Internal Revenue Service
Rev. Rul. 60-29
1960-1 C.B. 504
Section 7503 -- Weekends & Holidays; Timeliness
Neither the exemption with respect to sales for export, provided by section 4221(a)(2) of the Internal Revenue Code of 1954, nor the exemption for sales for further manufacture, provided by section 4221(a)(1) of the Code, applies to the sale for export of radio and television components which are destroyed by fire prior to actual exportation.
Rev. Rul. 60-29
Advice has been requested whether the exemption with respect to sales for export or the exemption with respect to sales of articles for further manufacture applies to the sale of radio and television components under the circumstances described below.
X corporation, located in the United States, sells for export to Y company, located in Mexico, the component parts necessary to build television chassis. Y company manufactures cabinets and assembles complete television receiving sets in Mexico. X corporation delivered a shipment of these television components to Y company's broker, located in Texas. Title to the components passed to Y company and the sale was fully consumated. However, the components were totally destroyed by fire at the broker's warehouse before they were exported to Mexico.
Section 4141 of the Internal Revenue Code of 1954 imposes a tax upon the sale by the manufacturer, producer, or importer of certain enumerated articles, including radio and television components.
Section 4221(a) of the Code provides, in part, as follows:
GENERAL RULE.-Under regulations prescribed by the Secretary or his delegate, no manufacturers excise tax shall be imposed * * * on the sale by the manufacturer of an article-
(1) for use by the purchaser for further manufacture, or for resale by the purchaser to a second purchaser for use by such second purchaser in further manufacture,
(2) for export, or for resale by the purchaser to a second purchaser for export,
* but only if such exportation or use is to occur before any other use.
Section 4221(b) of the Code provides as follows:
PROOF OF RESALE FOR FURTHER MANUFACTURE; PROOF OF EXPORT.-Where an article has been sold free of tax under subsection (a)-
(1) for resale by the purchaser to a second purchaser for use by such second purchaser in further manufacture, or
(2) for export, or for resale by the purchaser to a second purchaser for export, subsection (a) shall cease to apply in respect of such sale of such article unless, within the 6-month period which begins on the date of the sale by the manufacturer (or, if earlier, on the date of shipment by the manufacturer), the manufacturer receives proof that the article has been exported or resold for use in further manufacture.
In accordance with the provisions of section 4221(d)(6) of the Code, an article shall be treated as sold for use in further manufacture if, in the case of a radio or television component taxable under section 4141, such article is sold for use by the purchaser as material in the manufacture or production of, or as a component part of, another article to be manufactured or produced by him.
Section 4222( a) of the Code provides that except as provided in subsection (b), section 4221 shall not apply with respect to the sale of any article unless the manufacturer, the first purchaser, and the second purchaser (if any) are all registered under this section. Registration under this section shall be made at such time, in such manner and form, and subject to such terms and conditions, as the Secretary of the Treasury or his delegate may by regulations prescribe. A registration under this section may be used only in accordance with regulations prescribed under this section. Section 4222(b)(2) of the Code provides that subject to such regulations as the Secretary or his delegate may prescribe for the purpose of this paragraph, in the case of any sale or resale for export, the Secretary or his delegate may relieve the purchaser or the second purchaser, or both, from the requirement of registering under this section.
Under the provisions of section 148.1-3(i)(2) of the Temporary Rules for Registration Requirements for Certain Tax-Free Sales, Treasury Decision 6344, C.B. 1959-1, 776, the Secretary has provided that in the case of sales for export or for resale for export, where the first purchaser or the second purchaser is located in a foreign country or possession of the United States, such purchaser is not required to register. However, the manufacturer must obtain from such purchaser the information required in section 316.25 of Regulations 46, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47.
In the instant case, although the television components were identifiable as having been sold for export, they were not actually exported and proof of exportation could not be furnished. Moreover, the exemption for sales or resales to manufacturers for further manufacturer applies only to vendors and vendees within the United States who are registered in accordance with the provisions of section 4222 of the Code and has no application to those manufacturers located outside the United States.
Accordingly, it is held that neither the exemption with respect to tax-free sales for export, provided by section 4221(a)(2) of the Code, nor the exemption for sales or resales to manufacturers for further manufacture, provided by section 4221(a)(1) of the Code, applies to the sale for export of radio and television components which are destroyed by fire prior to their exportation. Consequently, the manufacturers excise tax on radio and television components, imposed by section 4141 of the Code, applies to the sale of those components which were destroyed by fire before they were exported.