Rev. Rul. 57-95

Advice has been requested concerning the applicability of the manufacturers excise tax to the sales of racing cars, as such, parts and accessories used in the manufacture of these vehicles, and replacement parts for these cars.

The racing cars are designed and adapted exclusively for use on off-highway race tracks. They are never driven on public highways. These race cars are usually manufactured complete without the engine or transmission, as the engine and transmission are of a special make and are usually installed by the buyer of the chassis and body. However, when the buyer requests the manufacturer to furnish these parts, the engine and transmission are included with the race car.

Section 4061(a) of the Internal Revenue Code of 1954 imposes a manufacturers excise tax on automobiles. Section 4061(b) of the Code specifies that, in addition to the motor vehicles enumerated in section 4061(a), parts and accessories therefor (other than tires and tubes and certain other exceptions not here in question) shall also be subject to a manufacturers excise tax. Section 4220 of the Code, as amended by Public Law 367, 84th Congress, 69 Stat. 689, C.B. 1955-2, 768, effective September 1, 1955, provides that a manufacturer may purchase automobile parts and accessories tax-free under exemption certificates for use in the manufacture or production of taxable or nontaxable articles.

A manufacturers excise tax is imposed by section 4071(a)(1) of the Code on tires of the type used on highway vehicles. Section 4071(a)(2) of the Code imposes a manufacturers excise tax on `other' tires, and section 4071(a)(3) of the Code imposes a similar tax on inner tubes for tires.

Since the race cars in question are designed and adapted exclusively for use on off-highway race tracks and are never driven on public highways, it is held that such cars are therefore not subject to the tax imposed by section 4061(a) of the Code, regardless of whether sold with or without engines and transmissions. It is further held that engines, transmissions, parts and accessories (except tires and tubes), which are used by the buyer of the body and chassis to complete the race car, are not subject to the manufacturers excise tax on parts and accessories under section 4061(b) of the Code.

Separate sales of replacement parts are also exempt from the manufacturers excise tax on parts and accessories if the parts are usable only in nontaxable race cars or engines. However, separate sales of replacement parts for racing cars or engines are subject to the tax if the parts are also usable in vehicles or engines which operate on public highways.

If the tires used in the manufacture of race cars or for replacement purposes are not of the type used on highway vehicles, the tax imposed by section 4071(a)(2) of the Code will be applicable rather than the tax under section 4071(a)(1) of the Code. Inner tubes are subject to the manufacturers excise tax under section 4071(a)(3) of the Code whether used in the manufacture of the race cars or for replacement purposes.