041(m), the sale or use of partially
exempt methanol or ethanol fuel is taxed at the rate of 4\1/2\ cents per
gallon of fuel sold or used. The amount of tax is based upon the total
volume of fuel and not merely upon the nonalcohol portion of the fuel.
(b) Partially exempt methanol or ethanol fuel defined. For purposes
of section 4041(m) and this section, partially exempt methanol or
ethanol fuel is liquid motor fuel, 85% of which by volume consists of
alcohol, as defined in section 4081 and Sec. 48.4081-2(a)(4) of the
regulations, as modified by the following sentence. For purposes of
section 4041(m) and this section, the alcohol contained in partially
exempt methanol or ethanol fuel must be produced from natural gas. The
actual gallonage of each component of the mixture (without adjustment
for temperature) shall be used in determining whether the 85 percent
alcohol requirement has been met. Further, in determining whether a
particular mixture containing less than 85 percent alcohol satisfies
this percentage requirement, the District Director shall take into
account the existence of any facts and circumstances that establish that
but for the commercial and operational realities of the blending
process, it may reasonably be concluded that the mixture would have
contained at least 85 percent alcohol. The necessary facts and
circumstances will not be found to exist if over a period of time the
mixtures blended by a blender show a consistent pattern of failing to
contain 85 percent alcohol. See paragraph (f) of this section for rules
relating to information required to be attached to the taxpayer's return
of the tax imposed by chapter 31 relating to the alcohol content of the
partially exempt methanol or ethanol fuel for which tax is paid.
(c) Mixtures which do not qualify as partially exempt methanol or
ethanol fuel. If methanol or ethanol fuel does not qualify as partially
exempt methanol or ethanol fuel under this section, the entire mixture
is taxed at the rate of tax applicable under section 4041(a)(2) of the
Code.
(d) Refunds relating to fuels. See section 6427 for rules which
relate to the allowance of a refund or credit to a person who uses tax-
paid diesel, special motor or noncommercial aviation fuel to produce a
partially exempt methanol or ethanol fuel and section 6416 for rules
which relate to the allowance of a refund or credit to a person who uses
tax-paid gasoline to produce a partially exempt methanol or ethanol
fuel.
(e) Later blending. If a partially exempt methanol or ethanol fuel
is blended with other motor fuel in a mixture less than 85 percent of
which consists of alcohol, the subsequent sale or use of such blended
motor fuel is taxable under the provisions of section 4041(a) or section
4081(a), subject to the requirements, limitations and exemptions of
those sections.
[[Page 88]]
(f) Records required to be furnished by the taxpayer. A taxpayer
making a return of the tax imposed by chapter 31 indicating payment of
the tax under section 4041(m) and Sec. 48.4041-20 at the reduced rate
must attach a statement to the return indicating the total number of
gallons of partially exempt methanol or ethanol fuel containing at least
85 percent alcohol and the total number of gallons of partially exempt
methanol or ethanol fuel containing less than 85 percent alcohol, but
qualifying for taxation at the reduced rate under the rules of paragraph
(b) of this section. However, the taxpayer does not have to specify the
precise mixture ratio of every mixture blended for which tax is being
paid.
(g) Effective date. Section 4041(m) applies to sales and uses after
July 31, 1984. If methanol or ethanol fuel meeting the requirements of
paragraph (b) of this section was put into the tank of a vehicle prior
to August 1, 1984, the fuel is considered used prior to that date and is
subject to the tax described in paragraph (a) of section 4041.
[T.D. 8152, 52 FR 31617, Aug. 21, 1987]
Sec. 48.4041-21 Compressed natural gas (CNG).
(a) Delivery of CNG into the fuel supply tank of a motor vehicle or
motorboat--(1) Imposition of tax. Tax is imposed on the delivery of
compressed natural gas (CNG) into the fuel supply tank of the propulsion
engine of a motor vehicle or motorboat unless tax was previously imposed
on the CNG under paragraph (b) of this section.
(2) Liability for tax. If the delivery of the CNG is in connection
with a sale, the seller of the CNG is liable for the tax imposed under
paragraph (a)(1) of this section. If the delivery of the CNG is not in
connection with a sale, the operator of the motor vehicle or motorboat,
as the case may be, is liable for the tax imposed under paragraph (a)(1)
of this section.
(b) Bulk sales of CNG--(1) In general. Tax is imposed on the sale of
CNG that is not in connection with the delivery of the CNG into the fuel
supply tank of the propulsion engine of a motor vehicle or motorboat if,
by the time of the sale--
(i) The buyer has given the seller a written statement stating that
the entire quantity of the CNG covered by the statement is for use by
the buyer for a taxable use as a fuel in a motor vehicle or motorboat;
and
(ii) The seller has given the buyer a written acknowledgement of
receipt of the statement described in paragraph (b)(1)(i) of this
section.
(2) Liability for tax. The seller of the CNG is liable for the tax
imposed under this paragraph (b).
(c) Exemptions--(1) In general. The taxes imposed under this section
do not apply to a delivery or sale of CNG for a use described in section
4041(a)(3)(B), (b)(1), (f), (g), or (h). However, if the person
otherwise liable for tax under this section is the seller of the CNG,
the exemption under this section applies only if, by the time of sale,
the seller receives an unexpired certificate (as described in this
paragraph (c)) from the buyer and has no reason to believe any
information in the certificate is false.
(2) Certificate; in general. The certificate to be provided by a
buyer of CNG is to consist of a statement that is signed under penalties
of perjury by a person with authority to bind the buyer, should be in
substantially the same form as the model certificate provided in
paragraph (c)(4) of this section, and should contain all information
necessary to complete the model certificate. A new certificate must be
given if any information in the current certificate changes. The
certificate may be included as part of any business records normally
used to document a sale. The certificate expires on the earliest of the
following dates:
(i) The date one year after the effective date of the certificate
(which may be no earlier than the date it is signed).
(ii) The date a new certificate is provided to the seller.
(iii) The date the seller is notified by the Internal Revenue
Service or the buyer that the buyer's right to provide a certificate has
been withdrawn.
(3) Withdrawal of the right to provide a certificate. The Internal
Revenue Service may withdraw the right of a buyer of CNG to provide a
certificate under this paragraph (c) if the buyer uses CNG to which a
certificate applies in a
[[Page 89]]
taxable use. The Internal Revenue Service may notify any seller to whom
the buyer has provided a certificate that the buyer's right to provide a
certificate has been withdrawn.
(4) Model certificate.
Certificate of Person Buying Compressed Natural Gas (CNG) for a
Nontaxable Use
(To support tax-free sales of CNG under section 4041 of the Internal
Revenue Code.)
________________________________________________________________________
________________________________________________________________________
Name, address, and employer identification number of seller
__________ (``Buyer'') certifies the following under penalties of
perjury:
The CNG to which this certificate relates will be used in a
nontaxable use.
This certificate applies to the following (complete as applicable):
If this is a single purchase certificate, check here ___ and enter:
1. Invoice or delivery ticket number ________
2. ____ (number of MCFs) ____
If this is a certificate covering all purchases under a specified
account or order number, check here ___ and enter:
1. Effective date ________
2. Expiration date ________ (period not to exceed 1 year after the
effective date)
3. Buyer account or order number ________
Buyer will not claim a credit or refund under section 6427 of the
Internal Revenue Code for any CNG to which this certificate relates.
Buyer will provide a new certificate to the seller if any
information in this certificate changes.
Buyer understands that if Buyer violates the terms of this
certificate, the Internal Revenue Service may withdraw Buyer's right to
provide a certificate.
Buyer has not been notified by the Internal Revenue Service that its
right to provide a certificate has been withdrawn. In addition, the
Internal Revenue Service has not notified Buyer that the right to
provide a certificate has been withdrawn from a purchaser to which Buyer
sells CNG tax free.
Buyer understands that the fraudulent use of this certificate may
subject Buyer and all parties making any fraudulent use of this
certificate to a fine or imprisonment, or both, together with the costs
of prosecution.
________________________________________________________________________
Printed or typed name of person signing
________________________________________________________________________
Title of person signing
________________________________________________________________________
Employer identification number
________________________________________________________________________
Address of Buyer
________________________________________________________________________
Signature and date signed
(d) Rate of tax. The rate of the tax imposed under this section is
the rate prescribed by section 4041(a)(3).
(e) Effective date. This section is effective October 1, 1995.
[T.D. 8609, 60 FR 40082, Aug. 7, 1995; 60 FR 50245, Sept. 28, 1995; T.D.
8659, 61 FR 10453, Mar. 14, 1996; T.D. 8879, 65 FR 17155, Mar. 31, 2000;
T.D. 9051, 69 FR 15941, Apr. 2, 2003]
Subpart G_Fuel Used on Inland Waterways
Source: T.D. 7536, 43 FR 13516, Mar. 31, 1978, unless otherwise
noted.
Sec. 48.4042-1 Tax on fuel used in commercial waterway transportation.
(a) In general. Section 4042(a) imposes an excise tax on the use of
liquid fuel in the propulsion system of commercial transportation
vessels while traveling on certain inland and intracoastal waterways
(see Sec. 48.4042-1 (f)). The tax applies generally to all types of
vessels, including ships, barges, and tugboats. It is in addition to all
other taxes imposed on the sale or use of fuel.
(b) Amount of tax. For the amount of tax, see section 4042(b).
(c) Person liable for tax. The person operating the vessel in which
the propulsion fuel is consumed is the user of liquid fuel for purposes
of section 4042(a). Thus, a person who operates (or whose employees
operate) a vessel is responsible for filing returns and paying the tax.
If a vessel owner (or lessee) contracts with an independent contractor
to operate the vessel, the independent contractor is the user of liquid
fuel for purposes of section 4042(a), regardless of who purchases the
fuel.
(d) Time of use. Fuel is not taxed by section 4042(a) when put into
a vessel's tanks. For purposes of section 4042(a), fuel is used when it
is actually consumed by a vessel's engine.
(e) Liquid fuel. For purposes of the tax imposed under this section,
liquid fuel means any liquid fuel including gasoline, diesel fuel,
special motor fuel, or Bunker C residual fuel oil.
[[Page 90]]
(f) Commercial waterway transportation--(1) In general. For purposes
of section 4042(a) and Sec. 48.4042-2(c)(1), the term ``commercial
waterway transportation'' means the use of a vessel on the waterways
specified in paragraphs (g) (1) through (27) of this section if:
(i) Use of the vessel is in the business of transporting property
for compensation or hire, or
(ii) Use of the vessel is in transporting property in the business
of the owner, lessee, or operator of the vessel (whether or not a fee is
charged).
Except for the operation of certain fishing vessels, the operation of
all vessels satisfying the requirements of paragraph (f)(1)(i) or
(1)(ii) of this section will be deemed ``commercial waterway
transportation,'' regardless of whether the vessel is actually engaged
in the transportation of property on a particular voyage. Thus,
``commercial waterway transportation'' includes the operation of vessels
while moving empty of cargo, while awaiting passage through locks, while
dislodging vessels grounded on a sandbar, while moving to or from a
repair facility, while maneuvering around loading and unloading docks,
and while fleeting barges into a single tow.
(2) Fishing vessels exception. A vessel does not transport property
in the business of the owner, lessee, or operator, for purposes of
paragraph (f)(1)(ii) of this section, by merely transporting fish or
other aquatic animal life caught on the voyage. The tax imposed by
section 4042(a) does not apply to fuel used by a fishing vessel while
traveling to a fishing site, while engaged in fishing, or while
returning from the fishing site with its catch. However, the tax applies
to fuel used by a commercial vessel along the taxable waterways while
traveling to pick up aquatic animal life caught by another vessel and
while transporting the catch of such other vessel.
(g) Specified waterways. Only fuel used on those waterways specified
in section 206 of the Inland Waterways Revenue Act of 1978 (specified
waterways) is taxable. The specified waterways are as follows:
(1) Alabama-Coosa Rivers. From junction with the Tombigbee River at
river mile (hereinafter referred to as RM) 0 to junction with the Coosa
River at RM 314.
(2) Allegheny River. From confluence with the Monongahela River to
form the Ohio River at RM 0 to the head of the existing project at East
Brady, Pennsylvania, RM 72.
(3) Apalachicola-Chattachoochee and Flint Rivers. Apalachicola River
from mouth at Apalachicola Bay (intersection with the Gulf Intracoastal
Waterway) RM 0 to junction with Chattachoochee and Flint Rivers at RM
107.8. Chattachoochee River from junction with Apalachicola and Flint
Rivers at RM 0 to Columbus, Georgia, at RM 155 and Flint River, from
junction with Apalachicola and Chattachoochee Rivers at RM 0 to
Bainbridge, Georgia, at RM 28.
(4) Arkansas River (McClellan-Kerr Arkansas River Navigation
System). From junction with Mississippi River at RM 0 to port of
Catoosa, Oklahoma, at RM 448.2.
(5) Atchafalaya River. From RM 0 at its intersection with the Gulf
Intracoastal Waterway at Morgan City, Louisiana, upstream to junction
with Red River at RM 116.8.
(6) Atlantic Intracoastal Waterway (A.I.W.W.). Two inland water
routes approximately paralleling the Atlantic coast between Norfolk,
Virginia, and Miami, Florida, for 1,192 miles via both the Albermarle
and Chesapeake Canal and Great Dismal Swamp Canal routes. For vessels
traveling along the A.I.W.W. no matter how short the distance, the
A.I.W.W. includes the main channel, all alternate channels, and all
adjoining bays and sounds, regardless of depth. However, vessels merely
crossing the A.I.W.W. on route either to a coastal port or to a
nonspecified waterway will not be treated as traveling on the A.I.W.W.
(7) Black Warrior-Tombigbee-Mobile Rivers. Black Warrior River
System from RM 2.9, Mobile River (at Chickasaw Creek) to confluence with
Tombigbee River at RM 45. Tombigbee River (to Demopolis at RM 215.4) to
port of Birmingham, RM's 374--411 and upstream to head of navigation on
Mulberry Fork (RM 429.6), Locust Fork (RM 407.8), and Sipsey Fork (RM
430.4).
(8) Columbia River (Columbia-Snake Rivers Inland Waterways). From
The
[[Page 91]]
Dalles at RM 191.5 to Pasco, Washington (McNary Pool), at RM 330, Snake
River from RM 0 at the mouth to RM 231.5 at Johnson Bar Landing, Idaho.
(9) Cumberland River: Junction with Ohio River at RM 0 to head of
navigation, upstream to Carthage, Tennessee, at RM 313.5.
(10) Green and Barren Rivers. Green River from junction with the
Ohio River at RM 0 to head of navigation at RM 149.1.
(11) Gulf Intracoastal Waterway (G.I.W.W.) From the mouth of St.
Mark's River, Florida, to Brownsville, Texas, 1,134.5 miles. For vessels
traveling along the G.I.W.W. no matter how short the distance, the
G.I.W.W. includes the main channel, all alternate channels, and all
adjoining bays and sounds, regardless of depth. However, vessels merely
crossing the G.I.W.W. on route either to a coastal port or to a
nonspecified waterway will not be treated as traveling on the G.I.W.W.
(12) Illinois Waterway. Illinois River from junction with the
Mississippi River at RM 0 to the Des Plaines River and along the Des
Plaines River to Lockport Lock and Dam at RM 291. Chicago Sanitary and
Ship Canal from Lockport Lock and Dam at RM 291 to the South Branch
Chicago River and along the South Branch Chicago River to Lake Street,
Chicago at RM 325.5 near Chicago Harbor. Calumet-Sag Channel from
junction with the Chicago Sanitary and Ship Canal to the Little Calumet
River and along the Little Calumet and Calumet Rivers to turning basin
5, near the entrance to Lake Calumet, an additional 23.8 RMS. Total
waterway distance approximately 350 RMs.
(13) Kanawha River. From junction with Ohio River at RM 0 to RM 90.6
at Deepwater, West Virginia.
(14) Kaskaskia River. From junction with the Mississippi River at RM
0 to RM 36.2 at Fayetteville, Illinois.
(15) Kentucky River. From junction with Ohio River at RM 0 to
confluence of Middle and North Forks at RM 258.6.
(16) Lower Mississippi River. From Baton Rouge, Louisiana, RM 233.9
to Cairo, Illinois, RM 953.8.
(17) Upper Mississippi River From Cairo, Illinois, RM 953.8 to
Minneapolis, Minnesota, RM 1,811.4.
(18) Missouri River. From junction with Mississippi River at RM 0 to
Sioux City, Iowa, at RM 734.8.
(19) Monongahela River. From junction with Allegheny River to form
the Ohio River at RM 0 to junction of the Tygart and West Fork Rivers,
FairmontOhio River. From junction with the Mississippi River at RM 0 to
junction of the Allegheny and Monongahela Rivers at Pittsburgh,
Pennsylvania, at RM 981.
(21) Ouachita-Black Rivers. From the mouth of the Black River at its
junction with the Red River at RM 0 to RM 351 at Camden, Arkansas.
(22) Pearl River. From junction of West Pearl River with the
Rigolets at RM 0 to Bogalusa, Louisiana, RM 58.
(23) Red River. From RM 0 to the mouth of Cypress Bayou at RM 236.
(24) Tennessee River. From junction with Ohio River at RM 0 to
confluence with Holstein and French Rivers at RM 652.
(25) Tennessee-Tombigbee Waterway. From its confluence with the
Tennessee River to the Warrior River at Demopolis, Alabama.
(26) White River. From RM 9.8 to RM 255 at Newport, Arkansas.
(27) Willamette River. From RM 21 upstream of Portland, Oregon, to
Harrisburg, Oregon, at RM 194.
[T.D. 7727, 45 FR 70861, Oct. 27, 1980, as amended by T.D. 8659, 61 FR
10453, Mar. 14, 1996]
Sec. 48.4042-2 Special rules.
(a) Dual use of liquid fuels--(1) Dual use by the propulsion engine.
The tax imposed by section 4042(a) applies to all taxable liquid used as
a fuel in the propulsion system of the vessel, regardless of whether the
engine (or other propulsion system) is used for a purpose other than
propulsion of the vessel. For purposes of this section, any engines
generating movement of a vessel (including bow thrusters used for
steering) are part of the propulsion system. The tax does not apply to
fuel consumed in engines which are not used to generate movement of a
vessel. When the propulsion engine operates special equipment by means
of a power take-off or
[[Page 92]]
power transfer, the tax applies to all liquid fuel consumed by that
engine. For example, the tax applies to all fuel used in the engine
operating an alternator, a generator, or pumps, if that engine is used
to generate movement of a vessel.
(2) Common tank. If the liquid fuel consumed by a nonpropulsion
engine is drawn from the same tank as fuel consumed by a propulsion
engine, a reasonable determination of the quantity of fuel used in such
a separate engine will be acceptable for purposes of excluding from
taxation a portion of the fuel consumed by the vessel. The determination
of the amount of fuel consumed by the nonpropulsion engine may be based
primarily on the operating experience of the person using the fuel;
however, in order to exclude fuel from taxation under the rule set out
in this paragraph (a)(2), the taxpayer must maintain records which will
support the allocation used.
(b) Voyages crossing boundaries of the specified waterways. Fuel
consumed by a vessel traveling along the specified waterways is taxable
only to the extent of fuel consumed for propulsion while on the
specified waterways. Generally, the operator may calculate the amount of
fuel consumed while on the specified waterways during a particular
voyage by mulitplying total fuel consumed in the propulsion engine by a
fraction. The numerator of the fraction is the time spent operating on
the specified waterways; the denominator is the total time spent
operating on the specified and nonspecified waterways during the voyage.
This calculation may not be used when it is unreasonable. It may be
determined to be unreasonable by:
(1) Better evidence of fuel consumed (e.g., readings from an
accurate fuel gauge or records from similar voyages); or
(2) The existence of factors causing a substantial discrepancy
between the rate of fuel consumption on the specified and nonspecified
waterways.
(c) Records required. (1) All operators of vessels used in
commercial waterway transportation must maintain records sufficient to
establish to the satisfaction of the district director the amount of
fuel used for taxable purposes. Those records may include, when relevant
to establish liability:
(i) Quantity of fuel and date of acquisition of all liquid fuels
acquired for both taxable and nontaxable purposes, whether delivered to
storage tanks or tanks on a vessel;
(ii) Date and quantity of fuel pumped into tanks on each vessel;
(iii) Identification number or name of each vessel using fuel; and
(iv) Departure time, departure point, route traveled, destination,
and arrival time for each vessel.
(2) Vessel operators seeking a tax exemption provided by section
4042(c) must maintain records which will support any exemption claimed.
Where applicable, the records shall contain:
(i) The draft of the vessel on each voyage (for exemption under
section 4042(c)(1));
(ii) The type of vessel in which fuel is consumed and the type of
vessel in which cargo is transported (for exemption under section
4042(c) (1), (2) or (4); and
(iii) The ultimate use of cargo transported (for exemption under
section 4042(c)(3)).
[T.D. 7727, 45 FR 70862, Oct. 27, 1980, as amended by T.D. 8442, 57 FR
48186, Oct. 22, 1992]
Sec. 48.4042-3 Certain types of commercial waterway transportation
excluded.
(a) Deep draft ocean-going vessels--(1) In general. Under section
4042(c)(1), there is no tax imposed by section 4042(a) if:
(i) The vessel was designed primarily for use on the high seas; and
(ii) The vessel has a draft of more than 12 feet on the voyage for
which the fuel tax exclusion is sought (e.g. 12 feet 1 inch).
(2) Meaning of ``designed primarily for use on the high seas.''
Section 4042(c)(1) requires a determination of the primacy of the design
features rendering the vessel useful for service on the high seas, as
opposed to the features which render the vessel useful for service on
all less turbulent waters. Thus, whether a ship is ``designed primarily
for use on the high seas'' must be determined from all the facts,
including structural
[[Page 93]]
features and equipment. If the predominant use of a vessel is on the
high seas, it shall be presumed to be ``designed primarily for use on
the high seas.'' If the predominant use of a vessel is on waters other
than the high seas, it shall be presumed not to be ``designed primarily
for use on the high seas.''
(3) Meaning of ``high seas.'' For purposes of this section, ``high
seas'' shall mean waters other than the territorial waters of the United
States or any other country. Thus, the high seas shall not include the
internal waters of any country, the Great Lakes, harbors, or narrow
coastal indentations.
(4) Twelve foot draft--(i) Definition. For purposes of section
4042(c)(1), ``draft'' shall mean the maximum vertical distance between
the mean water line and the bottom of the keel. In cases where a vessel
has a skeg or other appendage extending locally below the line of the
keel, the draft shall be measured from the deepest appendage. A separage
determination of draft must be made for each voyage when the vessel has
its greatest load of cargo and fuel. For purposes of this determination,
the term ``voyage'' means a round trip voyage. Therefore, if a vessel
travels into the specified waterway system to pick up cargo and has a
draft sufficient to qualify for the exclusion when loaded, then for
purposes of section 4042(c)(1) the vessel satisfies the 12 foot draft
requirement for the entire voyage. Similarly, if a vessel loaded with
cargo travels into the specified waterway system with a draft sufficient
to qualify for the exclusion provided by section 4042(c)(1), then the
fuel consumed on the entire voyage may be excluded, regardless of the
vessel's draft after the cargo is unloaded.
(ii) Example. The following example illustrates the application of
paragraph (a)(4)(i) of this section:
Example. A ship with a design draft of 20 feet (maximum certified
draft when fully loaded) travels into a taxable waterway with only a
partial load, such that the draft is 12 feet. The ship unloads and
departs the waterway empty. The portion of the fuel consumed for
propulsion of the vessel on the specified waterway is taxable because
only vessels with a draft greater than 12 feet are eligible for the
section 4042(c)(1) exemption from tax.
(b) Commercial passenger vessels. Under section 4042(c)(2), the tax
imposed by section 4042(a) does not apply to fuel consumed by vessels
used primarily for the transportation of persons. Thus, commercial
passenger vessels while being operated as passenger vessels are not
subject to tax, even if such vessels in fact transport property in
addition to transporting passengers. Similarly, ferry boats carrying
passengers are not subject to tax, even if such vessels carry the
passengers' automobiles.
(c) Exemption for State or local governments--(1) In general. Under
section 4042(c)(3), there is no tax imposed by section 4042(a) if:
(i) The vessel is being used by a State or local government; and
(ii) The vessel is being used in transporting property in the State
or local government's business.
(2) State or local government. For purposes of paragraph (c)(1)(i)
of this section a ``vessel is being used by a State or local
government'' if it is operated by any State, the District of Columbia,
or any political subdivision of a State. If a private party is
contracted to haul for a State or local government, the vessel is not
``being used by a State or local government.'' Similarly, if a person
other than a State or local government is contracted to supply vessel
operators, the fuel consumed by the vessel is not used ``by a State or
local government,'' regardless of ownership of the vessel. However, when
a local government leases barges and employees of the local government
operate the barges, the vessel is being used by the local government.
(3) Government business. The test for whether a vessel is being used
``in transporting in a State or local government's business,'' within
the meaning of paragraph (c)(1)(ii) of this section, is whether the
ultimate use of the cargo is for a function which is ordinarily carried
out by governmental units. For example, when the cargo transported is
salt to be spread on icy roads, the vessel is being used ``in
transporting in a State or local business'' because the use to which the
cargo will be put (road maintenance) is a function ordinarily performed
by governmental units. Fuel consumed in a vessel transporting
[[Page 94]]
property for compensation or in furtherance of a business not ordinarily
carried out by a governmental unit is not exempt from taxation by
section 4042(c)(3).
(d) Ocean-going barges. Under section 4042(c)(4), the tax imposed by
section 4042(a) does not apply to fuel consumed by tugs moving
exclusively barges released by ocean-going carriers solely to pick up or
deliver international cargos. The tax exemption provided by section
4042(c)(4) applies to LASH barges, SEABEE barges, and all other ocean-
going barges carried aboard ocean-going vessels. There is no exemption
under section 4042(c)(4) while:
(1) One or more of the barges in the tow is not a LASH barge, SEABEE
barge, or other ocean-going barge carried aboard on ocean-going vessel;
or
(2) One or more of the barges in the tow is not on an international
voyage; or
(3) Part of the cargo in the tow is not being transported
internationally.
[T.D. 7727, 45 FR 70862, Oct. 27, 1980]
Subpart H_Motor Vehicles, Tires, Tubes, Tread Rubber, and Taxable Fuel
Source: T.D. 6648, 28 FR 3633, Apr. 13, 1963, unless otherwise
noted.
Automotive and Related Items
motor vehicles
Sec. 48.4052-1 Heavy trucks and trailers; certification requirement.
(a) In general. Tax is not imposed by section 4051 on the sale of an
article for resale or leasing in a long-term lease if, by the time of
sale, the seller has in good faith accepted from the buyer a statement
that the buyer executed in good faith and that is in substantially the
same form, and subject to the same conditions, as the certificate
described in Sec. 145.4052-1(a)(6) of this chapter, except that the
certificate must be signed under penalties of perjury and need not refer
to Form 637 or include a registration number.
(b) References to Sec. 145.4052-1(a)(2) of this chapter. References
to Sec. 145.4052-1(a)(2) of this chapter appearing in Sec. 145.4052-1
of this chapter apply also to paragraph (a) of this section.
(c) Effective date. This section is applicable after June 30, 1998.
In addition, tax is not imposed on a sale occurring after December 31,
1997, and before July 1, 1998, if the conditions of paragraph (a) of
this section are satisfied.
[T.D. 8879, 65 FR 17155, Mar. 31, 2000]
Sec. 48.4061(a) [Reserved]
Sec. 48.4061(a)-1 Imposition of tax; exclusion for light-duty trucks, etc.
(a) Imposition of tax--(1) In general. Section 4061(a)(1) imposes a
tax on the sale by the manufacturer, producer, or importer of the
following articles (including in each case parts and accessories
therefor sold on or in connection therewith or with the sale thereof):
(i) Automobile truck and bus chassis and bodies;
(ii) Truck and bus trailer and semitrailer chassis and bodies; and
(iii) Tractors of the kind chiefly used for highway transportation
in combination with a trailer or semitrailer.
For purposes of this section, a sale of an automobile truck or bus, or a
truck or bus trailer or semitrailer, shall be considered to be a sale of
a chassis and of a body enumerated in this paragraph (a)(1).
(2) Special rule applicable to chassis and bodies. A chassis or body
enumerated in paragraph (a)(1) of this section is taxable under section
4061(a)(1) only if such chassis or body is, within the meaning of
paragraph (e) of this section, sold for use as a component part of a
highway vehicle (as defined in paragraph (d) of this section), which is
an automobile truck or bus, a truck or bus trailer or semitrailer, or a
tractor of the kind chiefly used for highway transportation in
combination with a trailer or semitrailer. Furthermore, a chassis or
body which is not enumerated in paragraph (a)(1) of this section is not
taxable under section 4061(a)(1) even though such chassis or body is
used as a component part of a highway vehicle (e.g., a chassis or body
of a passenger automobile).
(3) Equipment installed on chassis or bodies. (i) For purposes of
the tax imposed by section 4061(a)(1), equipment or machinery installed
on a taxable
[[Page 95]]
chassis or body is considered to be an integral part of the taxable
chassis or body if the machinery or equipment contributes toward the
highway transportation function of the chassis or body, regardless of
whether separate sales of the machinery or equipment would be subject to
the tax on automotive parts or accessories imposed by section 4061(b).
Therefore, the amount of the sale price of a taxable chassis or body
that is attributable to such machinery or equipment must be included in
the tax base when computing the tax due on a manufacturer's or
importer's sale or use of a taxable chassis or body. Examples of the
type of machinery or equipment that contribute to the highway
transportation function of a chassis or body are the following: Loading
and unloading equipment; towing winches; and all other machinery or
equipment contributing to either the maintenance or safety of the
vehicle, the preservation of cargo (other than refrigeration units), or
the comfort or nvenience of the driver or passengers.
(ii) Amounts charged for machinery or equipment that is installed on
a taxable chassis or body are not part of the taxable sale price of the
chassis or body if (A) such machinery or equipment does not contribute
toward the highway transportation function of the chassis or body and
(B) the reasonableness of the charge for the machinery or equipment is
supportable by adequate records. Examples of such machinery or equipment
are the following: equipment designed to spread materials on the
highway; machinery or equipment used solely in the operation of mobile
amusement rides; television equipment mounted in a mobile television
studio; machine shop equipment mounted in a mobile machine shop; and car
crushing equipment mounted on the chassis of a mobile car crusher.
(4) Passenger automobile chassis and bodies, motorcycles, etc. No
tax is imposed under section 4061(a) on the sale of a motorcycle or, in
the case of a sale made after December 10, 1971, on the sale of
automobile chassis and bodies not enumerated in paragraph (a)(1) of this
section, or of trailer and semitrailer chassis and bodies suitable for
use in combination with passenger automobiles. For tax on certain sales
made after December 31, 1958, and before December 11, 1971, see
paragraph (b)(4) of this section.
(5) Cross references. For additional rules relating to the sale of a
chassis or body enumerated in this paragraph for use as a component part
of a highway vehicle, see paragraph (e) of this section. For exclusion
of certain light-duty highway vehicles, see paragraph (f) of this
section. For provisions relating to the tax-free sale of bodies to
certain manufacturers, see section 4063(b) and the regulations
thereunder. For other exemptions from the tax imposed under section
4061(a), see sections 4063 and 4221 and the regulations thereunder. For
special rules relating to the sale by a manufacturer of a vehicle
consisting of a tax-paid chassis and a body manufactured by him, see
Sec. 48.4061(a)-5.
(b) Rate and computation of tax--(1) In general. With respect to the
articles enumerated in paragraph (a)(1) of this section, the rate of tax
imposed by section 4061(a)(1) is:
Percent
(i) For articles sold during the period beginning on January 10
1, 1959, and ending on September 30, 1979...................
(ii) For articles sold on or after October 1, 1979........... 5
(2) Determination of price subject to tax. The tax is computed by
applying to the price for which the article is sold the rate in effect
at the time of the sale. For definition of the term ``price'' and for
application of the tax to leases of articles, see sections 4216 and
4217, respectively, and the regulations thereunder. If an article
subject to tax under section 4061(a) has equipment mounted thereon to
perform functions other than in connection with the transportation of
persons or property, no tax under section 4061(a) attaches to that part
of the selling price of the completed unit which is reasonably
attributable to such equipment provided such part of the selling price
is billed separately on the invoice to the customer or can otherwise be
established by adequate records. For other rules relating to the sale of
parts or accessories in connection with the sale of a chassis, body, or
completed unit, see Sec. 48.4061(a)-4. For special rules relating to
the determination of selling price
[[Page 96]]
when equipment or machinery is permanently installed on a taxable
chassis or body, see paragraph (a)(3) of this section.
(3) Tax on trailers sold before December 11, 1971. With respect to
sales made after December 31, 1958, and before December 11, 1971, the
rate of tax imposed under section 4061(a) on a trailer or semitrailer
chassis or body that is a highway vehicle within the meaning of
paragraph (d) of this section depends upon a classification of the
article. The sale during this period of a trailer or semitrailer chassis
or body (other than a house trailer) suitable for use in combination
with passenger automobiles is subject ot tax as set forth in paragraph
(b)(4) of this section. A trailer suitable for use in combination with a
passenger automobile which is designed for purposes other than living or
sleeping, commonly referred to as a ``utility trailer'', is an example
of a trailer taxable at the 7 percent rate set forth in paragraph (b)(4)
of this section. The sale of a trailer or semitrailer chassis or body
that is not suitable for use in combination with passenger automobiles
is subject to tax as set forth in paragraph (b)(1) of this section.
(4) Passenger automobile chassis and bodies and related articles
sold before December 11, 1971. With respect to the sale after December
31, 1958, and before December 11, 1971, of (i) automobile chassis and
bodies not enumerated in paragraph (a)(1) of this section or (ii)
trailer and semitrailer chassis and bodies suitable for use in
combination with passenger automobiles, the tax imposed by section
4016(a) is computed in accordance with paragraph (b)(2) of this section
at the rate of 10 percent for sales prior to June 22, 1965, and at the
rate of 7 percent thereafter.
(c) Liability for tax. The tax imposed by section 4061(a) is payable
by the manufacturer, producer, or importer making the sale.
(d) Highway vehicle--(1) Definition. For purposes of this
subchapter, the term ``highway vehicle'' means any self-propelled
vehicle, or any trailer or semitrailer, designed to perform a function
of transporting a load over public highways, whether or not also
designed to perform other functins, but does not include a vehicle
described in paragraph (d)(2) of this section. For purposes of this
definition, a vehicle consists of a chassis, or a chassis and a body if
the vehicle has a body, but does not include the vehicle's load.
Therefore, in determining whether a vehicle is a ``highway vehicle'', it
is immaterial that the vehicle is designed to perform a highway
transportation function for only a particular kind of load, such as
passengers, furnishings and personal effects (as in a house, office, or
utility trailer), a special type of cargo, goods, supplies, or
materials, or, except to the extent otherwise provided in paragraph
(d)(2)(i) of this section, machinery or equipment specially designed to
perform some off-highway task unrelated to highway transportation. In
the case of specially designed machinery or equipment, it is also
immaterial, except as provided in paragraph (d)(2)(i) of this section,
that such machinery or equipment is permanently mounted on the vehicle.
For purposes of paragraph (d) of this section, the term ``transport''
includes the term ``tow'', and the term ``public highway'' includes any
road (whether a Federal highway, State highway, city street, or
otherwise) in the United States which is not a private roadway. A
vehicle which is not a highway vehicle within the meaning of this
paragraph shall be treated as a nonhighway vehicle for purposes of this
subchapter. Examples of vehicles that are designed to perform a function
of transporting a load over the public highways are passenger
automobiles, motorcycles, buses, and highway-type trucks, truck
tractors, trailers, and semi-trailers.
(2) Exceptions--(i) Certain specially designed mobile machinery for
nontransportation functions. A self-propelled vehicle, or trailer or
semi-trailer, is not a highway vehicle if it (A) consists of a chassis
to which there has been permanently mounted (by welding, bolting,
riveting, or other means) machinery or equipment to perform a
construction, manufacturing, processing, farming, mining, drilling,
timbering, or operation similar to any one of the foregoing enumerated
operations if the operation of the machinery or equipment or equipment
is unrelated to transportation on or off the public highways,
[[Page 97]]
(B) the chassis has been specially designed to serve only as a mobile
carriage and mount (and a power source, where applicable) for the
particular machinery or equipment involved, whether or not such
machinery or equipment is in operation, and (C) by reason of such
special design, such chassis could not, without substantial structural
modification, be used as a component of a vehicle designed to perform a
function of transporting any load other than that particular machinery
or equipment or similar machinery or equipment requiring such a
specially designed chassis.
(ii) Certain vehicles specially designed for offhighway
transportation. A self-propelled vehicle, or a trailer or semitrailer,
is not a highway vehicle if it is (A) specially designed for the primary
function of transporting a particular type of load other than over the
public highway in connection with a construction, manufacturing,
processing, farming, mining, drilling, timbering, or operation similar
to any one of the foregoing enumerated operations, and (B) if by reason
of such special design, the use of such vehicle to transport such load
over the public highways is substantially limited or substantially
impaired. For purposes of applying the rule of (B) of this subdivision,
account may be taken of whether the vehicle may travel at regular
highway speeds, requires a special permit for highway use, is
overweight, overheight or overwidth for regular use, and any other
relevant considerations. Soley for purposes of determinations under this
paragraph (d)(2)(ii), where there is affixed to the vehicle equiplment
used for loading, unloading, storing, vending, handling, processing,
preserving, or otherwise caring for a load transported by the vehicle
over the public highways, the functions are related to the
transportation of a load over the public highways even though such
functions may be performed off the public highways.
(iii) Certain trailers and semi-trailers specially designed to
perform non-transportation functions off the public highways. A trailer
or semi-trailer is not a highway vehicle if it is specially designed to
serve no purpose other than providing an enclosed stationary shelter for
the carrying on of a function which is directly connected with and
necessary to, and at the off-highway site of, a construction,
manufacturing, processing, mining, drilling, farming, timbering, or
operation similar to any one of the foregoing enumerated operations such
as a trailer specially designed to serve as an office for such an
operation.
(3) Optional application. For purposes of this subchapter, if any
rules existing immediately prior to January 13, 1977 would, if
applicable, unequivocally resolve an issue involving the definition of a
highway vehicle with respect to a period prior to such date, at the
option of the taxpayer, such rules existing prior to such date shall be
applied to resolve the issue for all periods prior to such date, and the
rules of paragraphs (d) (1) and (2) of this section, which define the
term ``highway vehicle'', shall not apply with respect to such issue for
all periods prior to such date.
(4) Highway vehicles not subject to section 4061 tax. Although for
purposes of this paragraph (d) passenger automobiles, automobile
trailers and semitrailers, motor homes, motorcycles, light-duty trucks,
etc., will be considered to be highway vehicles because they are
designed to perform a function of transporting a load over public
highways, the tax imposed under section 4061(a) does not apply to the
sale of such vehicles because they either are not articles subject to
tax under such section or are excluded from tax under section 4061
(a)(2). See also paragraphs (a)(4) and (f) of this section. Despite the
fact that passenger automobiles, passenger automobile trailers and semi-
trailers, motor homes, motorcycles, light-duty trucks, etc., are not
subject to the manufacturers excise tax on highway vehicles imposed by
section 4061(a), the fact that they are nevertheless considered highway
vehicles for purposes of this subchapter can be of material significance
in determining the applicability of such excise taxes as the tax imposed
by section 4041 (relating to diesel and special motor fuels), the tax
imposed by section 4071(a)(1) (relating to tires of the type used on
highway vehicles), or the tax imposed by section 4481 (relating to
highway use tax on highway
[[Page 98]]
motor vehicles). In addition, the definition of the term ``highway
vehicle'' is material in determining the credits or refunds provided by
section 6416(b)(2)(I) (relating to diesel fuel used in certain highway
vehicles), section 6421(a) (relating to gasoline used for a nonhighway
purpose), section 6424 (relating to lubricating oil used otherwise than
in a highway motor vehicle), and section 6427(a) (relating to diesel or
special motor fuel not used for a taxable purpose).
(e) Sale of a chassis or body for use as a component of a vehicle
other than a highway vehicle--(1) In general. Except as otherwise
provided in paragraphs (a)(4), (e)(2), or (f) of this section, the sale
of a chassis or body shall be deemed to be a sale of a chassis or body
enumerated in paragraph (a)(1) of this section if such chassis or body
is, in any sense, reasonably suitable for use as a component part of a
highway vehicle that is either an automobile truck or bus, a truck or
bus trailer or semitrailer, or a tractor of the kind chiefly used for
highway transportation in combination with a trailer or semitrailer.
(2) Exceptions based on unitary concept--(i) Completed vehicles not
qualifying as highway vehicles. With respect to the sale of a vehicle
after January 13, 1977 which would otherwise be treated under paragraph
(e)(1) of this section as a sale of a chassis or body enumerated in
paragraph (a)(1) of this section, the tax imposed under section 4061(a)
shall not apply to such sale if the vehicle (considered as a completed
unit) is not considered to be a highway vehicle within the meaning of
paragraph (d) of this section.
(ii) Tax-free sales of chassis and bodies. With respect to the sale
after January 13, 1977 of a chassis or body (not including the sale of a
completed vehicle described in paragraph (e)(2)(i) of this section)
which would otherwise be treated under paragraph (e)(1) of this section
as a sale of a chassis or body enumerated in paragraph (a)(1) of this
section, the tax imposed under section 4061(a) shall not apply to such
sale if the chassis or body is actually sold for use, or for resale for
use, as a component part of a vehicle that is not a highway vehicle
within the meaning of paragraph (d) of this section. For purposes of
determining the liability of the manufacturer or reseller for the tax
imposed under section 4061(a), the test of the preceding sentence will
be considered to be met if (A) the purchaser furnishes the statement set
forth in paragraph (e)(2)(iv) of this section to the seller before the
manufacturer files a return covering excise taxes for the period in
which the sale was made, and (B) the manufacturer or reseller complies
with the requirements set forth in paragraph (e)(2)(iii) of this
section. However, even though the purchaser and manufacturer (or
reseller) have complied with the foregoing, the tax imposed under
section 4061(a), shall apply to such sale if the manufacturer or
reseller has received a written notification (applicable with respect to
such sale) from the Internal Revenue Service that sales of a specified
type or types of chassis or bodies may not be made tax free pursuant to
this paragraph (e)(2)(ii) until further notification. Any such
notification issued by the Internal Revenue Service shall be effective
only with respect to sales after the manufacturer has received such
notification.
(iii) Requirements to be met. In order for a manufacturer or
reseller to sell free of tax under paragraph (e)(2)(ii) of this section
an otherwise taxable chassis or body, the manufacturer or reseller must:
(A) Retain in his possession the statement required to be furnished
by the purchaser and such other evidence as may be furnished by the
purchaser to support the tax-free sale. Such evidence shall be retained
for at least 3 years from the due date of the tax that would be due if
the transaction in question had been a taxable sale; and
(B) Indicate on the invoice with respect to the sale of the chassis
or body that the sale of such article is made free of tax under
paragraph (e)(2)(ii) of this section.
(iv) Form of statement. In order for an otherwise taxable chassis or
body to be sold free of tax under paragraph (e)(2)(ii) of this section,
the purchaser must execute and furnish to the manufacturer or reseller a
statement that
[[Page 99]]
substantially complies with the following form:
_____________, 19__
Under the penalty of perjury, the undersigned certifies that he, or
the ______________, (Name of purchaser if other than the undersigned) of
which he is _________ (Title), is in the business of ___________ (State
nature of business), and that the chassis and/or bodies covered by the
accompanying order or contract for purchase from __________ (Name and
address of seller) are purchased for (check One) __ [ballot] use, or for
[ballot] resale for use, as components of the following type or types of
nonhighway vehicles:
1.______________________________________________________________________
2.______________________________________________________________________
3.______________________________________________________________________
The undersigned understands that he must be prepared to establish by
satisfactory evidence the actual use or disposition of such chassis or
bodies and that, upon their use or disposition other than use as
components of a nonhighway vehicle, he consents to be treated as the
manufacturer of any such chassis or body purchased by him free of the
tax imposed by section 4061(a).
The undersigned also understands that he and all guilty parties
will, for use of this statement to willfully attempt to evade or defeat
the tax imposed under section 4061, be subject, under section 7201, to a
fine of not more than $10,000, or imprisonment for not more than 5
years, or both, together with the costs of prosecution.
The undersigned agrees to retain in his possession a copy of this
statement for at least 3 years from its date.
________________________________________________________________________
(Signature)
________________________________________________________________________
(Address)
(v) Refund or credit of overpayment. If a purchaser furnished the
manufacturer with the statement described in paragraph (e)(2)(iv) of
this section after the time the manufacturer has filed a return covering
excise taxes for the period in which the sale was made, the manufacturer
must include the tax on the sale in his return for the period. However,
in such case, if the conditions prescribed in paragraph (e)(2)(iii) of
this section are met, a claim for refund of the tax paid on such sale
may be filed by the manufacturer on Form 843, or a credit taken on a
subsequent return, in accordance with the provisions of sections 6402(a)
and 6416(a) and Sec. 48.6416(a)-1.
(vi) Cross reference. For special rules relating to the sale by a
manufacturer of a vehicle consisting of a tax-paid chassis and a body
manufactured by him, see Sec. 48.4061(a)-5.
(f) Exclusion of light-duty trucks, buses, and related articles from
tax--(1) In general. (i) No tax is imposed by section 4061(a)(1) on the
sale after December 10, 1971, of the following articles, if suitable for
use with a vehicle having a gross vehicle weight of 10,000 pounds or
less (as determined under paragraph (f)(3) of this section):
(A) Automobile truck and bus chassis and bodies, and
(B) Truck trailer and semitrailer chassis and bodies, suitable for
use with a trailer or semitrailer having a gross vehicle weight of
10,000 pounds or less (as so determined).
(ii) For purposes of this part, a chassis or body is suitable for
use with a vehicle having a gross vehicle weight of 10,000 pounds or
less (hereafter referred to in this paragraph (f) as a ``light-duty
vehicle'') if such chassis or body is commonly used with such a vehicle
or possesses actual, practical, and commercial fitness for such use. A
truck or bus chassis, sold after December 10, 1971, which is suitable
for use with a light-duty vehicle, is not subject to the tax imposed by
section 4061(a)(1) regardless of the body actually mounted thereon.
Similarly, a truck trailer or semitrailer chassis sold after such date,
suitable for use with a trailer or semitrailer having a gross vehicle
weight of 10,000 pounds or less, which trailer or semitrailer is
suitable for use in connection with a light-duty towing vehicle, is not
subject to such tax regardless of the body actually mounted thereon. A
truck or bus body, sold after such date, which is suitable for use with
a light-duty vehicle, is not subject to such tax even though it may also
be suitable for use with (and is actually a component of) a vehicle
having a gross vehicle weight in excess of 10,000 pounds. Similarly, a
truck trailer or semitrailer body sold after such date, suitable for use
with a trailer or semitrailer having a gross vehicle weight of 10,000
pounds or less, which trailer or semitrailer is suitable for use with a
light-duty towing vehicle, is not subject to such tax even though it may
[[Page 100]]
also be suitable for use with (and is actually a component of) a trailer
or semitrailer having a gross vehicle weight of more than 10,000 pounds,
or is used in connection with a vehicle having a gross vehicle weight of
more than 10,000 pounds.
(iii) Where an exempt body is mounted on a taxable chassis, or a
taxable body is mounted on an exempt chassis, the taxable chassis or
taxable body, as the case may be, nevertheless remains subject to such
tax, if the resulting vehicle is a highway vehicle as defined in
paragraph (d) of this section.
(iv) Where the modification of an article, exempt from tax when sold
by the original manufacturer, constitutes further manufacture after the
original manufacturer's sale, a tax may be imposed on the subsequent
manufacturer's sale or use of the modified article.
(2) Parts and accessories. (i) The sale of a part or accessory
which, if sold on December 10, 1971, would be subject to the tax imposed
by section 4061(a)(1) as in effect at such time, is not subject to the
tax imposed by section 4061(a)(1) as in effect after such date if:
(A) It is sold by the manufacturer on or in connection therewith, or
with the sale of, a vehicle enumerated in paragraph (f)(1)(i) of this
section which is not subject to such tax, and
(B) It is not a replacement part (as defined in paragraph (f)(2)(ii)
of this section).
(ii) For purposes of this paragraph (f)(2), a part or accessory is
considered sold with a vehicle if, as of the time the article is sold by
the manufacturer, the part or accessory has been ordered from such
manufacturer for use with the vehicle. Thus, for example, original
equipment sold after December 10, 1971, with a light-duty vehicle,
consisting of parts and accessories which are ordered from the
manufacturer of the vehicle not later than the time at which such
vehicle is sold by him (whether or not installed as of such time) are
not subject to such tax. For purposes of this paragraph (f)(2), a part
is a replacement part, regardless of when ordered,if its use with a
vehicle is as a replacement for a part of such vehicle. Therefore, spare
parts or accessories sold separately or ordered with a light-duty truck
are subject to the tax imposed on sales of parts or accessories by
section 4061(b)(1), unless they are excluded from tax as articles used
interchangeably between truck and passenger vehicles under the
provisions of section 4061(b)(2).
(3) Gross vehicle weight. (i) For purposes of paragraph (f)(1) of
this section gross vehicle weight means the maximum total weight of a
loaded vehicle. Except as otherwise provided in this paragraph (f)(3),
such maximum total weight shall be the gross vehicle weight rating of
the article (as manufactured) as secified or established by the
manufacturer of the completed article, unless such rating is
unreasonable in light of the facts and circumstances in a particular
case.
(ii) A manufacturer must specify or establish a weight rating for
each chassis, body, or vehicle sold by him after September 22, 1971, if
such article requires no additional manufacture other than (A) the
addition of readily attachable articles, such as tire or rim assemblies
or minor accessories, (B) the performance of minor finishing operations,
such as painting, or (C) in the case of a chassis, the addition of a
body. If an article is specially manufactured to the purchaser's
specifications, such specifications may be used to establish the gross
vehicle weight of the article.
(iii) A manufacturer shall maintian a record of the gross vehicle
weight rating of each truck, bus, trailer, and semitrailer sold by him
and excluded from the tax imposed by section 4061(a)(1) by reason of
section 4061(a)(2) and this paragraph (f). For this purpose, a record of
the serial number of each such article shall be treated as a record of
the gross vehicle weight rating of the article if such rating is
indicated by the serial number.
(iv) If (A) the manufacturer's rating indicated in a label or
identifying device affixed to an article, (B) the rating set forth in
his sales invoice or warranty agreement, and (C) his advertised rating
for that article (or two or more identical articles) are inconsistent,
the highest of such ratings will be considered to be the manufacturer's
gross vehicle weight rating specified or established for purposes of the
tax imposed by section 4061(a)(1).
[[Page 101]]
(v) With respect to articles sold after January 31, 1972, the
manufacturer's gross vehicle weight rating must take into account the
strength of the chassis frame, the axle capacity and placement, and the
spring, brake, rim, and tire capacities. The component with the lowest
weight rating ordinarily shall be considered determinative of the gross
vehicle weight. If the capacity of any of the readily attachable
components (springs, brakes, rims, or tires) would otherwise be
determinative of a gross vehicle weight rating of 10,000 pounds or less,
no readily attachable component will be taken into account in
determining such rating unless the rating determined solely on the basis
of the chassis frame or the total of the axle ratings is 12,000 pounds
or less.
(vi) For purposes of paragraph (f)(3)(v) of ths section, the term
``total of the axle ratings'' means the sum of the maximum load carrying
capability (capacity and placement) of the axles (without regard to
springs, brakes, rims, and tires) and, in the case of a trailer or
semitrailer, the weight, if any, that is to be borne by a vehicle used
in combination with the trailer or semitrailer for which gross vehicle
weight is determined.
[T.D. 7461, 42 FR 2672, Jan. 13, 1977, as amended by T.D. 7461, 42 FR
5695, Jan. 31, 1977; T.D. 7566, 43 FR 41389, Sept. 18, 1978]
Sec. 48.4061(a)-2 Bonding of importers.
(a) Authority for requiring bond. Section 623 of the Tariff Act of
1930, as amended (19 U.S.C. 1623), provides as follows:
Sec. 623. Bonds and other security. (a) In any case in which bond or
other security is not specifically required by law, the Secretary of the
Treasury may by regulation or specific instruction require, or authorize
collectors of customs to require, such bonds or other security as he, or
they, may deem necessary for the protection of the revenue or to assure
compliance with any provision of law, regulation, or instruction which
the Secretary of the Treasury or the Customs Service may be authorized
to enforce.
(b) Whenever a bond is required or authorized by a law, regulation,
or instruction which the Secretary of the Treasury or the Customs
Service is authorized to enforce, the Secretary of the Treasury may--
(1) Except as otherwise specifically provided by law, prescribe the
conditions and form of such bond, and fix the amount of penalty thereof,
whether for the payment of liquidated damages or of a penal sum:
Provided, That when a consolidated bond authorized by paragraph 4 of
this subsection is taken, the Secretary of the Treasury may fix the
penalty of such bond without regard to any other provision of law,
regulation, or instruction.
(2) Provide for the approval of the sureties on such bond, without
regard to any general provision of law.
(3) Authorize the execution of a term bond the conditions of which
shall extend to and cover similar cases of importations over such period
of time, not to exceed one year, or such longer period as he may fix
when in his opinion special circumstances existing in a particular
instance require such longer period.
(4) Authorize, to the extent that he may deem necessary, the taking
of a consolidated bond (single entry on term), in lieu of separate bonds
to assure compliance with two or more provisions of law, regulations, or
instructions which the Secretary of the Treasury or the Customs Service
is authorized to enforce. A consolidated bond taken pursuant to the
authority contained in this subsection shall have the same force and
effect in respect of every provision of law, regulation, or instruction
for the purposes for which it is required as though separate bonds had
been taken to assure compliance with each such provision.
(c) The Secretary of the Treasury may authorize the cancellation of
any bond provided for in this section, or of any charge that may have
been made against such bond, in the event of a breach of any condition
of the bond, upon the payment of such lesser amount or penalty or upon
such other terms and conditions as he may deem sufficient.
(d) No condition in any bond taken to assure compliance with any
law, regulation, or instruction which the Secretary of the Treasury or
the Customs Service is authorized to enforce shall be held invalid on
the ground that such condition is not specified in the law, regulation,
or instruction authorizing or requiring the taking of such bond.
(e) The Secretary of the Treasury is authorized to permit the
deposit of money or obligations of the United States, in such amount and
upon such conditions as he may by regulation prescribe, in lieu of
sureties on any bond required or authorized by a law, regulation, or
instruction which the Secretary of the Treasury or the Customs Service
is authorized to enforce.
(b) Application for determination whether bond required--(1)
Requirement of application--(i) In general. Except as otherwise provided
in subparagraph (2)
[[Page 102]]
of this paragraph, every importer of articles taxable under section
4061(a) shall make application for a determination whether the importer
is required to give bond in accordance with the provisions of paragraph
(c) of this section. Such application shall be submitted in writing to
the district director for the district in which the importer will file
returns of any tax under section 4061(a) for which he may incur
liability.
(ii) Form of application. No form is prescribed for making the
application required under subdivision (i) of this subparagraph, but
such application shall include the following information:
(a) The name of the person making the application and the address of
his principal place of business, and, if the principal place of business
of such person is outside the United States, the address of his
principal place of business, office, or agency in the United States.
(b) Information establishing that the person making the application
is an importer of articles taxable under section 4061(a).
(c) The kind and approximate number of automobiles, trucks, buses,
etc., which the importer may be expected to import during an average
calendar quarter and the approximate amount of tax under section 4061(a)
for which the importer may be expected to incur liability in respect of
such articles.
(d) Whether the importer has filed returns of tax under chapter 31
or chapter 32 within the 2-year period immediately preceding the date on
which the application is filed, and, if so, the internal revenue
district in which such returns were filed.
(e) Facts pertaining to the importer's assets and liabilities which
will aid the district director in determining whether a bond shall be
required.
(2) Exceptions. The provisions of subparagraph (1) of this paragraph
shall have no application in any case where an article taxable under
section 4061(a) is:
(i) Incidentally imported by an individual for his personal use.
(ii) Brought into the United States for export to a foreign country
or possession of the United States.
(iii) Admitted to the United States free of duty as an instrument of
international traffic.
(iv) Admitted to the United States free of duty as a temporary
importation under bond.
(v) Returned to the United States after having been sold in the
United States and exported.
(c) Requirement of bond--(1) In general. If the district director
determines that a bond is necessary in order to insure payment of the
tax under section 4061(a), and to assure compliance with all provisions
of the Code and regulations thereunder, with respect to articles
imported by any importer required to make application for a
determination under paragraph (b) of this section, such bond shall be
given by such importer. Such bond shall be submitted, in duplicate, to
the district director for the district in which the importer will file
returns of any tax under section 4061(a) for which he may incur
liability.
(2) Execution of bond--(i) In general. The bond required under this
paragraph shall be executed with satisfactory surety. (For provisions as
to what will be considered ``satisfactory surety'', see subparagraph (3)
of this paragraph.) Such bond shall be conditioned that the principal
shall not engage in any attempt, by himself or by collusion with others,
to defraud the United States of any tax under section 4061(a); that he
shall render truly and completely all returns, statements, and other
documents required of him by law or regulations in respect of such tax;
that he shall timely pay all such tax for which he is liable; and, in
the case of any such tax in respect of an article released from customs
custody by reason of such bond that he shall pay such tax whether the
liability therefor is incurred by him or by some other person as the
importer of the articles covered by the bond, unless such other person
makes payment of such tax on or before the due date. The bond shall be
in an amount which the district director believes to be sufficient to
protect the interests of the United States with respect to all articles
taxable under section 4061(a) which are released from customs custody by
reason of such bond, but in no event shall the
[[Page 103]]
bond be in an amount less than the approximate amount of tax under
section 4061(a) for which the principal may be expected to incur
liability during an average calendar quarter. Such bond shall be signed
by the individual, if the principal is an individual; the president,
vice president, or other principal officer, if the principal is a
corporation; a responsible and duly authorized member or officer having
knowledge of its affairs, if the principal is a partnership or other
unincorporated organization; or the fiduciary, if the principal is a
trust or estate.
(ii) Cancellation clause. The bond required under this paragraph may
be accepted with a cancellation clause incorporated therein. Such
cancellation clause shall provide that:
(a) Any surety on the bond may at any time give notice to the
principal and the district director that he desires to be relieved of
liability under said bond after a date named, which shall be at least 60
days after the receipt of notice by the district director.
(b) If the notice is not withdrawn in writing prior to the date
named in the notice, the rights of the principal as supported by said
bond shall be terminated on such date (unless supported by another bond
or bonds). The surety shall, however, remain liable with respect to any
tax under section 4061(a) (plus penalties and interest) the liability
for which is incurred in respect of articles released from customs
custody by reason of the bond.
(c) Said notice may not be given by an agent of the surety, unless
it is accompanied by power of attorney duly executed by the surety
authorizing the agent to give such notice or by a verified statement
that such power of attorney is on file with the Treasury Department.
(iii) Changes in bond. After filing of the bond required under this
paragraph, no change may be made in the terms thereof except with the
consent of the surety or sureties and subject to the approval of the
district director.
(3) Satisfactory surety--(i) Approved surety company or bonds or
notes of the United States. For purposes of subparagraph (2) of this
paragraph, a bond shall be considered executed with satisfactory surety
if:
(a) It is executed by a surety company holding a certificate of
authority from the Secretary as an acceptable surety on Federal bonds;
or
(b) It is secured by bonds or notes of the United States as provided
in 6 U.S.C. 15 (see 31 CFR Part 225).
(ii) Other surety acceptable in discretion of district director. For
purposes of subparagraph (2) of this paragraph, a bond may, in the
discretion of the district director, be considered executed with
satisfactory surety if, in lieu of being executed or secured as provided
in subdivision (i) of this subparagraph, it is:
(a) Executed by a corporate surety (other than a surety company),
provided such corporate surety establishes that it is within its
corporate powers to act as surety for another corporation or an
individual;
(b) Executed by two or more individual sureties, provided such
individual sureties meet the conditions contained in subdivision (iii)
of this subparagraph;
(c) Secured by a mortgage on real or personal property;
(d) Secured by a certified, cashier's, or treasurer's check drawn on
any bank or trust company incorporated under the laws of the United
States or any State, Territory, or possession of the United States, or
by a United States postal, bank, express, or telegraph money order;
(e) Secured by corporate bonds or stocks, or by bonds issued by a
State or political subdivision thereof, of recognized stability; or
(f) Secured by any other acceptable collateral. Collateral shall be
deposited with the district director or, in his discretion, with a
responsible financial institution acting as escrow agent.
(iii) Conditions to be met by individual sureties. If a bond is
executed by two or more individual sureties, the following conditions
must be met by each such individual surety:
(a) He must reside within the State in which the principal place of
business or legal residence of the primary obligor is located;
(b) He must have property subject to execution of a current market
value, above all encumbrances, equal to at least the penalty of the
bond;
[[Page 104]]
(c) All real property which he offers as security must be located in
the State in which the principal place of business or legal residence of
the primary obligor is located;
(d) He must agree not to mortgage, or otherwise encumber, any
property offered as security while the bond continues in effect without
first securing the permission of the district director; and
(e) He must file with the bond, and annually thereafter so long as
the bond continues in effect, an affidavit as to the adequacy of his
security, executed on the appropriate form furnished by the district
director.
Partners may not act as sureties upon bonds of their partnership.
Stockholders of a corporate principal may be accepted as sureties
provided their qualifications as such are independent of their holdings
of the stock of the corporation.
(iv) Adequacy of surety. No surety or security shall be accepted if
it does not adequately protect the interest of the United States.
(4) New or additional bond. The district director may require a new
or additional bond under this section in any case where he deems it
necessary or desirable in order to protect the interests of the United
States.
(d) Termination of requirement--(1) Application for relief from
requirement. Any importer who has given bond as required under paragraph
(c) of this section may make application for relief from such
requirement at any time after the last day of the first month following
the close of the calendar quarter in which the bond was given. Any such
application shall be submitted to the district director to whom the bond
was furnished and shall set forth such facts as will be of assistance to
the district director in determining whether the relief shall be
granted.
(2) Relief from requirement. In any case where the district director
determines that the bond required under paragraph (c) of this section to
be given by an importer is no longer necessary to insure payment of any
tax under section 4061(a) for which liability may be incurred by such
importer, such importer shall no longer be required to give such bond.
(e) Evidence required for release of imported articles from customs
custody--(1) In general. Each article taxable under section 4061(a)
which arrives in the United States from any foreign country or
possession of the United States on or after the first day of the first
calendar quarter beginning more than 60 days after the date of
publication of this Treasury decision in the Federal Register, and which
is imported by any person required under paragraph (b) of this section
to make application for a determination whether bond shall be given,
shall not, if subject to customs examination and release, be released
from customs custody until the evidence prescribed in subparagraph (2)
(i) or (ii) of this paragraph has been furnished by such person to the
collector of customs.
(2) Form of evidence. The evidence required under subparagraph (1)
of this paragraph shall be in the form of a statement, executed, signed,
and dated by the district director. Such statement shall show the
following:
(i) Bond required. If the importer is required to give bond under
this section the statement shall show:
(a) The total number of articles in respect of which the statement
is given.
(b) The model number of each such article.
(c) The name and address of the importer of such articles.
(d) If the articles are to be released from customs custody to a
person other than the importer, the name and address of such other
person.
(e) That the importer has given a bond which the district director
finds sufficient to protect the interests of the United States with
respect to any tax under section 4061(a) for which liability may be
incurred in respect of such articles.
A statement under this subdivision shall be furnished to the importer by
the district director, upon request of the importer, in every case where
such importer furnishes the district director with information which
establishes to the satisfaction of the district director that the
importer has given bond in an amount sufficient to protect the interests
of the United States with respect to any tax under section 4061(a) which
[[Page 105]]
may become due in respect of the articles to which the request relates,
and with such other information as is required under this subdivision to
be shown in the statement. Such request, together with such information,
shall be submitted by the importer immediately upon receipt by him of
notice that articles taxable under section 4061(a) have been exported to
his order. A separate request shall be made in respect of each shipment.
Each statement given under this subdivision shall be executed in
duplicate. The original of such statement shall be furnished by the
district director to the importer and the copy shall be retained by the
district director.
(ii) No bond required. If the importer is not required to give bond
under this section, the statement shall show:
(a) The name and address of the importer.
(b) That bond under this section is not required of such importer.
A statement under this subdivision shall be furnished to the importer by
the district director on the date on which the district director
determines that the importer is not required to give a bond under this
section. Such statement shall be executed in triplicate. The original of
such statement and one signed copy shall be furnished by the district
director to the importer, and one copy shall be retained by the district
director. Additional signed copies of such statement will be furnished
by the district director to the importer upon request of the importer.
However, once such statement, or a signed copy thereof, has been
furnished by the importer to a collector of customs, the requirements
imposed by subparagraph (1) of this paragraph are deemed to be satisfied
in respect of all articles taxable under section 4061(a) which
thereafter arrive in the United States for release to or for the
importer in a port under the jurisdiction of such collector of customs,
until such time, if any, as such collector of customs receives written
notification from the district director or the Commissioner of Customs
that such statement has been withdrawn.
(46 Stat. 759; 19 U.S.C. 1623)
[T.D. 6499, 25 FR 10347, Oct. 28, 1960, as amended by T.D. 7517, 42 FR
58935, Nov. 14, 1977]
Sec. 48.4061(a)-3 Definitions.
For purposes of the tax imposed by section 4061, unless otherwise
expressly indicated:
(a) Automobile truck. The term ``automobile truck'' includes
automobile buses, and truck and bus trailers and semitrailers.
(b) Other automobile. The term ``other automobile'' means all
automobiles other than automobile trucks, and includes trailers and
semitrailers suitable for use in connection with passenger automobiles,
but does not include house trailers.
(c) Tractor. The term ``tractor'' means any tractor chiefly used for
highway transportation in combination with a trailer or semitrailer.
Sec. 48.4061(a)-4 Parts or accessories sold on or in connection with
chasis, bodies, etc.
(a) In general. The tax attaches in respect of parts or accessories
for articles specified in section 4061(a) sold on or in connection
therewith or with the sale thereof at the rate applicable to the sale of
the basic article. The tax attaches in such case whether or not the
parts or accessories are billed separately. For the tax applicable to
parts or accessories which are not sold on or in connection with the
sale of a taxable chassis, body, or tractor, see Sec. 48.4061(b)-1.
(b) Essential equipment. If taxable chassis, bodies, or tractors are
sold by the manufacturer, producer, or importer without parts or
accessories which are considered equipment essential for the operation
or appearance of such articles, the sale of such parts or accessories
will be considered, in the absence of evidence to the contrary, to have
been made in connection with the sale of the basic article even though
they are shipped separately at the same time or on a different date. For
example, if a manufacturer sells to any person a chassis and the bumpers
for such chassis, or sells a taxable tractor
[[Page 106]]
and the fifth wheel and attachments, the tax applies to such parts or
accessories at the same rate as on the chassis or tractor regardless of
the method of billing or the time at which the shipments were made.
Sec. 48.4061(a)-5 Sale of automobile truck bodies and chassis.
(a) Sale of completed vehicle. An automobile truck (as defined by
Sec. 48.4061(a)-3(a)) for purposes of the tax imposed by section
4061(a) consists of two parts, namely, a body and a chassis. Generally,
the tax applies to the sale by the manufacturer of each. Thus, if the
purchaser of a tax-paid chassis attaches to it a taxable body
manufactured by him and sells the completed vehicle, he is liable for
tax based on the sale price of the body only. However, in such a case,
the tax attaches to the selling price of the entire vehicle unless
adequate records are available to show the portion of the total selling
price attributable to the body.
(b) Cross references. For special rules relating to the sale of a
chassis or body to a purchaser who will use it in the manufacture or
assembly of a nonhighway vehicle, see Sec. 48.4061(a)-1(e). With
respect to bodies sold to a chassis manufacturer, see also section
4063(b) and the regulations thereunder.
[T.D. 7461, 42 FR 2675, Jan. 13, 1977]
Sec. 48.4061(b) [Reserved]
Sec. 48.4061(b)-1 Imposition of tax.
(a) In general. Section 4061(b) imposes a tax on the sale by the
manufacturer, producer, or importer of parts or accessories (other than
tires and inner tubes and other than automobile radio and television
receiving sets) for any of the articles enumerated in section 4061 (a)
(see paragraph (a) of Sec. 48.4061 (a)-1).
(b) Rates of tax. Tax is imposed on the sale of parts or accessories
for any of the articles enumerated in section 4061(a) at the rates
specified below:
Percent
(1) Parts or accessories sold during the period January 1, 8
1959, to June 30, 1965, inclusive...........................
(2) Parts or accessories sold on or after July 1, 1965....... 5
The tax is computed by applying to the price for which the part or
accessory is sold the rate in effect at the time of the sale. For
definition of the term ``price'' see section 4216 and the regulations
thereunder contained in Subpart M of this part.
(c) Liability for tax. The tax imposed by section 4061(b) is payable
by the manufacturer, producer, or importer making the sale.
[T.D. 6648, 28 FR 3633, Apr. 13, 1963, as amended by T.D. 6753, 29 FR
12717, Sept. 9, 1964]
Sec. 48.4061(b)-2 Definition of parts or accessories.
(a) In general. The term ``parts or accessories'' includes (1) any
article the primary use of which is to improve, repair, replace, or
serve as a component part of an automobile truck or bus chasis or body,
or other automobile chassis or body, or taxable tractor, (2) any article
designed to be attached to or used in connection with such chassis,
body, or tractor to add to its utility or ornamentation, and (3) any
article the primary use of which is in connection with such chassis,
body, or tractor, whether or not essential to its operation or use. The
term ``parts or accessories'' includes all articles which have reached
such a stage of manufacture as to be commonly known as parts or
accessories whether or not fitting operations are required in connection
with their installation. An article shall not be deemed to be a taxable
part or accessory even though it is designed to be attached to the
vehicle or to be primarily used in connection therewith if the article
is in effect the load being transported and the primary function of the
article is to serve a purpose unrelated to the vehicle as such. For
example, a construction derrick attached to a truck is not a taxable
part or accessory inasmuch as the derrick is the load of the truck and
its use is in connection with construction work at a construction site
rather than in connection with the transportation or loading or
unloading function of the truck. On the other hand, an article such as a
towing cradle or loading or unloading equipment designed to be attached
to or to be primarily used in connection with a truck is a taxable part
or accessory inasmuch as the articles contributes to the load-carrying
function of the truck. The term ``parts
[[Page 107]]
or accessories'' does not include tires, inner tubes, or automobile
radio or television receiving sets, since these articles are expressly
exempted by section 4061(b) from the tax. However, the term ``parts or
accessories'' includes tire valves designed for use on tires or tubes
for articles taxable under section 4061(a).
(b) Articles of a general use. The term ``parts or accessories''
does not include articles which are not used primarily in the
manufacture, repair, etc., of automobile trucks, other automobiles, or
tractors, but have a general use in the manufacture, repair, etc., of
various articles. For example, commodities such as ball and roller
bearings, bolts, nuts, washers, screws, nails, tacks, rivets, pins,
studs, cotters, pipe fittings such as plugs, tees, ells, and elbows,
drain cocks, grease cups, oilers, and similar articles are not of
themselves parts or accessories unless so constructed as to be used
primarily in the manufacture, repair, etc., of automobile trucks, other
automobiles, or tractors. On the other hand, parts for automobile parts
or accessories are in themselves taxable unless they are articles of a
type not specifically designed for use primarily in the automobile
field. For example, the tax applies to the sale of gears, flexible
shafts and flexible housings designed as replacement parts for
automotive speedometers; as well as replacement parts for automobile
engines, transmissions, differentials, steering mechanisms, timers,
windshild-wiper motors, and other automobile parts or accessories.
(c) Materials of a general use--(1) General rule. The term ``parts
or accessories'' also does not include material such as glass, cloth,
leather, matting linoleum, and other materials sold in rolls or by the
foot, such as brake lining, tape, binding, wire, cable, metal and rubber
tubing, packing, conduit, and similar material. However, except as
provided in subparagraph (2) of this paragraph, when any such material
is cut or otherwise transformed by any person into an automobile part or
accessory, tax attaches at the time such part or accessory is sold by
such person.
(2) Articles made for immediate installation or repair. If in
connection with an immediate installation in an automobile truck, other
automobile, or tractor an article is produced through the use of special
machinery or as a result of specialized skills from lengths or rolls of
material, the person producing such article is considered to have
manufactured an automobile part or accessory and the tax applies to his
sale of such part or accessory. For example, tax applies to the sale of
automobile glass cut to size to replace broken glass, or automobile seat
covers, automobile floor mats, or fitted truck top covers produced to
replace worn seat covers, floor mats, or truck top covers. However, if
an article of a minor nature is produced by simple operation from
lengths or rolls of material for immediate use by a repairman in the
repair of an automobile truck, other automobile, or tractor on which he
is then working, the person producing such article is not considered to
have manufactured an automobile part or accessory and tax does not apply
on his sale of such article. For example, tax does not apply where a
wire, hose, or board is cut to size in order to replace a damaged wire,
hose, or board of an automobile truck, other automobile, or tractor.
(d) Examples of articles taxable as parts or accessories. Examples
of articles which are taxable as parts or accessories are: Automobile
air conditioners; baby seats for automobiles; automobile beds;
automobile hammocks; automobile clutches; bottle warmers and heating
pads designed to operate from an automobile cigarette lighter;
automobile radio antennae; automobile license plate frames; automobile
clocks; automobile mirrors and mirror brackets; purses for carrying
parking meter coins or cases for carrying registration cards when
designed for attachment to an automobile; safes primarily designed for
use in taxable motor vehicles; electric bulbs primarily designed and
adapted for use on automobiles; automobile floor mats; jacks of the
mechanical or hydraulic bumper, screw, ratchet, scissors, or other type
primarily designed to be carried as accessories in automobiles as
distinguished from jacks designed especially for use in garages and
repair shops; dollies of the type commonly
[[Page 108]]
known as converter dollies which are used as connectors to convert
semitrailers to full trailers; tool kits recommended for use with
automobiles; automobile seat covers of any construction whether they are
ready-made or custom fitted; fitted truck top covers; glass cut to size
for installation in automobiles; and automobile bearings, such as
automobile crankshaft or connecting rod bearings.
(e) Effective date. This section shall be effective with respect to
sales made on or after January 1, 1964. For the definition of parts or
accessories applicable to sales thereof prior to such date, see Sec.
40.4061(b)-2 of this chapter (Manufacturers and Retailers Excise Tax
Regulations).
(f) Cross references. For provisions relating to the tax imposed
upon:
(1) Tires and inner tubes, see section 4071 and the regulations
thereunder contained in subpart H of this part;
(2) Automobile radio and television receiving sets, see section 4141
and the regulations thereunder contained in subpart J of this part; and
(3) Fare registers and fare boxes for use on buses and automobiles,
see section 4191 and the regulations thereunder contained in subpart L
of this part.
[T.D. 6648, 28 FR 3633, Apr. 13, 1963, as amended by T.D. 6655, 28 FR
5235, May 25, 1963]
Sec. 48.4061(b)-3 Rebuilt, reconditioned, or repaired parts or
accessories.
(a) Rebuilt parts or accessories. Rebuilding of automobile parts or
accessories, as distinguished from reconditioning or repairing,
constitutes manufacturing, and the rebuilder of such parts or
accessories is liable for the tax imposed by section 4061(b) with
respect to his sales of such rebuilt parts or accessories. Reboring or
other machining, rewinding, and comparable major operations constitute
rebuilding. The person owning the part or accessory being rebuilt is the
manufacturer of the article and is liable for the tax on his sale of the
rebuilt part or accessory. The tax attaches whether the machining or
other operation is performed by the rebuilder himself or by some other
person in his behalf. For example, the tax attaches with respect to
sales of (1) rebuilt batteries, (2) rebabbited or machined connecting
rods, (3) reassembled clutches after operations such as the resurfacing
of clutch plates, (4) rewound armatures, (5) reassembled generators with
armatures rewound by or for the person reassembling the generator, (6)
reground or remetalized crankshafts, and (7) engines in which blocks are
machined (such as cylinders rebored or new sleeves inserted with or
without cylinders being rebored) or new blocks installed. For provisions
relating to the sale price of rebuilt parts or accessories, see Sec.
48.4062(b)-1.
(b) Reconditioned parts or accessories. The mere disassembling,
cleaning, and reassembling (with any necessary replacements of worn
parts) of automobile parts or accessories, such as fuel pumps, water
pumps, carburetors, distributors, shock absorbers, windshield-wiper
motors, brake shoes, clutch disks, voltage regulators, and other parts
or accessories, are regarded as reconditioning operations rather than
the manufacturing or production of rebuilt parts or accessories. The
sale of a reconditioned part or accessory is not subject to tax if
previous to the reconditioning there had been a prior sale of such part
or accessory in the United States. Any new taxable parts or accessories
produced, or purchased tax free for use in further manufacture, and used
as replacements in reconditioning such units are subject to tax when
used by the reconditioner.
(c) Repaired parts or accessories. The tax does not apply to the
amount paid for the repair of automobile parts or accessories for the
owner thereof. Repairing consists of the restoration, whether by
rebuilding or reconditioning, of an owner's part or accessory to usable
condition for his own use rather than for sale. The person who performs
the repairing must retain in his possession evidence or documents from
which the nontaxable nature of the operation can be ascertained. Any
person engaged in rebuilding parts or accessories for purposes of sale
incurs liability for tax with respect to his own use of any part or
accessory rebuilt by him for sale.
[[Page 109]]
Sec. 48.4061-1 Temporary regulations with respect to floor stock
refunds or credits on cement mixers.
(a) In general--(1) Refund or credit. Pub. L. 91-678 (84 Stat. 2062,
Jan. 12, 1971) provides that if:
(i) A manufacturer, producer, or importer paid the tax imposed by
section 4061 (relating to imposition of tax on motor vehicles) on the
sale of a cement mixer after June 30, 1968, and before January 1, 1970,
and
(ii) Such cement mixer was held by a dealer on January 1, 1970, for
purposes of resale and was not used,
the manufacturer, producer, or importer is entitled to a credit or
refund (without interest) of the amount of tax he paid on his sale of
such cement mixer.
(2) Time for filing claim. The manufacturer, producer, or importer
entitled to a credit or refund under subparagraph (1) of this paragraph
shall file his claim for credit or refund on or before October 31, 1971,
based upon a request submitted to the manufacturer, producer, or
importer on or before July 31, 1971, by the dealer who held the cement
mixer in respect of which the credit or refund is claimed. Before he
files his claim for credit or refund, the manufacturer, producer, or
importer shall either reimburse the dealer for the amount of tax he is
claiming with respect to the cement mixer or obtain written consent from
the dealer to claim such tax.
(3) Other provisions applicable. All provisions of law, including
penalties, applicable in respect of the taxes imposed by section 4061 of
such Code shall, insofar as applicable and not inconsistent with Pub. L.
91-678 apply in respect of the credits and refunds provided for in this
section to the same extent as if the credits or refunds constituted
overpayments of the taxes.
(b) Definitions. For purposes of this section:
(1) Cement mixer. The term ``cement mixer'' means:
(i) Any article designed to be placed or mounted on an automobile
truck chassis or truck trailer or semitrailer chassis and to be used to
process or prepare concrete, and
(ii) Parts or accessories designed primarily for use on or in
connection with an article described in subdivision (i) of this
subparagraph.
(2) Dealer. The term ``dealer'' includes a wholesaler, jobber,
distributor, or retailer.
(3) Held by a dealer. A cement mixer shall be considered as ``held
by a dealer'' if title thereto has passed to the dealer (whether or not
delivery to him has been made), and if for purposes of consumption title
to the cement mixer or possession thereof had not at any time prior to
January 1, 1970, been transferred to any person other than a dealer. For
purposes of paragraph (a) of this section and notwithstanding the
preceding sentence, a cement mixer shall be considered as ``held by a
dealer'' and not to have been used, although possession of such cement
mixer has been transferred to another person, if such cement mixer is
returned to the dealer in a transaction under which any amount paid or
deposited by the transferee for such cement mixer is refunded to him
(other than amounts retained by the dealer to cover damage to the cement
mixer). Moreover, such a cement mixer shall be considered as held by a
dealer on January 1, 1970, even though it was in the possession of the
transferee on such day, if it was returned to the dealer (in a
transaction described in the preceding sentence) before January 31,
1970. The determination as to the time title passes or possession is
obtained for purposes of consumption shall be made under applicable
local law. (See subdivisions (iii), (iv), and (v) of paragraph (b)(4) of
Sec. 145.2-1 of this subchapter for examples illustrating the
provisions of this subparagraph.)
(c) Other requirements. All the requirements of paragraph (c)
(relating to participation of dealers), paragraph (d) (relating to claim
for credit or refund), paragraph (e) (relating to evidence to be
retained), and paragraph (f) (relating to effect on other claims for
refund or credit) of Sec. 48.6412-1 are applicable (to the extent they
are not inconsistent with section 4061 and Pub. L. 91-678) with respect
to a claim for credit or refund under this section. With respect to
claims for credit or refund under this section, the term ``dealer
request limitation date'' and ``claim limitation date'' used in
paragraphs (c)
[[Page 110]]
and (d) of Sec. 48.6412-1 means July 31, 1971, and October 31, 1971,
respectively.
[T.D. 7090, 36 FR 3893, Mar. 2, 1971]
Sec. 48.4062(a) [Reserved]
Sec. 48.4062(a)-1 Specific parts or accessories.
Spark plugs, storage batteries, leaf springs, coils, timers, and
tire chains, which are suitable for use on or in connection with, or as
component parts of, automobile trucks, other automobiles, tractors, or
other vehicles enumerated in section 4061(a), are considered parts of,
or accessories for, such articles whether or not primarily designed or
adapted for such use.
Sec. 48.4062(b) [Reserved]
Sec. 48.4062(b)-1 Rebuilt parts or accessories sold on an exchange
basis.
The sale price of a rebuilt part or accessory on which the tax is to
be computed shall not include the value of a like part or accessory
accepted in exchange. The total amount charged in excess of the amount
allowed for a like article accepted in an exchange will be the basis for
tax. For example, if a rebuilt automobile engine is sold for $100, plus
another automobile engine, the tax on the rebuilt engine will be
computed on the basis of $100.
Sec. 48.4063-1 Tax-free sales of bodies to chassis manufacturers.
Under the provisions of section 4063(b), the tax imposed by section
4061(a) shall not apply to bodies sold by the manufacturer thereof to a
manufacturer (but not an importer) of automobile trucks (as defined by
Sec. 48.4061(a)-3(a)) to be sold by the purchaser. Thus, a manufacturer
of automobile truck bodies is permitted to sell such bodies tax free to
manufacturers of automobile truck chassis. This section does not apply
with respect to the sale of an automobile truck chassis to manufacturers
of automobile truck bodies. However, see Sec. 48.4061(a)-1(e) with
respect to the sale of an automobile truck chassis for use in the
manufacture or assembly of a nonhighway vehicle (within the meaning of
Sec. 48.4061(a)-1(d)). In order to effect a tax-free sale of a body as
provided in this section, both the seller and purchaser must comply with
the registration and other requirements of section 4222 and the
regulations thereunder. A chassis manufacturer who purchases a body tax
free as provided in this section shall, for purposes of application of
the tax imposed by section 4061(a), be considered the manufacturer of
such body.
[T.D. 7461, 42 FR 2675, Jan. 13, 1977]
Sec. 48.4063-2 Tax-free sales of parts or accessories sold for resale
on or in connection with the first retail sale of a light-duty truck.
(a) In general. Under section 4063(e), the 8-percent manufacturers
excise tax imposed by section 4061(b) on the sale of truck parts or
accessories does not apply to the sale by the manufacturer, producer, or
importer of any parts which are to be resold by the purchaser on or in
connection with the first retail sale of a light-duty truck as defined
in section 4061(a)(2), or which are to be resold by the purchaser to a
second purchaser for resale by the second purchaser on or in connection
with the first retail sale of a light-duty truck. A tax-free sale is
also allowed under section 4063(e) if an ultimate purchaser makes a
direct purchase from a manufacturer of a part or accessory for use on or
in connection with a substantially contemporaneous purchase of a new
light-duty truck.
(b) Evidence required for tax-free sales of light-duty truck parts
and accessories--(1) In general. The provisions of section 4063(e) do
not apply with respect to any sale unless the manufacturer, the first
purchaser, and the second purchaser, if any, are all registered as
required under section 4222, and unless they comply with all the
requirements under that section relating to tax-free sales. To
effectuate a tax-free sale directly from the manufacturer, first or
second purchaser to an ultimate purchaser, the ultimate purchaser must,
in every case, satisfy the provisions of paragraphs (b)(3)(i), (ii) and
(iii) of this section. Persons not required to be registered under
section 4222(b) may purchase articles tax free by following the same
procedures that apply to them in the case of other tax-free sales. See
Sec. 48.4222(b)-1.
[[Page 111]]
(2) Revocation or suspension of registration or right to use
exemption certificate. A person's registration and right to sell or
purchase articles tax free through the use of an exemption certificate
may be revoked or suspended. See Sec. 48.4222(c)-1. Such a revocation
or suspension shall be in addition to any other penalties that may
apply. Any person who purchases articles tax free and who sells or uses
them for a non-exempt purpose shall notify its vendor of the taxable
sale or use.
(3) Exemption certificate. (i) To establish exemption from tax under
section 4061(b) in those instances where a sale is made directly to an
ultimate purchaser, the manufacturer, first, or second purchaser must
obtain (prior to or at the time of sale) from the ultimate purchaser and
retain in its possession a properly executed exemption certificate in
the form prescribed in paragraph (b)(3)(iii) of this section.
(ii) Where only occasional sales are made, a separate exemption
certificate shall be furnished for each order. However, where sales are
regularly or frequently made to a purchaser for such exempt use, a
certificate covering all sales for a specified period not to exceed 12
calendar quarters will be acceptable. Such certificates and proper
records of invoices, orders, etc. relative to tax-free sales must be
kept for inspection by the district director as provided in section 6001
and the regulations thereunder.
(iii) The following form of exemption certificate will be acceptable
for purposes of this section and must be adhered to in substance.
Exemption Certificate
(For use by ultimate purchaser who purchase parts or accessories
from a manufacturer, producer, importer, first or second purchaser for
use on or in connection with the first retail sale of a light-duty
truck. (Section 4063 of the Internal Revenue Code.))
(Date) ___________ 19__.
1. I, the undersigned, certify that I am, or the (Name of company
_________ of which I am (Position held _____, is purchasing from the
manufacturer, producer, importer, first or second purchaser the parts or
accessories specified in section 2 below (or in the purchase order or
invoice attached hereto) for use on or in connection with a
substantially contemporaneous purchase of a new light-duty truck
specified in section 3 below. I also certify that (check applicable type
of certificate) ___ the article or articles specified in the
accompanying order, as described below, or _____ all orders placed by
the purchaser for the period commencing (Date) ___ and ending (Date) ___
(period not to exceed 12 calendar quarters), will be used only for the
above stated tax-exempt purposes and will not be used as a replacement
part.
I understand that the willful use of this exemption certificate to
evade or defeat the manufacturers excise tax otherwise applicable to
these parts or accessories will subject me to a fine of not more than
$10,000 or imprisonment for not more than 5 years, or both, together
with cost of prosecution.
(Signature) __________.
(Address) __________.
2. Description of parts and accessories
------------------------------------------------------------------------
Type Quantity Price Total
------------------------------------------------------------------------
......... ......... .........
......... ......... .........
------------------------------------------------------------------------
3. Description of new light-duty truck
(a) Type: (b) Quantity, (c) Serial Number.
(d) GVWR: (e) Date of Sale, (f) Invoice Number.
(g) Name and Address of Vendor of Vehicle.
(c) Information; records--(1) Information to be furnished to vendee.
A vendor (including the manufacturer) selling light-duty truck parts and
accessories tax free under section 4063(e) shall indicate to its vendee
that the vendee is obtaining the parts or accessories tax free for the
purpose of resale (or use) on or in connection with the first retail
sale of a light-duty truck. This information may be transmitted by any
convenient means, such as coding of sales invoices, provided that the
information is presented with sufficient particularity so that the
purchaser is informed that the purchaser has obtained the light-duty
truck parts or accessories tax free.
(2) Records of vendor. A manufacturer or vendor selling light-duty
truck parts or accessories tax free under section 4063(e) shall maintain
in its records the identity of the purchaser, a signed statement of the
exempt purpose for purchasing the light-duty truck parts or accessories,
and the quantity of light-duty truck parts or accessories sold tax free
to each purchaser.
(3) Records of vendee. A person purchasing light-duty truck parts or
accessories tax free under section 4063(e)
[[Page 112]]
must maintain sufficient records to establish that the parts or
accessories purchased tax free have actually been resold (or used) on or
in connection with the first retail sale of a light-duty truck or have
been resold to a second purchaser for such a resale by the second
purchaser.
(d) Duty of selling manufacturer to ascertain validity of tax-free
sale. The selling manufacturer of light-duty truck parts is not relieved
of liability under the provisions of section 4063(e) by reason of
section 4221(c) for the tax imposed by section 4061(b) if at the time of
sale the selling manufacturer has knowledge or reason to believe that
the light-duty truck parts or accessories sold by it to the purchaser
are not intended for resale (or use) on or in connection with the first
retail sale of a light-duty truck. The selling manufacturer is also not
relieved of liability if it has knowledge or reason to believe that the
purchaser has failed to register, refused to execute an exemption
certificate, or that its registration or its right to purchase tax free
through the use of an exemption certificate has been revoked or
suspended.
(e) Cross reference. For credit or refund, see section 6416(b)(2).
(f) Effective date. Section 4063(e) (relating to light-duty truck
parts and accessories) applies to sales on or after December 1, 1978.
Light-duty truck parts or accessories sold prior to that date are not
exempt from tax under section 4061(b) by reason of section 4063(e).
[T.D. 7834, 47 FR 42344, Sept. 27, 1982]
Sec. 48.4063-3 Other tax-free sales.
For provisions relating to tax-free sales of articles referred to in
section 4061, see:
(a) Section 4221, relating to certain tax-free sales;
(b) Section 4222, relating to registration; and
(c) Section 4223, relating to special rules pertaining to further
manufacture;
and the regulations thereunder contained in Subpart N of this part.
[T.D. 7727, 28 FR 3633, Apr. 13, 1963. Redesignated by T.D. 7834, 47 FR
42344, Sept. 27, 1982]
Sec. 48.4064-1 Gas guzzler tax.
(a) General rule--(1) In general. Section 4064 imposes on the sale
by the manufacturer of an automobile a tax determined in accordance with
the tables in section 4064(a) (1) through (7), and in paragraph (a)(2)
of this section. The tax is applicable to model types of 1980 and later
model year automobiles that have a fuel economy level below the
applicable tax-free fuel economy level. Paragraph (b) of this section
defines the following terms: sale, manufacturer, automobile, model year,
model type, fuel economy, and fuel. Paragraph (c) of this section
contains rules relating to the determination of fuel economy. Paragraph
(d) of this section contains a special rule for certain small
manufacturers. Paragraph (e) of this section contains rules relating to
the tax-free sales of emergency vehicles.
(2) Tables. (i) In the case of a 1980 model year automobile:
If the fuel economy of the model type in which the automobile falls
is:
The tax
is--
Miles per gallon:
At least 15............................................... 0
At least 14 but less than 15.............................. $200
At least 13 but less than 14.............................. 300
Less than 13.............................................. 550
(ii) In the case of a 1981 model year automobile:
If the fuel economy of the model type in which the automobile falls
is:
The tax
is--
Miles per gallon:
At least 17............................................... 0
At least 16 but less than 17.............................. $200
At least 15 but less than 16.............................. 350
At least 14 but less than 15.............................. 450
At least 13 but less than 14.............................. 550
Less than 13.............................................. 650
(iii) In the case of a 1982 model year automobile:
If the fuel economy of the model type in which the automobile falls
is:
The tax
is--
Miles per gallon:
At least 18.5............................................. 0
At least 17.5 but less than 18.5.......................... $200
At least 16.5 but less than 17.5.......................... 350
[[Page 113]]
At least 15.5 but less than 16.5.......................... 450
At least 14.5 but less than 15.5.......................... 600
At least 13.5 but less than 14.5.......................... 750
At least 12.5 but less than 13.5.......................... 950
Less than 12.5............................................ 1,200
(iv) In the case of a 1983 model year automobile:
If the fuel economy of the model type in which the automobile falls
is:
The tax
is--
Miles per gallon:
At least 19............................................... 0
At least 18 but less than 19.............................. $350
At least 17 but less than 18.............................. 500
At least 16 but less than 17.............................. 650
At least 15 but less than 16.............................. 800
At least 14 but less than 15.............................. 1,000
At least 13 but less than 14.............................. 1,250
Less than 13.............................................. 1,550
(v) In the case of a 1984 model year automobile:
If the fuel economy of the model type in which the automobile falls
is:
The tax
is--
Miles per gallon:
At least 19.5............................................. 0
At least 18.5 but less than 19.5.......................... $450
At least 17.5 but less than 18.5.......................... 600
At least 16.5 but less than 17.5.......................... 750
At least 15.5 but less than 16.5.......................... 950
At least 14.5 but less than 15.5.......................... 1,150
At least 13.5 but less than 14.5.......................... 1,450
At least 12.5 but less than 13.5.......................... 1,750
Less than 12.5............................................ 2,150
(vi) In the case of a 1985 model year automobile:
If the fuel economy of the model type in which the automobile falls
is:
The tax
is--
Miles per gallon:
At least 21............................................... 0
At least 20 but less than 21.............................. $500
At least 19 but less than 20.............................. 600
At least 18 but less than 19.............................. 800
At least 17 but less than 18.............................. 1,000
At least 16 but less than 17.............................. 1,200
At least 15 but less than 16.............................. 1,500
At least 14 but less than 15.............................. 1,800
At least 13 but less than 14.............................. 2,200
Less than 13.............................................. 2,650
(vii) In the case of a 1986 or later model year automobile:
If the fuel economy of the model type in which the automobile falls
is:
The tax
is--
Miles per gallon:
At least 22.5............................................. 0
At least 21.5 but less than 22.5.......................... $500
At least 20.5 but less than 21.5.......................... 650
At least 19.5 but less than 20.5.......................... 850
At least 18.5 but less than 19.5.......................... 1,050
At least 17.5 but less than 18.5.......................... 1,300
At least 16.5 but less than 17.5.......................... 1,500
At least 15.5 but less than 16.5.......................... 1,850
At least 14.5 but less than 15.5.......................... 2,250
At least 13.5 but less than 14.5.......................... 2,700
At least 12.5 but less than 13.5.......................... 3,200
Less than 12.5............................................ 3,850
(3) Liability for tax. The tax imposed by section 4064 is payable by
the manufacturer making the sale. An automobile sold before the time a
determination of fuel economy is made for the model type (as defined in
paragraph (b)(6) of this section) is subject to tax if it is
subsequently determined that the fuel economy level of that model type
of automobile is within the taxable range (see paragraph (a)(1) of this
section).
(b) Definitions--(1) Sale. Sale includes the use (within the meaning
of section 4218) or the first lease (within the meaning of section
4217(e)) of an automobile by the manufacturer.
(2) Manufacturer. The term ``manufacturer'' has the same meaning
assigned to such term under Sec. 48.0-2(a)(4). The term
``manufacturer'' includes a producer or importer. An importer is a
person who imports an automobile whether or not in connection with a
trade or business.
(3) Automobile. The term ``automobile'' means any four-wheeled
vehicle--
(i) Propelled by an engine powered by fuel;
(ii) Manufactured primarily for use on public streets, roads, and
highways (except any vehicle operated exclusively on a rail or rails);
(iii) Rated at 6,000 pounds gross vehicle weight or less; and
(iv) Requiring no further manufacturing operations to perform its
intended function, other than the addition of readily attachable
components, such as mirrors or tire and rim assemblies, or minor
finishing operations, such as painting. For this purpose, gross vehicle
weight means the value specified by the manufacturer as the maximum
design loaded weight of a
[[Page 114]]
single vehicle. An automobile does not include a nonpassenger automobile
as defined in regulations in effect on November 9, 1978 (49 CFR 523.5
(1978)), which were prescribed by the Secretary of Transportation for
section 501 of the Motor Vehicle Information and Cost Savings Act (15
U.S.C. 2001). In addition, an automobile does not include the following:
any vehicle sold for use and used primarily as an ambulance or
combination ambulance-hearse; any vehicle sold for use and used by the
United States or by a State or local government primarily for police or
other law enforcement purposes; or any vehicle sold for use and used
primarily for firefighting purposes.
(4) Model year. The term ``model year'' means the manufacturer's
annual production period (as determined by the Administrator of the
Environmental Protection Agency) which includes January 1 of any
particular calendar year. If the manufacturer has no annual production
year, the model year is the calendar year.
(5) Model type. The term ``model type'' means a particular class of
automobile, as determined by regulations in effect on November 9, 1978
(40 CFR 600.002-79(a)(19) (1978)), which were prescribed by the
Administrator of the Environmental Protection Agency.
(6) Fuel economy. The term ``fuel economy'' means the average number
of miles traveled by an automobile per gallon of fuel consumed, rounded
to the nearest .1 mile per gallon. The fuel economy for any model type
is determined by the Environmental Protection Agency (as determined in
accordance with the procedures provided in paragraph (c) of this
section). For this purpose, the fuel economy is a combined (urban-
highway weighted average) mileage figure estimated in connection with
the determination (or redetermination) of general label value (fuel
economy information displayed on a sticker that is affixed to new
automobiles) mandated under section 506 of the Motor Vehicle Information
and Cost Savings Act (15 U.S.C. 2006) and regulations thereunder (40 CFR
Part 600).
(7) Fuel. The term ``fuel'' means gasoline and diesel fuel.
(c) Determination of fuel economy. For purposes of this section, the
fuel economy for any model type is determined (or redetermined) in
accordance with the testing and calculation procedures utilized by the
Environmental Protection Agency Administrator for model year 1975
(weighted 55 percent urban cycle and 45 percent highway cycle), or any
other procedures (yielding comparable results) established by the
Administrator. The Environmental Protection Agency's determination (or
redetermination) of a model type's fuel economy is made at the time the
general label fuel economy value is calculated (or recalculated). This
determination (or redetermination) is conclusive for purposes of this
section. A redetermination of a model type's fuel economy value shall be
effective only with respect to those automobiles for which the
manufacturer is required (or is permitted and chooses) under
Environmental Protection Agency regulations to affix labels with the
recalculated general label fuel economy value.
(d) Special rule for small manufacturers--(1) In general. A small
manufacturer (as defined in subparagraph (2)(i) of this paragraph) may
apply for a determination that it is not feasible for that manufacturer
to meet the statutory tax-free fuel economy level for the model year,
with respect to all automobiles produced by that manufacturer, or with
respect to a particular model type. For this purpose, the Commissioner
(or his delegate) will make a determination of maximum feasible fuel
economy level with respect to the automobiles that are the subject of
the determination, but only after consultation with the Secretary of
Energy, the Secretary of Transportation, and the Administrator of the
Environmental Protection Agency (or their delegates) to obtain their
views. A finding that it is not feasible for the manufacturer to meet
the statutory tax-free fuel economy level will be made by the Internal
Revenue Service if the maximum feasible fuel economy level (as defined
in subparagraph (3)(i) of this paragraph) of the automobiles that are
the subject of the determination is lower than the statutory tax-free
fuel economy level
[[Page 115]]
for those automobiles. If it is determined that it is not feasible for a
small manufacturer to meet the statutory tax-free fuel economy level,
the Secretary (or his delegate) has the discretion to grant to the
manufacturer the alternate rate schedule prescribed in paragraph
(d)(3)(iii) of this section in lieu of the applicable statutory tax
table prescribed in section 4064(a). The decision whether to grant the
alternate rate schedule shall be based on the consideration set forth in
paragraph (d)(3)(ii) of this section. If a small manufacturer for which
an alternate rate schedule under this paragraph (d) is applicable sells
an automobile to an importer, the alternate rate schedule applies to the
sale by the importer of such automobile if such automobile is of the
model year and type to which such alternate schedule applies.
(2) Definitions--(i) Small manufacturer. A small manufacturer is any
manufacturer who produced (whether or not in the United States) fewer
than 10,000 automobiles in the second model year preceding the affected
model year (the model year for which the determination under this
paragraph is being made), and who can reasonably be expected to produce
(whether or not in the United States) fewer than 10,000 automobiles in
the affected model year.
(ii) Manufacturer. For purposes of this paragraph, the term
``manufacturer'' does not include a person who is only an importer, but
does include a producer of automobiles outside the United States who is
also an importer.
(iii) Members of a controlled group. For purposes of this paragraph,
persons who are members of a controlled group of corporations (as
defined in section 1563(a) of the Internal Revenue Code, except that
``more than 50 percent'' is substituted for ``at least 80 percent'' each
place it appears in section 1563(a)) are treated as one manufacturer.
(3) Basis for determination--(i) Maximum feasible fuel economy
level. For purposes of this paragraph, the maximum feasible fuel economy
level is determined by taking into account the same factors used in
determining the maximum feasible fuel economy level under section 502(e)
of the Motor Vehicle Information and Cost Savings Act (as amended) and
the regulations thereunder in effect on November 9, 1978. (Those
regulations for small manufacturers are prescribed in 49 CFR Part 525
(1978).) In making this determination, the Commissioner (or his
delegate) will consult with the National Highway Traffic Safety
Administration of the Department of Transportation.
(ii) Decision to grant alternate rate schedule. In deciding whether
to grant an alternate rate schedule, the Secretary (or his delegate)
will consider whether the use (in the United States) of the automobile
serves an important public policy (e.g., providing public transportation
or transportation for the handicapped) that overrides the United States'
need to conserve energy. The manufacturer has the burden of
demonstrating that the public policy consideration involved overrides
the United States' need to conserve energy. The Commissioner (or his
delegate), after consultation with the Secretary of Energy, the
Secretary of Transportation, and the Administratior of the Environmental
Protection Agency (or their delegates), will review the information
submitted by the manufacturer and report findings and recommendations to
the Secretary (or his delegate).
(iii) Alternate rate schedule and tax. If an alternate rate schedule
is granted, the maximum feasible fuel economy level shall be deemed to
be the statutory tax-free fuel economy level. Accordingly, a tax is
imposed only on automobiles sold that fail to meet the deemed tax-free
fuel economy level. The alternate rate schedule shall be determined by
substituting the maximum feasible fuel economy level for the tax-free
fuel economy level in the applicable statutory tax table set forth in
section 4064(a), and by substituting for the miles per gallon amount
prescribed in that applicable table an amount that is the tax-free level
decreased by one mile per gallon increments, while keeping the same
corresponding tax amount prescribed in the applicable table. The rule
for determining an alternate rate schedule may be illustrated by the
following example:
Example. Manufacturer X, a small manufacturer of automobiles
specifically designed to accommodate disabled passengers, applied
[[Page 116]]
for a determination that it is not feasible for X to meet the statutory
tax-free fuel economy level for a particular model type of X's 1982
model year automobiles. It was determined that the maximum feasible fuel
economy level for that model type was 15 miles per gallon. The Secretary
decided to grant X an alternate rate schedule. The alternate rate
schedule for the model type would be as follows:
If the fuel economy of the automobile is:
The tax
is--
Miles per gallon:
At least 15............................................... 0
At least 14 but less than 15.............................. $200
At least 13 but less than 14.............................. 350
At least 12 but less than 13.............................. 450
At least 11 but less than 12.............................. 600
At least 10 but less than 11.............................. 750
At least 9 but less than 10............................... 950
Less than 9............................................... 1,200
Thus, if X's 1982 automobiles of that model year and type attain only 12
miles per gallon (because X fails to modify them to reach the maximum
feasible fuel economy level before they are sold), the tax imposed upon
the sale of each automobile is $450 (instead of the $1,200 tax (see the
applicable statutory tax table set forth in section 4064(a)(3)), which
would have been imposed had no alternate rate schedule been prescribed).
(4) Duration of determination. A determination under this paragraph
does not apply to more than three model years.
(5) Requirements for application. Each application for a
determination under this section must--
(i) Identify the model year or years, and particular model type or
types for which a determination is requested;
(ii) (A) In the case of an application for model year 1980, be
submitted not later than May 8, 1980;
(B) In case of an application for model year 1981, be submitted not
later than 9 months before the beginning of that model year or March 10,
1980, whichever is later;
(C) In the case of an application for model year 1982 or any
subsequent model year, be submitted not later than 9 months before that
model year;
(iii) Be submitted in three copies to: Commissioner of Internal
Revenue, Attention: Associate Chief Counsel (Technical), 1111
Constitution Avenue, NW., Washington, DC 20224;
(iv) Be written in the English language;
(v) Set forth the full name, address, and title of the official
responsible for preparing the application;
(vi) State whether the applicant is a member of a controlled group
of corporations (as defined in paragraph (d) (2) (iii) of this section);
(vii) State the total number of automobiles manufactured (whether or
not in the United States) by the applicant (or the controlled group of
corporations in the case where the applicant is a member of the group)
in the second model year immediately preceding each affected model year
and the total number of automobiles likely to be manufactured in the
affected model year;
(viii) Set forth the same information required by an application
pursuant to section 502 (c) of the Motor Vehicle Information and Cost
Savings Act (as amended) and the regulations thereunder (see 49 CFR part
525 (1978)) and state whether or not the applicant under this paragraph
has also made an application pursuant to such Act; and
(ix) Set forth the reasons why an alternate rate schedule should be
granted under paragraph (d) (3) (ii) of this section.
(6) Update of application. A manufacturer making an application
under this section must update the application when a material change of
circumstances occurs or material information not available at the time
of applying becomes available. The manufacturer must also furnish any
further information that may be required by the Internal Revenue
Service.
(7) Processing of applications. If a manufacturer's application is
found not to contain the information required by this paragraph, the
applicant will be informed of the areas of insufficiency. The
application will not receive further consideration until the required
information is submitted. Each applicant will be informed in writing
whether an application has been granted or denied.
(e) Tax-free sales of emergency vehicles--(1) In general. The tax
imposed by section 4064 (a) shall not apply to vehicles sold by a
manufacturer for use and used (i) primarily as an ambulance or
combination ambulance-hearse, (ii) by the United States or by a State or
local
[[Page 117]]
government primarily for police or other law enforcement purposes, or
(iii) primarily for fire-fighting purposes. A vehicle may be sold tax-
free by the manufacturer under this paragraph only in those cases where
the sale is made directly to a purchaser for an emergency use prescribed
in this subparagraph. In order to effect a tax-free sale, the
requirements of section 4222 and the regulations thereunder must be met.
(2) Credit or refund. Where tax is paid on the sale of a vehicle,
but the vehicle is used or resold for an emergency use prescribed in
subparagraph (1) of this paragraph, a claim for refund of the tax paid
on such sale may be filed by the manufacturer on Form 8849 (or on such
other form as the Commissioner may designate), or a credit may be taken
on a subsequent return, in accordance with the provisions of sections
6402 (a) and 6416 (a) and Sec. 48.6416 (a)-1.
[T.D. 8036, 50 FR 29960, July 23, 1985, as amended by T.D. 8659, 61 FR
10453, Mar. 14, 1996]
Tires, Tubes, and Tread Rubber
Sec. 48.4071-1 Imposition and rates of tax.
(a) Imposition of tax--(1) Imposition of tax before January 1, 1984.
Section 4071 imposes a tax at the rates set forth in paragraph (b)(1) of
this section on tires made wholly or in part of rubber, inner tubes (for
tires) made wholly or in part of rubber and tread rubber which are sold
by the manufacturer thereof before January 1, 1984.
(2) Imposition of tax after December 31, 1983. Section 4071 imposes
a tax at the rates set forth in paragraph (b)(2) of this section on
tires of the type used on highway vehicles and made wholly or in part of
rubber which are sold by the manufacturer thereof after December 31,
1983.
(3) Definitions. For definitions of the terms ``tires,'' ``inner
tubes,'' ``tread rubber,'' ``rubber'' and ``manufacturer,'' see Sec.
48.4072-1 of the regulations.
(b) Rates and computation of tax--(1) Rates of tax before January 1,
1984--(i) Tires:
(A) Of the type used on highway vehicles:
(1) For the period July 1, 1965 to December 31, 1980, inclusive--10
cents per pound.
(2) For the period January 1, 1981 to December 31, 1983, inclusive--
9.75 cents per pound.
(B) Of the type used on other than highway vehicles:
(1) For the period July 1, 1965, to December 31, 1980, inclusive--5
cents per pound.
(2) For the period January 1, 1981 to December 31, 1983, inclusive--
4.875 cents per pound.
(C) Laminated tires for the period July 1, 1965 to December 31,
1983, inclusive--1 cent per pound.
(ii) Inner tubes:
For the period July 1, 1965 to December 31, 1983, inclusive--10
cents per pound.
(iii) Tread Rubber:
For the period July 1, 1965 to December 31, 1983, inclusive--5 cents
per pound.
(2) Rates of tax on or after January 1, 1984. Tires of the type used
on highway vehicles:
(i) Tires weighing not more than 40 pounds--0 cents.
(ii) Tires weighing more than 40 pounds but not more than 70
pounds--15 cents for each pound in excess of 40 pounds.
(iii) Tires weighing more than 70 pounds but not more than 90
pounds--$4.50 plus 30 cents for each pound in excess of 70 pounds.
(iv) Tires weighing more than 90 pounds--$10.50 plus 50 cents for
each pound in excess of 90 pounds.
(3) Computation of tax. The tax on tires, inner tubes, and tread
rubber is computed by applying to the total weight (including a
fractional part of a pound) of the article the rate in effect at the
time the article is sold. See Sec. 48.4071-2, relating to determination
of weight.
(c) Liability for tax. The tax imposed by section 4071 is payable by
the manufacturer when the manufacturer makes a sale of a taxable
article, or as provided in section 4071 (b) and Sec. 48.4071-3 for a
manufacturer who sells at retail, when the manufacturer delivers a
taxable article to a retail store, or to a retail outlet, of the
manufacturer.
[[Page 118]]
(d) Recapped or retreaded tires. The recapping or retreading of a
tire, whether from shoulder-to-shoulder or bead-to-bead, does not
constitute manufacture of a taxable tire. The tax on tires imposed by
section 4071 does not apply to the sale of a recapped or retreaded tire,
except that a used tire or carcass not previously sold in the United
States that is recapped or retreaded from shoulder-to-shoulder or bead-
to-bead in a foreign country and imported into the United States is
subject to the tax imposed by section 4071 when such tire is sold or
used by the importer. This paragraph (d) is effective for recapped and
retreaded tires sold on or after January 1, 1984.
(Secs. 4071(b), 4071(c), 4073(c), and 7805, Internal Revenue Code of
1954. (80 Stat. 331, 26 U.S.C. 4071(b); 68A Stat. 482, 26 U.S.C.
4071(c); 70 Stat. 389, 26 U.S.C. 4073(c); 68A Stat. 917, 26 U.S.C.
7805))
[T.D. 7809, 47 FR 6005, Feb. 10, 1982, as amended by T.D. 8057, 50 FR
41491, Oct. 11, 1985; T.D. 8152, 52 FR 31618, Aug. 21, 1987]
Sec. 48.4071-2 Determination of weight.
(a) In general--(1) Tires. (i) Metal rims or rim bases are not to be
included in determining the total weight of a tire. However, the wire,
staples, darts, clips, and other material or fastening devices which
form a part of the tire or are required for its use must be included in
determining the total weight of the tire. Studs are considered to be
part of a tire and are to be included when determining the weight of a
tire. In the case of a tubeless tire, the total weight includes the
weight of the air valve and stem or any other mechanism that functions
as a part of the tire and is used in connection with inflating the tire
or maintaining its air pressure.
(ii) When tires are sold with metal rims or rim bases attached, the
manufacturer must maintain records that will establish what portion of
the total weight of the finished product represents the tire exclusive
of the metal rim or rim base.
(2) Inner tubes. The total weight of an inner tube includes the
weight of the air valve and stem or any other mechanism attached to the
inner tube that is used in connection with inflating the tube or
maintaining its air pressure.
(b) Alternative method of determining weight of tires after December
31, 1983. A manufacturer who has received permission from the
Commissioner may, subject to such conditions as the Commissioner may
prescribe, determine total weight of tires manufactured and sold by the
manufacturer on the basis of the average weight for each type, size,
grade, and classification. The average weights must be established in
accordance with the method approved by the Commissioner and apply for
such periods as the Commissioner may prescribe. The Commissioner may
terminate the approval granted any manufacturer. In the case of the
termination of the approval granted any manufacturer, the termination
becomes effective 10 days from the date of the receipt by the
manufacturer of the notice of termination. A manufacturer may effect
termination, as of a specified date, of the privilege to determine total
weight in accordance with provisions of this paragraph by giving no less
than 10 days written notice of such intention to the Commissioner. The
termination of the approval given a manufacturer does not affect a
manufacturer's tax liability for tires sold prior to the effective date
of the notice of termination.
(Secs. 4071(b), 4071(c), 4073(c), and 7805, Internal Revenue Code of
1954. (80 Stat. 331, 26 U.S.C. 4071(b); 68A Stat. 482, 26 U.S.C.
4071(c); 70 Stat. 389, 26 U.S.C. 4073(c); 68A Stat. 917, 26 U.S.C.
7805))
[T.D. 7809, 47 FR 6005, Feb. 10, 1982, as amended by T.D. 8152, 52 FR
31618, Aug. 21, 1987]
Sec. 48.4071-3 Imposition of tax on tires and tubes delivered to
manufacturer's retail outlet.
(a) General rule. If, on or after October 1, 1966, a tire or inner
tube is delivered by the manufacturer thereof to a retail outlet of the
manufacturer, the manufacturer is liable for tax in respect of the tire
or tube at the rate set forth in section 4071 in the same manner as if
the tire or tube had been sold at the time it was delivered to the
retail outlet. The amount of tax payable shall be computed in accordance
with the provisions of paragraph (b)(2) of Sec. 48.4071-1, and of Sec.
48.4071-2.
(b) Definition of retail outlet. For purposes of this section, the
term ``retail
[[Page 119]]
outlet'' includes the term ``retail store.'' A retail outlet is a
facility maintained by a manufacturer for selling tires or tubes at
retail. A facility may be a retail outlet even though some sales are
made at wholesale at such facility; see paragraph (d)(1) of this
section. A facility may also be considered to a retail outlet for the
purposes of this section notwithstanding that its main activity is in
another area than selling tires or inner tubes. For example, if a
manufacturer operates a facility for both automotive repair and the
selling of tires at retail, the facility is considered a retail outlet
for the purposes of this section even if the primary activity of the
facility is automotive repair. No facility is considered a retail outlet
for the purposes of this section if it is determined that less than 15
percent of the taxable tires and inner tubes removed from such facility
are sold at retail by such facility. The determination described in the
preceding sentence is made on the basis of the experience of a
representative period, of at least 12 consecutive calendar months during
the 2-year period immediately preceding the first day included in the
return period for which tax under section 4071(b) is reported. If a
facility has not been in existence during such a 12-month period, the
determination is made on the basis of the available experience of the
manufacturer. See also paragraph (c)(3) of this section, relating to
imposition of tax where a retail outlet is maintained as an adjunct to a
production facility or distribution center.
(c) Delivery--(1) In general. A manufacturer of tires or inner tubes
may, at its option, treat either of the following events as constituting
delivery to a retail outlet:
(i) Delivery of tires or inner tubes to a common carrier (or, where
the tires or tubes are transported by the manufacturer, the placing of
the tires or tubes into the manufacturer's over-the-road vehicle) for
shipment from the plant in which the tires or tubes are manufactured, or
from a regional distribution center of tires and inner tubes, to a
retail outlet or to a location in the immediate vicinity of a retail
outlet primarily for future delivery to the retail outlet.
(ii) Arrival of the tires or tubes at the retail outlet, or, where
shipment is to a location in the immediate vicinity of a retail outlet
primarily for future delivery to the retail outlet, the arrival of the
tires or tubes at such location.
In its excise tax return for the first return period beginning after
September 30, 1966, a manufacturer of tires or inner tubes must elect to
determine the date of delivery to retail outlets in accordance with one
of the two subdivisions of this paragraph (c)(1) and must determine the
dates of all deliveries made to all retail outlets in accordance with
the subdivision which the manufacturer has elected to apply. The
election may be made in a statement attached to the return for such
period. Having elected to treat one of the events listed in subdivision
(i) or (ii) of this paragraph (c)(1) as constituting delivery to a
retail outlet for purposes of its return for the first return period
after September 30, 1966, the manufacturer may not use a different
criterion for a subsequent return period unless permission of the
district director is obtained in advance.
(2) Deliveries made in the immediate vicinity of a retail outlet
primarily for future delivery to the retail outlet. (i) For purposes of
this section, any delivery which is made in the immediate vicinity of a
retail outlet primarily for future delivery to the retail outlet is
deemed to be a delivery to the retail outlet. For the purpose of the
preceding sentence, a location is considered to be in the immediate
vicinity of a retail outlet if the distance between the location and the
retail outlet is sufficiently small so that it is feasible to transport
tires and inner tubes between the location and the retail outlet by
means of dollies, fork lift trucks, pushcarts, and similar vehicles of
the type normally used around the premises of factories and similar
establishments, as opposed to highway motor vehicles. For the purpose of
the preceding sentence, it is immaterial that a public thoroughfare must
be used in order to transport tires or inner tubes to a retail outlet
from another location. Tires and inner tubes delivered to a location in
the immediate vicinity of
[[Page 120]]
a retail outlet are considered to be delivered to the location
``primarily for future delivery'' to the retail outlet if it is
determined that a majority (by number) of the tires and tubes removed
from the location are delivered to the retail outlet. The determination
described in the preceding sentence is made on the basis of the
experience of a representative period of at least 12 consecutive
calendar months during the 2-year period immediately preceding the first
day included in the return period for which tax under section 4071(b) is
reported. If a facility has not been in existence during such a 12-month
period, the determination is made on the basis of the available
experience of the manufacturer. If it is determined that the majority of
all tires and inner tubes removed from a given location are delivered to
a retail outlet of the manufacturer in the immediate vicinity of the
location, tax is imposed upon all tires and tubes delivered by the
manufacturer to the location, even though all or part of the tires or
tubes comprising a particular shipment to the location may be intended
for further transportation to a location other than the retail outlet.
If it is determined that a majority of all tires and inner tubes removed
from a given location are not delivered to a retail outlet of the
manufacturer in the immediate vicinity of the location, tax is imposed
upon the removal of a tire or inner tube from the location to the
premises of the retail outlet. See also paragraph (d)(2) of this
section, relating to sales by the manufacturer at facilities other than
retail outlets.
(ii) The provisions of this paragraph (c)(2) may be illustrated by
the following examples.
Example. A manufacturer of tires and tubes whose plant is located in
City X operates two facilities in City Y; Warehouse A and Store Q. Store
Q is a retail outlet within the meaning of paragraph (b) of this
section, and Warehouse A is in the immediate vicinity of Store Q. During
the 12-month period ending September 30, 1966, 60 percent of the tires
and inner tubes removed from Warehouse A were delivered to Store Q. All
tires or inner tubes delivered by the manufacturer to Warehouse A are
subject to a tax under section 4071(b) and this section (unless, before
such delivery, tax was imposed on the same tires and tubes).
(3) Retail outlet maintained as adjunct of production or
distribution facility. If a retail outlet is maintained as an adjunct to
and in the immediate vicinity of a facility which is not a retail outlet
(as, for example, a production plant or a regional distribution center),
delivery to the retail outlet is deemed to occur at the earlier of:
(i) The date when a tire or inner tube is removed from the general
storage facilities in the facility which is not a retail outlet for
transfer to the premises of the retail outlet, or
(ii) The date when a tire or inner tube is designated to be sold by
or at the retail outlet.
(d) Special rules--(1) Retail outlets which also sell at wholesale.
Tax applies to all shipments of tires and inner tubes delivered to a
retail outlet as defined in paragraph (b)(2) of this section. Thus, for
the purposes of section 4071(b) and this section, it is immaterial that
all or part of the tires or inner tubes of a particular delivery to a
retail outlet are intended for sale at wholesale. See also paragraph
(d)(3) of this section.
(2) Sales by manufacturer at facilities other than retail outlets.
Sales by the manufacturer of tires and inner tubes at facilities other
than retail outlets are subject to tax under section 4071(a).
(3) Deliveries of tires or tubes on which tax has been previously
imposed. (i) Tax is not imposed under section 4071(b) and this section
on any tire or inner tube in respect of which there was previously
imposed a tax under section 4071(a). Similarly, a tire or inner tube is
taxed only once under section 4071(b) and this section.
(ii) The provisions of this paragraph (d)(3) may be illustrated by
the following example:
Example. A manufacturer has two selling facilities, Store No. 1 and
Store No. 2. Only retail sales are made at Store No. 2, which obtains
its merchandise from Store No. 1. Assume that, although wholesaling and
distribution activities are conducted at Store No. 1, the sale of tires
and tubes at retail is conducted at Store No. 1 to the extent that Store
No. 1 is a retail outlet within the meaning of paragraph (b) of this
section, with the result that tax is imposed on deliveries by the
manufacturer of tires and tubes
[[Page 121]]
to Store No. 1. Tax is not imposed on a delivery of tires or inner tubes
from Store No. 1 to Store No. 2.
(Secs. 4071(b), 4071(c), 4073(c), and 7805, Internal Revenue Code of
1954. (80 Stat. 331, 26 U.S.C. 4071(b); 68A Stat. 482, 26 U.S.C.
4071(c); 70 Stat. 389, 26 U.S.C. 4073(c); 68A Stat. 917, 26 U.S.C.
7805))
[T.D. 7809, 47 FR 6005, Feb. 10, 1982]
Sec. 48.4071-4 Original equipment tires on imported articles.
The tax imposed by section 4071(a) applies with respect to tires and
inner tubes (other than bicycle tires and inner tubes) that are original
equipment for an imported article upon which no tax is imposed under
section 4061 if the article is sold on or after December 11, 1971. In
such a case, the importer of the article is treated as the manufacturer
and vendor of the tires and inner tubes with which the article is
equipped. However, the tax imposed by section 4071(a) is not imposed
with respect to tires and inner tubes if the imported article is an
automobile bus chassis or an automobile bus body. Solely for purposes of
this section, the provisions of section 4218 (relating to use by a
manufacturer or importer considered a sale) do not apply in cases where
an individual imports an article having original equipment tires and
tubes and on which article no tax is imposed under section 4061 if the
article is imported solely for the individual's personal use and is so
used.
(Secs. 4071(b), 4071(c), 4073(c), and 7805, Internal Revenue Code of
1954. (80 Stat. 331, 26 U.S.C. 4071(b); 68A Stat. 482, 26 U.S.C.
4071(c); 70 Stat. 389, 26 U.S.C. 4073(c); 68A Stat. 917, 26 U.S.C.
7805))
[T.D. 7809, 47 FR 6006, Feb. 10, 1982]
Sec. 48.4072-1 Definitions.
For purposes of the regulations in this part, unless otherwise
expressly indicated:
(a) Rubber. The term ``rubber'' includes synthetic and substitute
rubber.
(b) Tread rubber. The term ``tread rubber'' means any material (1)
which is commonly or commercially known as tread rubber or camelback, or
(2) which is a substitute for any material commonly or commercially
known as tread rubber or camelback and is of a type used in recapping or
retreading tires. The term includes, for example, strips of material,
wholly or partially of rubber, natural or synthetic, intended to be
vulcanized or otherwise affixed to a tire casing to form the outside
perimeter of the tire, smooth or treaded. It also includes treading
material produced by reprocessing scrap, salvage, or junk rubber and a
continuous rubber ribbon produced through an extrusion process for
direct application in recapping or retreading a tire casing. The term
does not include rubber in various forms such as strip, slab, pellet,
etc. which is used as raw material for the extrusion process. Tread
rubber loses its identity as such when it has been used in the recapping
or retreading of a tire of a type used on a highway vehicle (without
regard to the actual use ultimately made of the tire) or has
deteriorated in quality to the point where it is no longer suitable for
use in recapping or retreading of a tire. (In the case of such
deterioration, see section 6416(b)(2) and Sec. 48.6416(b)-2 to secure a
refund or credit of the tax paid.)
(c) Tires of the type used on highway vehicles. (1) The term ``tires
of the type used on highway vehicles'', for purposes of Sec. Sec.
48.4071-1 through 48.4073-3 means tires of the type used on:
(i) Motor vehicles that are highway vehicles (within the meaning of
Sec. 48.4061(a)-1(d)), or
(ii) Vehicles of the type used in connection with motor vehicles
that are highway vehicles (within the meaning of Sec. 48.4061(a)-1(d)).
The term ``tires of the type used on highway vehicles'' does not include
bicycle tires. Bicycle tires, however, are included in the term ``other
tires'' as used in section 4071(a)(2).
(2) For purposes of paragraph (c)(1)(i) of this section, tires of
the type used on motor vehicles that are highway vehicles include tires
used on motor trucks, buses, passenger automobiles, motor homes, highway
tractors, trolley buses or coaches, and motorcycles.
(3) For purposes of paragraph (c)(1)(ii) of this section, tires of
the type used on vehicles of the type used in connection with motor
vehicles that are highway vehicles include tires used on truck or bus
trailers, truck semitrailers, mobile homes, housetrailers, or utility
trailers.
[[Page 122]]
(d) Inner tubes. 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.
(e) Tires. The term ``tires'' includes rubber casings, hoops, and
strips or bands of all kinds designed and shaped or built to form the
tread of or to fit a vehicle wheel. Tires of either the pneumatic or
solid type which fit or form the tread for wheels of any article which
is capable of use as a means of transporting a person or burden are
taxable as tires. Examples of articles which may be equipped with
taxable tires are motor scooters, minibikes, industrial trucks, farm
tractors, wheelbarrows, and similar articles. See section 4073(a) and
Sec. 48.4073-1 with respect to the exemption of tires of certain sizes,
and section 4073(b) and Sec. 48.4073-2 with respect to the exemption
for tires with internal wire fastening.
(f) Laminated tires. For purposes of the tax imposed by section
4071, the term ``laminated tires'' means tires (1) which are not ``tires
of the type used on highway vehicles'' within the meaning of paragraph
(c) of this section, and (2) which consist wholly of scrap rubber from
used tire casings with an internal metal fastening agent.
(g) Manufacturer. The term ``manufacturer'' means manufacturer,
producer, or importer. A person who converts, by any process, a new tire
taxable under section 4071 at one rate of tax into a tire taxable under
section 4071 at a different rate (as for example, an off highway-type
tire converted into a highway-type tire) is considered to be a
manufacturer of the converted tire. If a conversion results in a reduced
rate of tax for the converted tire, see section 6416(b)(2) and Sec.
48.6416(b)-2 to secure a credit or refund of part of the tax paid. The
term ``manufactured'' includes ``produced'' and ``imported''.
(h) Cross references. For other definitions, see Sec. 48.0-2.
(Secs. 4071(b), 4071(c), 4073(c), and 7805, Internal Revenue Code of
1954. (80 Stat. 331, 26 U.S.C. 4071(b); 68A Stat. 482, 26 U.S.C.
4071(c); 70 Stat. 389, 26 U.S.C. 4073(c); 68A Stat. 917, 26 U.S.C.
7805))
[T.D. 7809, 47 FR 6007, Feb. 10, 1982]
Sec. 48.4073 [Reserved]
Sec. 48.4073-1 Exemption of tires of certain sizes.
The tax does not apply to sales of tires of all-rubber construction
(whether hollow center or solid) if they have no fabric or metal
reinforcement and do not exceed either of these measurements: (a) 20
inches in diameter measured to the outside circumferences, and (b) 1\3/
4\ inches in cross-section. The exemption provided by section 4073(a) is
to be determined solely on the measurements of the tire and not on the
purpose for which it is designed or used.
(Secs. 4071(b), 4071(c), 4073(c), and 7805, Internal Revenue Code of
1954. (80 Stat. 331, 26 U.S.C. 4071(b); 68A Stat. 482, 26 U.S.C.
4071(c); 70 Stat. 389, 26 U.S.C. 4073(c); 68A Stat. 917, 26 U.S.C.
7805))
[T.D. 7809, 47 FR 6007, Feb. 10, 1982]
Sec. 48.4073-2 Exemption of tires with internal wire fastening.
The tax does not apply to sales of tires of any size or dimension
manufactured from extruded tiring that is fastened or held together by
means of internal wire or other metallic material.
(Secs. 4071(b), 4071(c), 4073(c), and 7805, Internal Revenue Code of
1954. (80 Stat. 331, 26 U.S.C. 4071(b); 68A Stat. 482, 26 U.S.C.
4071(c); 70 Stat. 389, 26 U.S.C. 4073(c); 68A Stat. 917, 26 U.S.C.
7805))
[T.D. 7809, 47 FR 6007, Feb. 10, 1982]
Sec. 48.4073-3 Exemption of tread rubber used for recapping
nonhighway tires.
(a) Sold direct by manufacturer for nontaxable use. The tax does not
apply to the sale of tread rubber by the manufacturer to any person for
use by that person otherwise than in the recapping or retreading of
tires of the type used on highway vehicles. In determining whether tread
rubber is sold for a taxable or nontaxable use, the type of vehicle on
which the recapped or retreaded tire is to be used, or the actual or
intended use of the recapped or retreaded tire, is immaterial. The
controlling factor is whether the tire resulting from the recapping or
retreading is of a type that is used otherwise
[[Page 123]]
than on a highway vehicle. For definition of ``tires of the type used on
highway vehicles'', see paragraph (c) of Sec. 48.4072-1.
(b) Sales for resale for nontaxable use. No sale of tread rubber may
be made tax free for resale even though it is known at the time of the
sale that the tread rubber will be resold for use otherwise than in the
recapping or retreading of tires of the type used on highway vehicles.
However, where the tread rubber is resold for such use, the manufacturer
who paid the tax on a sale of the tread rubber may secure a refund or
credit in accordance with the provisions of section 6416(b)(2) and Sec.
48.6416(b)-2.
(c) Evidence required to establish exemption. (1) To establish the
right to sell tread rubber tax free under section 4073(c), the
manufacturer must obtain from the purchaser and retain in its possession
a properly executed exemption certificate.
(2) Where only occasional sales of tread rubber for exempt use are
made to a purchaser, a separate exemption certificate should be
furnished for each order. However, where sales are regularly and
frequently made to a purchaser for exempt use, a certificate covering
all purchases during the period not to exceed 12 calendar quarters is
acceptable. The certificates and proper records of invoices, orders,
etc., relative to tax-free sales must be kept for inspection by the
district director as provided in section 6001 and the regulations in
subpart Q.
(d) Acceptable form of exemption certificate. The following form of
exemption certificate is acceptable for the purposes of this section and
must be adhered to in substance:
Exemption Certificate
(For use by persons who purchase tread rubber from the manufacturer,
producer, or importer thereof for use otherwise than in recapping or
retreading tires of the type used on highway vehicles (section 4073(c)
of the Internal Revenue Code).)
(Date) ____________, 19__
I, the undersigned, certify that I am the purchaser, or the (Title)
___ of (Name of purchaser if other than the undersigned) _____ who is
the purchaser of: __ The tread rubber specified in the accompanying
order or contract, or __ All tread rubber specified in contracts or
orders entered into or placed with (Name of seller) ___ for the period
commencing ___ and ending ___ (period not to exceed 12 calendar
quarters), and that such tread rubber will not be used in the recapping
or retreading of tires of the type used on highway vehicles, but will be
used for the following purposes:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
The undersigned understands that if the tread rubber is used for the
recapping or retreading of tires of the type used on highway vehicles,
or is sold or otherwise disposed of, such fact must be promptly reported
to the manufacturer. The undersigned also understands that the
fraudulent use of this certificate for the purpose of securing this
exemption will subject the undersigned or any other party making such
fraudulent use to a fine of not more than $10,000, or to imprisonment
for not more than 5 years, or both, together with costs of prosecution.
The purchaser also understands that the purchaser must be prepared to
establish by satisfactory evidence the purpose for which the tread
rubber was used.
(Signature)_____________________________________________________________
(Address)_______________________________________________________________
(e) Exemption certificate not obtained prior to filing of
manufacturer's excise tax return. If the sale is otherwise exempt but
the exemption certificate is not obtained prior to the time the
manufacturer files a return covering taxes due for the period during
which the sale was made, the manufacturer must include the tax on the
sale in its return for that period. However, if the certificate is later
obtained, a claim for refund of the tax paid on the sale may be filed,
or a credit for the amount may be taken upon a subsequent return, as
provided by section 6416(b)(2) and Sec. 48.6416(b)-2.
(Secs. 4071(b), 4071(c), 4073(c), and 7805, Internal Revenue Code of
1954. (80 Stat. 331, 26 U.S.C. 4071(b); 68A Stat. 482, 26 U.S.C.
4071(c); 70 Stat. 389, 26 U.S.C. 4073(c); 68A Stat. 917, 26 U.S.C.
7805))
[T.D. 7809, 47 FR 6007, Feb. 10, 1982]
Sec. 48.4073-4 Other tax-free sales.
(a) Cross references. For provisions relating to tax-free sales of
articles referred to in section 4071, see:
(1) Section 4221, relating to certain tax-free sales, and the
regulations thereunder in subpart H;
[[Page 124]]
(2) Section 4222, relating to registration, and the regulations
thereunder in subpart H;
(3) Section 4223, relating to special rules pertaining to further
manufacture, and the regulations thereunder in subpart H; and
(4) 28 FR 348, January 12, 1963, relating to the authorization of an
exemption from the tax imposed by section 4071 by the Secretary of the
Treasury under section 4293 for sales of certain tires and inner tubes
sold to the American Red Cross on or after March 1, 1963.
(Secs. 4071(b), 4071(c), 4073(c), and 7805, Internal Revenue Code of
1954; 80 Stat. 331, 26 U.S.C. 4071(b); 68A Stat. 482, 26 U.S.C. 4071(c);
70 Stat. 389, 26 U.S.C. 4073(c); 68A Stat. 917, 26 U.S.C. 7805)
[T.D. 7809, 47 FR 6008, Feb. 10, 1982]
Taxable Fuel
Source: T.D. 8421, 57 FR 32424, July 22, 1992, unless otherwise
noted.
Sec. 48.4081-1 Taxable fuel; definitions.
(a) Overview. This section provides definitions for purposes of the
tax on taxable fuel imposed by section 4081.
(b) Definitions.
Approved terminal or refinery means a terminal or refinery that is
operated, respectively, by a taxable fuel registrant that is a terminal
operator, or by a taxable fuel registrant that is a refiner.
Aviation gasoline means all special grades of gasoline that are
suitable for use in aviation reciprocating engines and covered by ASTM
specification D 910 or military specification MIL-G-5572. For
availability of ASTM and military specifications, see paragraph (d) of
this section.
Blender means any person that produces blended taxable fuel.
Bulk transfer means any transfer of taxable fuel by pipeline or
vessel.
Bulk transfer/terminal system means the taxable fuel distribution
system consisting of refineries, pipelines, vessels, and terminals.
Thus, taxable fuel in a refinery, pipeline, vessel, or terminal is in
the bulk transfer/terminal system. Taxable fuel in the fuel supply tank
of any engine, or in any tank car, rail car, trailer, truck, or other
equipment suitable for ground transportation is not in the bulk
transfer/terminal system.
Bus means automobile bus.
Diesel-powered bus means any bus that is propelled by a diesel-
powered engine.
Diesel-powered highway vehicle means a highway vehicle, as defined
in Sec. 48.4061(a)-1(d), that is propelled by a diesel-powered engine.
Diesel-powered train means any diesel-powered equipment or machinery
that rides on rails. Thus, for example, the term includes a locomotive,
work train, switching engine, and track maintenance machine.
Enterer generally means the importer of record (under customs law)
with respect to the taxable fuel, except that--
(1) If the importer of record is a customs broker engaged by the
owner of the taxable fuel, the person for whom the broker is acting is
the enterer; and
(2) If there is no importer of record for taxable fuel entered into
the United States, the owner of the taxable fuel at the time it is
brought into the United States is the enterer.
Entry of taxable fuel into the United States occurs when--
(1) The taxable fuel is brought into the United States and
applicable customs law requires that the taxable fuel be entered into
the United States for consumption, use, or warehousing; or
(2) The taxable fuel is brought into the United States from Puerto
Rico and applicable customs law would require that the taxable fuel be
entered into the United States for consumption, use, or warehousing if
the taxable fuel were brought into the United States from somewhere
other than Puerto Rico.
Excluded liquid means any liquid that--
(1) Contains less than four percent normal paraffins; or
(2) Has a--
(i) Distillation range of 125 [deg]F. or less;
(ii) Sulfur content of 10 ppm or less; and
(iii) Minimum color of + 27 Saybolt.
Finished gasoline means all products (including gasohol (as defined
in Sec. 48.4081-6(b)(2))) that are commonly or
[[Page 125]]
commercially known or sold as gasoline and are suitable for use as a
motor fuel, other than products that have an ASTM octane number of less
than 75 as determined by the motor method.
Gasoline means finished gasoline and gasoline blendstocks.
Industrial user means any person that receives gasoline blendstocks
by bulk transfer for its own use in the manufacture of any product other
than finished gasoline.
Kerosene means any liquid that meets the specifications for kerosene
or would meet those specifications but for the presence in the liquid of
a dye of the type described in Sec. 48.4082-1(b). A liquid meets the
specifications for kerosene if it is one of the two grades of kerosene
(No. 1-K and No. 2-K) covered by ASTM specification D 3699, or kerosene-
type jet fuel covered by ASTM specification D 1655 or military
specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8).
For availability of ASTM and military specifications, see paragraph (d)
of this section. However, the term does not include excluded liquid.
Position holder means, with respect to taxable fuel in a terminal,
the person that holds the inventory position in the taxable fuel, as
reflected on the records of the terminal operator. A person holds the
inventory position in taxable fuel when that person has a contractual
agreement with the terminal operator for the use of storage facilities
and terminaling services at a terminal with respect to the taxable fuel.
The term also includes a terminal operator that owns taxable fuel in its
terminal.
Rack means a mechanism capable of delivering taxable fuel into a
means of transport other than a pipeline or vessel.
Refiner means any person that owns, operates, or otherwise controls
a refinery.
Refinery means a facility used to produce taxable fuel and from
which taxable fuel may be removed by pipeline, by vessel, or at a rack.
However, the term does not include a facility where only blended fuel or
gasohol (as defined in Sec. 48.4081-6(b)(2)), and no other type of
taxable fuel, is produced. For this purpose blended fuel is any mixture
that, if produced outside the bulk transfer/terminal system, would be
blended taxable fuel.
Removal means any physical transfer of taxable fuel, and any use of
taxable fuel other than as a material in the production of taxable fuel
or special fuels. However, taxable fuel is not removed when it
evaporates or is otherwise lost or destroyed.
Sale means--
(1) The transfer of title to, or substantial incidents of ownership
in, taxable fuel (other than taxable fuel in a terminal) to the buyer
for a consideration, which may consist of money, services, or other
property; or
(2) The transfer of the inventory position in the taxable fuel in a
terminal if the transferee becomes the position holder with respect to
the taxable fuel.
State includes any State, any political subdivision of a State, the
District of Columbia, the American Red Cross, and, to the extent
provided by section 7871, any Indian tribal government.
Taxable fuel means gasoline, diesel fuel, and kerosene.
Taxable fuel registrant means an enterer, industrial user, refiner,
terminal operator, or throughputter that is registered as such under
section 4101.
Terminal means a taxable fuel storage and distribution facility that
is supplied by pipeline or vessel and from which taxable fuel may be
removed at a rack. However, the term does not include any facility at
which gasoline blendstocks are used in the manufacture of products other
than finished gasoline and from which no gasoline is removed. Also,
effective January 2, 1998, the term does not include any facility where
finished gasoline, undyed diesel fuel, or undyed kerosene is stored if
the facility is operated by a taxable fuel registrant and all such
taxable fuel stored at the facility has been previously taxed under
section 4081 upon removal from a refinery or terminal.
Terminal operator means any person that owns, operates, or otherwise
controls a terminal.
Throughputter means any person that--
(1) Owns taxable fuel within the bulk transfer/terminal system
(other than in a terminal); or
[[Page 126]]
(2) Is a position holder.
Vessel means a waterborne taxable fuel transporting vessel.
(c) Blended taxable fuel, diesel fuel, and gasoline blendstocks;
definitions--(1) Blended taxable fuel--(i) In general. Except as
provided in paragraphs (c)(1)(ii) and (c)(1)(iii) of this section,
blended taxable fuel means any taxable fuel that is produced outside the
bulk transfer/terminal system by mixing--
(A) Taxable fuel with respect to which tax has been imposed under
section 4041(a)(1) or 4081(a) (other than taxable fuel for which a
credit or payment has been allowed); and
(B) Any other liquid on which tax has not been imposed under section
4081.
(ii) Exclusion; minor blending. A mixture described in paragraph
(c)(1)(i) of this section is not blended taxable fuel if, during the
calendar quarter in which the blender removes or sells the mixture, all
such mixtures removed or sold by the blender contain, in the aggregate,
less than 400 gallons of liquid described in paragraph (c)(1)(i)(B) of
this section.
(iii) Exclusion; gasohol. Blended taxable fuel does not include any
gasohol (as defined in Sec. 48.4081-6(b)(2)) if, disregarding the
alcohol, the gasohol is not blended taxable fuel and contains, in
addition to permitted amounts of liquids described in paragraph
(c)(1)(i)(B) of this section, only gasoline with respect to which--
(A) Tax was imposed under section 4081(a) at a rate described in
Sec. 48.4081-6(e) (relating to the gasohol production tax rate and the
gasohol tax rate); or
(B) A valid claim is made under section 6427(f).
(2) Diesel fuel--(i) In general. Except as provided in paragraph
(c)(2)(ii) of this section, diesel fuel means any liquid that, without
further processing or blending, is suitable for use as a fuel in a
diesel-powered highway vehicle or diesel-powered train. A liquid is
suitable for this use if the liquid has practical and commercial fitness
for use in the propulsion engine of a diesel-powered highway vehicle or
diesel-powered train. A liquid may possess this practical and commercial
fitness even though the specified use is not the liquid's predominant
use. However, a liquid does not possess this practical and commercial
fitness solely by reason of its possible or rare use as a fuel in the
propulsion engine of a diesel-powered highway vehicle or diesel-powered
train.
(ii) Exclusion. Diesel fuel does not include gasoline, kerosene,
excluded liquid, No. 5 and No. 6 fuel oils covered by ASTM specification
D 396, or F-76 (Fuel Naval Distillate) covered by military specification
MIL-F-16884. For availability of ASTM and military specifications, see
paragraph (d) of this section.
(3) Gasoline blendstocks--(i) In general. Except as provided in
paragraph (c)(3)(ii) of this section, gasoline blendstocks means--
(A) Alkylate;
(B) Butane;
(C) Butene;
(D) Catalytically cracked gasoline;
(E) Coker gasoline;
(F) Ethyl tertiary butyl ether (ETBE);
(G) Hexane;
(H) Hydrocrackate;
(I) Isomerate;
(J) Methyl tertiary butyl ether (MTBE);
(K) Mixed xylene (not including any separated isomer of xylene);
(L) Natural gasoline;
(M) Pentane;
(N) Pentane mixture;
(O) Polymer gasoline;
(P) Raffinate;
(Q) Reformate;
(R) Straight-run gasoline;
(S) Straight-run naphtha;
(T) Tertiary amyl methyl ether (TAME);
(U) Tertiary butyl alcohol (gasoline grade) (TBA);
(V) Thermally cracked gasoline;
(W) Toluene; and
(X) Transmix containing gasoline.
(ii) Exclusion. Gasoline blendstocks does not include any product
that cannot, without further processing, be used in the production of
finished gasoline. For example, a mixed hydrocarbon stream that is
produced in a natural gas processing plant is not a gasoline blendstock
if the stream cannot be used to produce finished gasoline without
further processing.
(d) ASTM and military specifications. ASTM specifications may be
obtained from the American Society for Testing
[[Page 127]]
and Materials, 100 Barr Harbor Drive, West Conshohocken, PA 19428.
Military specifications may be obtained from the Standardization
Document Order Desk, Building 4, Section D, 700 Robbins Avenue,
Philadelphia, PA 19111.
(e) Other definitions. For other definitions relating to taxable
fuel, see Sec. Sec. 48.4081-6(b), 48.4082-5(b), 48.4082-6(b), 48.4082-
7(b), 48.4101-1(b), 48.6427-9(b), 48.6427-10(b), and 48.6427-11(b).
(f) Effective date. (1) Except as provided in paragraph (f)(2) of
this section, this section is applicable after December 31, 1993.
(2) In paragraph (b) of this section the definition of aviation
gasoline and the third sentence in the definition of terminal are
applicable after January 1, 1998, the definition of kerosene, excluded
liquid, and taxable fuel are applicable after June 30, 1998, and the
definition of enterer is applicable to entries of taxable fuel after
September 27, 2004. Paragraph (c)(2) of this section is applicable after
December 31, 1997.
[T.D. 8659, 61 FR 10453, Mar. 14, 1996, as amended by T.D. 8748, 63 FR
25, Jan. 2, 1998; T.D. 8879, 65 FR 17155, Mar. 31, 2000; T.D. 9051, 68
FR 15940, Apr. 2, 2003; T.D. 9145, 69 FR 45588, July 30, 2004; T.D.
9346, 72 FR 41223, July 27, 2007]
Sec. 48.4081-2 Taxable fuel; tax on removal at a terminal rack.
(a) Overview. This section provides the general rule that all
removals of taxable fuel at a terminal rack are subject to tax and the
position holder with respect to the fuel is liable for the tax.
(b) Imposition of tax. Tax is imposed on the removal of taxable fuel
from a terminal if the taxable fuel is removed at the rack.
(c) Liability for tax--(1) In general. The position holder with
respect to the taxable fuel is liable for the tax imposed under
paragraph (b) of this section.
(2) Joint and several liability of terminal operator; unregistered
position holder--(i) In general. The terminal operator is jointly and
severally liable for the tax imposed under paragraph (b) of this section
if--
(A) The position holder with respect to the taxable fuel is a person
other than the terminal operator and is not a taxable fuel registrant;
and
(B) The terminal operator has not met the conditions of paragraph
(c)(2)(ii) of this section.
(ii) Conditions for avoidance of liability. A terminal operator is
not liable for tax under this paragraph (c)(2) if, at the time of the
removal, the terminal operator--
(A) Is a taxable fuel registrant;
(B) Has an unexpired notification certificate (as described in Sec.
48.4081-5) from the position holder; and
(C) Has no reason to believe that any information in the
notification certificate is false.
(3) Joint and several liability of terminal operator; incorrect
information provided. The terminal operator is jointly and severally
liable for the tax imposed under paragraph (b) of this section if, in
connection with the removal of diesel fuel or kerosene that is not dyed
and marked in accordance with Sec. 48.4082-1, the terminal operator
provides any person (including the position holder with respect to the
fuel) with any bill of lading, shipping paper, record, or similar
document indicating that the diesel fuel or kerosene is dyed and marked
in accordance with Sec. 48.4082-1.
(4) Example. The following example illustrates this paragraph (c)
and Sec. 48.4082-1:
Example. (i) TO is a terminal operator and PH is the position holder
with respect to, and owner of, 8,000 gallons of diesel fuel stored in
TO's terminal. TO and PH are taxable fuel registrants. When the fuel is
removed from the terminal at the rack, the fuel is not dyed and marked
in accordance with Sec. 48.4082-1, and TO does not provide any person
with any paperwork indicating that the fuel is dyed and marked. After
the removal from the terminal, PH sells the fuel to individuals for use
as heating oil, a nontaxable use.
(ii) Because PH is the position holder of the fuel at the time of
the removal from the terminal, PH is liable for the tax imposed by
section 4081. The removal is subject to tax because the fuel is not dyed
and marked in accordance with Sec. 48.4082-1, and later use of the fuel
in a nontaxable use does not make the removal from the terminal exempt
from tax.
(iii) Because PH is a taxable fuel registrant and TO did not provide
any person with any paperwork indicating that the fuel is dyed and
marked, TO is not jointly and severally liable for tax under paragraph
(c) (2) or (3) of this section.
[[Page 128]]
(d) Rate of tax. For the rate of tax generally, see section 4081(a).
For the rate of tax on gasohol and on gasoline removed for gasohol
production, see Sec. 48.4081-6.
(e) Exemptions. For exemptions from the tax imposed under this
section, see Sec. Sec. 48.4081-4 (relating to gasoline blendstocks),
48.4082-1 (relating to dyed diesel fuel and dyed kerosene), 48.4082-5
(relating to diesel fuel and kerosene used in Alaska), 48.4082-6
(relating to aviation-grade kerosene), and 48.4082-7 (relating to
kerosene used for a feedstock purpose).
(f) Effective date. This section is applicable after December 31,
1993.
[T.D. 8659, 61 FR 10455, Mar. 14, 1996, as amended by T.D. 8879, 65 FR
17156, Mar. 31, 2000]
Sec. 48.4081-3 Taxable fuel; taxable events other than removal at
the terminal rack.
(a) Overview. Although tax is imposed when taxable fuel is removed
from the terminal at the rack, tax also is imposed in certain other
situations described in this section.
(b) Tax on removal from a refinery--(1) Imposition of tax. Tax is
imposed on the following removals from a refinery:
(i) A removal of taxable fuel by bulk transfer if the refiner or the
owner of the taxable fuel immediately before the removal is not a
taxable fuel registrant.
(ii) A removal of taxable fuel at the rack.
(iii) After September 30, 1995, a removal of a batch of gasohol from
an approved refinery by bulk transfer if the refiner treats itself with
respect to the removal as a person that is not registered under section
4101. See Sec. 48.4101-1(a). For the rule providing that no deposit is
required in the case of the tax imposed under this paragraph
(b)(1)(iii), see Sec. 40.6302(c)-1(f)(4) of this chapter. For the rule
allowing inspections of facilities where gasohol is produced, see
section 4083.
(2) Exception for certain refineries. The tax imposed under
paragraph (b)(1)(ii) of this section does not apply to a removal of
taxable fuel if--
(i) The taxable fuel is removed from an approved refinery that is
not served by pipeline (other than a pipeline for the receipt of crude
oil) or vessel;
(ii) The taxable fuel is received at a facility that is operated by
a taxable fuel registrant and is located within the bulk transfer/
terminal system;
(iii) The removal from the refinery is by--
(A) Rail car; or
(B) In the case of diesel fuel, a trailer or semi-trailer that is
used exclusively for the transport service described in paragraphs
(b)(2)(i) and (b)(2)(ii) of this section;
(iv) In the case of taxable fuel removed by rail car, the facility
at which the fuel is received is operated by the same person that
operates the refinery from which the fuel was removed; and
(v) In the case of diesel fuel removed by a trailer or semi-trailer,
the facility at which the fuel is received is less than 20 miles from
the refinery from which the diesel fuel was removed.
(3) Liability for tax. The refiner is liable for the tax imposed
under paragraph (b)(1) of this section.
(c) Tax on entry into the United States--(1) Imposition of tax. Tax
is imposed on the entry of taxable fuel into the United States if--
(i) The entry is by bulk transfer and the enterer is not a taxable
fuel registrant; or
(ii) The entry is not by bulk transfer.
(2) Liability for tax--(i) In general. The enterer is liable for the
tax imposed under paragraph (c)(1) of this section.
(ii) Joint and several liability of the importer of record. The
importer of record with respect to the taxable fuel is jointly and
severally liable with the enterer for the tax imposed under paragraph
(c)(1) of this section if--
(A) The importer of record is not the enterer of the taxable fuel;
and
(B) The enterer is not a taxable fuel registrant.
(iii) Conditions for avoidance of liability. The importer of record
is not liable for the tax under paragraph (c)(2)(ii) of this section if,
at the time of the entry, the importer of record--
(A) Has an unexpired notification certificate (as described in Sec.
48.4081-5) from the enterer; and
(B) Has no reason to believe that any information in the
notification certificate is false.
[[Page 129]]
(iv) Customs bond. The Customs bond posted with respect to the
importation of the fuel will not be charged for the tax imposed on the
entry of the fuel if the enterer is a taxable fuel registrant. A Customs
bond will not be charged for the tax imposed on the entry of the fuel
covered by the bond, if at the time of entry, the surety--
(A) Has an unexpired notification certificate (as described in Sec.
48.4081-5) from the enterer; and
(B) Has no reason to believe that any information in the
notification certificate is false.
(d) Tax on bulk transfers from a terminal by an unregistered
position holder--(1) Imposition of tax. Tax is imposed on the removal by
bulk transfer of taxable fuel from a terminal if the position holder
with respect to the taxable fuel is not a taxable fuel registrant.
(2) Liability for tax--(i) In general. The position holder with
respect to the taxable fuel is liable for the tax imposed under
paragraph (d)(1) of this section.
(ii) Joint and several liability of terminal operator. The terminal
operator is jointly and severally liable for the tax imposed under
paragraph (d)(1) of this section if--
(A) The position holder with respect to the taxable fuel is a person
other than the terminal operator; and
(B) The terminal operator has not met the conditions of paragraph
(d)(2)(iii) of this section.
(iii) Conditions for avoidance of liability. A terminal operator is
not liable for tax under this paragraph (d)(2) if, at the time of the
bulk transfer, the terminal operator--
(A) Is a taxable fuel registrant;
(B) Has an unexpired notification certificate (described in Sec.
48.4081-5) from the position holder; and
(C) Has no reason to believe that any information in the
notification certificate is false.
(e) Tax on bulk transfers not received at an approved terminal or
refinery--(1) Imposition of tax. Tax on taxable fuel is imposed if--
(i) Taxable fuel is removed by bulk transfer from a refinery or
terminal, or entered by bulk transfer into the United States;
(ii) No tax was imposed on such removal or entry under paragraph
(b), (c), or (d) of this section; and
(iii) Upon removal from the pipeline or vessel, the taxable fuel is
not received at an approved terminal or refinery (or at another pipeline
or vessel).
(2) Liability for tax--(i) In general. The owner of the taxable fuel
when it is removed from the pipeline or vessel is liable for the tax
imposed under paragraph (e)(1) of this section if the owner has not met
the conditions of paragraph (e)(2)(ii) of this section.
(ii) Conditions for avoidance of liability. An owner of taxable fuel
is not liable for tax under paragraph (e)(2)(i) of this section if, at
the time the taxable fuel is removed from the pipeline or vessel, the
owner of the taxable fuel--
(A) Is a taxable fuel registrant;
(B) Has an unexpired notification certificate (described in Sec.
48.4081-5) from the operator of the terminal or refinery where the
taxable fuel is received; and
(C) Has no reason to believe that any information in the
notification certificate is false.
(iii) Liability of the operator of the facility where the taxable
fuel is received. The operator of the facility where the taxable fuel is
received is liable for the tax imposed under paragraph (e)(1) of this
section if the owner of the taxable fuel has met the conditions of
paragraph (e)(2)(ii) of this section and is jointly and severally liable
for the tax if the owner has not met such conditions.
(f) Tax on sales within the bulk transfer/terminal system--(1)
Imposition of tax. Tax is imposed on the sale of taxable fuel located
within the bulk transfer/terminal system if the sale is to a person that
is not a taxable fuel registrant and tax has not been imposed on such
taxable fuel under Sec. 48.4081-2, or paragraph (b), (c), (d), or (e)
of this section.
(2) Exception for certain sales of taxable fuel for export. The tax
imposed under paragraph (f)(1) of this section does not apply to a sale
of taxable fuel if--
(i) The buyer's principal place of business is not within the United
States;
(ii) The sale of the fuel occurs as the fuel is delivered into a
transport vessel;
[[Page 130]]
(iii) The vessel has a capacity of at least 20,000 barrels of fuel;
(iv) The seller is a taxable fuel registrant and the exporter of
record of the fuel; and
(v) The fuel was exported in due course.
(3) Liability for tax--(i) In general. The seller of the taxable
fuel is liable for the tax imposed under paragraph (f)(1) of this
section if the seller has not met the conditions of paragraph (f)(3)(ii)
of this section.
(ii) Conditions for avoidance of liability. A seller is not liable
for tax under paragraph (f)(3)(i) of this section if, at the time of the
sale, the seller--
(A) Is a taxable fuel registrant;
(B) Has an unexpired notification certificate (described in Sec.
48.4081-5) from the buyer; and
(C) Has no reason to believe that any information in the certificate
is false.
(iii) Liability of the buyer. The buyer of the taxable fuel is
liable for the tax imposed under paragraph (f)(1) of this section if the
seller of the taxable fuel has met the conditions of paragraph
(f)(3)(ii) of this section and is jointly and severally liable for the
tax if the seller has not met such conditions.
(4) Example. The following example illustrates this paragraph (f)
and the definition of the term sale in Sec. 48.4081-1:
Example. PH owns one million gallons of untaxed gasoline that is
stored in TO's terminal. PH also is the position holder with respect to
the gasoline. While the gasoline remains stored in the terminal, PH
transfers title to 200,000 gallons of the gasoline to A, a person that
is not a taxable fuel registrant. PH continues to hold the inventory
position on TO's records with respect to the one million gallons.
Because PH continues as the position holder with respect to the
gasoline, the transfer of title to the gasoline from PH to A is not a
sale of gasoline. Because this transfer of title from PH to A is not a
sale of gasoline, the tax imposed under paragraph (f) of this section
does not apply to the transfer.
(g) Tax on removal or sale of blended taxable fuel by the blender--
(1) Imposition of tax. A tax is imposed on the removal or sale of
blended taxable fuel by the blender thereof. Tax is computed on the
difference between the total number of gallons of blended taxable fuel
removed or sold and the number of gallons of previously taxed taxable
fuel used to produce the blended taxable fuel. For this purpose, the
alcohol in gasohol is treated as previously taxed taxable fuel.
(2) Liability for tax--(i) Liability of the blender. The blender is
liable for the tax imposed under paragraph (g)(1) of this section.
(ii) Liability of seller of untaxed liquid. On and after April 2,
2003, a person that sells any liquid that is used to produce blended
taxable fuel is jointly and severally liable for the tax imposed under
paragraph (g)(1) of this section on the removal or sale of that blended
taxable fuel if the liquid--
(A) Is described in Sec. 48.4081-1(c)(1)(i)(B) (relating to liquids
on which tax has not been imposed under section 4081); and
(B) Is sold by that person as gasoline, diesel fuel, or kerosene
that has been taxed under section 4081.
(3) Examples. The following examples illustrate the provisions of
this paragraph (g) and the definitions of blended taxable fuel and
diesel fuel in Sec. 48.4081-1(c):
Example 1. (i) Facts. W is a wholesale distributor of petroleum
products and R is a retailer of petroleum products. W sells to R 1,000
gallons of an untaxed liquid (a liquid described in Sec. 48.4081-
1(c)(1)(i)(B)) and delivers the liquid into a storage tank (tank) at R's
retail facility. However, W's invoice to R states that the liquid is
undyed diesel fuel. At the time of the delivery, the tank contains 4,000
gallons of undyed diesel fuel, a taxable fuel that has been taxed under
section 4081. The resulting 5,000 gallon mixture is suitable for use as
a fuel in a diesel-powered highway vehicle because it has practical and
commercial fitness for use in the propulsion engine of a diesel-powered
highway vehicle. The mixture does not satisfy the dyeing requirements of
Sec. 48.4082-1. R sells the mixture from the tank to a construction
company for off-highway business use.
(ii) Analysis--(A) Production of blended taxable fuel. R is a
blender within the meaning of Sec. 48.4081-1 because R has produced
blended taxable fuel, as defined in Sec. 48.4081-1, by mixing 1,000
gallons of a liquid that has not been taxed under section 4081 with
4,000 gallons of diesel fuel that has been taxed under section 4081. The
mixing occurs outside of the bulk transfer/terminal system and the
resulting product is diesel fuel because it is suitable for use as a
fuel in a diesel-powered highway vehicle.
(B) Imposition of tax. Under paragraph (g)(1) of this section, tax
is imposed on R's sale of the 5,000 gallons of blended taxable fuel to
the construction company. Even though the
[[Page 131]]
blended taxable fuel is sold for off-highway business use, which is a
nontaxable use as defined in section 4082(b), the sale is not exempt
from tax because the blended taxable fuel does not satisfy the dyeing
requirements of Sec. 48.4082-1. Tax is computed on 1,000 gallons, which
is the difference between the number of gallons of blended taxable fuel
R sells (5,000) and the number of gallons of previously taxed taxable
fuel used to produce the blended taxable fuel (4,000).
(C) Liability for tax. R, as the blender, is liable for this tax
under paragraph (g)(2)(i) of this section. W is jointly and severally
liable for this tax under paragraph (g)(2)(ii) of this section because
the blended taxable fuel is produced using an untaxed liquid that W sold
as undyed diesel fuel (that is, as diesel fuel that was taxed under
section 4081).
Example 2. (i) Facts. W, a wholesale distributor of petroleum
products, buys 7,000 gallons of diesel fuel at a terminal rack. The
diesel fuel is delivered into a tank trailer. Tax is imposed on the
diesel fuel under Sec. 48.4081-2 when the diesel fuel is removed at the
rack. W then goes to another location where X, the operator of a
chemical plant, sells W 1,000 gallons of an untaxed liquid (a liquid
described in Sec. 48.4081-1(c)(1)(i)(B)). However, X's invoice to W
states that the liquid is undyed diesel fuel. This liquid is delivered
into the tank trailer already containing the 7,000 gallons of diesel
fuel. The resulting 8,000 gallon mixture is suitable for use as a fuel
in a diesel-powered highway vehicle because it has practical and
commercial fitness for use in the propulsion engine of a diesel-powered
highway vehicle. The mixture does not satisfy the dyeing requirements of
Sec. 48.4082-1. W sells the mixture to R, a retailer of petroleum
products, and delivers the mixture into a storage tank at R's retail
facility. R sells the mixture to its customers.
(ii) Analysis--(A) Production of blended taxable fuel. W is a
blender within the meaning of Sec. 48.4081-1 because W has produced
blended taxable fuel, as defined in Sec. 48.4081-1, by mixing 1,000
gallons of a liquid that has not been taxed under section 4081 with
7,000 gallons of diesel fuel that has been taxed under section 4081. The
mixing occurs outside of the bulk transfer/terminal system and the
resulting product is diesel fuel because it is suitable for use as a
fuel in a diesel-powered highway vehicle. Thus, R has bought blended
taxable fuel.
(B) Imposition of tax. Under paragraph (g)(1) of this section, tax
is imposed on W's sale of the 8,000 gallons of blended taxable fuel to
R. Tax is computed on 1,000 gallons, which is the difference between the
number of gallons of blended taxable fuel W sells (8,000) and the number
of gallons of previously taxed taxable fuel used to produce the blended
taxable fuel (7,000). No tax is imposed on R's subsequent sale of the
blended taxable fuel because tax is imposed only with respect to a
removal or sale by the blender.
(C) Liability for tax. W, as the blender, is liable for this tax
under paragraph (g)(2)(i) of this section. X is jointly and severally
liable for this tax under paragraph (g)(2)(ii) of this section because
the blended taxable fuel is produced using an untaxed liquid that X sold
as undyed diesel fuel (that is, as diesel fuel that was taxed under
section 4081). R has no liability for tax because R is not a blender and
did not sell any untaxed liquid as a taxed taxable fuel. R only sold
taxed taxable fuel, the blended taxable fuel bought from W.
(h) Rate of tax. For the rate of tax generally imposed under this
section, see section 4081(a). For the rate of tax on gasohol and on
gasoline removed or entered for gasohol production, see Sec. 48.4081-6.
(i) Exemptions. For exemptions from the taxes imposed under this
section, see Sec. Sec. 48.4081-4 (relating to gasoline blendstocks),
48.4082-1 (relating to dyed diesel fuel and dyed kerosene), 48.4082-5
(relating to diesel fuel and kerosene used in Alaska), 48.4082-6
(relating to aviation-grade kerosene), and 48.4082-7 (relating to
kerosene used for a feedstock purpose).
(j) Effective/applicability date: This section is applicable January
1, 1994, except that paragraphs (c)(2)(ii) through (iv) of this section
are applicable to entries of taxable fuel after September 27, 2004.
[T.D. 8659, 61 FR 10455, Mar. 14, 1996, as amended by T.D. 8879, 65 FR
17156, Mar. 31, 2000; T.D. 9051, 68 FR 15941, Apr. 2, 2003; T.D. 9145,
69 FR 45588, July 30, 2004; T.D. 9346, 72 FR 41223, July 27, 2007]
Sec. 48.4081-4 Gasoline; special rules for gasoline blendstocks.
(a) Overview. This section provides rules exempting from tax certain
removals, entries, and sales of gasoline blendstocks. Generally, under
prescribed conditions, tax is not imposed on gasoline blendstocks that
are not used to produce finished gasoline or that are received at an
approved terminal or refinery.
(b) Nonbulk removals and entries of gasoline blendstocks not used to
produce gasoline--(1) Removals and entries not in connection with sales.
Tax is not imposed under Sec. 48.4081-2(b), Sec. 48.4081-3(b)(1)(ii),
or Sec. 48.4081-3(c)(1)(ii) on the removal or entry of gasoline
[[Page 132]]
blendstocks not in connection with a sale if--
(i) The person otherwise liable for tax under Sec. 48.4081-2(c)(1)
(the position holder), Sec. 48.4081-3(b)(3) (the refiner), or Sec.
48.4081-3(c)(2) (the enterer) is a taxable fuel registrant; and
(ii) Such person does not use the gasoline blendstocks to produce
finished gasoline.
(2) Removals and entries in connection with sales. Tax is not
imposed under Sec. 48.4081-2(b), Sec. 48.4081-3(b)(1)(ii), or Sec.
48.4081-3(c)(1)(ii) on the removal or entry of gasoline blendstocks in
connection with a sale if--
(i) The person otherwise liable for tax under Sec. 48.4081-2(c)(1)
(the position holder), Sec. 48.4081-3(b)(3) (the refiner), or Sec.
48.4081-3(c)(2) (the enterer) is a taxable fuel registrant; and
(ii) At the time of the sale, such person has an unexpired
certificate (described in paragraph (e) of this section) from the buyer
and has no reason to believe any information in the certificate is
false.
(3) Tax on sales after certain nonbulk removals or entries--(i) In
general. If paragraph (b) (1) or (2) of this section applies to the
removal or entry of gasoline blendstocks, tax is imposed on any sale of
such blendstocks unless, at the time of the sale, the seller--
(A) Has an unexpired certificate (described in paragraph (e) of this
section) from its buyer; and
(B) Has no reason to believe any information in the certificate is
false.
(ii) Liability for tax. The seller is liable for the tax imposed
under this paragraph (b)(3).
(iii) Rate of tax. For the rate of tax, see section 4081.
(c) Nonbulk removals and entries of gasoline blendstocks received at
an approved terminal or refinery. Tax is not imposed under Sec.
48.4081-2(b), Sec. 48.4081-3(b)(1)(ii), or Sec. 48.4081-3(c)(1)(ii) on
the removal or entry of gasoline blendstocks that are received at a
terminal or refinery if the person otherwise liable for tax under Sec.
48.4081-2(c)(1) (the position holder), Sec. 48.4081-3(b)(3) (the
refiner), or Sec. 48.4081-3(c)(2) (the enterer)--
(1) Is a taxable fuel registrant;
(2) Has an unexpired notification certificate (described in Sec.
48.4081-5) from the operator of the terminal or refinery where the
gasoline blendstocks are received; and
(3) Has no reason to believe that any information in the certificate
is false.
(d) Bulk transfer to a registered industrial user. Tax is not
imposed under Sec. 48.4081-3(e)(1) if, upon the removal of gasoline
blendstocks from a pipeline or vessel, the gasoline blendstocks are
received by a taxable fuel registrant that is an industrial user.
(e) Certificate--(1) In general. The certificate to be provided by a
buyer of gasoline blendstocks consists of a statement that is signed
under penalties of perjury by a person with authority to bind the buyer,
is in substantially the same form as the model certificate provided in
paragraph (e)(3) of this section, and contains all information necessary
to complete such model certificate. A new certificate must be given if
any information in the current certificate changes. The certificate may
be included as part of any business records normally used to document a
sale. The certificate expires on the earliest of the following dates:
(i) The date one year after the effective date of the certificate
(which may be no earlier than the date it is signed).
(ii) The date a new certificate is provided to the seller.
(iii) The date the seller is notified by the Internal Revenue
Service or the buyer that the buyer's right to provide a certificate has
been withdrawn.
(2) Withdrawal of right to provide certificate. The Internal Revenue
Service may withdraw the right of a buyer of gasoline blendstocks to
provide a certificate under this paragraph (e) if such buyer uses
gasoline blendstocks to which a certificate applies in the production of
finished gasoline or resells the gasoline blendstocks without obtaining
a certificate from its buyer. The Internal Revenue Service may notify
any seller to whom the buyer has provided a certificate that the buyer's
right to provide a certificate has been withdrawn.
(3) Model certificate.
Certificate of Person Buying Gasoline Blendstocks for use Other Than in
the Production of Finished Gasoline
(To support tax-free sales under section 4081 of the Internal Revenue
Code)
________________________________________________________________________
[[Page 133]]
________________________________________________________________________
Name, address, and employer identification number of seller
The undersigned buyer (``Buyer'') hereby certifies the following
under penalties of perjury:
The gasoline blendstocks to which this certificate relates will not
be used to produce finished gasoline.
This certificate applies to the following (complete as applicable):
If this is a single purchase certificate, check here ___ and enter:
1. Invoice or delivery ticket number ___
2. ___ (number of gallons) of ___ (type of gasoline blendstocks)
If this is a certificate covering all purchases under a specified
account or order number, check here ___ and enter:
1. Effective date ___
2. Expiration date ___
(period not to exceed 1 year after the effective date)
3. Type (or types) of gasoline blendstocks ___
4. Buyer account or order number ___
Buyer will not claim a credit or refund under section 6427(h) of the
Internal Revenue Code for any gasoline blendstocks covered by this
certificate.
Buyer will provide a new certificate to the seller if any
information in this certificate changes.
If Buyer resells the gasoline blendstocks to which this certificate
relates, Buyer will be liable for tax unless Buyer obtains a certificate
from the purchaser stating that the gasoline blendstocks will not be
used to produce finished gasoline and otherwise complies with the
conditions of Sec. 48.4081-4(b)(3) of the Manufacturers and Retailers
Excise Tax Regulations.
Buyer understands that if Buyer violates the terms of this
certificate, the Internal Revenue Service may withdraw Buyer's right to
provide a certificate.
Buyer has not been notified by the Internal Revenue Service that its
right to provide a certificate has been withdrawn. In addition, the
Internal Revenue Service has not notified Buyer that the right to
provide a certificate has been withdrawn from a purchaser to which Buyer
sells gasoline blendstocks tax free.
Buyer understands that the fraudulent use of this certificate may
subject Buyer and all parties making such fraudulent use of this
certificate to a fine or imprisonment, or both, together with the costs
of prosecution.
________________________________________________________________________
Signature and date signed
________________________________________________________________________
Printed or typed name of person signing
________________________________________________________________________
Title of person signing
________________________________________________________________________
Name of Buyer
________________________________________________________________________
Employer identification number
________________________________________________________________________
Address of Buyer
(f) Effective date. This section is effective January 1, 1994.
[T.D. 8421, 57 FR 32424, July 22, 1992; 57 FR 39421, Aug. 31, 1992, as
amended by T.D. 8659, 61 FR 10457, Mar. 14, 1996]
Sec. 48.4081-5 Taxable fuel; notification certificate of taxable
fuel registrant.
(a) Overview. This section sets forth requirements for the
notification certificate under Sec. Sec. 48.4081-2(c)(2)(ii), 48.4081-
3(c)(2)(iii) and (iv), 48.4081-3(d)(2)(iii), 48.4081-3(e)(2)(iii),
48.4081-3(f)(2)(ii), and 48.4081-4(c) to notify another person of the
taxable fuel registrant's registration status.
(b) Certificate--(1) In general. The certificate to be provided by a
taxable fuel registrant consists of a statement that is signed under
penalties of perjury by a person with authority to bind the registrant,
is in substantially the same form as the model provided in paragraph
(b)(2) of this section, and contains all information necessary to
complete such model. A new certificate must be given if any information
in the most recently provided certificate changes. The certificate may
be included as part of any business records normally used to document a
sale. The certificate expires on the earlier of the following dates:
(i) The date the registrant provides a new certificate.
(ii) The date the recipient of the certificate is notified by either
the Internal Revenue Service or the registrant that the registrant's
registration has been revoked or suspended.
(2) Model certificate.
Notification Certificate of Taxable Fuel Registrant
________________________________________________________________________
________________________________________________________________________
Name, address, and employer identification number of person
receiving certificate
The undersigned taxable fuel registrant (``Registrant'') hereby
certifies under penalties of perjury that Registrant is registered by
the Internal Revenue Service with registration number ___ and that
Registrant's registration has not been revoked or suspended by the
Internal Revenue Service.
[[Page 134]]
Registrant understands that the fraudulent use of this certificate
may subject Registrant and all parties making such fraudulent use of
this certificate to a fine or imprisonment, or both, together with the
cost of prosecution.
________________________________________________________________________
Signature and date signed
________________________________________________________________________
Printed or typed name of person signing
________________________________________________________________________
Title of person signing
________________________________________________________________________
Name of registrant
________________________________________________________________________
Employer identification number
________________________________________________________________________
Address of registrant
(3) Use of Form 637 or letter of registration as a notification
certificate prohibited. A copy of the certificate of registry (Form 637)
or letter of registration issued to a registrant by the Internal Revenue
Service is not a notification certificate described in paragraph (b)(2)
of this section.
(c) Effective date. This section is effective January 1, 1994.
[T.D. 8421, 57 FR 32424, July 22, 1992; 57 FR 39422, Aug. 31, 1992, as
amended by T.D. 8659, 61 FR 10457, Mar. 14, 1996; T.D. 9145, 69 FR
45588, July 30, 2004; T.D. 9346, 72 FR 41224, July 27, 2007]
Sec. 48.4081-6 Gasoline; gasohol.
(a) Overview. This section provides rules for determining the
applicability of reduced rates of tax on a removal or entry of gasohol
or of gasoline used to produce gasohol. Rules are also provided for the
imposition of tax on the separation of gasoline from gasohol and the
failure to use gasoline that has been taxed at a reduced rate to produce
gasohol.
(b) Explanation of terms--(1) Alcohol--(i) In general; source of the
alcohol. Except as provided in paragraph (b)(1)(ii) of this section,
alcohol means any alcohol that is not a derivative product of petroleum,
natural gas, or coal (including peat). Thus, the term includes methanol
and ethanol that are not derived from petroleum, natural gas, or coal
(including peat). The term also includes alcohol produced either within
or outside the United States.
(ii) Proof and denaturants. Alcohol does not include alcohol with a
proof of less than 190 degrees (determined without regard to added
denaturants). If the alcohol added to a fuel/alcohol mixture (the added
alcohol) includes impurities or denaturants, the volume of alcohol in
the mixture is determined under the following rules:
(A) The volume of alcohol in the mixture includes the volume of any
impurities (other than added denaturants and any fuel with which the
alcohol is mixed) that reduce the purity of the added alcohol to not
less than 190 proof (determined without regard to added denaturants).
(B) The volume of alcohol in the mixture includes the volume of any
approved denaturants that reduce the purity of the added alcohol, but
only to the extent that the volume of the approved denaturants does not
exceed five percent of the volume of the added alcohol (including the
approved denaturants). If the volume of the approved denaturants exceeds
five percent of the volume of the added alcohol, the excess over five
percent is considered part of the nonalcohol content of the mixture.
(C) For purposes of this paragraph (b)(1)(ii), approved denaturants
are any denaturants (including gasoline and nonalcohol fuel denaturants)
that reduce the purity of the added alcohol and are added to such
alcohol under a formula approved by the Secretary.
(iii) Products derived from alcohol. If alcohol described in
paragraphs (b)(1)(i) and (ii) of this section has been chemically
transformed in producing another product (that is, the alcohol is no
longer present as a separate chemical in the other product) and there is
no significant loss in the energy content of the alcohol, any mixture
containing the product includes the volume of alcohol used to produce
the product. Thus, for example, a mixture of gasoline and ethyl tertiary
butyl ether (ETBE), or of gasoline and methyl tertiary butyl ether
(MTBE), includes any alcohol described in paragraphs (b)(1)(i) and (ii)
of this section that is used to produce the ETBE or MTBE, respectively,
in a chemical reaction in which there is no significant loss in the
energy content of the alcohol.
[[Page 135]]
(2) Gasohol--(i) In general--(A) Gasohol is a mixture of gasoline
and alcohol that is 10 percent gasohol, 7.7 percent gasohol, or 5.7
percent gasohol. The determination of whether a particular mixture is 10
percent gasohol, 7.7 percent gasohol, or 5.7 percent gasohol is made on
a batch-by-batch basis. A batch of gasohol is a discrete mixture of
gasoline and alcohol.
(B) If a particular mixture is produced within the bulk transfer/
terminal system (for example, at a refinery), the determination of
whether the mixture is gasohol is made at the time of the taxable
removal or entry of the mixture.
(C) If a particular mixture is produced outside of the bulk
transfer/terminal system (for example, by splash blending after the
gasoline has been removed from the terminal at the rack), the
determination of whether the mixture is gasohol is made immediately
after the mixture is produced. In such a case, the contents of the batch
typically correspond to a gasoline meter delivery ticket and an alcohol
meter delivery ticket, each of which shows the number of gallons of
liquid delivered into the mixture. The volume of each component in a
batch (without adjustment for temperature) ordinarily is determined by
the number of metered gallons shown on the delivery tickets for the
gasoline and alcohol delivered. However, if metered gallons of gasoline
and alcohol are added to a tank already containing more than a minor
amount of liquid, the determination of whether a batch satisfies the
alcohol-content requirement will be made by taking into account the
amount of alcohol and non-alcohol fuel contained in the liquid already
in the tank. Ordinarily, any amount in excess of 0.5 percent of the
capacity of the tank will not be considered minor.
(ii) 10 percent gasohol--(A) In general. A batch of gasoline/alcohol
mixture is 10 percent gasohol if it contains at least 9.8 percent
alcohol by volume, without rounding.
(B) Batches containing less than 10 percent but at least 9.8 percent
alcohol. If a batch of mixture contains less than 10 percent alcohol but
at least 9.8 percent alcohol, without rounding, only a portion of the
batch is considered to be 10 percent gasohol. That portion equals the
number of gallons of alcohol in the batch multiplied by 10. Any
remaining liquid in the mixture is excess liquid.
(iii) 7.7 percent gasohol--(A) In general. A batch of gasoline/
alcohol mixture is 7.7 percent gasohol if it contains less than 9.8
percent alcohol but at least 7.55 percent alcohol by volume, without
rounding.
(B) Batches containing less than 7.7 percent but at least 7.55
percent alcohol. If a batch of mixture contains less than 7.7 percent
alcohol but at least 7.55 percent alcohol, without rounding, only a
portion of the batch is considered to be 7.7 percent gasohol. That
portion equals the number of gallons of alcohol in the batch multiplied
by 12.987. Any remaining liquid in the mixture is excess liquid.
(iv) 5.7 percent gasohol--(A) In general. A batch of gasoline/
alcohol mixture is 5.7 percent gasohol if it contains less than 7.55
percent alcohol but at least 5.59 percent alcohol by volume, without
rounding.
(B) Batches containing less than 5.7 percent but at least 5.59
percent alcohol. If a batch of mixture contains less than 5.7 percent
alcohol but at least 5.59 percent alcohol, without rounding, only a
portion of the batch is considered to be 5.7 percent gasohol. That
portion equals the number of gallons of alcohol in the batch multiplied
by 17.544. Any remaining liquid in the mixture is excess liquid.
(v) Tax on excess liquid. If tax was imposed on the excess liquid in
any gasohol at the gasohol production tax rate (as defined in paragraph
(e)(1) of this section), the excess liquid in the batch is considered to
be gasoline with respect to which there is a failure to blend into
gasohol for purposes of paragraph (f) of this section. If tax was
imposed on the excess liquid at the rate of tax described in section
4081(a), a credit or refund under section 6427(f) is not allowed with
respect to the excess liquid.
(vi) Examples. The following examples illustrate this paragraph
(b)(2). In these examples, a gasohol blender creates a gasoline/alcohol
mixture by pumping a specified amount of gasoline into an empty tank and
then adding a specified amount of alcohol.
[[Page 136]]
Example 1. Mixtures containing exactly 10 percent alcohol. The
applicable delivery tickets show that the mixture is made with 7200
metered gallons of gasoline and 800 metered gallons of alcohol.
Accordingly, the mixture contains 10 percent alcohol (as determined
based on the delivery tickets provided to the blender) and qualifies as
10 percent gasohol.
Example 2. Mixtures containing less than 10 percent alcohol but at
least 9.8 percent alcohol. The applicable delivery tickets show that the
mixture is made with 7205 metered gallons of gasoline and 795 metered
gallons of alcohol. Because the mixture contains less than 10 percent
alcohol, but more than 9.8 percent alcohol (as determined based on the
delivery tickets provided to the blender), 7950 gallons of the mixture
qualify as 10 percent gasohol. If tax was imposed on the gasoline in the
mixture at the gasohol production rate applicable to 10 percent gasohol,
the remaining 50 gallons of the mixture (the excess liquid) are treated
as gasoline with respect to which there was a failure to blend into
gasohol for purposes of paragraph (f) of this section. If tax was
imposed on the gasoline in the mixture at the rate of tax described in
section 4081(a), a credit or refund under section 6427(f) is allowed
only with respect to 7155 gallons of gasoline.
Example 3. Mixtures containing less than 5.59 percent alcohol. The
applicable delivery tickets show that the mixture is made with 7568
metered gallons of gasoline and 436 metered gallons of alcohol. Because
the mixture contains only 5.45 percent alcohol (as determined based on
the delivery tickets provided to the blender), the mixture does not
qualify as gasohol.
(3) Gasohol blender. Gasohol blender means any person that regularly
produces gasohol outside of the bulk transfer/terminal system for sale
or use in its trade or business.
(4) Registered gasohol blender. Registered gasohol blender means a
person that is registered under section 4101 as a gasohol blender.
(c) Rate of tax on gasoline removed or entered for gasohol
production--(1) In general. The rate of tax imposed on gasoline under
Sec. 48.4081-2(b) (relating to tax imposed at the terminal rack), Sec.
48.4081-3(b)(1) (relating to tax imposed at the refinery), or Sec.
48.4081-3(c)(1) (relating to tax imposed on entries) is the gasohol
production tax rate if--
(i) The person liable for tax under Sec. 48.4081-2(c)(1) (the
position holder), Sec. 48.4081-3(b)(3) (the refiner), or Sec. 48.4081-
3(c)(2) (the enterer) is a taxable fuel registrant and a registered
gasohol blender, and such person produces gasohol with the gasoline
within 24 hours after removing or entering the gasoline; or
(ii) The gasoline is sold in connection with the removal or entry,
the person liable for tax under Sec. 48.4081-2(c)(1) (the position
holder), Sec. 48.4081-3(b)(3) (the refiner), or Sec. 48.4081-3(c)(2)
(the enterer) is a taxable fuel registrant and the person, at the time
of the sale,--
(A) Has an unexpired certificate (as described in paragraph (c)(2)
of this section) from the buyer; and
(B) Has no reason to believe that any information in the certificate
is false.
(2) Certificate--(i) In general. The certificate referred to in
paragraph (c)(1)(ii)(A) of this section is a statement that is to be
provided by a registered gasohol blender that is signed under penalties
of perjury by a person with authority to bind the registered gasohol
blender, is in substantially the same form as the model certificate
provided in paragraph (c)(2)(ii) of this section, and contains all
information necessary to complete such model certificate. A new
certificate must be given if any information in the current certificate
changes. The certificate may be included as part of any business records
normally used to document a sale. The certificate expires on the
earliest of the following dates:
(A) The date one year after the effective date of the certificate
(which may be no earlier than the date it is signed).
(B) The date the registered gasohol blender provides a new
certificate to the seller.
(C) The date the seller is notified by the Internal Revenue Service
or the gasohol blender that the gasohol blender's registration has been
revoked or suspended.
(ii) Model certificate.
Certificate of Registered Gasohol Blender
(To support sales of gasoline at the gasohol production tax rate under
section 4081(c) of the Internal Revenue Code)
________________________________________________________________________
Name, address, and employer identification number of seller
__________ (Buyer) certifies the following under penalties of
perjury:
Buyer is registered as a gasohol blender with registration number
________.
[[Page 137]]
Buyer's registration has not been suspended or revoked by the Internal
Revenue Service.
The gasoline bought under this certificate will be used by Buyer to
produce gasohol (as defined in Sec. 48.4081-6(b) of the Manufacturers
and Retailers Excise Tax Regulations) within 24 hours after buying the
gasoline.
Type of gasohol Buyer will produce (check one only):
___ 10% gasohol
___ 7.7% gasohol
___ 5.7% gasohol
If the gasohol the Buyer will produce will contain ethanol, check
here: ___
This certificate applies to the following (complete as applicable):
If this is a single purchase certificate, check here ___ and enter:
1. Account number ________
2. Number of gallons ________
If this is a certificate covering all purchases under a specified
account or order number, check here ___ and enter:
1. Effective date ________
2. Expiration date ________ (period not to exceed 1 year after the
effective date)
3. Buyer account or order number ________
Buyer will not claim a credit or refund under section 6427(f) of the
Internal Revenue Code for any gasoline covered by this certificate.
Buyer agrees to provide seller with a new certificate if any
information on this certificate changes.
Buyer understands that Buyer's registration may be revoked if the
gasoline covered by this certificate is resold or is used other than in
Buyer's production of the type of gasohol identified above.
Buyer will reduce any alcohol mixture credit under section 40(b) by
an amount equal to the benefit of the gasohol production tax rate under
section 4081(c) for the gasohol to which this certificate relates.
Buyer understands that the fraudulent use of this certificate may
subject Buyer and all parties making any fraudulent use of this
certificate to a fine or imprisonment, or both, together with the costs
of prosecution.
________________________________________________________________________
Printed or typed name of person signing
________________________________________________________________________
Title of person signing
________________________________________________________________________
Employer identification number
________________________________________________________________________
Address of Buyer
________________________________________________________________________
Signature and date signed
(iii) Use of Form 637 or letter of registration as a gasohol
blender's certificate prohibited. A copy of the certificate of registry
(Form 637) or letter of registration issued to a gasohol blender by the
Internal Revenue Service is not a gasohol blender's certificate
described in paragraph (c)(2)(ii) of this section.
(d) Rate of tax on gasohol removed or entered. The rate of tax
imposed on removals or entries of any gasohol under Sec. Sec. 48.4081-
2(b), 48.4081-3(b)(1), and 48.4081-3(c)(1) is the gasohol tax rate. The
rate of tax imposed on removals and entries of excess liquid described
in paragraph (b)(2) of this section is the rate of tax applicable to
gasoline under section 4081(a).
(e) Tax rates--(1) Gasohol production tax rate. The gasohol
production tax rate is the applicable rate of tax determined under
section 4081(c)(2)(A).
(2) Gasohol tax rate. The gasohol tax rate is the applicable alcohol
mixture rate determined under section 4081(c)(4)(A).
(f) Later separation and failure to blend--(1) Later separation--(i)
Imposition of tax. A tax is imposed on the removal or sale of gasoline
separated from gasohol with respect to which tax was imposed at a rate
described in paragraph (e) of this section or with respect to which a
credit or payment was allowed or made by reason of section 6427(f)(1).
(ii) Liability for tax. The person that owns the gasohol at the time
gasoline is separated from the gasohol is liable for the tax imposed
under paragraph (f)(1)(i) of this section.
(iii) Rate of tax. The rate of tax imposed under paragraph (f)(1)(i)
of this section is the difference between the rate of tax applicable to
gasoline not described in this section and the applicable gasohol
production tax rate.
(2) Failure to blend--(i) Imposition of tax. Tax is imposed on the
entry, removal, or sale of gasoline (including excess liquid described
in paragraph (b)(2) of this section) with respect to which tax was
imposed at a gasohol production tax rate if--
(A) The gasoline was not blended into gasohol; or
(B) The gasoline was blended into gasohol but the gasohol production
tax rate applicable to the type of gasohol produced is greater than the
rate of tax originally imposed on the gasoline.
[[Page 138]]
(ii) Liability for tax. (A) In the case of gasoline with respect to
which tax was imposed at the gasohol production tax rate under paragraph
(c)(1)(i) of this section, the person liable for the tax imposed by
paragraph (f)(2)(i) of this section is the person that was liable for
tax on the entry or removal.
(B) In the case of gasoline with respect to which tax was imposed at
the gasohol production tax rate under paragraph (c)(1)(ii) of this
section, the person that bought the gasoline in connection with the
entry or removal is liable for the tax imposed under paragraph (f)(2)(i)
of this section.
(iii) Rate of tax. The rate of tax imposed on gasoline described in
paragraph (f)(2)(i)(A) of this section is the difference between the
rate of tax applicable to gasoline not described in this section and the
rate of tax previously imposed on the gasoline. The rate of tax imposed
on gasoline described in paragraph (f)(2)(i)(B) of this section is the
difference between the gasohol production tax rate applicable to the
type of gasohol produced and the rate of tax previously imposed on the
gasoline.
(iv) Example. The following example illustrates this paragraph
(f)(2):
Example. (i) A registered gasohol blender bought gasoline in
connection with a removal described in paragraph (c)(1)(ii) of this
section. Based on the blender's certification (described in paragraph
(c)(2) of this section) that the blender would produce 10 percent
gasohol with the gasoline, tax at the gasohol production tax rate
applicable to 10 percent gasohol was imposed on the removal.
(ii) The blender then produced a mixture by splash blending in a
tank holding approximately 8000 gallons of mixture. The applicable
delivery tickets show that the mixture was blended by first pumping 7220
metered gallons of gasoline into the empty tank, and then pumping 780
metered gallons of alcohol into the tank. Because the mixture contains
9.75 percent alcohol (as determined based on the delivery tickets
provided to the blender) the entire mixture qualifies as 7.7 percent
gasohol, rather than 10 percent gasohol.
(iii) Because the 7220 gallons of gasoline were taxed at the gasohol
production tax rate applicable to 10 percent gasohol but the gasoline
was blended into 7.7 percent gasohol, a failure to blend has occurred
with respect to the gasoline. As the person that bought the gasoline in
connection with the taxable removal, the blender is liable for the tax
imposed under paragraph (f)(2)(i) of this section. The amount of tax
imposed is the difference between--
(A) 7220 gallons times the gasohol production tax rate applicable to
7.7 percent gasohol; and
(B) 7220 gallons times the gasohol production tax rate applicable to
10 percent gasohol.
(iv) Because the gasohol does not contain exactly 7.7 percent
alcohol, the benefit of the gasohol production tax rate with respect to
the alcohol is less than the amount of the alcohol mixture credit under
section 40(b) (determined before the application of section 40(c)).
Accordingly, the blender may be entitled to claim an alcohol mixture
credit for the alcohol used in the gasohol. Under section 40(c),
however, the amount of the alcohol mixture credit must be reduced to
take into account the benefit provided with respect to the alcohol by
the gasohol production tax rate.
(g) Effective date. This section is effective August 7, 1995.
[T.D. 8609, 60 FR 40082, Aug. 7, 1995, as amended by T.D. 8659, 61 FR
10457, Mar. 14, 1996; T.D. 8879, 65 FR 17157, Mar. 31, 2000]
Sec. 48.4081-7 Taxable fuel; conditions for refunds of taxable
fuel tax under section 4081(e).
(a) Overview. This section provides reporting requirements and other
conditions that a person paying tax to the government under section 4081
must satisfy to receive a refund (but not a credit) under section
4081(e) with respect to taxable fuel on which a prior tax was paid to
the government under section 4081. No credit against any tax imposed
under the Internal Revenue Code is allowed under this section.
(b) Conditions to allowance of refund. A claim for refund of tax
imposed by section 4081 with respect to taxable fuel is allowed under
section 4081(e) and this section only if--
(1) A tax imposed by section 4081 with respect to the taxable fuel
was paid to the government and not credited or refunded (the ``first
tax'');
(2) After imposition of the first tax, another tax was imposed by
section 4081 with respect to the same taxable fuel and was also paid to
the government (the ``second tax'');
(3) The person that paid the second tax to the government has filed
a timely claim for refund that contains the information required under
paragraph (d) of this section; and
[[Page 139]]
(4) The person that paid the first tax to the government has met the
reporting requirements of paragraph (c) of this section.
(c) Reporting requirements--(1) Reporting by persons paying the
first tax. Except as provided in paragraph (c)(3) of this section, the
person that paid the first tax under Sec. 48.4081-3 (the first
taxpayer) must file a report that is in substantially the same form as
the model report provided in paragraph (c)(2) of this section (or such
other model report as the Commissioner may prescribe) and contains all
information necessary to complete such model report (the first
taxpayer's report). A first taxpayer's report must be filed with the
return to which the report relates (or at such other time, or in such
other manner, as prescribed by the Commissioner).
(2) Model first taxpayer's report.
First Taxpayer's Report
1.______________________________________________________________________
________________________________________________________________________
First Taxpayer's name, address, and employer identification number
2.______________________________________________________________________
________________________________________________________________________
Name, address, and employer identification number of the buyer of the
taxable fuel subject to tax
3.______________________________________________________________________
Date and location of removal, entry, or sale
4.______________________________________________________________________
Volume and type of taxable fuel removed, entered, or sold
5. Check type of taxable event:
_____ Removal from refinery
_____ Entry into United States
_____ Bulk transfer from terminal by unregistered position holder
_____ Bulk transfer not received at an approved terminal
_____ Sale within the bulk transfer/terminal system
_____ Removal at the terminal rack
_____ Removal or sale by the blender
6.______________________________________________________________________
Amount of Federal excise tax paid on account of the removal, entry,
or sale
The undersigned taxpayer (the ``Taxpayer'') has not received, and
will not claim, a credit with respect to, or a refund of, the tax on the
taxable fuel to which this form relates.
Under penalties of perjury, the Taxpayer declares that Taxpayer has
examined this statement, including any accompanying schedules and
statements, and, to the best of Taxpayer's knowledge and belief, they
are true, correct and complete.
________________________________________________________________________
Signature and date signed
________________________________________________________________________
Printed or typed name of person signing this report
________________________________________________________________________
Title
(3) Optional reporting for certain taxable events. Paragraph (c)(1)
of this section does not apply with respect to a tax imposed under Sec.
48.4081-2 (removal at a terminal rack), Sec. 48.4081-3(c)(1)(ii)
(nonbulk entries into the United States), or Sec. 48.4081-3(g)
(removals or sales by blenders). However, if the person liable for the
tax expects that another tax will be imposed under section 4081 with
respect to the taxable fuel, that person should (but is not required to)
file a first taxpayer's report.
(4) Information provided to subsequent owners, etc.--(i) By person
required to file first taxpayer's report. A first taxpayer required to
file a first taxpayer's report under paragraph (c)(1) of this section
must give a copy of the report to--
(A) The person to whom the first taxpayer sells (within the meaning
of Sec. 48.4081-1)) the taxable fuel within the bulk transfer/terminal
system; or
(B) The owner of the taxable fuel immediately before the imposition
of the first tax, if the first taxpayer is not the owner at that time.
(ii) By person filing optional first taxpayer's report. A first
taxpayer filing a first taxpayer's report under paragraph (c)(3) of this
section should (but is not required to) give a copy of the report to--
(A) The person to whom the first taxpayer sells the taxable fuel; or
(B) The owner of the taxable fuel immediately before the imposition
of the first tax, if the first taxpayer is not the owner at that time.
(iii) By person receiving first taxpayer's report. A person that
receives a copy of the first taxpayer's report and subsequently sells
(within the meaning of Sec. 48.4081-1)) the taxable fuel within the
bulk transfer/terminal system must give the copy and a statement that
satisfies the requirements of paragraph (c)(4)(iv) of this section to
the buyer. A
[[Page 140]]
person that receives a copy of the first taxpayer's report and
subsequently sells the taxable fuel outside the bulk transfer/terminal
system should (but is not required to) give the copy and a statement
that satisfies the requirements of paragraph (c)(4)(iv) of this section
to the buyer, if that person expects that another tax will be imposed
under section 4081 with respect to the taxable fuel.
(iv) Form of statement--(A) In general. A statement satisfies the
requirements of this paragraph (c)(4)(iv) if it is provided at the
bottom or on the back of the copy of the first taxpayer's report (or in
an attached document). This statement must contain all information
necessary to complete the model statement provided in paragraph
(c)(4)(iv)(B) of this section (or such other model statement as the
Commissioner may prescribe) but need not be in the same format.
(B) Model statement describing subsequent sale.
Statement of Subsequent Seller
1.______________________________________________________________________
________________________________________________________________________
Name, address, and employer identification number of seller in
subsequent sale
2.______________________________________________________________________
________________________________________________________________________
Name, address, and employer identification number of buyer in subsequent
sale
3.______________________________________________________________________
Date and location of subsequent sale
4.______________________________________________________________________
Volume and type of taxable fuel sold
The undersigned seller (the ``Seller'') has received the copy of the
first taxpayer's report provided with this statement in connection with
Seller's purchase of the taxable fuel described in this statement.
Under penalties of perjury, Seller declares that Seller has examined
this statement, including any accompanying schedules and statements,
and, to the best of Seller's knowledge and belief, they are true,
correct and complete.
________________________________________________________________________
Signature and date signed
________________________________________________________________________
Printed or typed name of person signing this statement
________________________________________________________________________
Title
(v) Sale to multiple buyers. If the first taxpayer's report relates
to taxable fuel divided among more than one buyer, multiple copies of
the first taxpayer's report must be made at the stage that the taxable
fuel is divided and each buyer must be given a copy of the report.
(d) Form and content of claim--(1) In general. The following rules
apply to claims for refund under section 4081(e):
(i) The claim must be made by the person that paid the second tax to
the government and must include all the information described in
paragraph (d)(2) of this section.
(ii) The claim must be made on Form 8849 (or such other form as the
Commissioner may designate) in accordance with the instructions on the
form. The form should be marked Section 4081(e) Claim at the top.
Section 4081(e) claims must not be included with a claim for a refund
under any other provision of the Internal Revenue Code.
(2) Information to be included in the claim. Each claim for a refund
under section 4081(e) must contain the following information with
respect to the taxable fuel covered by the claim:
(i) Volume and type of taxable fuel.
(ii) Date on which the claimant incurred the tax liability to which
this claim relates (the second tax).
(iii) Amount of second tax that claimant paid to the government and
a statement that claimant has not included the amount of this tax in the
sales price of the taxable fuel to which this claim relates and has not
collected that amount from the person that bought the taxable fuel from
claimant.
(iv) Name, address, and employer identification number of the person
that paid the first tax to the government.
(v) A copy of the first taxpayer's report that relates to the
taxable fuel covered by the claim.
(vi) If the taxable fuel covered by the claim was bought other than
from the first taxpayer, a copy of the statement of subsequent seller
that the claimant received with respect to that taxable fuel.
(e) Time for filing claim. A claim for refund under section 4081(e)
may be filed any time after the claimant has filed the return of the
second tax and
[[Page 141]]
before the end of the period prescribed by section 6511 for the filing
of a claim for a refund.
(f) Examples. The following examples illustrate the provisions of
this section.
Example 1. (i) A is a taxable fuel registrant that owns 10,000
gallons of gasoline, and on April 5, 1996, is transporting the gasoline
by barge on a waterway in the United States. That day, A sells the
gasoline to B, a person that is not a taxable fuel registrant. A is
liable for tax on the sale under Sec. 48.4081-3(f). A pays this tax to
the government and attaches to its return of the gasoline tax for the
2nd quarter of 1996 the first taxpayer's report described in paragraph
(c) of this section. A also gives a copy of this report to B.
(ii) On April 9, 1996, B sells the gasoline to C, a taxable fuel
registrant. B also gives C a copy of the first taxpayer's report and the
statement of subsequent seller (required under paragraph (c)(4) of this
section). On April 14, 1996, the gasoline is removed from a terminal at
the rack. C is the position holder of the gasoline at the time of the
removal and thus is liable for tax on the removal under Sec. 48.4081-
2(c)(1). C pays this tax to the government.
(iii) After C has filed a return of the second tax and before the
end of the period prescribed by section 6511 for filing a claim for a
refund, C files a claim for a refund of the second tax. The claim is in
the form prescribed in paragraph (d)(2) of this section. C includes with
its claim a copy of the first taxpayer's report and statement of
subsequent seller. Because the conditions to allowance of a refund under
paragraph (b) of this section have been met, C is allowed a refund of
the second tax.
Example 2. The facts are the same as in Example 1 except that A does
not pay the tax to the government. Because the first tax was not paid to
the government as required by paragraph (b)(1) of this section, the
conditions to allowance of a refund under paragraph (b) of this section
have not been met. Therefore, C is not allowed a refund of the second
tax.
(g) Effective date. This section is effective in the case of taxable
fuel with respect to which the first tax is imposed after September 30,
1995.
[T.D. 8421, 57 FR 32424, July 22, 1992, as amended by T.D. 8609, 60 FR
40086, Aug. 7, 1995; T.D. 8659, 61 FR 10457, Mar. 14, 1996; T.D. 8879,
65 FR 17157, Mar. 31, 2000]
Sec. 48.4081-8 Taxable fuel; measurement.
(a) In general. Volumes of taxable fuel may be measured on the basis
of actual volumetric gallons or gallons adjusted to 60 degrees
Fahrenheit.
(b) Effective date. This section is applicable January 1, 1994.
[66 FR 27597, May 18, 2001]
Sec. 48.4082-1 Diesel fuel and kerosene; exemption for dyed fuel.
(a) Exemption. Tax is not imposed by section 4081 on the removal,
entry, or sale of any diesel fuel or kerosene if--
(1) The person otherwise liable for tax is a taxable fuel
registrant;
(2) In the case of a removal from a terminal, the terminal is an
approved terminal; and
(3) The diesel fuel or kerosene satisfies the dyeing and marking
requirements of paragraphs (b), (c), and (d) of this section.
(b) Dyeing requirements. Diesel fuel or kerosene satisfies the
dyeing requirement of this paragraph (b) only if the diesel fuel or
kerosene contains--
(1) The dye Solvent Red 164 (and no other dye) at a concentration
spectrally equivalent to at least 3.9 pounds of the solid dye standard
Solvent Red 26 per thousand barrels of diesel fuel or kerosene; or
(2) Any dye of a type and in a concentration that has been approved
by the Commissioner.
(c) Marking requirements. [Reserved]
(d) [Reserved]. For further guidance, see Sec. 48.4082-1T(d).
(e) Effective date--(1) Except as provided in paragraph (e)(2) of
this section, this section is applicable March 14, 1996.
(2) [Reserved] For further guidance, see Sec. 48.4082-1T(e)(2).
[T.D. 8659, 61 FR 10457, Mar. 14, 1996, as amended by T.D. 8879, 65 FR
17157, Mar. 31, 2000; T.D. 9199, 70 FR 21333, Apr. 26, 2005]
Sec. 48.4082-1T Diesel fuel and kerosene; exemption for dyed
fuel (temporary).
(a) through (c) [Reserved]. For further guidance, see Sec. 48.4082-
1(a) through (c).
(d) Time and method for adding dye--(1) In general. Except as
provided by paragraph (d)(6) of this section, diesel fuel or kerosene
satisfies the dyeing requirements of this paragraph (d) only if the dye
required by Sec. 48.4082-1(b) is
[[Page 142]]
combined with the diesel fuel or kerosene by means of a mechanical
injection system that is approved by the Commissioner for use at the
facility where the dyeing occurs. Application for approval must be made
in the form and manner required by the Commissioner. Rules similar to
the rules of Sec. 48.4101-1(g) apply to the Commissioner's action on
the applications.
(2) Mechanical injection system; requirements. The Commissioner will
approve a mechanical injection system only if--
(i) The system has features that automatically inject an amount of
dye that satisfies the concentration requirements of Sec. 48.4082-1(b)
into diesel fuel or kerosene as the diesel fuel or kerosene is delivered
from the bulk transfer/terminal system into the transport compartment of
a truck, trailer, railroad car, or other means of nonbulk transfer;
(ii) The system has calibrated devices that accurately measure and
record the amount of dye and the amount of diesel fuel and kerosene that
is dispensed for each removal;
(iii) The system has automatic shut-off devices that prevent the
removal of more than 100 gallons of undyed diesel fuel or kerosene in
the case of a system malfunction;
(iv) The system is secured by either--
(A) Unbroken seals that are issued, installed, and maintained by the
terminal operator and secure the measurement devices, shut-off devices,
and other access points to the injection system; or
(B) A secured container that controls access to the measurement
devices, shut-off devices, and other access points and is secured by an
unbroken seal issued, installed, and maintained by the terminal
operator;
(v) Each seal securing the system bears a unique identifying number
or code and is produced in a manner that provides adequate assurance
against duplication; and
(vi) The operator of the facility has written procedures in place
for complying with its duty, described in paragraph (d)(4) of this
section, to maintain the system's security standards.
(3) Mechanical injection system; basis for approval. In determining
whether to approve a mechanical injection system, the Commissioner will
take into account the individual circumstances of each facility,
including local fire and safety codes, to ensure that the cost of
acquiring and maintaining the appropriate levels of security are
reasonable for that facility.
(4) Mechanical injection system; duty of the operator of a
mechanical injection system to maintain the system's security standards.
Each operator of a mechanical injection system must--
(i) Maintain a record for each seal, including its identifying
number or code, the location of the seal, the date(s) on which the seal
was issued and installed, and the reason for the installation;
(ii) Visually inspect each installed seal not less than once during
every 24 hour period to ascertain that each seal and lock mechanism, if
applicable, has not been physically altered;
(iii) Check the identifying number or code for each seal against the
records maintained by the terminal operator no less frequently than once
during each seven day period and record each inspection and
verification;
(iv) Promptly notify the Commissioner if inspection of a seal
reveals any inconsistency in the records pertaining to that seal, or if
the seal has been damaged or removed (other than a removal authorized by
the operator for testing or maintenance);
(v) Maintain a record of each seal that has been replaced to include
the seal number or code, the date the seal was issued, the location of
the seal, the date the seal was replaced, and the reason the seal was
replaced;
(vi) Promptly destroy and replace seals that have been removed from
the system;
(vii) Restrict access to unused seal inventory to individuals
specifically designated by the operator and maintain a record of such
individuals;
(viii) Maintain a record of each installation, inspection, and
destruction described in this paragraph (d)(4), including the name of
the individual who conducts the installation, inspection, or
destruction;
(ix) Make available for the Commissioner's immediate inspection the
seals
[[Page 143]]
and records described in this paragraph (d)(4); and
(x) Promptly notify the Commissioner if, and when, the dye injection
system is placed out of service.
(5) Mechanical injection system; revocation or suspension of
approval. The Commissioner may revoke or suspend its approval of a dye
injection system if the Commissioner determines that the system does not
meet the standards of paragraph (d)(2) of this section or if the
operator of the system has not complied with the requirements of
paragraph (d)(4) of this section.
(6) Sales and entries. For purposes of determining whether tax is
imposed by section 4081 on a sale or entry of diesel fuel or kerosene,
such fuel satisfies the dyeing requirements of this paragraph (d) only
if the dye required by Sec. 48.4082-1(b) is combined with the fuel
before the sale or entry and the seller or enterer has in its records
evidence (such as a certificate from the terminal operator providing the
fuel) establishing that the dye was combined with the fuel by means of a
mechanical injection system. Thus, for example, diesel fuel or kerosene
that is entered into the United States by means of nonbulk transfer
(such as a railroad car) does not satisfy the requirements of this
paragraph (d) if the required dye and marker are combined with diesel
fuel or kerosene after the diesel fuel or kerosene has been entered into
the United States.
(7) Cross reference. For the penalty relating to mechanical dye
injection systems, see section 6715A.
(e) and (e)(1) [Reserved]. For further guidance, see Sec. 48.4082-
1(e) and (e)(1).
(2) This section is applicable on October 24, 2005.
[T.D. 9199, 70 FR 21333, Apr. 26, 2005]
Sec. 48.4082-2 Diesel fuel and kerosene; notice required for
dyed fuel.
(a) In general. A legible and conspicuous notice stating ``DYED
DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE'' must be
posted by a seller on any retail pump or other delivery facility where
it sells dyed diesel fuel for use by its buyer. A legible and
conspicuous notice stating ``DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY
FOR TAXABLE USE'' must be posted by a seller on any retail pump or other
delivery facility where it sells dyed kerosene for use by its buyer. Any
seller that fails to post the required notice on any retail pump or
other delivery facility where it sells dyed fuel is, for purposes of the
penalty imposed by section 6715, presumed to know that the fuel will not
be used for a nontaxable use.
(b) Cross reference; terminal operators. For the requirement that
terminal operators provide a notice with respect to dyed fuel, see Sec.
48.4101-1(h)(3) (relating to terms and conditions of registration for
terminal operators).
(c) Effective date. This section is applicable with respect to
diesel fuel after December 31, 1993, and with respect to kerosene after
June 30, 1998.
[T.D. 8879, 65 FR 17157, Mar. 31, 2000]
Sec. 48.4082-3 Diesel fuel and kerosene; visual inspection
devices. [Reserved]
Sec. 48.4082-4 Diesel fuel and kerosene; back-up tax.
(a) Imposition of tax--(1) In general. Tax is imposed by section
4041 on the delivery into the fuel supply tank of the propulsion engine
of a diesel-powered highway vehicle (other than a diesel-powered bus)
of--
(i) Any diesel fuel or kerosene on which tax has not been imposed by
section 4081;
(ii) Any diesel fuel or kerosene for which a credit or payment has
been allowed under section 6427; or
(iii) Any liquid (other than taxable fuel) for use as fuel.
(2) Liability for tax--(i) In general. The operator of the highway
vehicle into which the fuel is delivered is liable for the tax imposed
under paragraph (a)(1) of this section.
(ii) Joint and several liability of the seller. The seller of the
fuel is jointly and severally liable for the tax imposed under paragraph
(a)(1) of this section if the seller knows or has reason to know that
the fuel will not be used in a nontaxable use.
(3) Rate of tax. The rate of tax is the rate imposed on diesel fuel
by section 4081(a).
(b) Tax on diesel fuel and kerosene; buses and trains--(1) In
general. Tax is
[[Page 144]]
imposed by section 4041 on the delivery into the fuel supply tank of the
propulsion engine of a diesel-powered bus or a diesel-powered train of--
(i) Any diesel fuel or kerosene on which tax has not been imposed by
section 4081;
(ii) Any diesel fuel or kerosene for which a credit or payment has
been allowed under section 6427; or
(iii) Any liquid (other than taxable fuel) for use as fuel.
(2) Liability for tax--(i) In general. Except as provided in
paragraph (b)(2)(ii) of this section, the operator of the bus or train
into which the fuel is delivered is liable for the tax imposed under
paragraph (b)(1) of this section.
(ii) Special rule for certain train operators. The person that
delivers the fuel into the fuel supply tank of a train, rather than the
train operator, is liable for the tax imposed under paragraph (b)(1) of
this section if, at the time of the delivery--
(A) The deliverer of the fuel and the operator of the train are both
registered as train operators under Sec. 48.4101-1; and
(B) A written agreement between the deliverer of the fuel and the
operator requires the deliverer to pay the tax imposed under paragraph
(b)(1) of this section.
(3) Rate of tax--(i) Buses--(A) In general. The rate of tax under
paragraph (b)(1) of this section is the sum of the rates described in
sections 4041(a)(1)(C)(iii)(I) and 4041(d)(1) (the bus rate) if the bus
is used to furnish (for compensation) passenger land transportation
available to the general public and either such transportation is
scheduled and along regular routes or the seating capacity of the bus is
at least 20 adults (not including the driver). A bus is available to the
general public if the bus is available for hire to more than a limited
number of persons, groups, or organizations.
(B) Other uses. The rate of tax under paragraph (b)(1) of this
section is the rate of tax imposed on diesel fuel by section 4081(a) if
the bus is used for a purpose other than that described in paragraph
(b)(3)(i)(A) of this section.
(ii) Trains. The rate of tax under paragraph (b)(1) of this section
is the rate prescribed in section 4041 for diesel fuel sold for use in a
train (the train rate).
(4) Cross reference. For the registration requirement relating to
certain bus and train operators, see Sec. 48.4101-1(c)(2).
(c) Exemptions. The taxes imposed under paragraphs (a) and (b) of
this section do not apply to a delivery of any liquid for--
(1) Use on a farm for farming purposes as that term and related
terms are defined in Sec. 48.6420-4 (a) through (g);
(2) The exclusive use of a State;
(3) Use described in section 4041(h) (relating to use in a vehicle
owned by an aircraft museum);
(4) Use in a bus while the bus is engaged in the transportation of
students and employees of schools (as defined in the last sentence of
section 4221(d)(7)(C));
(5) Use in a qualified local bus (as defined in section
6427(b)(2)(D)) while the bus is engaged in furnishing (for compensation)
intracity passenger land transportation that is available to the general
public and is scheduled and along regular routes;
(6) Use in a highway vehicle that--
(i) Is not registered (and is not required to be registered) for
highway use under the laws of any State or foreign country; and
(ii) Is used in the operator's trade or business or in an activity
of the operator described in section 212 (relating to the production of
income);
(7) The exclusive use of a nonprofit educational organization, as
defined in Sec. 48.4221-6(b); or
(8) Use in a highway vehicle that is owned by the United States and
is not used on the highway.
(d) Effective date. This section is applicable after December 31,
1993, except that references to kerosene are applicable after June 30,
1998.
[T.D. 8659, 61 FR 10458, Mar. 14, 1996, as amended by T.D. 8879, 65 FR
17157, Mar. 31, 2000]
Sec. 48.4082-5 Diesel fuel and kerosene; Alaska.
(a) Application. This section applies to diesel fuel or kerosene
removed, entered, or sold in Alaska for ultimate sale or use in an
exempt area of Alaska.
[[Page 145]]
(b) Definitions.
Exempt area of Alaska means the area of Alaska in which the sulfur
content requirements for diesel fuel (see section 211(i) of the Clean
Air Act (42 U.S.C. 7545(i))) do not apply because the Administrator of
the Environmental Protection Agency has granted an exemption under
section 211(i)(4) of that Act.
Nontaxable use means a use described in section 4082(b).
Qualified dealer means any person that holds a qualified dealer
license from the state of Alaska or has been registered by the district
director as a qualified retailer. The district director will register a
person as a qualified retailer only if the district director--
(1) Determines that the person, in the course of its trade or
business, regularly sells diesel fuel or kerosene for use by its buyer
in a nontaxable use; and
(2) Is satisfied with the filing, deposit, payment, and claim
history for all federal taxes of the person and any related person.
(c) Tax-free removals and entries. Notwithstanding Sec. 48.4082-1,
tax is not imposed by section 4081 on the removal or entry of any diesel
fuel or kerosene in an exempt area of Alaska if--
(1) The person that would be liable for tax under Sec. 48.4081-2 or
48.4081-3 is a taxable fuel registrant and satisfies the requirements of
paragraph (e) of this section;
(2) In the case of a removal from a terminal, the terminal is an
approved terminal; and
(3) The owner of the diesel fuel or kerosene immediately after the
removal or entry holds the fuel for its own use in a nontaxable use or
is a qualified dealer.
(d) Sales after removals and entries--(1) In general. Paragraph (c)
of this section does not apply with respect to diesel fuel or kerosene
that is subsequently sold by a qualified dealer unless--
(i) The fuel is sold in an exempt area of Alaska;
(ii) The buyer purchases the fuel for its own use in a nontaxable
use or is a qualified dealer; and
(iii) The seller satisfies the requirements of paragraph (e) of this
section.
(2) Tax imposed at time of sale; liability for tax. Notwithstanding
Sec. Sec. 48.4081-2 and 48.4081-3, in any case in which paragraph (c)
of this section does not apply with respect to diesel fuel or kerosene
because of a subsequent sale by a qualified dealer, the tax with respect
to that fuel is imposed at the time of the subsequent sale and the
qualified dealer is liable for the tax.
(3) Rate of tax. For the rate of tax, see section 4081.
(e) Evidence of tax-free transactions. The requirements of section
4082(c)(2) (relating to certification) and this paragraph (e) are
satisfied if the person otherwise liable for tax is able to show the
district director satisfactory evidence of the exempt nature of the
transaction and has no reason to believe that the evidence is false.
Satisfactory evidence may include copies of qualified dealer licenses or
exemption certificates obtained for state tax purposes.
(f) Registration. With respect to each person that has been
registered as a qualified retailer by the district director, the rules
of Sec. 48.4101-1(g), (h), and (i) apply.
(g) Cross reference. For the tax on previously untaxed diesel fuel
or kerosene that is used for a taxable purpose, see Sec. 48.4082-4.
(h) Effective date. This section is applicable with respect to
diesel fuel removed or entered after December 31, 1996, and with respect
to kerosene removed or entered after June 30, 1998. A person registered
by the district director as a qualified retailer before April 2, 1998
may be treated, to the extent the district director determines
appropriate, as a qualified dealer for the period before that date.
[T.D. 8693, 61 FR 66216, Dec. 17, 1996. Redesignated and amended by T.D.
8748, 63 FR 25, Jan. 2, 1998; T.D. 8879, 65 FR 17157, Mar. 31, 2000]
Sec. 48.4082-6 Kerosene; exemption for aviation-grade kerosene.
(a) Overview. This section prescribes the conditions under which tax
does not apply to the removal or entry of aviation-grade kerosene that
is destined for use as a fuel in an aircraft.
(b) Definition. For purposes of this section, aviation-grade
kerosene means
[[Page 146]]
kerosene-type jet fuel covered by ASTM specification D 1655 or military
specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8).
For availability of ASTM and military specifications, see Sec. 48.4081-
1(d).
(c) Exemption for certain removals and entries. Tax is not imposed
under Sec. 48.4081-2(b), 48.4081-3(b)(1)(ii), or 48.4081-3(c)(1)(ii) on
the removal or entry of aviation-grade kerosene if--
(1) The person otherwise liable for tax is a taxable fuel
registrant;
(2) In the case of a removal from a terminal, the terminal is an
approved terminal; and
(3)(i) The person otherwise liable for tax delivers the kerosene
into the fuel supply tank of an aircraft and this delivery is not in
connection with a sale; or
(ii) The kerosene is sold for use as a fuel in an aircraft and, at
the time of the sale, the person otherwise liable for tax has an
unexpired certificate (described in paragraph (e) of this section) from
the buyer and has no reason to believe any information in the
certificate is false.
(d) Certain later sales--(1) In general. Paragraph (c) of this
section does not apply with respect to kerosene that is sold as
described in paragraph (c)(3)(ii) of this section if there is a later
disqualifying sale of the kerosene. A later disqualifying sale is any
later sale other than a later sale--
(i) By a person that, at the time of the sale, has an unexpired
certificate (described in paragraph (e) of this section) from the buyer
and has no reason to believe that any information in the certificate is
false; or
(ii) In connection with the delivery of the kerosene into the fuel
supply tank of an aircraft.
(2) Imposition of tax; liability for tax. Notwithstanding Sec. Sec.
48.4081-2 and 48.4081-3, in any case in which paragraph (d)(1) of this
section applies, tax is imposed with respect to that kerosene at the
time of the first later disqualifying sale and the seller in that sale
is liable for the tax.
(3) Rate of tax. For the rate of tax, see section 4081.
(e) Certificate--(1) In general. The certificate described in this
paragraph (e) is a statement by a buyer that is signed under penalties
of perjury by a person with authority to bind the buyer, is in
substantially the same form as the model certificate provided in
paragraph (e)(3) of this section, and contains all information necessary
to complete the model certificate. A new certificate or notice that the
current certificate is invalid must be given if any information in the
current certificate changes. The certificate may be included as part of
any business records normally used to document a sale. The certificate
expires on the earliest of the following dates:
(i) The date one year after the effective date of the certificate
(which may be no earlier than the date it is signed).
(ii) The date the buyer provides the seller a new certificate or
notice that the current certificate is invalid.
(iii) The date the Internal Revenue Service or the buyer notifies
the seller that the buyer's right to provide a certificate has been
withdrawn.
(2) Withdrawal of the right to provide a certificate. The Internal
Revenue Service may withdraw the right of a buyer of aviation-grade
kerosene to provide a certificate under this section if the buyer uses
the aviation-grade kerosene to which a certificate relates other than as
a fuel in an aircraft or sells the kerosene without first obtaining a
certificate from its buyer. The Internal Revenue Service may notify any
seller to whom the buyer has provided a certificate that the buyer's
right to provide a certificate has been withdrawn.
(3) Model certificate.
CERTIFICATE OF PERSON BUYING AVIATION-GRADE KEROSENE FOR USE AS A FUEL
IN AN AIRCRAFT
(To support tax-free removals and entries of aviation-grade kerosene
under section 4082 of the Internal Revenue Code.)
___________________(Buyer) certifies the following
Name of Buyer
under penalties of perjury:
The aviation-grade kerosene to which this certificate applies will
be used by Buyer as a fuel in an aircraft or resold by Buyer for that
use.
This certificate applies to ____ percent of Buyer's purchases from
____________ (name, address, and employer identification number of
seller) as follows (complete as applicable):
[[Page 147]]
1. A single purchase on invoice or delivery ticket number ______.
2. All purchases between ______ (effective date) and ______
(expiration date) (period not to exceed one year after the effective
date) under account or order number(s) ______. If this certificate
applies only to Buyer's purchases for certain locations, check here ____
and list the locations.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Buyer is buying the kerosene for (check either or both as
applicable): __ Buyer's use as a fuel in an aircraft. __ Resale for use
as a fuel in an aircraft.
Buyer will provide a new certificate to the seller if any
information in this certificate changes.
If Buyer sells the aviation-grade kerosene to which this certificate
relates and does not deliver it into the fuel supply tank of an
aircraft, Buyer will be liable for tax unless Buyer obtains a
certificate from its buyer stating that the aviation-grade kerosene will
be used as a fuel in an aircraft.
If Buyer violates the terms of this certificate, the Internal
Revenue Service may withdraw Buyer's right to provide a certificate.
Buyer has not been notified by the Internal Revenue Service that its
right to provide a certificate has been withdrawn.
The fraudulent use of this certificate may subject Buyer and all
parties making any fraudulent use of this certificate to a fine or
imprisonment, or both, together with the costs of prosecution.
________________________________________________________________________
Printed or typed name of person signing
________________________________________________________________________
Title of person signing
________________________________________________________________________
Employer identification number
________________________________________________________________________
Address of Buyer
________________________________________________________________________
Signature and date signed
(f) Effective date. This section is applicable after March 30, 2000,
except that paragraph (d) of this section is applicable after June 30,
2000.
[T.D. 8879, 65 FR 17158, Mar. 31, 2000]
Sec. 48.4082-7 Kerosene; exemption for feedstock purposes.
(a) Overview. This section prescribes the conditions under which tax
does not apply to the removal or entry of kerosene for use for a
feedstock purpose.
(b) Definitions. The following definitions apply to this section:
Feedstock purpose means the use of kerosene for nonfuel purposes in
the manufacture or production of any substance other than gasoline,
diesel fuel, or special fuels referred to in section 4041. Thus, for
example, kerosene is used for a feedstock purpose when it is used as an
ingredient in the production of paint and is not used for a feedstock
purpose when it is used to power machinery at a factory where paint is
produced.
Feedstock user means a person that uses kerosene for a feedstock
purpose.
Registered feedstock user means a feedstock user that is--
(1) Registered under section 4101 as a feedstock user; or
(2) With respect to removals and entries before October 1, 2000, a
taxable fuel registrant.
(c) Exemption for removals and entries. Tax is not imposed on the
removal or entry of kerosene if--
(1) The person otherwise liable for tax is a taxable fuel
registrant;
(2) In the case of a removal from a terminal, the terminal is an
approved terminal; and
(3)(i) The person otherwise liable for tax uses the kerosene for a
feedstock purpose; or
(ii) The kerosene is sold for use by the buyer for a feedstock
purpose and, at the time of the sale, the person otherwise liable for
tax has an unexpired certificate (described in paragraph (e) of this
section) from the buyer and has no reason to believe any information in
the certificate is false.
(d) Later sale--(1) In general. Paragraph (c) of this section does
not apply with respect to kerosene that is sold as described in
paragraph (c)(3)(ii) of this section if the buyer in that sale (the
certifying buyer) sells the kerosene.
(2) Imposition of tax; liability for tax. Notwithstanding Sec. Sec.
48.4081-2 and 48.4081-3, in any case in which paragraph (d)(1) of this
section applies, tax with respect to that kerosene is imposed at the
time of the sale by the certifying buyer and the certifying buyer is
liable for the tax.
(3) Rate of tax. For the rate of tax, see section 4081.
[[Page 148]]
(e) Certificate--(1) In general. The certificate described in this
paragraph (e) is a statement by a buyer that is signed under penalties
of perjury by a person with authority to bind the buyer, is in
substantially the same form as the model certificate provided in
paragraph (e)(2) of this section, and contains all information necessary
to complete the model certificate. A new certificate or notice that the
current certificate is invalid must be given if any information in the
current certificate changes. The certificate may be included as part of
any business records normally used to document a sale. The certificate
expires on the earliest of the following dates:
(i) The date one year after the effective date of the certificate
(which may be no earlier than the date it is signed).
(ii) The date the buyer provides the seller a new certificate or
notice that the current certificate is invalid.
(iii) The date the seller is notified by the Internal Revenue
Service or the buyer that the buyer's registration has been revoked or
suspended.
(2) Model certificate.
CERTIFICATE OF REGISTERED FEEDSTOCK USER
(To support tax-free removals and entries of kerosene under section 4082
of the Internal Revenue Code.)
___________________(Buyer) certifies the following
Name of Buyer
under penalties of perjury:
Buyer is a registered feedstock user with registration number ____.
Buyer's registration has not been revoked or suspended.
The kerosene to which this certificate applies will be used by Buyer
for a feedstock purpose.
This certificate applies to ____ percent of Buyer's purchases from
____________ (name, address, and employer identification number of
seller as follows (complete as applicable):
1. A single purchase on invoice or delivery ticket number ______.
2. All purchases between ______ (effective date) and ______
(expiration date) (period not to exceed one year after the effective
date) under account or order number(s) ______. If this certificate
applies only to Buyer's purchases for certain locations, check here ____
and list the locations.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
If Buyer sells the kerosene to which this certificate relates, Buyer
will be liable for tax on that sale.
Buyer will provide a new certificate to the seller if any
information in this certificate changes.
If Buyer violates the terms of this certificate, the Internal
Revenue Service may revoke Buyer's registration.
Buyer understands that the fraudulent use of this certificate may
subject Buyer and all parties making any fraudulent use of this
certificate to a fine or imprisonment, or both, together with the costs
of prosecution.
________________________________________________________________________
Printed or typed name of person signing
________________________________________________________________________
Title of person signing
________________________________________________________________________
Employer identification number
________________________________________________________________________
Address of Buyer
________________________________________________________________________
Signature and date signed
________________________________________________________________________
(f) Effective date. This section is applicable after March 30, 2000,
except that paragraph (d) of this section is applicable after June 30,
2000.
[T.D. 8879, 65 FR 17158, Mar. 31, 2000]
Sec. 48.4083-1 Taxable fuel; administrative authority.
(a) In general--(1) Authority to inspect. Officers or employees of
the IRS designated by the Commissioner, upon presenting appropriate
credentials and a written notice to the owner, operator, or agent in
charge, are authorized to enter any place and to conduct inspections in
accordance with paragraphs (a) through (c) of this section.
(2) Reasonableness. Inspections will be performed in a reasonable
manner and at times that are reasonable under the circumstances, taking
into consideration the normal business hours of the place to be entered.
(b) Place of inspection--(1) In general. Inspections may be at any
place at which taxable fuel is (or may be) produced or stored or at any
inspection site where evidence of activities described in section
6715(a) may be discovered. These places may include, but are not limited
to--
(i) Any terminal;
(ii) Any fuel storage facility that is not a terminal;
[[Page 149]]
(iii) Any retail fuel facility; or
(iv) Any designated inspection site.
(2) Designated inspection sites. A designated inspection site is any
State highway inspection station, weigh station, agricultural inspection
station, mobile station, or other location designated by the
Commissioner to be used as a fuel inspection site. A designated
inspection site will be identified as a fuel inspection site.
(c) Scope of inspection--(1) Inspection. Officers or employees may
physically inspect, examine or otherwise search any tank, reservoir, or
other container that can or may be used for the production, storage, or
transportation of fuel, fuel dyes, or fuel markers. Inspection may also
be made of any equipment used for, or in connection with, production,
storage, or transportation of fuel, fuel dyes, or fuel markers. This
includes any equipment used for the dyeing or marking of fuel. This also
includes books and records, if any, that are maintained at the place of
inspection and are kept to determine excise tax liability under section
4081.
(2) Detainment. Officers or employees may detain any vehicle or
train for the purpose of inspecting its fuel tanks and storage tanks.
Detainment will be either on the premises under inspection or at a
designated inspection site. Detainment may continue for such reasonable
period of time as is necessary to determine the amount and composition
of the fuel.
(3) Removal of samples. Officers or employees may take and remove
samples of fuel in such quantities as are reasonably necessary to
determine the composition of the fuel.
(d) Refusal to submit to inspection. For the penalty for any refusal
to permit an entry or inspection authorized by this section, see section
4083(c)(3). This penalty is in addition to any tax that may be imposed
by section 4041 or 4081 and any penalty that may be imposed by section
6715.
(e) Effective date. This section is effective January 1, 1994.
[T.D. 8659, 61 FR 10458, Mar. 14, 1996, as amended by T.D. 8685, 61 FR
58007, Nov. 12, 1996; T.D. 8879, 65 FR 17159, Mar. 31, 2000]
Sec. 48.4091-3 [Reserved]
Sec. 48.4101-1 Taxable fuel; registration.
(a) In general. (1) This section provides rules relating to
registration under section 4101 for purposes of the federal excise tax
on taxable fuel imposed by sections 4041(a)(1) and 4081 and the credit
or payment allowed to certain ultimate vendors of diesel fuel and
kerosene under section 6427.
(2) A person is registered under section 4101 only if the district
director has issued a registration letter to the person and the
registration has not been revoked or suspended. However, the United
States is treated as registered under section 4101.
(3) A refiner that is registered under section 4101 may, with
respect to the bulk removal of any batch of gasohol from its refinery,
treat itself as a person that is not registered. See Sec. 48.4081-
3(b)(1)(iii).
(4) Each business unit that has, or is required to have, a separate
employer identification number is treated as a separate person. Thus,
two business units (for example, a parent corporation and a subsidiary
corporation, or a proprietorship and a related partnership), each of
which has a different employer identification number, are two persons.
(5) A registration in effect on December 31, 1993, with respect to
the tax on gasoline or diesel fuel is subject to the district director's
review, and to revocation or suspension, under the standards set forth
in this section, but remains in effect until the earlier of--
(i) The effective date of a registration issued under paragraph
(g)(3) of this section; or
(ii) The effective date of the revocation or suspension of the
registration under paragraph (i) of this section.
(6)(i) A person is treated as a taxable fuel registrant if on June
30, 1998, the person--
(A) Is an enterer, refiner, terminal operator, or throughputter with
respect to kerosene and is registered under section 4101 as a producer
or importer of aviation fuel;
(B) Operates one or more terminals that store kerosene (and no other
type of taxable fuel); or
[[Page 150]]
(C) Is a commercial airline, an operator of aircraft in
noncommercial aviation, or a fixed base operator and is also a position
holder with respect to kerosene.
(ii) A person treated as registered under paragraph (a)(6)(i) of
this section is treated as registered from July 1, 1998, until the
earlier of--
(A) The date of a subsequent denial of an application for
registration under paragraph (g)(2) of this section;
(B) The effective date of a subsequent registration issued under
paragraph (g)(3) of this section;
(C) The effective date of a subsequent revocation or suspension of
registration under paragraph (i) of this section; or
(D) July 1, 1999.
(b) Definitions--(1) Applicant. An applicant is a person that has
applied for registration under paragraph (e) of this section.
(2) Bonded registrant. A bonded registrant is a person that has
given a bond to the district director under paragraph (j) of this
section as a condition of registration.
(3) Gasohol bonding amount. The gasohol bonding amount is the
product of--
(i) The rate of tax applicable to later separation, as described in
Sec. 48.4081-6(f)(1)(iii); and
(ii) The total number of gallons of gasoline expected to be bought
at the gasohol production tax rate by the gasohol blender during a
representative 6-month period (as determined by the district director).
(4) Penalized for a wrongful act. A person has been penalized for a
wrongful act if the person has--
(i) Been assessed any penalty under chapter 68 of the Internal
Revenue Code (or similar provision of the law of any State) for
fraudulently failing to file any return or pay any tax, and the penalty
has not been wholly abated, refunded, or credited;
(ii) Been assessed any penalty under chapter 68 of the Internal
Revenue Code, such penalty has not been wholly abated, refunded, or
credited, and the district director determines that the conduct
resulting in the penalty is part of a consistent pattern of failing to
deposit, pay, or pay over a substantial amount of tax;
(iii) Been convicted of a crime under chapter 75 of the Internal
Revenue Code (or similar provision of the law of any State), or of
conspiracy to commit such a crime, and the conviction has not been
wholly reversed by a court of competent jurisdiction;
(iv) Been convicted, under the laws of the United States or any
State, of a felony for which an element of the offense is theft, fraud,
or the making of false statements, and the conviction has not been
wholly reversed by a court of competent jurisdiction;
(v) Been assessed any tax under section 4103 and the tax has not
been wholly abated, refunded, or credited; or
(vi) Had its registration under section 4101 or 4222 revoked.
(5) Related person. A related person is a person that--
(i) Directly or indirectly exercises control over an activity of the
applicant if the activity is described in paragraph (c)(1) or (d) of
this section;
(ii) Owns, directly or indirectly, five percent or more of the
applicant;
(iii) Is under a duty to assure the payment of a tax for which the
applicant is responsible;
(iv) Is a member, with the applicant, of a group of organizations
(as defined in Sec. 1.52-1(b) of this chapter) that would be treated as
a group of trades or businesses under common control for purposes of
Sec. 1.52-1 of this chapter; or
(v) Distributed or transferred assets to the applicant in a
transaction in which the applicant's basis in the assets is determined
by reference to the basis of the assets in the hands of the distributor
or transferor.
(6) Registrant. A registrant is a person that the district director
has, in accordance with paragraph (g)(3) of this section, registered
under section 4101 and whose registration has not been revoked or
suspended.
(7) Pipeline operator. A pipeline operator is any person that
operates a pipeline within the bulk transfer/terminal system.
(8) Vessel operator. A vessel operator is any person that operates a
vessel within the bulk transfer/terminal system. However, for purposes
of this definition, vessel does not include a deep draft ocean-going
vessel (as defined in Sec. 48.4042-3(a)).
[[Page 151]]
(9) Other definitions. For other definitions relating to taxable
fuel, see Sec. Sec. 48.4081-1, 48.4081-6(b), 48.4082-5(b), 48.4082-
6(b), 48.4082-7(b), 48.6427-9(b), 48.6427-10(b), and 48.6427-11(b).
(c) Persons required to be registered--(1) In general. A person is
required to be registered under section 4101 if the person is--
(i) A blender;
(ii) An enterer;
(iii) A pipeline operator;
(iv) A position holder;
(v) A refiner;
(vi) A terminal operator; or
(vii) A vessel operator.
(2) Bus and train operators. Every operator of a bus or train is
required to be registered under section 4101 at any time it incurs any
liability for tax under section 4041 at the bus rate (as described in
Sec. 48.4082-4(b)(3)(i)) or the train rate (as described in Sec.
48.4082-4(b)(3)(ii)).
(3) Consequences of failing to register. For the criminal penalty
imposed for failure to register, see section 7232. For the civil penalty
imposed for failure to register, see section 7272.
(d) Persons that may, but are not required to, be registered. A
person may, but is not required to, be registered under section 4101 if
the person is--
(1) A feedstock user;
(2) A gasohol blender;
(3) An industrial user;
(4) A throughputter that is not a position holder;
(5) An ultimate vendor; or
(6) An ultimate vendor (blocked pump).
(e) Application instructions. Application for registration under
section 4101 must be made in accordance with the instructions for Form
637 (or such other form as the Commissioner may designate).
(f) Registration tests--(1) In general--(i) Persons other than
ultimate vendors, pipeline operators, and vessel operators. Except as
provided in paragraph (f)(1)(ii) of this section, the district director
will register an applicant only if the district director determines that
the applicant meets the following three tests (collectively, the
registration tests):
(A) The activity test of paragraph (f)(2) of this section.
(B) The acceptable risk test of paragraph (f)(3) of this section.
(C) The adequate security test of paragraph (f)(4) of this section.
(ii) Ultimate vendors, pipeline operators, and vessel operators. The
district director will register an applicant as an ultimate vendor,
ultimate vendor (blocked pump), pipeline operator, or vessel operator
only if the district director--
(A) Determines that the applicant meets the activity test of
paragraph (f)(2) of this section; and
(B) Is satisfied with the filing, deposit, payment, and claim
history for all federal taxes of the applicant and any related person.
(2) The activity test. An applicant meets the activity test of this
paragraph (f)(2) only if the district director determines that the
applicant--
(i) Is, in the course of its trade or business, regularly engaged as
an operator of a bus or train or in the characteristic activity of a
person described in paragraph (c)(1) or (d) of this section; or
(ii) Is likely to be (because of such factors as the applicant's
business experience, financial standing, or trade connections), in the
course of its trade or business, regularly engaged as an operator of a
bus or train or in the characteristic activity of a person described in
paragraph (c)(1) or (d) of this section within a reasonable time after
becoming registered under section 4101.
(3) Acceptable risk test--(i) In general. An applicant meets the
acceptable risk test of this paragraph (f)(3) only if--
(A) Neither the applicant nor a related person has been penalized
for a wrongful act; or
(B) Even though the applicant or a related person has been penalized
for a wrongful act, the district director determines, after review of
evidence offered by the applicant, that the registration of the
applicant does not create a significant risk of nonpayment or late
payment of the tax imposed by sections 4041(a)(1) and 4081.
(ii) Significant risk of nonpayment or late payment of tax. In
making the determination described in paragraph (f)(3)(i)(B) of this
section, the district director may consider factors such as the
following:
[[Page 152]]
(A) The time elapsed since the applicant or related person was
penalized for a wrongful act.
(B) The present relationship between the applicant and any related
person that was penalized for any wrongful act.
(C) The degree of rehabilitation of the person penalized for any
wrongful act.
(D) The amount of bond given by the applicant. In this regard, the
district director may accept a bond under paragraph (j) of this section,
without regard to the limits on the amount of the bond set by paragraph
(j)(2) of this section.
(4) Adequate security test--(i) In general. An applicant meets the
adequate security test of this paragraph (f)(4) only if the district
director determines that the applicant has both adequate financial
resources and a satisfactory tax history, or the applicant gives the
district director a bond (under the provisions of paragraph (j) of this
section).
(ii) Adequate financial resources--(A) In general. An applicant has
adequate financial resources only if the district director determines
that the applicant is financially capable of paying--
(1) Its expected tax liability under sections 4041(a)(1) and 4081
for a representative 6-month period (as determined by the district
director);
(2) In the case of a terminal operator, the expected tax liability
under section 4081 of persons other than the terminal operator with
respect to taxable fuel removed at the racks of its terminals during a
representative 1-month period (as determined by the district director);
and
(3) In the case of a gasohol blender, the gasohol bonding amount.
(B) Basis for determination. The determination under Sec. 48.4101-
1(f)(4)(ii) must be based on all information relevant to the applicant's
financial status.
(iii) Satisfactory tax history. An applicant has a satisfactory tax
history only if the district director is satisfied with the filing,
deposit, and payment history for all federal taxes of the applicant and
any related person.
(g) Action on the application by the district director--(1) Review
of application. The district director may investigate the accuracy and
completeness of any representations made by an applicant, request any
additional relevant information from the applicant, and inspect the
applicant's premises during normal business hours without advance
notice.
(2) Denial. If the district director determines that an applicant
does not meet all of the applicable registration tests described in
paragraph (f) of this section, the district director must notify the
applicant, in writing, that its application for registration is denied
and state the basis for the denial.
(3) Approval. If the district director determines that an applicant
meets all of the applicable registration tests described in paragraph
(f) of this section, the district director must register the applicant
under section 4101 and issue the applicant a letter of registration
containing the effective date of the registration. The effective date of
the registration must be no earlier than the date on which the district
director signs the letter of registration. A copy of an application for
registration (Form 637) is not a letter of registration.
(h) Terms and conditions of registration--(1) Affirmative duties.
Each registrant must--
(i) Make deposits, file returns, and pay taxes required by the
Internal Revenue Code and the regulations;
(ii) Keep records sufficient to show the registrant's tax liability
under sections 4041(a)(1) and 4081 and payments or deposits of such
liability;
(iii) Make all information reports required under section 4101(d);
(iv) Make available for inspection on demand by the Internal Revenue
Service during normal business hours records relevant to a determination
of tax liability under sections 4041(a)(1) and 4081; and
(v) Notify the district director of any change (such as a change in
ownership) in the information the registrant submitted in connection
with its application for registration, or previously submitted under
this paragraph (h)(1)(v), within 10 days after the change occurs.
(2) Prohibited actions. A registrant may not--
(i) Sell, lease or otherwise allow another person to use its
registration;
(ii) Make any false statement to the district director in connection
with a
[[Page 153]]
submission under paragraph (h)(1) or (h)(3) of this section;
(iii) Make any false statement on, or violate the terms of, any
certificate given to another person to support an exemption from, or a
reduced rate of, the tax imposed by section 4081; or
(iv) In the case of an ultimate vendor (blocked pump), deliver
kerosene (or allow kerosene to be delivered) into the fuel supply tank
of a diesel-powered highway vehicle or diesel-powered train from a
blocked pump.
(3) Additional terms and conditions for terminal operators--(i)
Notice required with respect to dyed diesel fuel and dyed kerosene. A
legible and conspicuous notice stating ``DYED DIESEL FUEL, NONTAXABLE
USE ONLY, PENALTY FOR TAXABLE USE'' must be provided by each terminal
operator to any person that receives dyed diesel fuel at a terminal rack
of that operator. A legible and conspicuous notice stating ``DYED
KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE'' must be
provided by each terminal operator to any person that receives dyed
kerosene at a terminal rack of that operator. These notices must be
provided by the time of the removal and must appear on all shipping
papers, bills of lading, and similar documents that are provided by the
terminal operator to accompany the removal of the fuel.
(ii) Records to be maintained relating to removals of diesel fuel or
kerosene. Each terminal operator must keep the following information
with respect to each rack removal of diesel fuel or kerosene at each
terminal it operates:
(A) The bill of lading or other shipping document.
(B) The record of whether the fuel was dyed and marked in accordance
with Sec. 48.4082-1.
(C) The volume and date of the removal.
(D) The identity of the person, such as a common carrier, that
physically received the fuel.
(E) Any other information required by the Commissioner.
(iii) Records to be maintained relating to dye. With respect to each
of its terminals, a terminal operator must keep records relating to dye
inventories and usage.
(iv) [Reserved]. For further guidance, see Sec. 48.4101-
1T(h)(3)(iv).
(v) Prohibition on providing incorrect information. In connection
with the removal of diesel fuel or kerosene that is not dyed and marked
in accordance with Sec. 48.4082-1, a terminal operator may not provide
any person (including the position holder with respect to the fuel) with
any bill of lading, shipping paper, or similar document indicating that
the diesel fuel or kerosene is dyed and marked in accordance with Sec.
48.4082-1.
(i) Adverse actions by the district director against a registrant--
(1) Mandatory revocation or suspension. The district director must
revoke or suspend the registration of any registrant if the district
director determines that the registrant, at any time--
(i) Does not meet one or more of the applicable registration tests
under paragraph (f) of this section and has not corrected the deficiency
within a reasonable period of time after notification by the district
director;
(ii) Has used its registration to evade, or attempt to evade, the
payment of any tax imposed by section 4041(a)(1) or 4081, or to postpone
or in any manner to interfere with the collection of any such tax, or to
make a fraudulent claim for a credit or payment;
(iii) Has aided or abetted another person in evading, or attempting
to evade, payment of any tax imposed by section 4041(a)(1) or 4081, or
in making a fraudulent claim for a credit or payment; or
(iv) Has sold, leased, or otherwise allowed another person to use
its registration.
(2) Remedial action permitted in other cases. If the district
director determines that a registrant has, at any time, failed to comply
with the terms and conditions of registration under paragraph (h) of
this section, made a false statement to the district director in
connection with its application for registration or retention of
registration, or otherwise used its registration in a manner that
creates a significant risk of nonpayment or late payment of tax, then
the district director may--
(i) Revoke or suspend the registrant's registration;
[[Page 154]]
(ii) In the case of a registrant other than an ultimate vendor or an
ultimate vendor (blocked pump), require the registrant to give a bond
under the provisions of paragraph (j) of this section as a condition of
retaining its registration; and
(iii) In the case of a registrant other than an ultimate vendor or
an ultimate vendor (blocked pump), require the registrant to file
monthly or semimonthly returns under Sec. 40.6011(a)-1(b) of this
chapter as a condition of retaining its registration.
(3) Action by the district director to revoke or suspend a
registration. If the district director revokes or suspends a
registration, the district director must so notify the registrant in
writing and state the basis for the revocation or suspension. The
effective date of the revocation or suspension may not be earlier than
the date on which the district director notifies the registrant.
(j) Bonds--(1) Form. Each bond given to the district director as a
condition of registration under paragraph (f)(4)(i) or (i)(2)(ii) of
this section must be executed in the form prescribed by the district
director. Each bond must be--
(i) A public debt obligation of the United States Government;
(ii) An obligation the principal and interest of which are
unconditionally guaranteed by the United States Government;
(iii) A bond executed by a surety company listed in Department of
the Treasury Circular 570 as an acceptable surety or reinsurer of
federal bonds (a surety bond); or
(iv) Any other bond with security (including liens under section
4101(b)(1)(B)) considered acceptable by the district director.
(2) Amount of bond. A bond given under this paragraph (j) must be in
an amount that the district director determines will ensure timely
collection of the taxes imposed by sections 4041(a)(1) and 4081, taking
into account the applicant's financial capabilities, tax history, and
expected liability under sections 4041(a)(1) and 4081. The district
director may increase or decrease the amount of the required bond to
take into account changes in the applicant's financial capabilities, tax
history, and expected liability under sections 4041(a)(1) and 4081.
However, in no case may the amount of the bond be greater than the
amount that the district director determines is equal to--
(i) The applicant's expected tax liability under sections 4041(a)(1)
and 4081 for a representative 6-month period (as determined by the
district director);
(ii) In the case of a terminal operator, the expected tax liability
of persons other than the terminal operator under section 4081 with
respect to taxable fuel removed at the racks of its terminals
(determined as if all removals of taxable fuel were taxable) during a
representative 1-month period (as determined by the district director);
and
(iii) In the case of a gasohol blender, the gasohol bonding amount.
(3) Collection of taxes from a bond. If a bonded registrant does not
pay the amount of tax it incurs under section 4041(a)(1) or 4081 by the
time prescribed in section 6151 for paying that tax, the district
director may collect the amount of the unpaid tax (including penalties
and interest with respect to that tax) from the bonded registrant's
bond.
(4) Termination of bonds--(i) Surety bonds. A surety on a bond may
give written notice to the district director and the bonded registrant
that the surety desires to be relieved of liability under the bond after
a certain date, which date must be at least 60 days after the receipt of
the notice by the district director. The surety will be relieved of any
liability that the bonded registrant incurs after the date named in the
notice. However, the surety remains liable for the amount of tax that
the bonded registrant incurred under sections 4041(a)(1) and 4081 during
the term of the bond and for penalties and interest with respect to that
tax.
(ii) Other bonds. A bond (other than a surety bond) given to the
district director may be returned to the bonded registrant only after
the earlier of--
(A) The district director's determination that the bonded registrant
has paid all taxes that the bonded registrant incurred under sections
4041(a)(1) and 4081 during the period covered by the bond and any
penalties and interest with respect to the taxes;
[[Page 155]]
(B) The expiration of the period for assessment of the taxes that
the bonded registrant incurred under sections 4041(a)(1) and 4081 taxes
during the period covered by the bond, as determined under the
provisions of subchapter A of chapter 66 of the Internal Revenue Code;
or
(C) The date that the district director receives from the registrant
a substitute bond given under this paragraph (j).
(5) Determination that bond is no longer required. If the district
director determines that the bonded registrant meets the adequate
security test of paragraph (f)(4) of this section without a bond, the
registrant is to be released from the obligation to give a bond as a
condition of registration under section 4101.
(k) Cross references. For a rule relating to the filing of monthly
and semimonthly returns by certain persons that are registered under
section 4101, see Sec. 40.6011(a)-1(b)(2) of this chapter. For rules
relating to the tax on taxable fuel, see Sec. Sec. 48.4081-1 through
48.4083-1. For rules relating to claims by registered ultimate vendors,
see Sec. 48.6427-9. For rules relating to claims by registered ultimate
vendors (blocked pump), see Sec. 48.6427-10.
(l) Effective dates. (1) Except as otherwise provided in this
paragraph (l), this section is applicable as of January 1, 1994.
(2) Paragraph (c)(1) of this section (relating to persons required
to be registered) is applicable as of January 1, 1995, except that
paragraphs (c)(1)(iii) and (c)(1)(vii) of this section are applicable
after March 31, 2001.
(3) Paragraph (h)(3)(iii) of this section (relating to certain
recordkeeping requirements) is applicable as of July 1, 1996.
(4) References in this section to kerosene are applicable after June
30, 1998.
(5) Applicability date. Paragraph (f)(4)(ii)(B) of this section
applies on and after July 6, 2011.
[T.D. 8659, 61 FR 10459, Mar. 14, 1996; 61 FR 28053, June 4, 1996, as
amended by T.D. 8879, 65 FR 17159, Mar. 31, 2000; 65 FR 26488, May 8,
2000; T.D. 9199, 70 FR 21334, Apr. 26, 2005; T.D. 9533, 76 FR 39283,
July 6, 2011; 78 FR 9637, 78 FR 54761, Sept. 6, 2013]
Sec. 48.4101-2 Information reporting.
(a) In general. Each information report under section 4101(d) must
be--
(1) Made in the form required by the Commissioner;
(2) Made for a period of one calendar month; and
(3) Filed by the last day of the first month following the month for
which the report is made, except that a report relating to any month
during 2000 must be filed by February 28, 2001.
(b) Effective date. This section is applicable after March 30, 2000.
[T.D. 8879, 65 FR 17160, Mar. 31, 2000]
Sec. 48.4102-1 Inspection of records by State or local tax officers.
(a) Inspection of records maintained by taxpayer. The records that a
taxpayer is required to keep with respect to the taxes imposed by
section 4081 or 4091 must be open to inspection by any officer of any
State or political subdivision thereof, or of the District of Columbia,
who is charged with the enforcement or collection of any tax on taxable
fuel or aviation fuel.
(b) Inspection of records maintained by Internal Revenue Service--
(1) In general. The records maintained by the Internal Revenue Service
with respect to the taxes imposed by sections 4081 and 4091 shall, upon
the request of an officer (described in paragraph (b)(2) of this
section) of a State or political subdivision thereof, or of the District
of Columbia, be open to inspection by the officer for purposes of
collection or enforcement.
(2) Requests for inspection. Requests for inspection under this
paragraph shall be made in writing, signed by any officer of a State,
political subdivision, or the District of Columbia, who is charged with
the enforcement or collection of any tax on taxable fuel or aviation
fuel imposed by the State, political subdivision, or the District of
Columbia, and shall be addressed to the director of the Internal Revenue
Service Center having custody of the records which it is desired to
inspect. Each such request shall state (i) the kind of records (whether
pertaining to taxable fuel or aviation fuel) it is desired to inspect,
(ii) the period or periods covered by the records involved,
[[Page 156]]
(iii) the name of the officer by whom the inspection is to be made, (iv)
the name of the representative of the officer who has been designated to
make the inspection, (v) by specific reference, the law of the State,
political subdivision, or the District of Columbia imposing the tax
which the officer is charged with collecting or enforcing, and the law
under which the officer is so charged, and (vi) the purpose for which
the inspection is to be made. The service center director will notify
the person making the request upon approval or disapproval of the
request.
(3) Time and place for inspection. In any case where a request for
inspection under this paragraph (b) is approved, the inspection shall be
made in the office of the service center director having custody of the
records which it is desired to inspect, but only in the presence of an
internal revenue officer or employee and during the regular hours of
business of the office.
[T.D. 7908, 48 FR 40222, Sept. 6, 1983, as amended by T.D. 8659, 61 FR
10462, Mar. 14, 1996]
Subpart I_Coal
Sec. 48.4121-1 Imposition and rate of tax on coal.
(a) Imposition of tax--(1) In general. Section 4121(a) imposes a tax
on coal mined at any time in this country if the coal is sold or used by
the producer after March 31, 1978 (see section 4218 and the regulations
under that section for rules relating to the use of coal being treated
as a sale of coal). For purposes of this section, the term ``producer''
means the person in whom is vested ownership of the coal under state law
immediately after the coal is severed from the ground, without regard to
the existence of any contractual arrangement for the sale or other
disposition of the coal or the payment of any royalties between the
producer and third parties. The term includes any person who extracts
coal from coal waste refuse piles or from the silt waste product which
results from the wet washing (or similarly processing) of coal. However,
the excise tax does not apply to a producer who sells the silt waste
product without extracting the coal from it, or to the producer who uses
the silt waste product without extracting the coal from it. Furthermore,
the excise tax does not apply to the sale or use of the silt waste
product after any coal has been extracted from it.
(2) Examples. Paragraph (a)(1) of this section may be illustrated by
the following examples:
Example (1). A, a limited partnership, is the owner of land on which
a coal mine is located. A contracts with XYZ Company to extract the coal
for a set price per ton. XYZ Company is an independent contractor and
has no ownership interest in the coal mined. Under state law, A is the
owner of the coal immediately after severance. After XYZ extracts the
coal from the mine, A sells the coal. A is the producer of the coal and
is responsible for the payment of the excise tax.
Example (2). A, a limited partnership, is the owner of land on which
a coal mine is located. A leases the land to XYZ Company, and XYZ
Company extracts coal from the mine and sells it. Under state law, XYZ
is the owner of the coal immediately after the coal is severed from the
ground. XYZ Company is the producer and must pay the excise tax. This is
true even though the lease agreement requires XYZ to pay a royalty to A.
Example (3). XYZ Company purchases a coal waste refuse pile from B
and extracts the coal from the waste refuse pile and sells the coal. XYZ
is the producer and must pay the excise tax.
Example (4). XYZ Company is a producer of coal and operates its own
cleaning plant. After wet washing the coal, it sells the coal and the
silt waste product. The sale of the coal is subject to the excise tax
whereas the sale of the silt is not.
Example (5). Assume the same facts as in example (4) except that
before selling the silt waste product XYZ Company extracts a small
quantity of finely sized coal from the silt waste product and then sells
both the finely sized coal and the silt waste product. The sale of the
finely sized coal is subject to the excise tax whereas the sale of the
silt is not.
(b) Rate of tax--(1) Underground mines; surface mines. The rate of
tax imposed on coal from underground mines located in the United States
is the lower of 50 cents per ton (2,000 pounds), or 2 percent of the
sale price. The rate of tax imposed on coal from surface mines located
in the United States is the lower of 25 cents per ton (2,000 pounds) or
2 percent of the sale price. If a sale or use includes a portion of a
ton, the tax is applied proportionately. Thus, if
[[Page 157]]
1,200 pounds of coal from an underground mine are sold for $35.00, the
tax is 30 cents.
(2) Combination. If a single mine yields coal from both surface and
underground mining, the producer must determine the rate (50 cents or 25
cents per ton) for each ton of coal mined: It is presumed that coal is
mined from underground mines (50 cents per ton) unless the producer
keeps sufficient records to establish to the satisfaction of the
Secretary that the coal was mined from a surface mine.
(c) Exemptions--(1) Lignite or imported coal. The excise tax of coal
does not apply to lignite or imported coal. Lignite is defined in
accordance with the standard specification for classification of coals
by rank of the American Society for Testing and Materials (Annual Book
of ASTM Standards Part 26, D 388). The procedures specified in D 388
must be followed. If a producer extracts both taxable coal and lignite,
then the producer must maintain adequate records to establish the
portion of the mineral mined that is exempt from the tax. In determining
whether all or a portion of the mineral extracted is lignite, the
Service will consider all the facts and circumstances. For example, if a
producer sells lignite and coal, the Service will examine all the facts
and circumstances, including the contract price, contract
specifications, and the amount of lignite extracted as it compares to
the amount of lignite sold.
(2) Other exemptions not applicable. There are no exemptions for
sales for further manufacture, for export, for use as supplies for
vessels or aircraft, for the use of a State or local government, or for
the use of a nonprofit educational organization. Furthermore, the
Secretary does not have discretion to exempt sales of coal for use of
the United States from the tax. There is also no exemption from the coal
excise tax when the coal is used in further manufacture of another
article that is subject to manufacturers excise tax. For example, if a
producer of coal converts coal into gasoline which the producer then
sells, the producer is liable for the coal excise tax when the coal is
converted into gasoline and also liable for the manufacturers excise tax
on gasoline when the gasoline is sold.
(d) Definitions and special rules--(1) Coal produced from surface
mine. Coal is treated as produced from a surface mine if all of the
geological matter (e.g., trees, earth, rock) above the coal is removed
before the coal is mined. In addition, both coal mined by auger and coal
that is reclaimed from coal waste refuse piles are treated as produced
from a surface mine.
(2) Coal produced from underground mine. Coal is treated as produced
from an underground mine if it is not produced from a surface mine.
(3) Coal used by the producer. For purposes of this section, the
term ``coal used by the producer'' means use by the producer in other
than a mining process. A mining process is determined the same way it is
determined for percentage depletion purposes. For example, a producer
who mines coal does not ``use'' the coal and thereby becomes liable for
the tax merely because, before selling the coal, the producer breaks it,
cleans it, sizes it, or applies one of the other processes listed in
section 613(c)(4)(A) of the Code. In such a case, the producer will be
liable for the tax only when he sells the coal. On the other hand, a
producer who mines coal does become liable for the tax when he uses the
coal as fuel, as an ingredient in making coke, or in another process not
treated as ``mining'' under section 613(c).
(4) Tonnage sold and sales price. For purposes of determining both
the amount of coal sold by a producer and the sales price of the coal,
the point of sale is f.o.b. mine, or f.o.b. cleaning point if the
producer cleans the coal before selling it. This is true even if the
producer sells the coal on the basis of a delivered price. Accordingly,
f.o.b. mine or cleaning point is the point at which the number of tons
sold is to be determined for purposes of applying the applicable tonnage
rate, and the point at which the sales price is to be determined for
purposes of the tax under the 2 percent rate.
(5) Constructive sale price. If a producer uses coal mined by the
producer in other than a mining process, a constructive sale price must
be used in determining the tax under the 2 percent
[[Page 158]]
rate. This constructive price is determined under sections 613(c) and
4218(e) of the Code, and is based on sales of like kind and grade of
coal by the producer or other producers made f.o.b. mine (if the coal is
used without first being cleaned) or f.o.b. cleaning plant (if the coal
is cleaned before it is used). Normally, this constructive price will be
the same as the constructive price used in determining the producer's
percentage depletion deduction.
[T.D. 7726, 45 FR 66453, Oct. 7, 1980; 45 FR 69214, Oct. 20, 1980; T.D.
8448, 57 FR 48186, Oct. 22, 1992]
Subpart J [Reserved]
Subpart K_Sporting Goods
Source: Sections 48.4161(a)-1 through 48.4161(b)-5 contained in T.D.
7328, 39 FR 36586, Oct. 11, 1974, unless otherwise noted. Sections
48.4181-1 through 48.4182-2 contained in T.D. 6454, 25 FR 1774, Mar. 1,
1960.
Sec. 48.4161(a) [Reserved]
Sec. 48.4161(a)-1 Imposition and rate of tax; fishing equipment.
(a) Imposition of tax. Section 4161(a) imposes a tax on the sale of
the following articles of fishing equipment (including in each case
parts or accessories of such articles sold on or in connection therewith
or with the sale thereof) by the manufacturer, producer, or importer
thereof:
(1) Fishing rods;
(2) Fishing creels;
(3) Fishing reels; and
(4) Artificial lures, baits, and flies.
The tax applies only to those items of fishing equipment specified in
section 4161(a) and this paragraph. Therefore, other items of fishing
equipment, such as fishing nets, lines, hooks, sinkers, gaffs, etc., are
not subject to the tax. Furthermore, the tax applies only to those
specified articles of fishing equipment that are designed or constructed
for use in the sport of fishing. Accordingly, the tax does not apply to
those articles which, although nominally articles that are specified in
section 4161(a), are in the nature of toys or novelties that merely
simulate articles of a type referred to in section 4161(a), and are not
designed or constructed for practical use in the sport of fishing.
(b) Rate of tax. Tax is imposed on the sale of the articles
enumerated in section 4161(a) and paragraph (a) of this section at the
rate of 10 percent of the price for which such articles are sold. For
the definition of the term ``price'' see section 4216 and the
regulations thereunder.
(c) Liability for tax. The tax imposed by section 4161(a) is payable
by the manufacturer, producer, or importer making the sale. For
determining who is the manufacturer, producer, or importer, see Sec.
48.0-2(a)(4).
[T.D. 7328, 39 FR 36586, Oct. 11, 1974, as amended by T.D. 8043, 50 FR
32014, Aug. 8, 1985]
Sec. 48.4161(a)-2 Meaning of terms.
(a) Fishing rods. The term ``fishing rods'' includes all articles,
however, designated, that are designed or constructed for use in
conjunction with a fishing reel for casting a line and hook in the sport
of fishing. The term does not include any article that is neither
designed for use in casting, nor suitable for such use. A so-called
fishing rod ``blank'' is not considered to be a ``fishing rod'' unless
the blank contains an affixed handle and reel seat, or is sold in the
form of a kit that contains a rod blank, a handle, and a reel seat.
(b) Fishing creels. The term ``fishing creels'' includes all
portable containers, of whatever material made, that are designed for
storing and carrying fish from the time they are caught until such time
as they are removed from the container for consumption or preservation.
The term does not include any article primarily designed for use in the
commercial fishing industry, or an article such as a collapsible wire
basket designed to be hung over the side of a boat to keep fish captive
and alive in the water.
(c) Fishing reels. The term ``fishing reels'' includes all
mechanical and electrical devices that contain a spool for dispensing
and recovering fishing line, and are designed for use with fishing rods
in casting and in reeling in hooked fish in the sport of fishing. The
term also includes reels designed for use with bows, in the sport of
bowfishing.
[[Page 159]]
(d) Artificial lures, baits, and flies. The term ``artificial lures,
baits, and flies'' includes all artifacts, of whatever materials made,
that simulate an article considered edible by fish and are designed to
be attached to a line or hook to attract fish so that they may be
captured. Thus, the term includes such artifacts as imitation flies,
blades, spoons, and spinners, and edible materials that have been
processed so as to resemble a different edible article considered more
attractive to fish, such as bread crumbs treated so as to simulate
salmon eggs, and pork rind cut and dyed to resemble frogs, eels, or
tadpoles.
[T.D. 7328, 39 FR 36586, Oct. 11, 1974, as amended by T.D. 8043, 50 FR
32014, Aug. 8, 1985]
Sec. 48.4161(a)-3 Parts and accessories.
(a) In general. The tax attaches with respect to parts and
accessories for articles specified in section 4161(a) and Sec.
48.4161(a)-1 that are sold on or in connection with such articles, or
with the sale thereof, at the same rate applicable to the sale of the
basic articles. The tax attaches in such cases whether or not charges
for the parts or accessories are billed separately. To be considered a
part or accessory for an article specified in section 4161(a), an item
must be either essential to the operation of the specified article, or
be designed to directly improve the performance of the specified
article, or to improve its appearance. For example, a carrying case for
a fishing rod is not considered to be a part or accessory for a fishing
rod, despite the fact that it is designed for use with the rod, because
it is neither essential to the use of the rod, nor does it in any way
improve its performance or appearance. A sale of a part or accessory
which would otherwise be considered a sale ``on or in connection with''
the sale of an article taxable under section 4161(a), is not subject to
tax if the part or accessory is sold as a replacement for an identical
part or accessory being sold with the taxable article.
(b) Essential equipment. If taxable articles are sold by the
manufacturer, producer, or importer thereof, without parts or
accessories that are essential for their operation, or are designed
directly to improve the performance or appearnace of the articles, the
separate sale of the parts accessories to the same vendee will be
considered, in the absense of evidence to the contrary, to have been
made in connection with the sale of the basic article, even though the
parts or accessories are shipped separately at the same time or on a
different date.
[T.D. 7328, 39 FR 36586, Oct. 11, 1974, as amended by T.D. 8043, 50 FR
32014, Aug. 8, 1985]
Sec. 48.4161(a)-4 Use considered sale.
For provisions relating to the tax on use of taxable articles by the
manufacturer, producer, or importer thereof, see section 4218 relating
to use by a manufacturer being considered a sale, and the regulations
thereunder.
Sec. 48.4161(a)-5 Tax-free sales.
For provisions relating to the tax-free sales of articles referred
to in section 4161(a) see:
(a) Section 4221, relating to certain tax-free sales;
(b) Section 4222, relating to registration;
(c) Section 4223, pertaining to special rules relating to further
manufacture; and
(d) Section 4225, relating to exemption of articles manufactured or
produced by Indians;
and the regulations thereunder.
Sec. 48.4161(b) [Reserved]
Sec. 48.4161(b)-1 Imposition and rates of tax; bows and arrows.
(a) Imposition of tax. Section 4161(b) imposes a tax on the sale of
the following articles by the manufacturer, producer, or importer
thereof:
(1) Any bow that has a draw weight of 10 pounds or more;
(2) Any arrow that measures 18 inches overall or more in length;
(3) Any part or accessory (other than a fishing reel) suitable for
inclusion in or attachment to a bow or arrow described in subparagraph
(1) or (2) of this paragraph; and
(4) Any quiver suitable for use with arrows described in
subparagraph (2) of this paragraph.
[[Page 160]]
(b) Rate of tax. The tax is imposed on the sale of articles
enumerated in section 4161(b) and paragraph (a) of this section at the
rate of 11 percent of the price for which such articles are sold. For
the definition of the term ``price'', see section 4216 and the
regulations thereunder.
(c) Liability for tax. (1) The tax imposed by section 4161(b) is
payable by the manufacturer, producer, or importer making the sale. For
determining who is the manufacturer, producer, or importer, see Sec.
48.0-2(a)(4).
[T.D. 7328, 39 FR 36586, Oct. 11, 1974, as amended by T.D. 8043, 50 FR
32014, Aug. 8, 1985]
Sec. 48.4161(b)-2 Meaning of terms.
(a) For purposes of the tax imposed by section 4161(b), and unless
otherwise expressly indicated:
(1) Bows. The term ``bows'' includes all articles made of flexible
materials, that are designed to be equipped with a string and used for
the propelling of arrows in the sport of archery (target shooting), or
in hunting or fishing.
(2) Arrows. The term ``arrows'' includes all articles designed or
constructed to be propelled by a bow in the sport of archery (target
shooting), or in hunting or fishing. The overall length of an arrow is
to be measured from the point of the tip or arrow-head to the end of the
arrow nock. In the case of arrows sold by the manufacturer without
heads, tips, or nocks, the overall length is to include the length of
the shaft plus the length of the nock and head or tip that is normally
used with the particular type of arrow shaft.
(b) Parts and accessories--(1) In general. ``Parts and accessories''
for bows and arrows include all articles (other than fishing reels)
suitable for inclusion in, or attachment to, a bow or arrow of the type
described in section 4161(b)(1) and paragraph (a) of this section.
Examples of parts and accessories for bows are bow handles, bow limbs,
bow strings, bow string silencers, bow stabilizers, arrow rests, bow
slings, bow sights, bow levels, bow tip protectors, brush buttons,
camouflaged bow covers, and all other articles designed to be attached
to or included in a bow to assist in aiming or propelling an arrow, or
to protect the bow while in use. Example of parts and accessories for
arrows are arrow shafts, nocks, tips, heads, head adapters, and
feathers.
(2) General purpose materials and articles. General purpose
materials and articles that are not specifically designed to directly
improve the performance or appearance of bows or arrows, or to protect
them while in use, are not considered to be ``parts and accessories''
for bows or arrows, even though such materials may be intended, after
further processing, to be included in or attached to bows or arrows. An
example of a nontaxable article that is designed for use with a bow, but
is neither attached to a bow, nor serves a purpose directly related to
the efficient use of a bow, is a carrying case for a bow. Examples of
nontaxable general purpose materials or articles are glues and cements,
feathers before they are prepared for use with arrows, and bowstring
thread before it is processed into bowstrings. Arrow-shaft material is
considered to be a taxable part for an arrow, unless the manufacturer,
producer, or importer can establish that the particular material is
unsuitable for use in the manufacture of arrows that are subject to the
tax imposed by section 4161(b)(1)(B). In addition, the term ``parts and
accessories'' does not include articles in the nature of expendable
supplies, even though such articles are designed to be applied to, or
used with, bows or arrows. Examples of such supply materials are
bowstring wax, and archery powder.
(c) Quivers. The term ``quivers'' includes all articles, of whatever
material made, that are designed to contain, and to provide ready access
to, taxable arrows during the time an archer is engaged in target
shooting, hunting, or fishing. The term does not include any article
designed solely for storing or transporting arrows during times when the
arrows are not in use.
Sec. 48.4161(b)-3 Use considered sale.
For provisions relating to the tax on use of taxable articles by the
manufacturer, producer, or importer thereof, see section 4218 relating
to use by a manufacturer considered a sale, and the regulations
thereunder.
[[Page 161]]
Sec. 48.4161(b)-4 Tax-free sales.
For provisions relating to tax-free sales of articles referred to in
section 4161(b) see:
(a) Section 4221, relating to certain tax-free sales;
(b) Section 4222, relating to registration;
(c) Section 4223, pertaining to special rules relating to further
manufacture; and
(d) Section 4225, relating to exemption of articles manufactured or
produced by Indians;
and the regulations thereunder.
Sec. 48.4161(b)-5 Effective date.
The taxes imposed by section 4161(b) are effective with respect to
sales made on and after January 1, 1975.
Subpart L_Taxable Medical Devices
Sec. 48.4191-1 Imposition and rate of tax.
(a) Imposition of tax. Under section 4191(a), tax is imposed on the
sale of any taxable medical device by the manufacturer, producer, or
importer of the device. For the definition of the term taxable medical
device, see Sec. 48.4191-2.
(b) Rate of tax. Tax is imposed on the sale of a taxable medical
device at the rate of 2.3 percent of the price for which the device is
sold. For the definition of the term price, see section 4216 and
Sec. Sec. 48.4216(a)-1 through 48.4216(e)-3.
(c) Liability for tax. The manufacturer, producer, or importer
making the sale of a taxable medical device is liable for the tax
imposed by section 4191(a). For rules relating to the determination of
who the manufacturer, producer, or importer is for purposes of section
4191, see Sec. 48.0-2(a)(4). For the definition of the term sale, see
Sec. 48.0-2(a)(5). For rules relating to the lease of an article by the
manufacturer, producer, or importer, see section 4217 and Sec. 48.4217-
1 through Sec. 48.4217-2. For rules relating to the use of an article
by the manufacturer, producer, or importer, see section 4218 and Sec.
48.4218-1 through Sec. 48.4218-5.
(d) Procedural rules. For the procedural rules relating to section
4191, see part 40 of this chapter.
(e) Tax-free sales for further manufacture or export. For rules
relating to tax-free sales of taxable medical devices for further
manufacture or export, see section 4221 and Sec. 48.4221-1 through
Sec. 48.4221-3.
(f) Payments made on or after January 1, 2013, pursuant to lease,
installment sale, or sale on credit contracts. For rules relating to the
taxability of payments made on or after January 1, 2013, pursuant to a
lease, installment sale, or sale on credit contract entered into on or
after March 30, 2010, see Sec. 48.4216(c)-1(e)(1). For rules relating
to the taxability of payments made on or after January 1, 2013, pursuant
to a lease, installment sale, or sale on credit contract entered into
before March 30, 2010, see Sec. 48.4216(c)-1(e)(2).
(g) Effective/applicability date. This section applies to sales of
taxable medical devices on and after January 1, 2013.
[T.D. 9604, 77 FR 72934, Dec. 7, 2012]
Sec. 48.4191-2 Taxable medical device.
(a) Taxable medical device--(1) In general. A taxable medical device
is any device, as defined in section 201(h) of the Federal Food, Drug,
and Cosmetic Act (FFDCA), that is intended for humans. For purposes of
this section, a device defined in section 201(h) of the FFDCA that is
intended for humans means a device that is listed as a device with the
Food and Drug Administration (FDA) under section 510(j) of the FFDCA and
21 CFR part 807, pursuant to FDA requirements.
(2) Devices that should have been listed with the FDA. If a device
is not listed as a device with the FDA but the FDA determines that the
device should have been listed as a device, the device will be deemed to
be listed as a device with the FDA as of the date the FDA notifies the
manufacturer or importer in writing that corrective action with respect
to listing is required.
(b) Exemptions--(1) Specific exemptions. The term taxable medical
device does not include eyeglasses, contact lenses, and hearing aids.
(2) Retail exemption. The term taxable medical device does not
include any device of a type that is generally purchased by the general
public at retail
[[Page 162]]
for individual use (the retail exemption). A device will be considered
to be of a type that is generally purchased by the general public at
retail for individual use if it is regularly available for purchase and
use by individual consumers who are not medical professionals, and if
the design of the device demonstrates that it is not primarily intended
for use in a medical institution or office or by a medical professional.
Whether a device is of a type described in the preceding sentence is
evaluated based on all the relevant facts and circumstances. Factors
relevant to this evaluation are enumerated in paragraphs (b)(2)(i) and
(ii) of this section. Further, there may be facts and circumstances that
are relevant in evaluating whether a device is of a type generally
purchased by the general public at retail for individual use in addition
to those described in paragraphs (b)(2)(i) and (ii) of this section. The
determination of whether a device is of a type that qualifies for the
retail exemption is made based on the overall balance of factors
relevant to the particular type of device. The fact that a device is of
a type that requires a prescription is not a factor in the determination
of whether or not the device falls under the retail exemption.
(i) Regularly available for purchase and use by individual
consumers. The following factors are relevant in determining whether a
device is of a type that is regularly available for purchase and use by
individual consumers who are not medical professionals:
(A) Whether consumers who are not medical professionals can purchase
the device in person, over the telephone, or over the Internet, through
retail businesses such as drug stores, supermarkets, or medical supply
stores and retailers that primarily sell devices (for example, specialty
medical stores, durable medical equipment, prosthetics, orthotics, and
supplies (DMEPOS) suppliers and similar vendors);
(B) Whether consumers who are not medical professionals can use the
device safely and effectively for its intended medical purpose with
minimal or no training from a medical professional; and
(C) Whether the device is classified by the FDA under Subpart D of
21 CFR part 890 (Physical Medicine Devices).
(ii) Primarily for use in a medical institution or office or by a
medical professional. The following factors are relevant in determining
whether a device is designed primarily for use in a medical institution
or office or by a medical professional:
(A) Whether the device generally must be implanted, inserted,
operated, or otherwise administered by a medical professional;
(B) Whether the cost to acquire, maintain, and/or use the device
requires a large initial investment and/or ongoing expenditure that is
not affordable for the average individual consumer;
(C) Whether the device is a Class III device under the FDA system of
classification;
(D) Whether the device is classified by the FDA under--
(1) 21 CFR part 862 (Clinical Chemistry and Clinical Toxicology
Devices), 21 CFR part 864 (Hematology and Pathology Devices), 21 CFR
part 866 (Immunology and Microbiology Devices), 21 CFR part 868
(Anesthesiology Devices), 21 CFR part 870 (Cardiovascular Devices), 21
CFR part 874 (Ear, Nose, and Throat Devices), 21 CFR part 876
(Gastroenterology--Urology Devices), 21 CFR part 878 (General and
Plastic Surgery Devices), 21 CFR part 882 (Neurological Devices), 21 CFR
part 886 (Ophthalmic Devices), 21 CFR part 888 (Orthopedic Devices), or
21 CFR part 892 (Radiology Devices);
(2) Subpart B, Subpart D, or Subpart E of 21 CFR part 872 (Dental
Devices);
(3) Subpart B, Subpart C, Subpart D, Subpart E, or Subpart G of 21
CFR part 884 (Obstetrical and Gynecological Devices); or
(4) Subpart B of 21 CFR part 890 (Physical Medicine Devices); and
(E) Whether the device qualifies as durable medical equipment,
prosthetics, orthotics, and supplies for which payment is available
exclusively on a rental basis under the Medicare Part B payment rules,
and is an ``item requiring frequent and substantial servicing'' as
defined in 42 CFR 414.222.
(iii) Safe Harbor. The following devices will be considered to be of
a type
[[Page 163]]
generally purchased by the general public at retail for individual use:
(A) Devices that are included in the FDA's online IVD Home Use Lab
Tests (Over-the-Counter Tests) database, available at http://
www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfIVD/Search.cfm.
(B) Devices that are described as ``OTC'' or ``over the counter''
devices in the relevant FDA classification regulation heading.
(C) Devices that are described as ``OTC'' or ``over the counter''
devices in the FDA's product code name, the FDA's device classification
name, or the ``classification name'' field in the FDA's device
registration and listing database, available at http://
www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfrl/rl.cfm.
(D) Devices that qualify as durable medical equipment, prosthetics,
orthotics, and supplies, as described in Subpart C of 42 CFR part 414
(Parenteral and Enteral Nutrition) and Subpart D of 42 CFR part 414
(Durable Medical Equipment and Prosthetic and Orthotic Devices), for
which payment is available on a purchase basis under Medicare Part B
payment rules, and are--
(1) ``Prosthetic and orthotic devices,'' as defined in 42 CFR
414.202, that do not require implantation or insertion by a medical
professional;
(2) ``Parenteral and enteral nutrients, equipment, and supplies'' as
defined in 42 CFR 411.351 and described in 42 CFR 414.102(b);
(3) ``Customized items,'' as described in 42 CFR 414.224;
(4) ``Therapeutic shoes,'' as described in 42 CFR 414.228(c); or
(5) Supplies necessary for the effective use of durable medical
equipment (DME), as described in section 110.3 of chapter 15 of the
Medicare Benefit Policy Manual (Centers for Medicare and Medicaid
Studies Publication 100-02).
(iv) Examples. The following examples illustrate the rules of this
paragraph (b)(2).
Example 1. X manufactures non-sterile absorbent tipped applicators.
X sells the applicators to distributors Y and Z, which, in turn, sell
the applicators to medical institutions and offices, medical
professionals, and retail businesses. The FDA requires manufacturers of
non-sterile absorbent tipped applicators to list the applicators as a
device with the FDA. The applicators are classified by the FDA under 21
CFR part 880 (General Hospital and Personal Use Devices) and product
code KXF.
Absorbent tipped applicators do not fall within a retail exemption
safe harbor set forth in paragraph (b)(2)(iii) of this section.
Therefore, the determination of whether the absorbent tipped applicators
are devices of a type generally purchased by the general public at
retail for individual use must be made on a facts and circumstances
basis.
Individual consumers who are not medical professionals can regularly
purchase the absorbent tipped applicators at drug stores, supermarkets,
cosmetic supply stores or other similar businesses, and can use the
applicators safely and effectively for their intended medical purpose
without training from a medical professional. Further, the absorbent
tipped applicators do not need to be implanted, inserted, operated, or
otherwise administered by a medical professional, do not require a large
investment and/or ongoing expenditure, are not a Class III device, are
not classified by the FDA under a category described in paragraph
(b)(2)(ii)(D) of this section, and are not ``items requiring frequent
and substantial servicing'' as defined in 42 CFR 414.222.
Thus, the applicators have multiple factors under paragraph
(b)(2)(i) of this section that tend to show they are regularly available
for purchase and use by individual consumers and none of the factors
under paragraph (b)(2)(ii) of this section tend to show they are
designed primarily for use in a medical institution or office or by
medical professionals. Based on the totality of the facts and
circumstances, the applicators are devices that are of a type that are
generally purchased by the general public at retail for individual use.
Example 2. X manufactures adhesive bandages. X sells the adhesive
bandages to distributors Y and Z, which, in turn, sell the bandages to
medical institutions and offices, medical professionals, and retail
businesses. The FDA requires manufacturers of adhesive bandages to list
the bandages as a device with the FDA. The adhesive bandages are
classified by the FDA under 21 CFR part 880 (General Hospital and
Personal Use Devices) and product code KGX.
Adhesive bandages do not fall within a retail exemption safe harbor
set forth in paragraph (b)(2)(iii) of this section. Therefore, the
determination of whether the adhesive bandages are devices of a type
generally purchased by the general public at retail for individual use
must be made on a facts and circumstances basis.
Individual consumers who are not medical professionals can regularly
purchase the adhesive bandages at drug stores, supermarkets, or other
similar businesses, and
[[Page 164]]
can use the adhesive bandages safely and effectively for their intended
medical purpose without training from a medical professional. Further,
the adhesive bandages do not need to be implanted, inserted, operated,
or otherwise administered by a medical professional, do not require a
large investment and/or ongoing expenditure, are not Class III devices,
are not classified by the FDA under a category described in paragraph
(b)(2)(ii)(D) of this section, and are not ``items requiring frequent
and substantial servicing'' as defined in 42 CFR 414.222.
Thus, the adhesive bandages have multiple factors under paragraph
(b)(2)(i) of this section that tend to show they are regularly available
for purchase and use by individual consumers and none of the factors
under paragraph (b)(2)(ii) of this section tend to show they are
designed primarily for use in a medical institution or office or by
medical professionals. Based on the totality of the facts and
circumstances, the adhesive bandages are devices that are of a type that
are generally purchased by the general public at retail for individual
use.
Example 3. X manufactures snake bite suction kits. X sells the snake
bite suction kits to distributors Y and Z, which, in turn, sell the kits
to medical institutions and offices, medical professionals, and retail
businesses. The FDA requires manufacturers of snake bite suction kits to
list the kits as a device with the FDA. The FDA classifies the snake bit
suction kits under 21 CFR part 880 (General Hospital and Personal Use
Devices) and product code KYP.
Snake bite suction kits do not fall within a retail exemption safe
harbor set forth in paragraph (b)(2)(iii) of this section. Therefore,
the determination of whether the snake bite suction kits are devices of
a type generally purchased by the general public at retail for
individual use must be made on a facts and circumstances basis.
Individual consumers who are not medical professionals can regularly
purchase the snake bite suction kits at sporting goods stores, camping
stores, or other similar retail businesses, and can use the kits safely
and effectively for their intended medical purpose without training from
a medical professional. Further, the snake bite suction kits do not need
to be implanted, inserted, operated, or otherwise administered by a
medical professional, do not require a large investment and/or ongoing
expenditure, are not Class III devices, are not classified by the FDA
under a category described in paragraph (b)(2)(ii)(D) of this section,
and are not ``items requiring frequent and substantial servicing'' as
defined in 42 CFR 414.222.
Thus, the snake bite suction kits have multiple factors under
paragraph (b)(2)(i) of this section that tend to show they are regularly
available for purchase and use by individual consumers and none of the
factors under paragraph (b)(2)(ii) of this section tend to show they are
designed primarily for use in a medical institution or office or by
medical professionals. Based on the totality of the facts and
circumstances, the snake bite suction kits are devices that are of a
type that are generally purchased by the general public at retail for
individual use.
Example 4. X manufactures denture adhesives. X sells the denture
adhesives to distributors Y and Z, which, in turn, sell the adhesives to
dental offices and retail businesses. The FDA requires manufacturers of
denture adhesives to list the adhesive as a device with the FDA. The FDA
classifies the denture adhesives under 21 CFR part 872 (Dental Devices)
and product code KXX.
The denture adhesives do not fall within a retail exemption safe
harbor set forth in paragraph (b)(2)(iii) of this section. Therefore,
the determination of whether the denture adhesives are devices of a type
generally purchased by the general public at retail for individual use
must be made on a facts and circumstances basis.
Individual consumers who are not medical professionals can regularly
purchase the denture adhesives at drug stores, supermarkets, or other
similar businesses, and can use the adhesives safely and effectively for
their intended medical purpose with minimal or no training from a
medical professional. Further, the denture adhesives do not need to be
implanted, inserted, operated, or otherwise administered by a medical
professional, do not require a large investment and/or ongoing
expenditure, are not Class III devices, are not classified by the FDA
under a category described in paragraph (b)(2)(ii)(D) of this section,
and are not ``items requiring frequent and substantial servicing'' as
defined in 42 CFR 414.222.
Thus, the denture adhesives have multiple factors under paragraph
(b)(2)(i) of this section that tend to show they are regularly available
for purchase and use by individual consumers and none of the factors
under paragraph (b)(2)(ii) of this section tend to show they are
designed primarily for use in a medical institution or office or by
medical professionals. Based on the totality of the facts and
circumstances, the denture adhesives are devices that are of a type that
are generally purchased by the general public at retail for individual
use.
Example 5. X manufactures mobile x-ray systems. X sells the x-ray
systems to distributors Y and Z, which, in turn, sell the systems
generally to medical institutions and offices, as well as medical
professionals. The FDA requires manufacturers of mobile x-ray systems to
list the systems as a device with the FDA. The FDA classifies the mobile
x-ray systems under 21 CFR part 892 (Radiology Devices) and product code
IZL.
Mobile x-ray systems do not fall within a retail exemption safe
harbor set forth in
[[Page 165]]
paragraph (b)(2)(iii) of this section. Therefore, the determination of
whether the mobile x-ray systems are devices of a type generally
purchased by the general public at retail for individual use must be
made on a facts and circumstances basis.
Individual consumers who are not medical professionals can regularly
purchase the mobile x-ray systems over the Internet. However, individual
consumers cannot use the x-ray systems safely and effectively for their
intended medical purpose without training from a medical professional.
Although the mobile x-ray systems are not Class III devices and are not
``items requiring frequent and substantial servicing'' as defined in 42
CFR 414.222, they need to be operated by a medical professional, may
require a large investment and/or ongoing expenditure, and are
classified by the FDA under a category described in paragraph
(b)(2)(ii)(D) of this section (21 CFR part 892 (Radiology Devices).
Thus, with regard to the factors under paragraph (b)(2)(i) of this
section, the mobile x-ray systems have one factor that tends to show
they are regularly available for purchase and use by individual
consumers and one factor that tends to show that they are not regularly
available for purchase and use by individual consumers. With regard to
the factors under paragraph (b)(2)(ii) of this section, the mobile x-ray
systems have multiple factors that tend to show they are designed
primarily for use in a medical institution or office or by medical
professionals. Based on the totality of the facts and circumstances, the
mobile x-ray systems are not devices that are of a type that are
generally purchased by the general public at retail for individual use.
Example 6. X manufactures pregnancy test kits. X sells the kits to
distributors Y and Z, which, in turn, sell the pregnancy test kits to
medical institutions and offices, medical professionals, and retail
businesses. The FDA requires manufacturers of pregnancy test kits to
list the kits as a device with the FDA. The FDA classifies the kits
under 21 CFR part 862 (Clinical Chemistry and Clinical Toxicology
Devices) and product code LCX.
The pregnancy test kits are included in the FDA's online IVD Home
Use Lab Tests (Over-the-Counter Tests) database. Therefore, the over the
counter pregnancy test kits fall within the safe harbor set forth in
paragraph (b)(2)(iii)(A) of this section. Further, the FDA product code
name for LCX is ``Kit, Test, Pregnancy, HCG, Over The Counter.''
Therefore, the pregnancy test kits also fall within the safe harbor set
forth in paragraph (b)(2)(iii)(C) of this section. Accordingly, the
pregnancy test kits are devices that are of a type that are generally
purchased by the general public at retail for individual use.
Example 7. X manufactures blood glucose monitors, blood glucose test
strips, and lancets. X sells the blood glucose monitors, test strips,
and lancets to distributors Y and Z, which, in turn, sell the monitors,
test strips, and lancets to medical institutions and offices, medical
professionals, and retail businesses. The FDA requires manufacturers of
blood glucose monitors, test strips, and lancets to list the items as
devices with the FDA. The FDA classifies the blood glucose monitors
under 21 CFR part 862 (Clinical Chemistry and Clinical Toxicology
Devices) and product code NBW. The FDA classifies the test strips under
21 CFR part 862 (Clinical Chemistry and Clinical Toxicology Devices) and
product code NBW. The FDA classifies the lancets under 21 CFR part 878
(General and Plastic Surgery Devices) and product code FMK.
The blood glucose monitors and test strips are included in the FDA's
online IVD Home Use Lab Tests (Over-the-Counter Tests) database.
Therefore, the blood glucose monitors and test strips fall within the
safe harbor set forth in paragraph (b)(2)(iii)(A) of this section.
Further, the FDA product code name for NBW is ``System, Test, Blood
Glucose, Over the Counter.'' Therefore, the blood glucose monitors and
test strips also fall within the safe harbor set forth in paragraph
(b)(2)(iii)(C) of this section.
In addition, the lancets are supplies necessary for the effective
use of DME as described in section 110.3 of chapter 15 of the Medicare
Policy Benefit Manual. Therefore, the lancets fall within the safe
harbor set forth in paragraph (b)(2)(iii)(D)(5) of this section.
Accordingly, the blood glucose monitors, test strips, and lancets
are devices that are of a type that are generally purchased by the
general public at retail for individual use.
Example 8. X manufactures single axis endoskeletal knee shin
systems, which are used in the manufacture of prosthetic legs. X sells
the knee shin systems to Y, a business that makes prosthetic legs. The
FDA requires manufacturers of knee shin systems and prosthetic legs to
list the items as devices with the FDA. The FDA classifies prosthetic
leg components, including knee shin systems, as external limb prosthetic
components under Subpart D of 21 CFR part 890.3420 and product code ISH.
The FDA classifies prosthetic legs as an external assembled lower limb
prosthesis under 21 CFR part 890.3500 and product code ISW/KFX. In
addition, the Centers for Medicare and Medicaid Services have assigned
the knee shin systems Healthcare Procedure Coding System code L5810.
Prosthetic legs and certain prosthetic leg components, including
single axis endoskeletal knee shin systems, fall within the safe harbor
for prosthetic and orthotic devices that do not require implantation or
[[Page 166]]
insertion by a medical profession that is set forth in paragraph
(b)(2)(iii)(D)(1) of this section. Accordingly, both the single axis
endoskeletal knee shin systems manufactured by X and the prosthetic legs
made by Y are devices that are of a type that are generally purchased by
the general public at retail for individual use.
Example 9. X manufactures mechanical and powered wheelchairs. X
sells the wheelchairs to distributors Y and Z, which, in turn, sell the
wheelchairs to medical institutions and offices, medical professionals,
nursing homes, and retail businesses. The FDA requires manufacturers of
manual and powered wheelchairs to list the items as devices with the
FDA. The FDA classifies the manual and powered wheelchairs under Subpart
D of 21 CFR part 890 (Physical Medicine Devices). The FDA classifies
mechanical wheelchairs under product code IOR. The FDA classifies
powered wheelchairs under product code product code ITI.
Mechanical and powered wheelchairs do not fall within a retail
exemption safe harbor set forth in paragraph (b)(2)(iii) of this
section. Therefore, the determination of whether the mechanical and
powered wheelchairs are devices of a type generally purchased by the
general public at retail for individual use must be made on a facts and
circumstances basis.
Individual consumers who are not medical professionals can regularly
purchase the wheelchairs in drug stores, medical specialty stores, or
DME suppliers, as well as over the Internet. In addition, individual
consumers can use the wheelchairs safely and effectively for their
intended medical purpose with minimal or no training from a medical
professional, and the wheelchairs are classified by the FDA under
Subpart D of 21 CFR part 890 (Physical Medicine Devices). Further,
although the wheelchairs may require a large initial investment and/or
ongoing expenditure, they do not need to be implanted, inserted,
operated, or otherwise administered by a medical professional, are not
Class III devices, are not classified by the FDA under a category
described in paragraph (b)(2)(ii)(D) of this section, and are not
``items requiring frequent and substantial servicing'' as defined in 42
CFR 414.222.
Thus, the wheelchairs have multiple factors under paragraph
(b)(2)(i) of this section that tend to show they are regularly available
for purchase and use by individual consumers and, at most, only one
factor under paragraph (b)(2)(ii) of this section tends to show they are
designed primarily for use in a medical institution or office or by
medical professionals. Based on the totality of the facts and
circumstances, the mechanical and powered wheelchairs are devices that
are of a type that are generally purchased by the general public at
retail for individual use.
Example 10. X manufactures portable oxygen concentrators. X sells
the portable oxygen concentrators to distributors Y and Z, which, in
turn, sell the portable oxygen concentrators to medical institutions and
offices, medical professionals, and retail businesses. The FDA requires
manufacturers of portable oxygen concentrators to list the items as
devices with the FDA. The FDA classifies the oxygen regulators under 21
CFR part 868 (Anesthesiology Devices) and product code CAW.
Portable oxygen concentrators do not fall within a retail exemption
safe harbor set forth in paragraph (b)(2)(iii) of this section.
Therefore, the determination of whether the oxygen concentrators are
devices of a type generally purchased by the general public at retail
for individual use must be made on a facts and circumstances basis.
Individual consumers who are not medical professionals can regularly
purchase the portable oxygen concentrators in retail pharmacies, medical
specialty stores, or DME suppliers, as well as over the Internet. In
addition, individual consumers can use the portable oxygen concentrators
safely and effectively for their intended medical purpose with minimal
or no training from a medical professional. Further, although the
portable oxygen concentrators are classified by the FDA under a category
described in paragraph (b)(2)(ii)(D) of this section, they do not need
to be implanted, inserted, operated, or otherwise administered by a
medical professional, do not require a large investment and/or ongoing
expenditure, are not Class III devices, and are not ``items requiring
frequent and substantial servicing'' as defined in 42 CFR 414.222.
Thus, the portable oxygen concentrators have multiple factors under
paragraph (b)(2)(i) of this section that tend to show they are regularly
available for purchase and use by individual consumers and only one
factor under paragraph (b)(2)(ii) of this section that tends to show
they are designed primarily for use in a medical institution or office
or by medical professionals. Based on the totality of the facts and
circumstances, the portable oxygen concentrators are devices that are of
a type that are generally purchased by the general public at retail for
individual use.
Example 11. X manufactures urinary ileostomy bags. X sells the
urinary ileostomy bags to distributors Y and Z, which, in turn, sell the
urinary ileostomy bags to medical institutions and offices, medical
professionals, and retail businesses. The FDA requires manufacturers of
urinary ileostomy bags to list the items as devices with the FDA. The
FDA classifies the urinary ileostomy bags under 21 CFR part 876
(Gastroenterology--Urology Devices) and product code EXH.
[[Page 167]]
The urinary ileostomy bags are ``Prosthetic and orthotic devices,''
as defined in 42 CFR 414.202, that do not require implantation or
insertion by a medical professional. Therefore, the urinary ileostomy
bags fall within the safe harbor set forth in paragraph
(b)(2)(iii)(D)(1) of this section. Accordingly, the urinary ileostomy
bags are devices that are of a type that are generally purchased by the
general public at retail for individual use.
Example 12. X manufactures nonabsorbable silk sutures. X sells the
nonabsorbable silk sutures to distributors Y and Z, which, in turn, sell
the nonabsorbable silk sutures to medical institutions and offices,
medical professionals, and retail businesses. The FDA requires
manufacturers of nonabsorbable silk sutures to list the items as devices
with the FDA. The FDA classifies the nonabsorbable silk sutures under 21
CFR part 878 (General and Plastic Surgery Devices) and product code GAP.
Nonabsorbable silk sutures do not fall within a retail exemption
safe harbor set forth in paragraph (b)(2)(iii) of this section.
Therefore, the determination of whether the nonabsorbable silk sutures
are devices of a type generally purchased by the general public at
retail for individual use must be made on a facts and circumstances
basis.
Individual consumers who are not medical professionals can regularly
purchase the nonabsorbable silk sutures over the Internet. However,
individual consumers cannot use nonabsorbable silk sutures safely and
effectively for their intended medical purpose with minimal or no
training from a medical professional. Further, although the
nonabsorbable silk sutures do not require a large investment and/or
ongoing expenditure, are not Class III devices, and are not ``items
requiring frequent and substantial servicing'' as defined in 42 CFR
414.222, the nonabsorbable silk sutures are classified by the FDA under
a category described in paragraph (b)(2)(ii)(D) of this section, and
they need to be administered by a medical professional.
Thus, with regard to the factors under paragraph (b)(2)(i) of this
section, the nonabsorbable silk sutures have one factor that tends to
show they are regularly available for purchase and use by individual
consumers and one factor that tends to show that they are not regularly
available for purchase and use by individual consumers. With regard to
the factors under paragraph (b)(2)(ii) of this section, the
nonabsorbable silk sutures have multiple factors that tend to show they
are designed primarily for use in a medical institution or office or by
medical professionals. Based on the totality of the facts and
circumstances, the nonabsorbable silk sutures are not devices that are
of a type that are generally purchased by the general public at retail
for individual use.
Example 13. X manufactures nuclear magnetic resonance imaging (NMRI)
systems (also known as magnetic resonance imaging (MRI) systems). X
sells the NMRI systems to distributor Y, which, in turn, sells the
systems to medical institutions. The FDA requires manufacturers of NMRI
systems to list the systems as a device with the FDA. The FDA classifies
the magnetic resonance diagnostic device under 21 CFR part 892
(Radiology Devices) and product code LNH.
NMRI systems do not fall within a retail exemption safe harbor set
forth in paragraph (b)(2)(iii) of this section. Therefore, the
determination of whether the NMRI systems are devices of a type
generally purchased by the general public at retail for individual use
must be made on a facts and circumstances basis.
Individual consumers who are not medical professionals may be able
to regularly purchase the NMRI systems over the Internet. However,
individual consumers cannot use the NMRI systems safely and effectively
for their intended medical purpose without training from a medical
professional. Although the NMRI systems are not Class III devices and
are not ``items requiring frequent and substantial servicing'' as
defined in 42 CFR 414.222, they need to be operated by a medical
professional, and are of a type classified by the FDA under 21 CFR part
892 (Radiology Devices). Further, the cost to acquire, maintain, and/or
use the NMRI systems requires a large initial investment and/or ongoing
expenditure that is not affordable for the average consumer.
Thus, with regard to the factors under paragraph (b)(2)(i), the NMRI
systems have, at most, one factor that tends to show that they are
regularly available for purchase and use by individual consumers and at
least one factor that tends to show that they are not regularly
available for purchase and use by individual consumers. With regard to
the factors under paragraph (b)(2)(ii), the NMRI systems have multiple
factors that tend to show they are designed primarily for use in a
medical institution or office or by medical professionals. Based on the
totality of the facts and circumstances, the NMRI systems are not
devices that are of a type that are generally purchased by the general
public at retail for individual use.
Example 14. X manufactures therapeutic AC powered adjustable home
use beds. X sells the beds to distributors Y and Z, which, in turn, sell
the beds to retail businesses. The FDA requires manufacturers of
therapeutic AC powered adjustable home use beds to list the items as
devices with the FDA. The FDA classifies the therapeutic AC powered
adjustable home use beds under 21 CFR part 880 (General Hospital
Devices) and product code LLI.
[[Page 168]]
Therapeutic AC powered adjustable home use beds do not fall within a
retail exemption safe harbor set forth in paragraph (b)(2)(iii) of this
section. Therefore, the determination of whether the beds are devices of
a type generally purchased by the general public at retail for
individual use must be made on a facts and circumstances basis.
Although the beds may require a large initial investment and/or
ongoing expenditure, individual consumers who are not medical
professionals can regularly purchase the beds in medical specialty
stores or from DME suppliers, as well as over the Internet. In addition,
individual consumers can use the beds safely and effectively for their
intended medical purpose with minimal or no training from a medical
professional. Further, the beds are not classified by the FDA under a
category described in paragraph (b)(2)(ii)(D) of this section, do not
need to be implanted, inserted, operated, or otherwise administered by a
medical professional, are not Class III devices, and are not ``items
requiring frequent and substantial servicing'' as defined in 42 CFR
414.222.
Thus, the therapeutic AC powered adjustable home use beds have
multiple factors under paragraph (b)(2)(i) of this section that tend to
show they are regularly available for purchase and use by individual
consumers and, at most, only one factor under paragraph (b)(2)(ii) of
this section that tends to show they are designed primarily for use in a
medical institution or office or by medical professionals. Based on the
totality of the facts and circumstances, the therapeutic AC powered
adjustable home use beds are devices that are of a type that are
generally purchased by the general public at retail for individual use.
Example 15. X manufactures powered flotation therapy beds. X sells
the beds to distributors Y and Z, which, in turn, sell the beds to
medical institutions and offices, and medical professionals. The FDA
requires manufacturers of powered flotation therapy beds to list the
items as devices with the FDA. The FDA classifies the powered flotation
therapy beds under 21 CFR part 890 (Physical Medicine Devices) and
product code IOQ.
Powered flotation therapy beds do not fall within a retail exemption
safe harbor set forth in paragraph (b)(2)(iii) of this section.
Therefore, the determination of whether the beds are devices of a type
generally purchased by the general public at retail for individual use
must be made on a facts and circumstances basis.
Individual consumers who are not medical professionals may be able
to regularly purchase the beds over the Internet. However, individual
consumers cannot use the beds safely and effectively for their intended
medical purpose with minimal or no training from a medical professional.
Although the powered flotation therapy beds are not Class III devices
and are not ``items requiring frequent and substantial servicing'' as
defined in 42 CFR 414.222, they need to be operated or otherwise
administered by a medical professional. Further, the cost to acquire,
maintain, and/or use the powered flotation therapy beds requires a large
initial investment and/or ongoing expenditure that is not affordable for
the average consumer.
Thus, with regard to the factors under paragraph (b)(2)(i) of this
section, the powered flotation therapy beds have, at most, one factor
that tends to show they are regularly available for purchase and use by
individual consumers and at least one factor that tends to show they are
not regularly available for purchase and use by individual consumers.
With regard to the factors under paragraph (b)(2)(ii) of this section,
the powered flotation therapy beds have multiple factors that tend to
show they are designed primarily for use in a medical institution or
office or by medical professionals. Based on the totality of the facts
and circumstances, the powered flotation therapy beds are not devices
that are of a type that are generally purchased by the general public at
retail for individual use.
(c) Effective/applicability date. This section applies to sales of
taxable medical devices on and after January 1, 2013.
[T.D. 9604, 77 FR 72934, Dec. 7, 2012; 78 FR 15878, Mar. 13, 2013]
Subpart M_Special Provisions Applicable to Manufacturers Taxes
Sec. 48.4216(a)-1 Charges to be included in sale price.
(a) In general. The ``price'' for which an article is sold includes
the total consideration paid for the article, whether that consideration
is in the form of money, services, or other things. See Sec. 48.0-2 (a)
(5). However, for purposes of the taxes imposed under Chapter 32 certain
collateral charges made in connection with the sale of a taxable article
must be included in the taxable sale price, whereas others may be
excluded. Any charge which is required by a manufacturer, producer, or
importer to be paid as a condition of its sale of a taxable article and
which is not attributable to an expense falling within one of the
exclusions provided in section 4216 or the regulations thereunder is
includible in the taxable
[[Page 169]]
sale price. It is immaterial for this purpose that the charge may be
paid to a person other than the manufacturer, producer, or importer, or
that it may be separately billed to the purchaser as a charge earmarked
for expenses incurred or to be incurred in his behalf, such as charges
for demonstration or display of the article, for sales promotion
programs, or otherwise. With respect to the rules relating to exclusion
(in the case of sales after December 31, 1960) of charges for local
advertising of a manufacturer's products, see section 4216(e) and Sec.
48.4216(e)-1. In the case of sales on credit, a carrying, finance, or
service charge is excludable from the sale price if it is reasonably
related to the costs of carrying the deferred portion of the sale price
(such as interest on the deferred portion of the sale price, expenses of
bookkeeping necessary to keep the records of such sales, and expenses of
correspondence and other communication in connection with collection).
(b) Tools and dies. Separate charges for tools and dies used in the
manufacture or production of a taxable article are to be included, in
whole or in part, in the sale price on which the tax is based. It is
immaterial whether the charges for such items are billed in a lump sum
or are amortized or allocated to each of the taxable articles. If, at
the termination of a contract to manufacture taxable articles, the tools
and dies used in production pass to the purchaser, only the amount of
depreciation of the tools and dies incurred in production, computed on a
``production output'' basis, should be included in the sale price. If
the purchaser furnishes the tools and dies, the amount of the cost
thereof, to the extent that such cost has been depreciated in the
production of the taxable articles (computed on a ``production output''
basis), shall be included in determining the sale price of the articles
for purposes of computing the tax. This paragraph applies to sales by
manufacturers after May 5, 1974.
(c) Charges for warranty. A charge for a warranty of an article
which the manufacturer, producer, or importer requires the purchaser to
pay in order to obtain the article shall be included in the sale price
of the article on which the tax is computed. On the other hand, a charge
for a warranty of a taxable article paid at the purchaser's option shall
not be included in the sale price for purposes of computing tax thereon.
(d) Charges for coverings, containers, and packing. Any charge by
the manufacturer, producer, or importer for coverings and containers of
whatever nature used to pack an article for shipment shall be included
as part of the sale price for the purpose of computing the tax, whether
or not the charges are identified as such on the invoice or are billed
separately. Even though there is an agreement that the manufacturer,
producer, or importer will repay all or a portion of the charge for the
coverings or containers upon the return thereof, the full charge
nevertheless shall be included in the sale price. It is immaterial
whether the charge made at the time of sale is more or less than the
actual value of the covering or container. See paragraph (b)(4) of Sec.
48.6416(b)-1 for provisions relating to the claiming of a credit or
refund in the case of a price readjustment due to the return or
repossession of a covering or container. Packing charges are to be
included in the sale price whether the charges cover normal packing or
special packing services, such as for extra protection of the article or
for odd-lot quantities. This rule shall apply whether the packing
services are initiated by the manufacturer, producer, or importer or are
furnished at the request of the purchaser and whether the packing is
performed by the manufacturer, producer, or importer or by another
person at his request. If the purchaser supplies packing materials, the
fair market value of such materials must be included in the tax base
when computing tax liability on the sale of the article.
(e) Taxable and nontaxable articles sold as a unit. Where a taxable
article and a nontaxable article are sold by the manufacturer as a unit,
the tax attaches to that portion of the manufacturer's sale price of the
unit which is properly allocable to the taxable article. For example,
where a fishing reel (an article subject to tax under section 4161(a))
is equipped with a fishing line (a nontaxable article) and the reel and
line
[[Page 170]]
are sold as a unit, the tax imposed by section 4161(a) applies only to
that portion of the manufacturer's sale price of the unit which is
properly allocable to the fishing reel. Normally, the taxable portion of
such a unit may be determined by applying to the manufacturer's sale
price of the unit the ratio which the manufacturer's separate sale price
of the taxable article bears to the sum of the sale prices of both the
taxable and nontaxable articles, if such articles are sold separately by
the manufacturer. Where the articles (or either one of them) are not
sold separately by the manufacturer and do not have established sale
prices, the taxable portion is to be determined from a comparison of the
actual costs of the articles to the manufacturer. Thus, if the cost of
the taxable article represents four-fifths of the total cost of the
complete unit, the tax applies to four-fifths of the price charged by
the manufacturer for the unit.
[T.D. 7536, 43 FR 13517, Mar. 31, 1978]
Sec. 48.4216(a)-2 Exclusions from sale price.
(a) Tax--(1) Tax not part of taxable sale price. The tax imposed by
Chapter 32 of the Code on the sale of an article is not part of the
taxable sale price of the article. Thus, if a manufacturer computes the
tax on a sale price which is determined without regard to the tax, and
it charges the proper tax as a separate item, the amount of tax so
charged does not become a part of the taxable sale price and no tax is
due on the tax so charged. Where no separate charge is made as tax, it
will be presumed that the price charged to the purchaser for the article
includes the proper tax, and the proper percentage of such price will be
allocated to the tax.
(2) Computation of tax. If an article subject to tax at the rate of
10 percent is sold for $100 and an additional item of $10 is billed as
tax, $100 is the taxable selling price and $10 is the amount of tax due
thereon. However, if the article is sold for $100 with no separate
billing or indication of the amount of the tax, it will be presumed that
the tax is included in the $100, and a computation will be necessary to
determine what portion of the total amount represents the sale price of
the article and what portion represents the tax. The computation is as
follows:
Taxable sale price = sale price including tax/100 + rate of tax.
Thus, if the tax rate is 10 percent and the sale price including tax is
$100, the taxable sale price is $90.91 (that is, $100 divided by (100 +
10)), and the tax is 10 percent of $90.91, or $9.09.
(b) Transportation, delivery, insurance, or installation charges--
(1) Charges incurred pursuant to sale. Charges for transportation,
delivery, insurance, installation, and other expenses actually incurred
in connection with the delivery of an article to a purchaser pursuant to
a bona fide sale shall be excluded from the sale price in computing the
tax. Such charges include all items of transportation, delivery,
insurance, installation, and similar expense incurred after shipment to
a customer begins, in response to the customer's order, pursuant to a
bona fide sale. However, costs of such nature incurred by a
manufacturer, producer, or importer in transporting, in the normal
course of business and for its benefit and convenience, articles from a
factory or port of entry to a warehouse or other facility (regardless of
the location of such warehouse or facility) are not considered as being
incurred in connection with the delivery of an article to a purchaser
pursuant to a bona find sale, and charges therefor cannot be excluded
from the sale price in computing tax liability. Similarly, an allowance
granted by a manufacturer as reimbursement for expenses incurred by the
purchaser in shipping used articles to the manufacturer for credit
against the purchase price of taxable articles shall not be excluded
from the sale price when computing tax due on the sale of the taxable
articles. In any event, no charge may be excluded from the sale price
unless the conditions set forth in subparagraph (2) of this paragraph
are complied with. Said conditions are prescribed under the authority
granted the Secretary or his delegate in section 4216(a).
(2) Only actual expenses to be excluded. Where a separate charge is
made for transportation or other expenses incurred in connection with
the delivery
[[Page 171]]
of an article to the purchaser pursuant to a bona fide sale, there shall
be excluded in arriving at the sale price subject to tax only that
portion of the charge which represents the actual expenses incurred for
the transportation or other excludible expenses. Where a separate charge
is less than the actual expense, the difference is presumed to be
included in the billed price. Such difference, together with the
separate charge, shall be excluded in arriving at the sale price on
which the tax is computed. Similarly, where no separate charge is made
but the manufacturer, producer, or importer incurs an expense of the
type to which this paragraph has application, the amount of such expense
actually incurred shall be excluded from the sale price on which the tax
is computed. Where transportation expense is incurred in conjunction
with a shipment composed of both taxable and nontaxable articles, only
the portion of the expense allocable to the taxable articles shall be
excludible. In general, unless the taxpayer establishes to the
satisfaction of the district director that another method reasonably
apportions such freight expense between taxable and nontaxable articles,
such expense should be apportioned on the basis of the relative weights
(or, if available, the relative published tariff rates applicable to)
the taxable and nontaxable articles. Where it is not feasible to
apportion such expense on the basis of relative weights or tariff rates,
the expense shall be apportioned on another reasonable basis; for
example, in the case of a shipment including both taxable and nontaxable
automotive parts which are subject to the same tariff rate, it may be
appropriate to apportion the transportation expense on the basis of the
relative sale prices. A charge for insurance in connection with the
delivery of an article to a purchaser is considered to represent an
expense actually incurred only to the extent that an amount equivalent
to such charge is paid or payable by the manufacturer to a person
authorized to assume such insurance risk.
(3) Transportation, delivery, or installation services performed by
manufacturer. For purposes of computing the taxable sale price of
articles, it is immaterial whether the transportation, delivery, or
other services of the type to which this paragraph has application are
performed by a common carrier or independent agency for or on behalf of
the manufacturer, producer, or importer, or are performed by the
manufacturer, producer, or importer with the use of its own vehicles or
other facilities. Thus, where a manufacturer, producer, or importer
performs the transportation, delivery, or other services with its
equipment, tools, employees, etc., the cost of such services allocable
to the sale of the taxable article shall be excluded. In determining
whether an expense is an excludible transportation or delivery expense,
only those expenses incurred by reason of the fact that the purchaser
accepts delivery at some point other than the manufacturer's place of
business shall be considered excludible transportation or delivery
expenses. All expenses incurred in placing an article packed, ready for
shipment on the loading dock at the manufacturer's factory are not
excludible transportation or delivery expenses. An allowance granted by
the manufacturer, producer, or importer to the purchaser for
transportation, delivery, or other expenses incurred or to be incurred
by the purchaser in connection with the sale shall be excluded in
computing the taxable sale price, if charges for similar expenses would
be excludible if incurred by the manufacturer.
(4) Records in support of exclusion. Every manufacturer, producer,
or importer making sales of taxable articles shall keep records which
will disclose the amount of transportation, delivery, insurance,
installation or other expense actually incurred by it in connection with
the delivery of a taxable article to a purchaser pursuant to a bona fide
sale.
(c) Other charges. A charge or expense not within the scope of
paragraph (a) or (b) of this section, whether or not separately stated,
may not be excluded in computing the taxable sale price unless it can be
shown by adequate records that the charge or expense properly is not to
be included as a manufacturing or selling expense or is in no way
incidental to placing the article in condition packed ready for
shipment.
[[Page 172]]
Commissions to manufacturers' agents, or allowances, payments, or
adjustments made to, and for the benefit of, persons other than the
purchaser may not be excluded or deducted, under any condition, in
computing the sale price upon which the tax is computed.
[T.D. 7536, 43 FR 13518, Mar. 31, 1978; T.D. 7536, 43 FR 16974, Apr. 21,
1978]
Sec. 48.4216(a)-3 Other items relating to tax on sale price.
(a) Exchanges. If, in connection with the sale of an article subject
to a tax imposed under Chapter 32 on the price for which sold, a
manufacturer receives from its vendee another article in exchange, the
tax on the manufacturer's sale shall be computed on the basis of the
amount allowed for the article received from the vendee, plus any
additional amount charged the vendee.
(b) Replacements under warranty. If an article, subject to a tax
imposed under Chapter 32 on the price for which sold, is returned to the
manufacturer by reason of the failure of the article under a warranty as
to its quality or service, and a new article is given by the
manufacturer, free, or at a reduced price, the tax on the new article
shall be computed on the actual amount, if any, to be paid to the
manufacturer for the new article. See paragraph (b)(2) of Sec.
48.6416(b)-1 for the circumstances under which the allowance made by the
manufacturer, producer, or importer upon the return of the first article
constitutes a price readjustment of the sale price of first article and
the extent, if any, to which a credit may be allowed, or refund made, of
the tax paid by the manufacturer, producer, or importer on the sale of
the first article.
(c) Readjustments in sale price. Readjustment in sale price (such as
allowable discounts, rebates, bonuses, etc.) cannot be anticipated. The
tax must be based upon the original price unless the readjustments have
actually been made prior to the close of the period for which the tax
upon the sale is returned. However, if the price upon which the tax was
computed is subsequently readjusted, credit may be taken against the tax
due on a subsequent return or a claim for refund filed as provided by
section 6416(b)(1) and the regulations thereunder.
[T.D. 7536, 43 FR 13519, Mar. 31, 1978]
Sec. 48.4216(b)-1 Constructive sale price; scope and application.
(a) In general. Section 4216(b) pertains to those taxes imposed
under Chapter 32 that are based on the price for which an article is
sold, and contains the provisions for constructing a tax base other than
the actual sale price of the article, under certain defined conditions.
(b) Specific applications. (1) Section 4216(b)(1) applies to:
(i) Arm's-length sales at retail or on consignment, other than those
sales at retail and to retailers to which section 4216(b)(2) and Sec.
48.4216(b)-3 apply; and
(ii) Sales otherwise than at arm's length, and at less than fair
market price.
(2) Section 4216(b)(2) applies generally to arm's-length sales of an
article at retail or to retailers, or both, where the manufacturer also
sells the same article to wholesale distributors.
(3) Section 4216(b)(3) provides a formula for determining a
constructive sale price for sales of taxable articles between members of
an affiliated group of corporations (as ``affiliated group'' is defined
in section 1504(a)) in those instances where the purchasing corporation
regularly resells to retailers but does not regularly resell to
wholesale distributors, and except for situations where section 4216(b)
(4) or (5) applies.
(4) Section 4216(b)(4) provides a special method for computing a
constructive sale price for sales of taxable articles between affiliated
corporations where the purchasing corporation sells only to retailers,
and the normal method of selling within the industry is for
manufacturers to sell to wholesale distributors.
(5) Section 4216(b)(5) provides a special method for computing a
constructive sale price for sales of articles subject to a tax imposed
by section 4061(a) (trucks, buses, tractors, etc.) between affiliated
corporations, where the purchasing corporation regularly sells such
articles in arm's-length transactions to independent retailers.
[[Page 173]]
(c) Definitions. For purposes of section 4216(b) and the regulations
thereunder and unless otherwise indicated:
(1) Sale at retail. A ``sale at retail,'' or a ``retail sale'', is a
sale of an article to a purchaser who intends to use or lease the
article rather than resell it. The fact that articles are sold in
wholesale lots, or at wholesale prices, will not change the character of
such sales as ``sales at retail'' if the purchaser is not engaged in the
business of reselling such articles, and acquires them for the purpose
of using them rather than reselling them.
(2) Retail dealers. A ``retail dealer'', or ``retailer'', is a
person engaged in the business of selling articles at retail.
(3) Wholesale distributor. The term ``wholesale distributor'' means
a person engaged in the business of selling articles to persons engaged
in the business of reselling such articles.
[T.D. 7613, 44 FR 23824, Apr. 23, 1979]
Sec. 48.4216(b)-2 Constructive sale price; basic rules.
(a) In general. Section 4216(b)(1) sets forth the conditions that
require the Secretary to construct a sale price on which to compute a
tax imposed under Chapter 32 on the price for which an article is sold.
The section requires a constructive sale price to be established where a
taxable article is (1) sold at retail, (2) sold while on consignment, or
(3) sold otherwise than through an arm's-length transaction at less than
fair market price. See Sec. 48.4216 (b)-2 (c) for the treatment of
articles taxable under section 4061(a).
(b) Sales at retail. Section 4216(b)(1)(A) relates to the
determination of a constructive sale price for sales of taxable articles
sold at arm's length and at retail. In the case of such sales, the
constructive sale price is the highest price for which such articles are
sold to wholesale distributors, in the ordinary course of trade, by
manufacturers or producers thereof, as determined by the Secretary. If
the constructive sale price is less than the actual sale price, the
constructive sale price shall be used as the tax base. If the
constructive sale price is not less than the actual sale price, the
actual sale price shall be considered as not less than fair market, and
shall be used as the tax base. In determining the highest price for
which articles are sold by manufacturers to wholesale distributors,
there must be taken into consideration the normal industry practices
with respect to section 4216 (a) and (f) inclusions and exclusions.
However, once a constructive sale price has been determined by the
Secretary or his delegate, no further adjustment of such price shall be
made. The provisions of section 4216(b)(1)(A) and this paragraph shall
not apply in those instances where the provisions of section 4216(b)(2)
and Sec. 48.4216(b)-3 apply.
(c) Sales of articles taxable under section 4061(a). With respect to
sales made after December 31, 1978, in the case of an article the sale
of which is taxable under section 4061(a) and which is sold at retail,
the tax under this chapter shall be computed on a percentage (as
determined by the Secretary but not greater than 100 percent) of the
actual selling price based on the highest price for which such articles
are sold by manufacturers and producers in the ordinary course of trade.
The constructive sale price under this section shall be determined
without regard to any individual manufacturer's or producer's cost.
(d) Sales on consignment. As in the case of sales at retail, the
constructive sale price for sales on consignment shall be the price for
which such articles are sold, in the ordinary course of trade, by
manufacturers or producers thereof, as determined by the Secretary or
his delegate. For purposes of section 4216(b)(1)(B) and this paragraph,
an article is considered to be sold on consignment if it is sold while
it is on consignment to a person which has the right to sell, and does
sell, such article in its own name, but never receives title to the
article from the manufacturer. Ordinarily, the constructive sale price
of an article sold on consignment is the net price received by the
manufacturer from the consignee. The provisions of section 4216(b)(1)(B)
and this paragraph shall not apply if the provisions of section
4216(b)(2) and Sec. 48.4216(b)-3 apply.
(e) Sales not at arm's length. For purposes of section 4216(b)(1)(C)
and this paragraph, a sale is considered to be
[[Page 174]]
made under circumstances otherwise than at ``arm's length'' if:
(1) One of the parties is controlled (in law or in fact) by the
other, or there is common control, whether or not such control is
actually exercised to influence the sale price, or
(2) The sale is made pursuant to special arrangements between a
manufacturer and a purchaser.
In the case of an article sold otherwise than at arm's length, and at
less than fair market price, the constructive sale price shall be the
price for which such articles are sold, in the ordinary course of trade,
by manufacturers or producers thereof, as determined by the Secretary.
Once such a constructive sale price has been determined, no further
adjustment of such price shall be made. See sections 4216(b) (3), (4),
and (5), and Sec. 48.4216 (b)-4, for specific methods for determining
constructive sale prices for intercompany sales under certain defined
conditions.
[T.D. 7613, 44 FR 23825, Apr. 23, 1979; 44 FR 47767, Aug. 15, 1979]
Sec. 48.4216(b)-3 Constructive sale price; special rule for
arm's-length sales.
(a) In general. Section 4216 (b)(2) provides a special rule under
which a manufacturer shall determine a constructive sale price for his
sales of taxable articles at retail, and to retail dealers, under
certain conditions. The rule is applicable where:
(1) The manufacturer regularly sells such articles at retail, or to
retailers, or both, as the case may be,
(2) The manufacturer also regularly sells such articles to one or
more wholesale distributors in arm's-length transactions, and the
manufacturer establishes that its prices in such cases are determined
without regard to any benefit to be derived under section 4216(b)(2),
(3) The transactions are arm's-length transactions, and
(4) With respect to articles to which the tax imposed by section
4061(a) applies (relating to trucks, buses, tractors, etc.), the normal
method of sales for such articles within the industry is not to sell
such articles at retail or to retailers, or combinations thereof.
A manufacturer meeting the foregoing requirements shall base its tax
liability for sales at retail and sales to retailers on the lower of its
actual sale price or the highest price for which it sells the same
articles under the same conditions to wholesale distributors.
(b) Definitions. For purposes of section 4216(b)(2) and this
section:
(1) Actual sale price. ``Actual sale price'' means the actual
selling price of an article determined in the same manner as sale price
is determined for a taxable sale. Accordingly, such price must reflect
the inclusions and exclusions set forth in sections 4216 (a) and (f),
and any price adjustments described in section 6416(b)(1).
(2) Highest price to wholesale distributors. The ``highest price''
charged wholesale distributors for an article by a manufacturer,
producer, or importer thereof, is the highest price at which the
manufacturer, producer, or importer sells the article to wholesale
distributors, determined without regard to quantity. Such price shall be
determined in the same manner as sale price is determined for a taxable
sale with respect to sections 4216 (a) and (f) inclusions and
exclusions; however, since the price is to be a ``highest'' price, no
further adjustment may be made for price readjustments under section
6416(b)(1).
(3) Regular sales. An article is considered to sold ``regularly'' at
retail or to retailers if sales are made at retail or to retailers
periodically and recurringly as a regular part of the seller's business.
If a seller makes only isolated or casual sales of an article at retail
or to retailers, it is not considered to be selling ``regularly'' at
retail or to retailers. Similarly, a manufacturer is considered to be
making regular sales for an article to one or more distributors if it
sells the article to at least one distributor periodically and
recurringly as a regular part of its business.
(4) Normal method of sales in industry. In the absence of a showing
to the Commissioner of Internal Revenue of a more appropriate manner of
determining the normal method of sales within an industry which is
practical in application, the normal method of sales within an industry
shall be regarded as not being at retail or to retailers, or both, if
the industry dollar
[[Page 175]]
volume of sales which are at retail or to retailers, or both, is less
than half the total industry dollar volume of sales at all levels of
distribution by manufacturers, producers, or importers, including sales
to other manufacturers, producers, or importers.
(5) Industry. Each of the following categories of articles upon
which tax is imposed by section 4061(a) constitutes a separate
``industry'':
(i) Taxable automobile trucks (consisting of automobile truck bodies
and chassis);
(ii) Taxable automobile buses (consisting of automobile bus bodies
and chassis);
(iii) Taxable truck and bus trailers and semitrailers (consisting of
chassis and bodies of such trailers and semi-trailers); and
(iv) Taxable tractors of the kind chiefly used for highway
transportation in combination with a trailer or semi-trailer.
(6) Application of section 4216(b)(2) to certain sales before June
22, 1965. In the case of sales before June 22, 1965, of articles then
taxable under section 4121 (relating to electric, gas, and oil
appliances), section 4216(b)(2) also applied in the case of a sale of
such an article to a special dealer. The applicability of section
4216(b)(2) to such a sale may be determined by inserting ``or to a
special dealer'' following ``or to a retailer'' in so much of section
4216(b)(2) as precedes subparagraph (A); by inserting ``or to special
dealers'' following ``retailers'' in section 4216(b)(2)(A); and by
inserting ``(other than special dealers)'' after ``wholesale
distributors'' in section 4216(b)(2)(B) and so much of section
4216(b)(2) as follows section 4216(b)(2)(D). A ``special dealer'' was a
distributor of articles taxable under section 4121 who did not maintain
a sales force to resell the article whose constructive sale price was
established under section 4216(b)(2) but relied on salesmen of the
manufacturer, producer, or importer of the article. In the case of sales
before June 22, 1965, of articles taxable under section 4191 (relating
to business machines) or section 4211 (relating to matches), section
4216(b)(2) was applicable in the same manner as in the case of articles
taxable under section 4061(a). With respect to sales after September 30,
1972, section 4216(b)(2)(C) applied only to articles taxable under
section 4061(a), 4191, or 4211. Section 4216(b)(2)(C) was applicable to
sales before October 1, 1962, of all articles subject to tax under
Chapter 32.
[T.D. 7613, 44 FR 23825, Apr. 23, 1979]
Sec. 48.4216(b)-4 Constructive sale price; affiliated corporations.
(a) In general. Sections 4216(b) (3), (4), and (5) establish
procedures for determining a constructive sale price under section
4216(b)(1)(C) for sales between corporations that are members of the
same ``affiliated group'', as that term is defined in section 1504(a).
(b) Sales to which section 4216(b)(3) applies. Section 4216(b)(3),
which applies to articles sold after December 31, 1969, provides a
procedure for determining a constructive sale price under section
4216(b)(1)(C) in those instances where:
(1) A manufacturer, producer or importer regularly sells a taxable
article (other than an article subject to a tax imposed by section
4061(a) (trucks, buses, etc.)) to a wholesale distributor which is a
member of the same affiliated group as the manufacturer, producer or
importer, and
(2) The wholesale distributor regularly sells such article to one or
more independent retailers, but does not regularly sell to wholesale
distributors.
Under such circumstances the constructive sale price for the article
shall be an amount equal to 90 percent of the lowest price for which the
distributor regularly sells the article in arm's-length transactions to
such independent retailers. Once the constructive sale price has been
determined, no adjustment shall be made for sections 4216 (a) and (f)
inclusions or exclusions or section 6416(b)(1) price readjustments. If
both section 4216(b)(3) and section 4216(b)(4) apply with respect to the
sale of an article, the constructive sale price for such article shall
be the lower of the prices computed under section 4216(b)(3) and section
4216(b)(4).
(c) Sales to which section 4216(b)(4) applies. Section 4216(b)(4),
which applies to articles sold after December 31, 1969, provides a
procedure for determining a constructive sale price under section
4216(b)(1)(C) in those instances where:
[[Page 176]]
(1) A manufacturer, producer, or importer regularly sells (except
for tax-free sales) a taxable article only to a wholesale distributor
which is a member of the same affiliated group as the manufacturer,
producer, or importer,
(2) The distributor regularly sells (except for tax-free sales) such
article only to retail dealers, and
(3) The normal method of sales for such articles within the industry
is to sell such articles in arm's-length transactions to wholesale
distributors.
Section 4216(b)(4) applies with respect to articles taxable under
section 4061(a) (relating to trucks, buses, etc.) only as to sales after
December 31, 1969, and before January 1, 1971. Under section 4216(b)(4),
the constructive sale price of such article shall be the median price at
which the distributor, at the time of the sale by the manufacturer,
resells the article to retail dealers, reduced by a percentage of such
price equal to the percentage which:
(i) The difference between the median price for which comparable
articles are sold to wholesale distributors, in the ordinary course of
trade, by manufacturers of producers thereof, and the median price at
which such wholesale distributors in arm's-length transactions sell such
comparable articles to retailers, is of
(ii) The median price at which such wholesale distributors in arm's-
length transactions sell such comparable articles to retailers.
For purposes of this paragraph, the ``median price'' for which an
article is sold at a particular level of distribution is the price
midway between the highest and lowest prices charged vendees at the
particular level of distribution. Where only one price is charged at a
level of distribution, ``median price'' is equivalent to ``actual
price''. All sale prices referred to in paragraphs (b), (c), (d), and
(e) of this section are prices that must reflect the inclusions and
exclusions set forth in sections 4216(a) and (f). However, once a
constructive sale price has been determined under these paragraphs, no
further adjustment of such price is allowed.
(d) Application of section 4216(b)(4). The application of section
4216(b)(4) and paragraph (c) of this section may be illustrated by the
following example:
Example. M, a corporation engaged in the manufacture of article X,
sold 100 of such articles at $10.00 per article to a wholesale
distributor N, a corporation engaged in the business of selling X
articles to independent retail dealers. N is a member of the same
affiliated group of corporations as M. M sells X articles only to N. The
normal method of manufacturers' sales of X articles in the industry is
to sell to independent wholesale distributors. N corporation sells X
articles to retailers for $15.00 each. The price for which comparable X
articles are sold to wholesale distributors in the ordinary course of
trade by manufacturers thereof is $12.00 per article. Wholesale
distributors sell X articles to retailers in the ordinary course of
trade for $16.00 per article. Under the foregoing facts the constructive
sale price determined under section 4216(b)(4) and this paragraph is
$11.25, computed as follows:
[GRAPHIC] [TIFF OMITTED] TC14NO91.111
(e) Sales to which section 4216(b)(5) applies. Section 4216(b)(5),
which applies to articles sold after December 31, 1970, provides a
procedure for determining a constructive sale price under section
4216(b)(1)(C) in those circumstances where:
(1) A manufacturer, producer, or importer of an article subject to a
tax imposed by section 4061(a) (trucks, buses, etc.) regularly sells
such article to a wholesale distributor that is a member of the same
affiliated group of corporations as the manufacturer, producer, or
importer, and
(2) Such distributor regularly sells such articles to independent
retail dealers.
Under such circumstances the constructive sale price of such articles
shall be 98\1/2\ percent of the lowest price
[[Page 177]]
for which such distributor regularly sells the article in arms's-length
transactions to the independent retail dealers. Once the constructive
sale price has been determined, no adjustment shall be made for section
4216 (a) and (f) inclusions or exclusions or section 6416(b)(1) price
readjustments.
(f) Determination of ``lowest price''. (1) In addition to other
considerations, in determining a ``lowest price'' for purposes of
section 4216(b) (1), (3), and (5) and Sec. 48.4216(b)-4(b), and
48.4216(b)-4(e), such price shall be determined:
(i) Without requiring that a given percentage of sales be made at
that price (provided that the volume of sales made at that price is
great enough to indicate that those sales have not been engaged in
primarily to establish a lower tax base), and
(ii) Without including any charge for a fixed amount that the
purchaser has an unconditional right to recover on the basis of a
contractual arrangement existing at the time of sale.
(2) For purposes of applying section 4216(b)(1) and Sec.
48.4216(b)-2, section 4216(b)(6) and this paragraph apply to articles
sold after June 30, 1962. For purposes of applying section 4216(b)(3)
and paragraph (b) of this section, section 4216(b)(6) and this paragraph
apply to articles sold after December 31, 1969. For purposes of applying
section 4216(b)(5) and paragraph (e) of this section, section 4216(b)(6)
and this paragraph apply to articles sold after December 31, 1970.
(g) Definitions. For purposes of this section and paragraphs (3),
(4), and (5) of section 4216(b), the term ``regularly sells'' has the
same meaning as that accorded the term ``regular sales'' in subparagraph
(3) of Sec. 48.4216(b)-3(b), and the term ``normal method of sales in
the industry'' has the same meaning as accorded that term in
subparagraph (4) of Sec. 48.4216(b)-3(b).
[T.D. 7613, 44 FR 23826, Apr. 23, 1979; 44 FR 47767, Aug. 15, 1979]
Sec. 48.4216(c)-1 Computation of tax on leases and installment sales.
(a) Leases. When a taxable article is leased by a manufacturer,
producer, or importer, liability for tax is incurred, except as provided
by section 4217(b) and Sec. 48.4217-2, on each payment made with
respect to such lease. Tax is payable on each lease payment as long as
the article is leased by the manufacturer, producer, or importer. The
tax payable with respect to each lease payment is a percentage of each
payment based on the rate of tax, if any, in effect on the date the
lease payment is due. If the article is subsequently sold by the
manufacturer, producer, or importer, the tax applies also to such sale,
without regard to the tax paid when the article was leased. For
definition of the term ``lease'', see paragraph (a) of Sec. 48.4217-
1(a).
(b) Installment sales. When a taxable article is sold under an
installment payment contract with title reserved in the seller, or under
a conditional sale contract, chattel mortgage arrangement or other
arrangement creating a security interest with payments to be made in
installments, tax shall be computed and paid on each payment made by the
purchaser. The tax payable with each payment is a percentage of each
payment based on the rate of tax, if any, in effect on the date the
payment is due. The part of each payment that is subject to tax is that
portion of the payment equal to the percentage of the total charge for
the article that is subject to tax. For example, if the total charge for
the article is $1,000, and of the total amount charged only 90 percent
thereof, or $900, is subject to tax by reason of exclusions, then only
90 percent of the installment payment is subject to tax. If the tax base
is a constructive sale price computed under section 4216(b) that is less
than the actual sale price of the article, the portion of each payment
subject to tax is the percentage of such payment equal to the percentage
that the constructive sale price bears to the actual sale price. For
example, if an article is sold at retail for $100, and the constructive
sale price for such an article computed under the provisions of section
4216(b)(1)(A) is $75, the percentage which the constructive sale price
bears to the actual sale price is 75 percent. Accordingly, only 75
percent of each installment payment is subject to tax.
(c) Sales on credit. Where articles are sold on credit under
conditions other than those specified in paragraph (b) of
[[Page 178]]
this section, the entire tax shall be reported and paid with the return
covering the period in which the sale is made, even though the price may
not be paid to the manufacturer, producer, or importer until a later
date, or not paid at all.
(d) Effective dates of paragraphs (a) and (b) of this section. The
rules set forth in paragraphs (a) and (b) of this section are effective
as of June 22, 1965. As in effect before June 22, 1965, section 4216(c)
required, in the case of a transaction described in section 4216(c) (1),
(2), (3), or (4), that there be paid upon each payment with respect to
an article that portion of the total tax which was proportionate to the
portion of the total amount to be paid represented by such payment.
(e) Contracts for the lease, installment sale, or sale on credit, of
a taxable medical device--(1) General rule. Payments made on or after
January 1, 2013, pursuant to a contract for the lease, installment sale,
or sale on credit of a taxable medical device that was entered into on
or after March 30, 2010, are subject to tax under section 4191. The
provisions of sections 4216(c) and 4217, paragraphs (a), (b), and (c) of
this section, and Sec. 48.4217-2 apply.
(2) Exception for payments made on or after January 1, 2013,
pursuant to written binding contracts entered into prior to March 30,
2010. Payments made on or after January 1, 2013, pursuant to a written
binding contract for the lease, installment sale, or sale on credit of a
taxable medical device that was in effect prior to March 30, 2010, are
not subject to tax under section 4191. This exception includes payments
made on or after January 1, 2013, if they are made pursuant to a written
binding contract that was entered into prior to March 30, 2010. This
exception does not apply to payments made under any contract that is
materially modified on or after March 30, 2010. For this purpose, a
material modification includes only a modification that materially
affects the property to be provided under the contract, the terms of
payment under the contract, or the amount payable under the contract.
Notwithstanding the foregoing, a material modification does not include
a modification to the contract required by applicable Federal, State, or
local law.
(3) Effective/applicability date. This section applies on and after
January 1, 2013.
[T.D. 7536, 43 FR 13519, Mar. 31, 1978, as amended by T.D. 9604, 77 FR
72938, Dec. 7, 2012; 78 FR 15878, Mar. 13, 2013]
Sec. 48.4216(d)-1 Sales of installment accounts.
(a) In general. Except as provided in paragraph (d) of this section,
in case of a sale or other disposition by a manufacturer, producer, or
importer of an installment account of the type specified in section
4216(c), the tax shall not apply to subsequent installment payments on
such account. Instead, there shall be paid an amount equal to the
difference between the tax previously paid on such installment account
and the total tax computed by applying:
(1) To each installment due before the sale of the installment
account, the rate of tax applicable at the time payment thereof was due,
and
(2) To each installment, the time for payment of which has not
arrived, the rate of tax which, under the provisions of Chapter 32 as in
effect on the date of the sale of the installment account, is (or is to
be) in effect on the date such installment is due.
However, see paragraph (b) of this section if the sale is made in a
bankruptcy or insolvency proceeding. The tax due under this paragraph
shall be included in the return for the period in which the account is
sold.
(b) Sale in bankruptcy or insolvency proceeding. In the case of a
sale of an installment account of a manufacturer, producer, or importer
pursuant to the order of, or subject to the approval of, a court of
competent jurisdiction in a bankruptcy or insolvency proceeding, the
amount of tax due shall be computed and paid as provided in paragraph
(a) of this section but shall not exceed the amount of tax computed by
multiplying (1) the proportionate share of the amount for which such
accounts are sold which is allocable to each unpaid installment payment,
by (2) the rate of tax which, under the provisions of chapter 32 as in
effect on the date of the sale of the installment account, is
[[Page 179]]
(or is to be) in effect on the date such payment is due.
(c) Collection of installment accounts on behalf of the
manufacturer. Where a manufacturer, producer, or importer retains title
to an installment account but turns it over to another person for
collection on a fee basis, no sale of such account (or other disposition
as contemplated in section 4216(d)) has been made. The tax shall
continue to be paid as provided by section 4216(c).
(d) Returned installment accounts. Where an installment account
which has been sold or otherwise disposed of is returned to the
manufacturer, producer, or importer who sold it under an agreement under
which the account was sold, and credit or refund has been allowed under
section 6416(b)(5) and the regulations thereunder, the manufacturer,
producer, or importer shall pay tax as provided by section 4216(c) and
Sec. 48.4216(c)-1 on any subsequent payments made on such returned
installment account until such time as there shall have been paid the
total tax liability with respect to the account as computed under
paragraph (a) of this section.
(e) Limitation. The sum of the amounts payable under this section
and Sec. 48.4216(c)-1 on an installment account shall not exceed the
total amount of tax which would be payable if such installment account
had not been sold or otherwise disposed of (computed as provided in
subsection (c)).
(f) Applicability of paragraphs (a) and (b) of this section. The
rules set forth in paragraphs (a) and (b) of this section apply in the
case of installment accounts sold after June 21, 1965. In the case of
installment accounts sold before June 22, 1965, paragraph (b) of this
section shall be applied by substituting, in lieu of subparagraph (2)
thereof, ``the rate of tax, as set forth in chapter 32 of the Code,
which applied on the day on which the transaction giving rise to such
installment accounts took place.''
[T.D. 7536, 43 FR 13520, Mar. 31, 1978]
Sec. 48.4216(e)-1 Exclusion of local advertising charges from
sale price.
(a) In general. Section 4216(e) deals with the treatment to be
accorded charges made by a manufacturer for, and reimbursements by a
manufacturer of expenditures in connection with, the advertising of
certain articles subject to excise tax under chapter 32 of the Code.
Section 4216(e) provides an exclusion (which is in addition to the
exclusions provided by section 4216(a) and the regulations thereunder)
in respect of charges for local advertising, as defined in paragraph (b)
of this section, for purposes of determining the price for which an
article is sold. See paragraph (c) of this section. The exclusion
provided by section 4216(e) and paragraph (c) of this section has
application only if:
(1) In the case of articles sold during the period January 1, 1961,
through December 31, 1962, the advertising is broadcast over a radio or
television station, or appears in a newspaper; and
(2) In the case of articles sold on or after January 1, 1963, the
advertising is broadcast over a radio or television station, appears in
a newspaper or magazine, or is displayed by means of an outdoor
advertising sign or poster.
Section 4216(e) also provides an overall limitation in respect of the
sum of the amount of the exclusions from price as charges for local
advertising and the amount of the readjustments authorized under section
6416(b)(1) (relating to credits or refunds for price readjustments) in
respect of reimbursements by a manufacture of expenditures for local
advertising. See Sec. 48.4216(e)-2. For provisions prohibiting
exclusion from price or readjustment of price in respect of charges for,
and reimbursements of expenditures for, advertising other than local
advertising, see Sec. 48.4216(e)-3.
(b) Definition of local advertising--(1) In general. For purposes of
the regulations under sections 4216(e) and 6416(b)(1), the term ``local
advertising'' means advertising which relates to an article with respect
to which tax is imposed under Chapter 32 of the Code on the price for
which sold and which:
(i) Is initiated or obtained by the purchaser or any subsequent
vendee,
(ii) Names the article for which the price is determinable under
section 4216 and states the location at which such article may be
purchased at retail, and
[[Page 180]]
(iii)(a) In the case of articles sold on or after January 1, 1961,
and before January 1, 1963, is broadcast over a radio station or
television station or appears in a newspaper, or
(b) In the case of articles sold on or after January 1, 1963, is
broadcast over a radio station or television station, appears in a
newspaper or magazine, or is displayed by means of an outdoor
advertising sign or poster.
(2) Initiating or obtaining advertising. For purposes of
subparagraph (1) of this paragraph, the advertising must be initiated or
obtained by one or more of the persons in the chain of distribution of
the article (wholesale distributor, jobber, dealer, etc.) who purchased
the article for resale. For purposes of this subparagraph, the
manufacturer is not considered to be one of the persons in the chain of
distribution of the article. In general, advertising of an article is
considered to be initiated or obtained by one or more persons in the
chain of distribution of the article if any such person:
(i) Takes an active part in the actual planning and development, or
in the arrangements or negotiations leading to the development, of the
form and content of the advertising, or
(ii) Contracts for the placement of the advertising.
The participation by the manufacturer of the article in the planning,
development, or placement of the advertising is immaterial provided the
advertising is in fact initiated or obtained by one or more persons in
the chain of distribution of the article. Furthermore, it is immaterial
whether or not the advertising is subject to the approval of the
manufacturer of the article. However, if no person in the chain of
distribution of the article takes an active part in the actual planning
and development, or in the arrangements or negotiations leading to the
development, of the form and content of the advertising, but, rather,
all such planning, development, arrangements, and negotiations are
accomplished by the manufacturer of the article, then such manufacturer
is considered to have initiated the advertising, and if he also
contracts for the placement of the advertising, such advertising does
not qualify as ``local advertising''.
(3) Identification of article and sales location. To meet the
requirements of subparagraph (1) of this paragraph, the advertising must
identify the article for which the price is determinable under section
4216 and give the location or locations at which the article may be
purchased at retail. All products taxable at the same rate under the
same section of chapter 32 of the Code shall be considered to be an
``article'' for purposes of the preceding sentence. No specific method
or means of identification is prescribed. The identification of the
article may be made through the use of the name of the manufacturer or
the use of an established trade-mark, such as a seal, picture, letter or
letters, etc., or a combination thereof. The advertising must identify
the particular retail establishment or establishments at which the
article may be purchased at retail but need not specify the location of
any such establishment in terms of the number by which the premises are
designated or the name of the street on which the retail premises are
situated. However, the location of the retail premises must be described
sufficiently, as, for example, by reference to a particular named
shopping area or shopping center, to enable consumers to find the retail
establishment.
(4) Determination of costs of local advertising. Where an
advertisement identifies more than one article, and all such articles
are not taxable, or are not taxable at the same rate under the same
section of Chapter 32 of the Code, a reasonable allocation of the cost
of the advertisement must be made among (i) articles taxable at the same
rate under the same section of the Code and (ii) articles which are not
taxable under Chapter 32 of the Code. For example, in the case of a
single page newspaper or magazine advertisement, an allocation of costs
reflecting the lineage or space devoted to the specified categories will
be considered to reflect a reasonable allocation of the cost of
advertising the different articles. As a general rule, only the cost of
the ``spot'' portion identifying the retail establishment is considered
``local advertising'' in the case of national television or radio
programs.
[[Page 181]]
(5) Meaning of ``newspaper''. The term ``newspaper'', as used in
subparagraph (1) of this paragraph, is limited to those publications
which are commonly understood to be newspapers and which are printed and
distributed periodically at daily, weekly, or other short intervals for
the dissemination of news of a general character and of a general
interest. The term does not include handbills, circulars, flyers, or the
like, unless printed and distributed as a part of a publication which
constitutes a newspaper within the meaning of this subparagraph. Neither
does the term include any publication which is issued to supply
information on certain subjects of interest to particular groups unless
such publication otherwise qualifies as a newspaper within the meaning
of this subparagraph. For purposes of this subparagraph, advertising is
not considered to be news of a general character and of a general
interest.
(6) Meaning of ``magazine''. The term ``magazine'', as used in
subparagraph (1) of this paragraph, is limited to those publications
which are (i) commonly understood to be magazines, (ii) printed and
distributed periodically at least twice a year, and (iii) published for
the dissemination of information of a general nature or of special
interest to particular groups. The term does not include handbills,
circulars, flyers or the like, unless printed and distributed as a part
of a publication which constitutes a magazine within the meaning of this
subparagraph. For purposes of this subparagraph, advertising is not
considered to be information of a general nature or information of
special interest to particular groups within the contemplation of
subdivision (iii) of this subparagraph.
(7) Meaning of ``outdoor advertising sign or poster''. The term
``outdoor advertising sign or poster'', as used in subparagraph (1) of
this paragraph, means a sign or poster displaying advertising matter,
which is located outside of a roofed enclosure. This term includes both
signs or posters on billboards, whether placed on or affixed to land,
buildings, or other structures, and those which are displayed on or
attached to moving objects, provided the signs or posters are located
outside of a roofed enclosure. The term ``roofed enclosure'' means a
roof structure which is enclosed on more than one-half of its sides by
walls, fences, or other barriers.
(c) Exclusion--(1) Conditions and limitations. A charge for local
advertising which is required by a manufacturer to be paid as a
condition to his sale of an article is not a part of the taxable price
of the article, to the extent that such charge meets each of the
following conditions and limitations:
(i) Such charge does not exceed 5 percent of the difference between
(a) an amount which would constitute to taxable price of the article
(computed at the time of the sale of the article) if no part of any
charge for local advertising were excludable in computing taxable price
and (b) the amount of any separate charge for local advertising,
whatever the amount of such charge may be,
(ii) Such charge is specifically shown as a separate charge for
local advertising on the invoice or statement covering the sale of the
article.
(iii) Such charge is billed by the manufacturer with the intention
on his part of repaying the amount of the charge to the person
purchasing the article from him, or to any person who subsequently
purchases the article for resale, in reimbursement of costs incurred or
local advertising of such article or some other article or articles
taxable at the same rate under the same section of the Code. In the
absence of evidence to the contrary, the fact of such intention will be
assumed in all cases where the manufacturer and his vendees are parties
to an advertising plan which calls for such repayments, or the
manufacturer can otherwise establish that the vendees to whom he bills
such charges understand and expect that such repayments will be made.
(2) When exclusion ceases to apply. To the extent that charge for
local advertising meets the conditions and limitations stated in
subparagraph (1) of this paragraph, such charge is excludable in
computing the taxable price of the article in respect of which the
charge was made. However, the exclusion will cease to apply in respect
of any part of such charge which the manufacturer
[[Page 182]]
fails to repay, before May 1 of the calendar year following the calendar
year in which the article was sold, to the person who purchased the
article from him, or to some other person who subsequently purchases the
article for resale, in reimbursement of costs incurred for local
advertising of such article or some other article or articles taxable at
the same rate under the same section of the Code. If, before such May 1,
any part of the charge so excluded has not been so repaid, the
manufacturer becomes liable for tax on such May 1 in the same manner as
if an article taxable under such section of the Code had been sold by
him on such May 1 at a taxable price equivalent to that part of the
charge not so repaid. However, see paragraph (c)(2) of Sec. 48.6416(b)-
1, relating to price readjustments in cases where local advertising
charges are not repaid before such May 1 but are subsequently paid over
by the manufacturer to his vendees in reimbursement of costs for local
advertising. For provisions relating to the method of determining
whether a payment by a manufacturer is or is not attributable to an
excluded local advertising charge, see paragraph (b)(3) of Sec.
48.4216(e)-2. In any case where the payment is determined to be
attributable to such a charge, the date of the sale in connection with
which the charge was made shall be determined on a first-in-first-out
basis in respect of the vendee to whom the charge was billed by the
manufacturer.
(d) Examples. The application of this section may be illustrated by
the following examples:
Example (1). During the first calendar quarter of 1961, a
manufacturer sold refrigerators to one of his distributors at a total
charge of $10,500, exclusive of tax, transportation charges, delivery
charges, or other charges which are excludable in computing taxable
price pursuant to section 4216(a). This total charge of $10,500 was
billed as follows:
Refrigerators............................................... $10,000
Local advertising charge.................................... 500
-----------
Total charge.............................................. 10,500
At the time of the manufacturer's sales of the refrigerators, it was his
intention, in accordance with the agreement between him and the
distributor, to make repayment to the distributor of the local
advertising charge, to the extent of expenditures by the distributor for
radio, television, or newspaper advertising specifically naming
refrigerators or other articles taxable at the same rate under section
4111 which were manufactured by the manufacturer, and giving the
location of various retail stores within the distributor's territory
where such articles may be purchased. Pursuant to such agreement, the
selection of the advertising medium to be employed is to be made by the
distributor, who is to plan the advertising subject to approval by the
manufacturer, and contract for its placement. In this example, the
advertising for which the charge is made qualifies as local advertising,
the charge is billed to the manufacturer's vendee as a separate charge,
the manufacturer intends to repay the charge to his vendee in
reimbursement of costs incurred by the vendee for local advertising, and
the charge does not exceed 5 percent of $10,000. Accordingly, the
manufacturer's charge of $500 for local advertising is not includible in
the taxable price of the refrigerators for purposes of computing and
paying the tax imposed by section 4111.
Example (2). Assume the same facts as those stated in Example (1),
and assume further that prior to May 1, 1962, the manufacturer has
repaid to the distributor, in reimbursement of local advertising
expenses incurred by the distributor in connection with refrigerators or
other articles taxable at the same rate under section 4111 sold to him
by the manufacturer, $400 of the $500 billed as a local advertising
charge by the manufacturer in connection with his sale of refrigerators
to the distributor in the first quarter of 1961. The manufacturer is
liable, as of May 1, 1962, for tax in respect of the $100 which has not
been repaid to the distributor. The amount of the tax is determinable at
the rate in effect under section 4111 on May 1, 1962, in respect of
refrigerators and is includible in the manufacturer's return of tax
under such section for the second quarter of 1962.
Example (3). During the first calendar quarter of 1961, a
manufacturer sold refrigerators to one of his distributors at a total
charge of $11,000, exclusive of tax, transportation charges, delivery
charges, or other charges which are excludable in computing taxable
price under section 4216(a). This total charge of $11,000 was billed as
follows:
Refrigerators............................................... $10,000
Local advertising charge.................................... 1,000
-----------
Total charge.............................................. 11,000
At the time of the manufacturer's sales of the refrigerators, it was his
intention, in accordance with the terms of a cooperative advertising
plan to which the manufacturer and the distributor were parties, to make
repayment to the distributor of the local advertising charge. Pursuant
to the plan, the repayment would be made to the extent of
[[Page 183]]
expenditures by the distributor for radio, television, or newspaper
advertising, initiated or obtained by him, specifically naming
refrigerators or other articles taxable at the same rate under section
4111 which were manufactured by the manufacturer, and giving the
location of various retail stores within the distributor's territory
where such articles may be purchased. In this example, only $500 of the
manufacturer's charge of $1,000 for local advertising may be excluded in
determining the taxable price of the refrigerators for purposes of
reporting and paying the tax imposed by section 4111. The remaining $500
may not be excluded in computing the taxable price of the refrigerators
since this is the amount by which the $1,000 local advertising charge
exceeds 5 percent of $10,000. Thus, the taxable price of the
refrigerators in this example is $10,500.
Example (4). Assume the same facts as those stated in Example (1),
except that, pursuant to the agreement between the manufacturer and the
distributor, the manufacturer is to contract for the placement of the
local advertising. Payment of the $500 local advertising charge is to be
made by the manufacturer to the person with whom the advertising is
placed in satisfaction of the manufacturer's contractual liability to
such person. Under these circumstances, the manufacturer's payment of
the $500 charge to the person with whom the advertising is placed does
not constitute a refund to the purchaser in reimbursement of costs
incurred for local advertising.
[T.D. 6635, 28 FR 1201, Feb. 7, 1963, as amended by T.D. 6686, 28 FR
11410, Oct. 24, 1963. Redesignated and amended by T.D. 7536, 43 FR
13520, Mar. 31, 1978]
Sec. 48.4216(e)-2 Limitation on aggregate of exclusions and
price readjustments.
(a) In general. The sum of the amount excluded from taxable price in
respect of charges for local advertising, as provided in section
4216(e)(1) and Sec. 48.4216(e)-1, plus the amount of the readjustments
for which credits or refunds may be claimed in respect of local
advertising, as provided in section 6416(b)(1) and paragraph (c) of
Sec. 48.6416(b)-1, is subject to an over-all 5 percent limitation. This
limitation applies to each manufacturer, as of the close of each
calendar quarter, in respect of all articles taxable under the same
section of Chapter 32 which were sold by such manufacturer in such
quarter (and the preceding quarter of quarters, if any, in the calendar
year). For example, a manufacturer selling articles taxable under
section 4061 (relating to automobiles, trucks, buses, etc.), and also
selling articles taxable under section 4111 (relating to refrigerators,
quick-freeze units, etc.), who makes separate charges for local
advertising in connection with his sales, or who makes reimbursement of
local advertising expenses to his vendees out of moneys previously
included in taxable price, in respect of any one or more articles in
each of the two groups must apply the limitation separately in relation
to the articles taxable under section 4061 and in relation to the
articles taxable under section 4111. However, in such case, no breakdown
of the separate articles taxable under section 4061, or of the separate
articles taxable under section 4111, is required.
(b) Computation of over-all 5 percent limitation--(1) In general.
The limitation prescribed by section 4216(e)(2) (the ``over-all 5
percent limitation'' referred to in paragraph (a) of this section) as to
the total of the exclusions from price and readjustments of price which
may be claimed for local advertising in respect of all articles taxable
under the same section of Chapter 32 of the Code shall be computed as of
the close of each calendar quarter of the calendar year. The over-all 5
percent limitation is 5 percent of the difference between (i) the amount
which would constitute the total taxable price (computed at the time of
sale) of all articles taxable under the same section of Chapter 32 of
the Code sold by the manufacturer during the elapsed calendar quarters
of the calendar year, if no part of any charge for local advertising
were excludable in computing taxable price, and (ii) the total of all
amounts billed as separate charges for local advertising of such
articles (whatever the amount of any single charge of the total of all
charges). In making the computations under subdivisions (i) and (ii) of
this subparagraph, credits or refunds under section 6416(b) of tax paid
on the sale of any such articles are to be disregarded and articles sold
tax-free by the manufacturer are to be excluded. The amount by which the
over-all 5 percent limitation computed as of the close of a particular
calendar quarter in respect of articles taxable under the same section
of the Code exceeds the sum of the
[[Page 184]]
charges for local advertising excluded in computing the taxable price
and the amount of reimbursements for local advertising of such articles
made during the elapsed calendar quarters of the calendar year, in
respect of which credit or refund has been claimed, represents the
unused portion of the over-all 5 percent limitation. Such unused portion
is the maximum amount of reimbursements for local advertising in respect
of which credit or refund may be claimed at the close of the particular
calendar quarter, subject to the applicable conditions and limitations
governing the right to claim a credit or refund in respect of local
advertising (see Sec. 48.6416(b)-1). The unused portion of the over-all
5 percent limitation as of the close of the fourth calendar quarter of a
calendar year in respect of which credit or refund may not be claimed as
of the close of such quarter must be disregarded in computing the over-
all 5 percent limitation for any subsequent calendar quarter. Moreover,
the amount of any reimbursements for local advertising made by a
manufacturer in a calendar year which is in excess of the amount of such
reimbursements in respect of which credit or refund may be claimed,
within the over-all limitation, as of the close of the calendar year,
may not subsequently serve as the basis for a credit or refund.
(2) Alternative method of computation in certain cases. If during
the portion of the calendar year ending with the date as of which the
over-all 5 percent limitation is being computed the amount of the local
advertising charge separately billed by the manufacturer has not, in
respect of any sale of any articles taxable under the same section of
Chapter 32 of the Code, exceeded the amount excludable pursuant to
paragraph (c) of Sec. 48.4216(e)-1 in computing taxable price, the
over-all 5 percent limitation as of the close of a particular calendar
quarter in respect of articles taxable under such section is 5 percent
of the total taxable price (computed at the time of the sale) of all
such articles sold taxpaid during the calendar year.
(3) Allocation of amounts paid in reimbursement of expenditures for
local advertising. If a manufacturer makes contributions to a local
advertising program in connection with which he makes excludable local
advertising charges, it is necessary that reimbursements by the
manufacturer for local advertising be attributed to the charges for
local advertising, to the manufacturer's contributions, or allocated
between them. Whether an amount paid by a manufacturer in reimbursement
of expenses for local advertising is or is not a repayment of a local
advertising charge which was excluded from taxable price under section
4216(e)(1) and Sec. 48.4216(e)-1, shall be determined on the basis of
an allocation made under the agreement between the manufacturer and his
vendee (or any subsequent vendee).
(c) Examples. The application of paragraphs (a) and (b) of this
section may be illustrated by the following examples:
Example (1). During the first and second calendar quarters of 1961,
a manufacturer makes sales of articles taxable under section 4111 to his
distributors. The total charges for such sales, exclusive of the tax,
transportation charges, delivery charges, or other charges which are
excludable, pursuant to section 4216(a), in computing taxable price, are
as follows:
First Quarter
Articles taxable under section 4111......................... $100,000
Local advertising charges................................... 3,000
-----------
Total charge.............................................. $103,000
Second Quarter
Articles taxable under section 4111......................... $150,000
Local advertising charges................................... 4,000
-----------
Total charge.............................................. $154,000
Assume further that the manufacturer contributes to the advertising plan
and that the manufacturer pays $5,500 and $1,000 during the first and
second calendar quarters of 1961, respectively, to his distributors in
reimbursement of expenses incurred by them for local advertising of the
articles purchased from the manufacturer.
Computation as of close of first calendar quarter
1. Amount which would constitute total taxable price $103,000
(computed at time of sale) if not part of any charge for
local advertising were excludable in computing taxable
price......................................................
2. Amounts billed as separate charges for local advertising. 3,000
-----------
3. Difference............................................... $100,000
4. Over-all 5 percent limitation (5 percent of item 3)...... $5,000
5. Amount excluded in computing taxable price............... 3,000
-----------
6. Unused portion of limitation............................. $2,000
7. Allocation, pursuant to agreement, or $5,500 paid to
distributors:
Charges for local advertising........................... $3,000
[[Page 185]]
Contributions by manufacturer........................... 2,500
Readjustment may be claimed in respect of that portion of the total
amount repaid to the distributors which is allocated to the
manufacturer's contribution ($2,500) to the extent that such portion
does not exceed the unused portion of the over-all 5 percent limitation
($2,000). Accordingly, as of the close of the first calendar quarter the
manufacturer may claim credit or refund in respect of a readjustment or
price in the amount of $2,000.
Computation as of close of second calendar quarter
1. Amount which would constitute total taxable price $257,000
(computed at time of sale) if not part of any charge for
local advertising were excludable in computing taxable
price $103,000 + $154,000).................................
2. Amounts billed as separate charges for local advertising 7,000
($3,000 + $4,000)..........................................
-----------
3. Difference............................................... $250,000
4. Over-all 5 percent limitation (5 percent of item 3)...... $12,500
5. Amount excluded in computing taxable price ($3,000 + 9,000
$4,000) plus readjustment claimed at end of first calendar
quarter ($2,000)...........................................
-----------
6. Unused portion of limitation............................. $3,500
7. Allocation, pursuant to agreement, of $6,500 ($5,500 +
$1,000) paid to distributors:
Charges for local advertising........................... $3,500
Contributions by manufacturer........................... 3,000
Although the total reimbursements for local advertising expenses
attributable to contributions by the manufacturer ($3,000) does not
exceed the unused portion of the over-all 5 percent limitation ($3,500),
the manufacturer having taken, at the close of the first calendar
quarter, a price readjustment in the amount of $2,000 in respect of his
contributions is entitled at the close of the second calendar quarter to
claim credit or refund in respect of a price readjustment in the amount
of $1,000 ($3,000-$2,000).
Example (2). During the first calendar quarter of 1961, a
manufacturer sold articles taxable under section 4111 to his
distributors at a total charge of $106,000, exclusive of the tax,
transportation charges, delivery charges, or other charges which are
excludable, pursuant to section 4216(a), in computing taxable price.
This total charge of $106,000 was billed as follows:
Articles taxable under section 4111......................... $100,000
Local advertising charges................................... 6,000
-----------
Total charge............................................ $106,000
Assume further that the manufacturer contributes to the advertising plan
and that the manufacturer pays $3,000 during the first calendar quarter
of 1961 to his distributors in reimbursement of expenses incurred by
them for local advertising of the articles purchased from the
manufacturer.
Computation as of close of first calendar quarter
1. Amount which would constitute total taxable price $106,000
(computed at time of sale) if not part of any charge for
local advertising were excludable in computing taxable
price......................................................
2. Amounts billed as separate charges for local advertising. 6,000
-----------
3. Difference............................................... $100,000
-----------
4. Over-all 5 percent limitation (5 percent of item 3)...... $5,000
5. Amount excluded in computing taxable price (see paragraph 5,000
(c) of Sec. 48.4216(e)-1)................................
-----------
6. Unused portion of limitation............................. $0
-----------
7. Allocation, pursuant to agreement, of $3,000 paid to
distributors:
Charges for local advertising........................... $2,000
Contributions by manufacturer........................... 1,000
Credit or refund may not be claimed in respect of that portion of the
total amount repaid to the distributors ($3,000) which is allocated to
the manufacturer's contribution ($1,000) since the amount excluded in
computing taxable price is equal to the over-all 5 percent limitation.
[T.D. 6635, 28 FR 1203, Feb. 7, 1963. Redesignated and amended by T.D.
7536, 43 FR 13520, Mar. 31, 1978]
Sec. 48.4216(e)-3 No exclusion or readjustment for other
advertising charges or reimbursements.
(a) Exclusions from price. No exclusion in computing the taxable
price of any article sold by the manufacturer may be allowed in respect
of any charge for advertising if, and to the extent that, such charge:
(1) Is for advertising which does not qualify as local advertising
within the meaning of section 4216(e)(4) and paragraphs (a) and (b) of
Sec. 48.4216(e)-1, or
(2) Does not satisfy all of the conditions and limitations stated in
section 4216(e)(1) and paragraph (c) of Sec. 48.4216(e)-1.
(b) Readjustments of price. No credit or refund under section
6416(b)(1) may be allowed in respect of any amount which was included in
the taxable price of an article sold by the manufacturer and which was
later paid by him to his vendee in reimbursement of costs incurred for
advertising, if, and to the extent that, the amount so paid:
(1) Is for advertising which does not qualify as local advertising
within the meaning of section 4216(e)(4) and paragraph (b) of Sec.
48.4216(e)-1, or
(2) Is not within the limitation provided in section 4216(e)(2), as
computed
[[Page 186]]
in accordance with Sec. 48.4216(e)-2, as of the close of the calendar
quarter in which the amount is so paid over or as of the close of any
subsequent calendar quarter in the same calendar year. See, however,
paragraph (c)(2)(ii) of Sec. 48.6416(b)-1, relating to redetermination
of price readjustments in cases where local advertising charges excluded
from taxable price in one calendar year become taxable as of May 1 of
the following calendar year.
[T.D. 6686, 28 FR 11411, Oct. 24, 1963. Redesignated and amended by T.D.
7536, 43 FR 13521, Mar. 31, 1978]
Sec. 48.4216(f)-1 Value of used components excluded from price of
certain trucks.
For purposes of the tax imposed by section 4061(a)(1) (relating to
trucks, buses, etc.), in determining the price for which an article is
sold, the value of any previously used component of such article shall
be excluded from the price if the person furnishing the component is the
first user of the finished article. For example, where a manufacturer
builds a truck for a customer who intends to use, rather than resell the
truck, incorporating used parts furnished by the customer, the value of
the previously used parts shall not be included in the price for which
the truck is considered sold by the manufacturer.
[T.D. 7536, 43 FR 13521, Mar. 31, 1978]
Sec. 48.4217-1 Lease considered as sale.
For purposes of Chapter 32 of the Code, the lease of an article by a
manufacturer, producer, or importer shall be considered a sale of the
article. The term ``lease'' means a contract or agreement, written or
verbal, which gives the lessee an exclusive, continuous right to the
possession or use of a particular article for a period of time. The term
includes any renewal or extension of a lease or any subsequent lease of
the article. However, in the case of the lease of an automobile the sale
of which by the manufacturer would be taxable under section 4064, the
term includes only the first lease (excluding any renewal or extension
of the lease) of such automobile by the manufacturer.
[T.D. 7536, 43 FR 13521, Mar. 31, 1978, as amended by T.D. 8036, 50 FR
29963, July 23, 1985]
Sec. 48.4217-2 Limitation on amount of tax applicable to certain
leases.
(a) Conditions for eligibility. Section 4217(b) provides for a
limitation on the amount of tax that shall apply to the lease, any
renewal, or further lease, of an article which, if sold, would be
subject to tax on the basis of sale price. Such limitation on the amount
of the tax applies with respect to the lease of an article only if, at
the time of making the lease, the lessor is engaged in the business of
selling in arm's length transactions the same type and model of article.
In case of a lease to which section 4217(b) does not apply, tax shall be
computed and paid as provided in section 4216(c) and paragraph (a) of
Sec. 48.4216(c)-1.
(b) Lessor engaged in business of selling. The lessor will be
regarded as being engaged in the business of selling in arm's length
transactions the same type and model of an article as the one being
leased if it periodically and recurringly makes bona fide offers for
sale of such articles in the regular course of operation of its
business, which offers if accepted would constitute sales at arm's
length. Whether the offers are bona fide shall be determined on the
basis of the facts in each case, such as sales actually made, the nature
of the advertising, sales literature, and other means used to effectuate
sales. It is not necessary that the offers for sale be made to the same
class of purchasers as those to whom the article is being leased.
(c) Same type and model of article. To qualify as the ``same type
and model of article'', the article offered for sale must be an unused
article essentially the same in size, design, and function as the
article being leased. For example, a van-type truck trailer would not be
the same type and model as a stake-body of flat-bed truck trailer.
Neither would a 25-foot van-type trailer be the same type and model as a
35-foot van-type trailer. Slight differences in appearance or
accessories will not render
[[Page 187]]
articles dissimilar which are identical in all other respects.
(d) Basis for tax--(1) Tax payable until total tax is paid. In case
of a lease of an article to which section 4217 (b) applies, tax shall be
paid on each lease payment in an amount computed by applying to such
lease payment a percentage equal to the rate of tax in effect on the
date of the lease payment. Such tax payments shall continue to be made
under such lease, or any subsequent lease of the article, until the
cumulative total of the tax payments equals the total tax. Lease
payments made thereafter with respect to that article shall not be
subject to tax. For definition of the term ``total tax'', see paragraph
(e) of this section.
(2) Changes in tax rates. Except as provided in:
(i) Section 701 (a) (3) of the Excise Tax Reduction Act of 1965 (79
Stat. 155) in the case of certain reductions in tax rates effective June
22, 1965, or January 1, 1966, and
(ii) Section 401(h)(3) of the Revenue Act of 1971 (85 Stat. 534) in
the case of certain reductions in tax rates effective December 11, 1971,
if the rate of tax is increased or decreased during a lease period, the
new rate shall apply to the lease payments made on and after the date of
the change, but the amount of the total tax shall remain the same.
(e) Total tax. For purposes of this section, the term ``total tax''
means the amount of tax, computed at the rate in effect on the date of
the first lease of the article to which section 4217(b) applies, which
would be due on the constructive sale price of the article as determined
under section 4216(b) and Sec. 48.4216(b)-2, as if the article had been
sold by a manufacturer at retail on such date.
(f) Sale of article before total tax becomes payable. If the lessor
sells the article before the total tax has become payable, the tax
payable on the sale shall be the lesser of the following amounts:
(1) The difference between (i) the total tax, and (ii) the aggregate
tax applicable to lease payments already received; or
(2) A tax computed, at the rate in effect on the date of the sale,
on the price for which the article is sold.
For purposes of subparagraph (2) of this paragraph, the provisions of
section 4216(b) for determining a constructive sale price shall not
apply if the sale is at arm's length. If the sale is not at arm's
length, the tax referred to in subparagraph (2) of this paragraph shall
be computed on a constructive sale price as provided in Sec.
48.4216(b)-2.
(g) Sale of article after total tax has become payable. If the
lessor sells an article after the total tax has become payable, the tax
imposed under Chapter 32 of the Code shall not apply to such sale.
(h) Special rules applicable to certain leases entered into before
January 1, 1959. For purposes of this section, in the case of any lease
entered into before, and existing on, January 1, 1959:
(1) Such lease shall be considered to have been entered into on
January 1, 1959.
(2) The total tax shall be computed on the fair market value of the
article on January 1, 1959.
(3) The lease payments under such lease shall include only payents
attributable to periods beginning after December 31, 1958.
(i) Cross-reference. In the case of the lease of an automobile the
sale of which by the manufacturer would be taxable under section 4064,
the foregoing provisions of this section shall not apply. See section
4217 (e) for the rules relating to the payment of the gas guzzler tax.
[T.D. 7536, 43 FR 13521, Mar. 31, 1978, as amended by T.D. 8036, 50 FR
29963, July 23, 1985]
Use by Manufacturer or Importer Considered Sale
Sec. 48.4218-1 Tax on use by manufacturer, producer, or importer.
(a) In general. Section 4218 imposes tax in respect of certain uses
of articles by the actual manufacturer, producer, or importer thereof.
This section also applies in respect of the use of articles by any other
person who, pursuant to a provision of Chapter 32 of the Code, is
considered to be, or is treated as, the
[[Page 188]]
manufacturer or producer of the articles. See, for example, section 4223
relating to articles purchased tax free for use in further manufacture.
(b) Taxable articles in general--(1) Application of tax. If the
manufacturer, producer, or importer of an article taxable under Chapter
32 of the Code (other than an article referred to in paragraph (a), (d),
or (e) of this section) uses the article for any purpose other than that
indicated in subparagraph (3) or (4) of this paragraph, he shall be
liable for tax with respect to the use of such article in the same
manner as if the article were sold by him.
(2) Taxable use in manufacture of nontaxable articles--(i) In
general. In the case of an article to which subparagraph (1) of this
paragraph applies, tax attaches when the manufacturer, producer, or
importer of the article uses it as material in the manufacture or
production of, or as a component part of, another article which is not
taxable under Chapter 32 of the Code, regardless of the disposition made
of such other article. (See paragraph (c) of Sec. 48.4218-5 for
computation of tax on such use.)
(ii) Types of use in manufacture of nontaxable articles. Taxable use
may consist of the incorporation of a taxable article, such as an
electric light bulb, into a nontaxable article, such as a flashlight.
Taxable use may also result from the combining of a taxable article (or
the components thereof) with a nontaxable article (or the components of
a nontaxable article) resulting in a combination end article which
itself is not taxable. Although the taxable article may not be a
completely separable unit, within the contemplation of the law a taxable
article has been produced and incorporated in the combination end
article. The following are examples of taxable articles so used:
(a) Household type electric or gas clothes drier incorporated in a
combination washer-drier.
(b) Household type electric, gas, or oil cooking range combined
either with a range using other means of heating or with a nontaxable
space heater.
(c) Taxable radio receiving set incorporated in a combination radio
receiver-transmitter or in a combination radio receiver-
intercommunication system.
If an automobile part or accessory, radio or television component, or
camera lens is used as material in the manufacture or production of, or
as a component part of, a taxable article to which subparagraph (1) of
this paragraph has application and such article in turn is used in the
manufacture or production of, or as a component part of, a nontaxable
article, the part or accessory, component, or lens is considered to have
been used in the manufacture of the taxable article, and not in the
manufacture of the nontaxable article. For example, the use of taxable
radio components in the production of a taxable radio receiving set is
exempt from tax (see paragraph (d) of this section), but the use of the
radio receiving set in the production of a nontaxable combination radio
receiver-transmitter is subject to tax. See section 6416(b)(2) or
6416(b)(3) and the regulations thereunder contained in subpart O for
credit or refund of tax paid in respect of such radio receiver if the
combination radio receiver-transmitter is by any person exported, sold
to a State or local government for its exclusive use, sold to a
nonprofit educational organization for its exclusive use, or used or
sold for use as supplies for vessels or aircraft.
(3) Nontaxable use in manufacture of taxable articles. The tax on
the use of an article to which subparagraph (1) of this paragraph has
application shall not apply if the article is used by the manufacturer,
producer, or importer thereof as material in the manufacture or
production of, or as a component part of, another article taxable under
Chapter 32 to be manufactured or produced by him. It is immaterial what
disposition is made of such other article.
(4) Gasoline. The tax on the use of an article shall not apply in
the case of gasoline used on or after October 1, 1961, by any person,
for nonfuel purposes, as a material in the manufacture or production of
another article to be manufactured or produced by him. See section 4221
and the regulations thereunder contained in subpart N. For provisions
applicable to use of gasoline by a producer or importer otherwise than
in the production of other gasoline, or
[[Page 189]]
special motor fuel taxable under section 4041(b), see section 4082(c)
and paragraph (c) of Sec. 48.4082-1 contained in subpart H.
(c) Tires, inner tubes, and automobile radio or television receiving
sets. If the manufacturer, producer, or importer of a tire or inner tube
taxable under section 4071 (other than a bicycle tire or inner tube
referred to in paragraph (e) of this section), or an automobile radio or
television receiving set taxable under section 4141, sells such article
on or in connection with the sale of any other article or uses it for
any purpose, he shall be liable for tax with respect to such tire, inner
tube, or radio or television receiving set in the same manner as if it
were sold by him as a separate article. However, tax does not apply
where the manufacturer, producer, or importer of the tire, inner tube,
or automobile radio or television receiving set sells such article on or
in connection with the sale of another article manufactured by him for
any of the exempt purposes specified in paragraphs (2) to (5),
inclusive, of section 4221(a) and the regulations thereunder contained
in subpart N.
(d) Automobile parts or accessories, radio or television components,
and camera lenses--(1) Application of tax. If the manufacturer,
producer, or importer of an automobile part or accessory taxable under
section 4061(b), a radio or television component taxable under section
4141, or a camera lens taxable under section 4171, uses the article for
any purpose other than that indicated in subparagraph (2) of this
paragraph, he shall be liable for tax with respect to the use of the
article in the same manner as if the article were sold by him. For
example, tax applies if the manufacturer, producer, or importer uses the
article referred to in this subparagraph for repair or replacement
purposes in connection with equipment used by him in the operation of
his business.
(2) Nontaxable use in manufacture of other articles. The tax on the
use of an article referred to in subparagraph (1) of this paragraph
shall not apply if the article is used by the manufacturer, producer, or
importer thereof as material in the manufacture or production of, or as
a component part of, any other article (whether or not taxable under
Chapter 32) to be manufactured or produced by him. It is immaterial what
disposition is made of such other article.
(e) Bicycle tires and inner tubes--(1) Application of tax. If the
manufacturer, producer, or importer of a bicycle tire as defined in
section 4221(e)(4)(B) or an inner tube for such a tire uses the tire or
inner tube for any purpose other than as indicated in subparagraph (2)
of this paragraph, he shall be liable for tax with respect to the use of
the tire or inner tube in the same manner as if the article were sold by
him.
(2) Nontaxable use in manufacture of other articles. The tax on the
use of a bicycle tire or inner tube referred to in subparagraph (1) of
this paragraph shall not apply if the tire or inner tube is used by the
manufacturer, producer, or importer thereof as material in the
manufacture or production of, or as a component part of, a new bicycle
to be manufactured or produced by him. It is immaterial what disposition
is made of the new bicycle. Tax, however, applies in the case of the use
of a bicycle tire or inner tube by the manufacturer, producer, or
importer thereof in the rebuilding or reconditioning of a used bicycle.
(3) Effective date. The provisions of this paragraph shall apply to
the use on or after May 1, 1960, of a bicycle tire or inner tube by the
manufacturer, producer, or importer thereof. Liability for tax on the
use prior to that date of a bicycle tire or inner tube by the
manufacturer, producer, or importer thereof shall be based on the
provisions of paragraph (c) of this section which apply to tires and
inner tubes in general.
(f) Use after lease. If the manufacturer, producer, or importer of a
taxable article leases such article and thereafter uses the article, he
incurs liability for tax on such use as provided in these regulations to
the same extent as if the article were sold after being leased. See
section 4217 and the regulations thereunder in this subpart for
application and computation of tax in case of leased articles.
(g) Time of application of tax. In the case of a taxable use of an
article by
[[Page 190]]
the manufacturer, producer, or importer thereof, the tax attaches at the
time such use begins. If tax applies by reason of the sale of an article
by the manufacturer, producer, or importer thereof on or in connection
with his sale of another article, the tax attaches at the time of the
sale of such other article.
(h) Exemptions because of other statutory provisions. Tax does not
apply on the use of an article by the manufacturer, producer, or
importer thereof if under the applicable provisions of the Code the sale
of the article for a similar use would not be subject to tax. For
example, the use of gasoline by the producer thereof to propel tankers
engaged in foreign trade which are owned or leased by the producer would
not be subject to tax under section 4218 since a sale for such use would
be exempt from tax as provided in section 4221(a)(3). Also, tax need not
be paid with respect to the use of an article by the manufacturer,
producer, or importer thereof if such use would qualify, under the
provisions of section 6416(b), for credit or refund of the tax paid.
[T.D. 6687, 28 FR 11780, Nov. 5, 1963]
Sec. 48.4218-2 Business or personal use of articles.
(a) Business use. Section 4218 applies to the use by a person, in
the operation of any business in which he is engaged, of a taxable
article which has been manufactured, produced, or imported by him or his
agent. For example, a person engaged in the operation of a dairy
business incurs liability for tax with respect to a truck body
manufactured by him and used in the operation of his dairy business.
(b) Personal use. The tax on use of a taxable article does not
attach in cases where an individual incidentally manufactures, produces,
or imports a taxable article for his personal use or causes a taxable
article to be manufactured, produced, or imported for his personal use.
[T.D. 6687, 28 FR 11781, Nov. 5, 1963]
Sec. 48.4218-3 Events subsequent to taxable use of article.
Liability for tax incurred on the use of an article is not
extinguished or reduced because of any subsequent sale or lease of the
article even if such sale or lease would have been exempt if the article
had been so sold or leased prior to use. If a manufacturer, producer, or
importer of an article incurs liability for tax on his use thereof, and
thereafter sells or leases the article in a transaction which otherwise
would be subject to tax, liability for tax is not incurred on such sale
or lease.
[T.D. 6687, 28 FR 11781, Nov. 5, 1963]