Internal Revenue Service
Rev. Rul. 60-310
1960-2 C.B. 334
Caution: Distinguished by Rev. Rul. 75-509
Where a manufacturer sells automobile trucks complete with gasoline engines to a company for the purpose of export and prior to exportation the company substitutes diesel engines, different clutches, and different transmissions in such vehicles, the company is considered to have further manufactured the automobile truck chassis. Accordingly, the exemption for export, provided by section 4221(a)(2) of the Internal Revenue Code of 1954, does not apply to the sale by the manufacturer of such automobile truck chassis. However, the exemption for export applies to the sale of the truck bodies, since they are not further manufactured prior to exportation.
Rev. Rul. 60-310
Advice has been requested concerning the applicability of the exemption from manufacturers excise tax, with respect to sales for export, in situations where automobile trucks are sold under the circumstances described below.
Manufacturer X sells automobile trucks complete with gasoline engines to Y company for the purpose of export. However, prior to exportation, Y company substitutes diesel engines for the gasoline engines and also substitues different clutches and transmissions.
Section 4061(a)(1) of the Internal Revenue Code of 1954 imposes a tax upon the sale by the manufacturer, producer, or importer of automobile truck chassis, automobile truck bodies, and other enumerated motor vehicles articles. A sale of an automobile truck shall, for the purposes of this paragraph, be considered to be a sale of the chassis and of the body.
Section 4221(a)(2) of the Code provides, in part, that under regulations prescribed by the Secretary of the Treasury or his delegate no manufacturers excise tax shall be imposed on the sale by the manufacturer of an article for export. Section 4221(b)(2) of the Code provides, in part, that where an article has been sold free of tax under subsection (a) for export, subsection (a) shall cease to apply in respect of such sale of such article unless, within the six-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.
Section 316.25(a) of Regulations 46, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that to exempt from tax a sale for export it is necessary that two conditions be met; namely, (1) that the article be identified as having been sold by the manufacturer for export and (2) that it be exported in due course. Section 316.25(b) of the regulations provides, in part, that where delivery by the manufacturer of an article is to be made within the United States, such article will be regarded as having been sold by the manufacturer for export if the manufacturer has in his possession at the time title passes or at the time of shipment a statement from the purchaser showing (a) that the article is purchased to fill existing or future orders for delivery to a foreign destination, and (b) that such article will be transported to its foreign destination in due course prior to use or further manufacture and prior to any resale except for export.
In the instant case, when Y company substitutes diesel engines, different clutches, and different transmissions in such vehicles, it is considered to have further manufactured the automobile truck chassis prior to their exportation. Accordingly, it is held that the exemption for export, provided by section 4221(a)(2) of the Code, is not applicable to sales of such automobile truck chassis by manufacturer X to Y company. Moreover, Y company becomes the manufacturer of automobile truck chassis and is liable for the manufacturers excise tax on his sales of such chassis unless they are sold for one of the taxfree purposes enumerated in section 4221 of the Code. However, under the provisions of section 4221(a)(1) and 4222 of the Code, manufacturer X could sell the chassis with gasoline engines to Y company tax-free for the purpose of the further manufacture, without regard to their ultimate disposition by Y company. Then Y company, as the manufacturer of chassis, could in turn sell them tax-free for export.
With respect to the automobile truck bodies, the exemption for export is applicable to sales of such bodies by manufacturer X to Y company, since they were not further manufactured prior to exportation.