Internal Revenue Service
Rev. Rul. 68-30
1968-1 C.B. 481
Caution: Modified by Rev. Rul. 69-640
Caution:Distinguished by Rev. Rul. 69-598
The Internal Revenue Service discusses the effect of section 4218 of the Internal Revenue Code of 1954 in several situations involving the importation for personal use of foreign-made automobiles.
Rev. Rul. 68-30 /1/
Advice has been requested as to the applicability of the manufacturers excise tax imposed by section 4061(a)(2) of the Internal Revenue Code of 1954 in the situations described below.
Situation (1) .-A resident of the United States, before going abroad to visit a foreign country, enters into a transaction whereby he orders a foreign-made automobile to be delivered to him when he arrives at his foreign destination. This is the so-called `tourist delivery plan' under which the order and payment for the vehicle are forwarded to the foreign automobile manufacturer in advance of the traveler's departure from the United States. The plan included pre-arranged transportation for the vehicle to the United States after the traveler has completed his visit. Upon returning to the United States, the tourist uses the automobile for personal travel.
Situation (2) .-A resident of the United States is assigned by his employer to a foreign country for a two-year tour of duty. Upon arrival there he takes up residence and purchases a foreign-made automobile for his own use. At the conclusion of his tour of duty he brings the vehicle back to the United States, along with his other personal and household goods, for his personal use.
Situation (3) .-A member of the Armed Forces stationed in a foreign country is reassigned to duty in the United States. Upon notification of his reassignment, he purchases a foreign-made automobile. At the time of leaving the foreign country, the serviceman brings the vehicle back to the United States, along with his other personal and household goods, for his personal use.
Situation (4) .-A United States resident acquires for his personal use a foreign-made automobile by going to Canada and purchasing the vehicle from a Canadian dealer. Delivery of the automobile is made in Canada and the United States resident returns to this country in the newly acquired vehicle.
Section 4061(a)(2) of the Code imposes a tax upon the sale by the manufacturer, producer, or importer of automobile chassis and bodies other than those taxable under section 4061(a)(1) of the Code. A sale of an automobile for purposes of section 4061(a)(2) of the Code is considered to be the sale of the chassis and the body.
Section 4218(a) of the Code provides that if any person manufactures, produces, or imports an article and uses it (otherwise than as material in the manufacture or production of, or as a component part of, another taxable article), then he is liable for manufacturers excise tax in the same manner as if the article were sold by him.
Section 48.4218-2(b) of the Manufacturers and Retailers Excise Tax Regulations provides that 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.
Revenue Ruling 65-317, C.B. 1965-2, 422, describes two situations involving the importation by a United States resident of a foreign-made automobile which had not previously been sold in the United States. In each case the United States resident acquired ownership of the vehicle without leaving the country. Revenue Ruling 65-317 concludes that in both cases the automobile was not `incidentally' imported for personal use within the meaning of section 48.4218-2(b) of the regulations because the facts in each situation do not reflect any primary purpose to which the importation could be attributed as incidental. Therefore, the Revenue Ruling holds the United States resident liable for the tax imposed by section 4061(a)(2) of the Code upon his use of the imported vehicle.
The circumstances involved in this Revenue Ruling differ from the situations described in Revenue Ruling 65-317 in that in the instant cases, the United States resident acquires ownership of the foreign-made automobile not previously sold in the United States while he is outside the United States. However, the question of whether the vehicles in this Revenue Ruling have been `incidentally' imported is still present.
The transactions described in Situations (1), (3) and (4) above do not reflect any primary purpose to which the importation could be ascribed as incidental. Thus, the foreign-made automobiles are not `incidentally' imported for personal use within the meaning of the regulations. Therefore, the provisions of section 4218(a) of the Code are applicable. Also, the importer will be subject to the bonding requirements of section 48.4061(a)-2 of the regulations.
Under the `tourist delivery plan' described in Situation (1) of this Revenue Ruling, the importation of the vehicle is not regarded as incidental because the ultimate use of the vehicle in the United States is an essential ingredient of, and a motivating force behind, the transaction involving the purchase of the foreign-made automobile in the first instance. This is also true in Situations (3) and (4) of this Ruling and, furthermore, the facts present in these last two cases do not reflect any primary purpose to which the importation of the vehicles could be attributed as incidental.
Accordingly, in each of Situations (1), (3), and (4) of this Revenue Ruling, the tax imposed by section 4061(a)(2) of the Code is incurred by the importer upon his use of the vehicle in the United States. However, the Internal Revenue Service recognizes that there may be circumstances underlying the acquisition by a United States resident of a foreign-made automobile, not previously sold in the United States, that would tend to negate the taxable conclusion reached in this Ruling with respect to Situations (1), (3), and (4) . Therefore, by submitting satisfactory evidence the importer may establish the `incidental' nature of the importation for personal use.
With respect to the circumstances described in Situation (2) of this Revenue Ruling, the tax does not apply because the facts of that situation reflect a purpose to which the importation is considered to be incidental.
The basis for computing the tax imposed by section 4061(a)(2) of the Code in the case of taxable importations by individual residents of the United States is the total cost of acquiring the vehicle. Such cost includes the purchase price of the imported vehicle, import duties, customs handling fees, ocean freight, agents' or sales commissions, and any other costs of acquiring the vehicle. Revenue Ruling 66-66, C.B. 1966-1, 252. Other costs that are not to be included in the cost of acquiring the vehicle are state and local use taxes, fees paid for registration or license tags under state law, and any other fee required to be paid for the privilege of operating the automobile on state highways. Revenue Ruling 67-56, C.B. 1967-1, 295.
Pursuant to the authority granted by section 7805(b) of the Code, the conclusions of taxability set forth in this Revenue Ruling will not be applied to foreign-made automobiles imported prior to January 15, 1968.
/1/ Also released as Technical Information Release 955, dated January 5, 1968.