Rev. Rul. 58-32

Advice has been requested whether the manufactures excise tax on motor vehicles applies to sales of funeral coaches and ambulances made from regular passenger automobile chassis, or from complete passenger automobiles, purchased on a tax-paid basis.

X company purchases regular passenger automobile chassis, each of which it lengthens sufficiently to accommodate a complete funeral coach or ambulance body of its own manufacture. X company sells the completed vehicle.

Y company purchases a regular two-door sedan and lengthens it sufficiently to convert it into a funeral coach or ambulance. This is accomplished by cutting both the body and the chassis and inserting the necessary parts and materials.

Section 4061(a) of the Internal Revenue Code of 1954 imposes a tax upon automobile and/or truck bodies and chassis, and other enumerated motor vehicle articles (including in each case parts or accessories therefor sold on or in connection therewith or with the sale thereof) sold by the manufacturer, producer, or importer. Section 4061(b) imposes a tax upon parts or accessories (other than tires and inner tubes and other than automobile radio and television sets) for any of the articles enumerated in subsection (a) sold by the manufacturer, producer, or importer. Section 4063(b) permits the taxfree sale of bodies to manufacturers of automobile trucks or other automobiles.

Section 4220 provides exemption for sales or resales to manufacturers, as follows:

Under regulations prescribed by the Secretary or his delegate, no tax under this chapter chapter 32 shall be imposed with respect to the sale of-

(1) any article (other than an automobile part or accessory taxable under section 4061(b), a refrigerator component taxable under section 4111, a radio or television component taxable under section 4141, or a camera lens taxable under section 4171)-

(A) for use by the vendee as material in the manufacture or production of, or as a component part of, an article enumerated in this chapter; or

(B) for resale by the vendee for such use by his vendee, if such article is in due course so resold; or

(2) an automobile part or accessory taxable under section 4061(b), a refrigerator component taxable under section 4111, a radio or television component taxable under section 4141, or a camera lens taxable under section 4171-

(A) for use by his vendee as material in the manufacture or production of, or as a component part of any article; or

(B) for resale by the vendee for such use by his vendee, if such article is in due course resold. For the purposes of this chapter, the manufacturer or producer to whom an article is sold under paragraph (1)(A) or (2)(A) or resold under paragraph (1)(B) or (2)(B) shall be considered the manufacturer or producer of such article. The provisions of paragraph (1) and (2) shall not apply with respect to tires, inner tubes, or automobile radio or television receiving sets taxable under section 4141.

Under the provisions of section 6416(b)(3) of the Code, if a manufacturer purchases an automobile chassis or body, on which the manufacturers excise tax has been paid, and uses it in the manufacture of another article on which the manufacturers excise tax has been paid or which has been sold free of tax by virtue of section 4220 or 4224, relating to tax-free sales, the tax paid by the original manufacturer of the chassis or body may be credited or refunded to the purchasing manufacturer. Similarly, if a manufacturer purchases automobile parts or accessories, on a tax-paid basis, and uses them in the manufacture of any taxable or nontaxable article, the tax paid by the manufacturer of the parts or accessories may be credited or refunded to the purchasing manufacturer.

The conversion of a passenger automobile chassis to a chassis suitable for use in making a funeral coach or ambulance, as in the case of X company, is considered to be an act of further manufacture, since a new and different chassis is the result of such conversion. Likewise, the conversion of a regular passenger automobile to a funeral coach or ambulance, under the circumstances in the case of Y company, is an act of further manufacture on both the passenger automobile chassis and the body.

Accordingly, it is held that, under the circumstances described, both X company and Y company are manufacturers of automobile trucks or other automobiles, that their sales of the funeral coaches are subject to the manufacturers excise tax on motor vehicles imposed by section 4061(a)(1) of the Code, and that their sales of ambulances and combination funeral coaches and ambulances are subject to the manufacturers excise tax imposed by section 4061(a)(2).

It is further held that where the chassis, bodies, and/or parts used in the conversion were purchased on a tax-paid basis, the manufacturer of the funeral coaches or ambulances is entitled, under the provisions of section 6416(b)(3) of the Code, to claim a credit or refund of an amount equal to the tax paid by the original manufacturer on such chassis, bodies, or parts. However, under the provisions of section 4063(b) of the Code, either manufacturer X or manufacturer Y may purchase automobile bodies on a tax-free basis. Furthermore, under the provisions of section 4220 of the Code, the chassis, bodies, or parts for use in the manufacture of the funeral coaches or ambulances may be purchased on a tax-free basis.

It was the former position of the Internal Revenue Service that the lengthening or conversion of an automobile chassis under circumstances similar to those described above did not constitute further manufacture. Therefore, to the extent that this Revenue Ruling holds such lengthening or conversion of chassis to be further manufacture, it will not, under the authority contained in section 7805(b) of the Code, be applied to sales prior to April 1, 1958, of automobile chassis so converted. However, since the conclusion set forth above with respect to the conversion of one type of automobile body into another type of body does not represent a change in the position of the Service, this nonretroactive application will have no effect on the taxability of sales of bodies so converted.