Rev. Rul. 82-14
1982-1 C.B. 210, 1982-2 I.R.B. 11.
Internal Revenue Service
MANUFACTURERS; PARTS AND ACCESSORIES; FURTHER MANUFACTURER; CREDITS OR
Published: January 11, 1982
26 CFR 48.6416(b)-3: Article sold tax-paid by manufacturer thereof to another manufacturer for specified use
(Also Sections 4061, 4221; 48.4061(b)-1, 48.4221-2.)
Manufacturers; parts and accessories; further manufacturer; credits or refund. A manufacturer of a part or accessory subject to tax may not claim a credit or refund of tax when the manufacturer sells the article tax-paid and a subsequent purchaser uses it in further manufacture. Only the person who uses the article in further manufacture is entitled to claim the credit or refund.
Who may properly claim a credit or refund of tax imposed by section 4061(b)(1) of the Internal Revenue Code in the situation described below?
X, a manufacturer of automotive parts and accessories, sold a part tax-paid to Y, who resold the part to Z for use as a component in the manufacture of another article. At the time of the sale Z informed Y that the part or accessory was to be used in the manufacture of another article. Y therefore reduced the price to Z by the amount of the tax paid on the original sale by X. Y then requested an adjustment from X to reflect the tax-excluded sale. X, in turn, claimed a credit in the amount of the tax on its quarterly excise tax return.
LAW AND ANALYSIS
Section 4061(b) of the Code imposes a manufacturers excise tax on certain automotive parts and accessories. Section 4221 provides rules under which parts and accessories may be sold tax free by the manufacturer. Under section 4221(a) a sale by a manufacturer may be made tax free if the article is for use by the purchaser, or for resale by the purchaser for use by the second purchaser, in the manufacture or production of another article.
Section 6416(b)(3)(B) of the Code provides rules for a credit or refund when a part or accessory sold by the manufacturer in a tax-paid transaction is used by a subsequent manufacturer in the manufacture or production of another article. Under that section the subsequent manufacturer is deemed to have made an overpayment of tax and may claim a credit or refund in the amount of the tax paid on the original manufacturer's sale of the article.
Section 6416(b)(3) of the Code provides the only method of obtaining a credit or refund of tax on a tax-paid article used in further manufacture. Only the subsequent manufacturer is entitled to file a claim. When parts or accessories are sold tax paid and later resold for use in the manufacture of another article, it is not appropriate for a dealer or distributor to remove the amount of tax from its selling price to the subsequent manufacturer with the expectation that the original manufacturer will make an adjustment in the form of a refund or credit of the amount of tax it passed on to the dealer or distributor.
When a manufacturer sells a taxable part or accessory tax-paid to a purchaser who resells the article for use in the manufacture or production of another article, only the subsequent manufacturer or producer may properly claim a credit or refund of the tax paid by the original manufacturer. Therefore, X is not entitled to a credit or refund in the situation described above.
For examples of how to compute the credit or refund, see Rev. Rul. 71- 170. 1971-1 C.B. 365, and Rev. Rul. 73-560, 1973-2 C.B. 350.
Rev. Rul. 82-14, 1982-1 C.B. 210, 1982-2 I.R.B. 11.