Rev. Rul. 60-5

Advice has been requested whether the sales by manufacturers of so-called `laminated' tires described below are subject to the manufacturers excise tax on tires.

The laminated tires are made from salvage or scrap pneumatic truck tires. Segments of various sizes are punched out of each sidewall and a hole is made in each segment. Each segment is then ground or tapered so that it looks like a wedge, one end of which is approximately twice the thickness of the other. The segments of the tiring are then threaded on a metal band which is cut and shaped to the desired size. After the band is completely covered, it is then placed upon a machine which forces additional segments of tiring onto it. When the required number of segments are forced onto the metal band, pressure is applied in such a manner that the band overlaps forming a circle. The overlapping metal band is then joined or fixed to gether by a bolting or welding process. The pressure is released and the segments thrust out to cover the exposed parts of the metal fastening band forming a complete circle. A rim is then placed horizontally upon the ground and the circle of laminated segments is placed upon it under pressure so as to force the segments to follow the contour of the rim. The metal band remains inside the hollow tubing, but it cannot be seen because it is covered by the segments of tiring.

The end result of the aforesaid fabrication process is a circle of laminated segments suitable for use as treads on wheels of vehicles designed to operate at low speeds. The laminated tires will not function at higher speeds than approximately 10 to 25 miles per hour because of friction between the segments. Consequently, they cannot be used upon highway vehicles or in any other application where greater speed is required. The tire is an industrial type of tire for use on certain nonhighway equipment such as lift trucks, front end loaders, towing tractors, rotary cutters, and cranes which are operated at slow speeds.

Prior to its amendment by the Highway Revenue Act of 1956, Public Law 627, C.B. 1956-2, 1150, section 4071 of the Internal Revenue Code of 1954 provided as follows:

There is hereby imposed upon the following articles sold by the manufacturer, producer, or importer a tax at the following rates:

(1) Tires wholly or in part of rubber, 5 cents a pound on total weight (exclusive of metal rims or rime bases);

(2) Inner tubes (for tires) wholly or in part of rubber, 9 cents a pound on total weight.

The total weight of the foregoing articles is to be determined under regulations prescribed by the Secretary or his delegate.

Section 4071(a) of the Code as amended by the Highway Revenue Act of 1956, effective July 1, 1956, provides, in part, as follows:

IMPOSITION AND RATE OF TAX.-There is hereby imposed upon the following articles if wholly or in part of rubber, sold by the manufacturer, producer, or importer, a tax at the following rates:

(1) Tires of the type used on highway vehicles, 8 cents a pound.

(2) Other tires, 5 cents a pound.

Section 4072 of the Code provides as follows:

(c) TIRES OF THE TYPE USED ON HIGHWAY VEHICLES.-For purposes of this part, the term `tires of the type used on highway vehicles' means tires of the type used on-

(1) motor vehicles which are highway vehicles, or

(2) vehicles of the type used in connection with motor vehicles which are highway vehicles.

Section 48.4072-1(e)(1) of the Manufacturers and Retailers Excise Tax Regulations, T.D. 6408, C.B. 1959-2, 269, provides, in part, that the term `tires' includes rubber casings, hoops and strips or bands of all kinds designed and shaped or built to form the tread of or to fit a vehicle wheel. Tires of either the pneumatic or solid type which fit or form the tread for wheels of any article which is capable of use as a means of transporting a person or burden are taxable as tires. Examples of articles which have taxable tires are motor scooters, industrial trucks, farm tractors, wheelbarrows, and similar articles.

Section 4073(a) of the Code provides that the tax imposed by section 4071 of the Code shall not apply to tires which are not more than 20 inches in diameter and not more than one and three-fourths inches in cross-section, if such tires are of all-rubber construction (whether hollow center or solid) without fabric or metal reinforcement. Section 4073(b) of the Code provides that the tax imposed by section 4071 of the Code shall not apply to tires of extruded tiring with an internal wire fastening agent.

Section 48.4073-2 of the regulations provides that the tax does not apply to sales of tires of any size or dimension manufactured or produced from extruded tiring fastened or held together by means of internal wire or other metallic material.

Since the definition of the term `tires' in section 48.4072-1(e)(1) of the regulations uses the word `includes,' and then lists certain articles, such definition is not all-inclusive and limited to the articles named therein. Moreover, to come within the meaning of the term `tires' as defined in the regulations, it is not necessary that a tire be pneumatic or solid. It may be either semi-pneumatic or semi-solid.

The wording of the statute is sufficiently broad and general in its terms as to encompass all tires with the exception of those which are specifically exempted by section 4073(a) and (b) of the Code. Moreover, although neither the statute nor the regulations define the word `extruded' as it is used in section 4073(b) of the Code, the term `extruded tiring' is considered to mean the type of tiring in rolls such as is used on baby buggies, lawn mowers, children's tricycles, scooters, and coaster wagons, and the word `extruded' was inserted to distinguish such tiring from solid molded tires. The Joint Committee Staff Summary of Provisions of the Revenue Act of 1951, C.B. 1951-2, 287, at 355, states that the provisions excluding tires with internal wire fastners from the tax has the effect of removing the tax on tires for baby buggies, lawn mowers, children's tricycles, scooters, coaster wagons, etc. Therefore, it is held that laminated tires do not come within the exception provided by section 4073(b) of the Code.

Prior to July 1, 1956, section 4071 of the Code imposed tax at the rate of five cents a pound on total weight (exclusive of metal rims or rim bases) on `tires' made wholly or in part of rubber. By virtue of the amendment to section 4071 of the Code by the Highway Revenue Act of 1956, effective July 1, 1956, tax at the rate of eight cents a pound is imposed on tires of the type used on highway vehicles, while tax at the rate of five cents a pound is imposed on `other tires.' In the history of the tax on tires, this is the first distinction or difference made in the general classification of tires for tax purposes.

Accordingly, it is held that, prior to July 1, 1956, laminated tires were subject to the tax on `tires' imposed by section 4071(1) of the Code, and on or after July 1, 1956, since laminated tires cannot be on highway vehicles, they are subject to the tax on `other tires' imposed by section 4071(a)(2) of the Code.