Internal Revenue Service
Revenue Ruling sm

Rev. Rul. 68-402

1968-2 C.B. 586

IRS Headnote

No credit or refund is allowable under section 6416(b)(2)(C) of the Code where a company purchases a truck chassis on a tax-paid basis for further manufacture of nontaxable snow removal equipment that it sells for the exclusive use of a State or local government.

Full Text

Rev. Rul. 68-402

A company that manufactures snow removal equipment purchases a highway-type truck chassis from the manufacturer thereof in a transaction subject to the manufacturers excise tax imposed by section 4061(a)(1) of the Internal Revenue Code of 1954. The company performs extensive further manufacturing operations on the chassis converting it into a nontaxable off-highway-type chassis which, after conversion, is designed solely to accommodate a snow broom, blower, and an additional engine. The resultant chassis, with snow removal equipment installed, is sold to a group of commercial airlines. The airlines, in turn, deliver the snow removal unit to a municipality for its exclusive use in removing snow from runways of a municipal airport. The transfer of title from the airlines to the municipality is made under conditions that amount to a `sale' of the unit within the meaning of section 6416(b)(2)(C) relating to sales to a State or local government for its exclusive use.

Held , no credit or refund of the manufacturers excise tax paid on the sale of the original highway-type truck chassis is allowable under section 6416(b)(2)(C) of the Code, since the article resold for use of the municipality is a nontaxable off-highway-type chasis with snow removal equipment installed rather than the original taxable chassis. See Revenue Ruling 59-63, C.B. 1959-1, 356, which relates to a similar situation involving the use of electric light bulbs by a manufacturer in the further manufacture of nontaxable articles which, in turn, are sold by the manufacturer to states or political subdivisions thereof.