Rev. Rul. 59-126

Advice has been requested whether the manufacturers excise taxes on the sale of gasoline and on the sale of lubricating oil apply to gasoline and lubricating oil which are given away by a producer for use in stock car races for promotional purposes.

Section 4081 of the Internal Revenue Code of 1954 imposes a tax on gasoline sold by the producer or importer thereof, or by any producer of gasoline. Section 4091 of the Code imposes a tax upon cutting oils and other lubricating oils sold in the United States by the manufacturer or producer.

Section 42818(a) of the Code provides, with certain exceptions not here material, that if any person manufactures, produces, or imports a taxable article and uses it, otherwise than a material in the manufacture or production of, or as a component part of another taxable article manufactured or produced by him, he shall be liable for the tax in the same manner as if such article was sold by him.

S.T. 592, C.B. XI-2, 509 (1932), holds that no tax liability is incurred where samples of taxable articles are distributed by the manufacturer free of charge to the consumer for advertising purposes.

In the instant case, since the producer receives no payment or consideration for the gasoline and the lubricating oil furnished free of charge for use in stock car races, other than the indirect benefits derived from advertising and sales promotion, such gasoline and lubricating oil are not considered `sold' by the producer. Accordingly, the producer is not liable for the manufacturers excise taxes imposed by sections 4081 and 4091 of the Code. Moreover, the provisions of section 4218(a) of the Code are not applicable, since a gift of gasoline and lubricating oil, under such circumstances, is not considered to be a `use' of the products as contemplated by that section. However, where tax-paid gasoline and lubricating oil are given away by a dealer or distributor, there is no basis for allowing a credit or refund of the tax paid to the United States Government by the producer on his sale of the products to the dealer or distributor.