Rev. Rul. 64-243

The Internal Revenue Service has been asked whether the requirement for certificates of nonlubricating use may be waived where lubricating oil is sold for nonlubricating use in the situations described below.

Situation 1 . A manufacturer sells lubricating oil in bulk direct to consumers for nonlubricating use by them. The manufacturer also sells lubricating oil which he packages in containers of various sizes. Some of the containers hold five gallons or less of lubricating oil, whereas other containers hold more than five gallons. All of the containers are labeled to indicate that the oil is sold specifically for nonlubricating use, and the oil is advertised for such use.

Situation 2 . Another manufacturer sells lubricating oil in bulk on a tax-paid basis to dealers or distributors for resale. The dealers or distributors package the oil in containers which vary in size from five gallons or less to more than five gallons. All of the containers are labeled to indicate that the oil is for nonlubricating use only, and the oil is advertised for such use.

Situation 3 . Other manufacturers, dealers, and distributors sell lubricating oil for nonlubricating use to consumers who furnish their own containers.

Section 4091 of the Internal Revenue Code of 1954 imposes a tax upon lubricating oils sold by the manufacturer or producer thereof.

Section 48.4091-2(a) of the Manufacturers and Retailers Excise Tax Regulations provides that the term `lubricating oils' includes all oils, regardless of origin, which (1) are suitable for use as a lubricant, or (2) are sold for use as a lubricant.

Section 48.4091-4(a)(1) provides, in general, that the tax imposed by section 4091 of the Code does not attach to the sale by the manufacturer of lubricating oil direct to a purchaser for nonlubricating use by him, if such oil is actually so used by the purchaser. In order to establish the right to sell lubricating oil tax-free under the foregoing provision, the manufacturer must obtain from the purchaser and retain in his possession a properly executed certificate of nonlubricating use, except as otherwise provided in section 48.4091-4(c) and in section 48.4091-4(d). The form of certificate which will be acceptable and which must be adhered to in substance is set forth in section 48.4091-4(a)(2). The provisions of section 48.4091-4(d) are not relevant to the situations in the instant case.

Section 48.4091-4(c) provides that a sale of lubricating oil may be made tax-free in any case where (1) a manufacturer of lubricating oil packages the oil in containers of five gallons or less furnished by him and labeled by him to indicate use of the oil for nonlubricating purposes only; (2) any advertising of such oil so packaged and labeled indicates that the oil is for nonlubricating use only; and (3) the oil so packaged and labeled is sold by the manufacturer to a purchaser for such use by him or for resale by him for such use. The requirement of a certificate of nonlubricating use is waived with respect to sales to which section 48.4091-4(c) has application.

In situation 1 , where the manufacturer packages the lubricating oil in containers of five gallons or less, labeled to indicate that the oil is for nonlubricating use only, and advertises and sells that oil to a purchaser for such use (or for resale for such use), the sales are not subject to the manufacturers excise tax on lubricating oils, and the requirement for obtaining a certificate of nonlubricating use is waived, under the provisions of the regulations. However, where the manufacturer sells the lubricating oil in bulk or in containers larger than five gallons direct to consumers for nonlubricating use, the sales may be made tax-free only if the consumers furnish the manufacturer with properly executed certificates of nonlubricating use, such as prescribed in section 48.4091-4(a)(2) of the regulations.

In Situation 2 , wherein the manufacturer sells lubricating oil in bulk on a tax-paid basis to dealers or distributors who resell the oil to consumers sumers for nonlubricating use, the manufacturer is entitled, under the provisions of section 6416(b)(2)(N) of the Code, to a credit or refund of the tax paid on his sale of the oil to the dealers or distributors. Generally, to support such a claim for credit or refund, the dealers or distributors must furnish to the manufacturer certificates of nonlubricating use obtained from all consumers to whom the oil was resold. However, such certificates will not be required in any instance where the dealers or distributors repackage the oil in containers of five gallons or less, labeled to indicate nonlubricating use only, and resell the oil in those containers to consumers. In lieu of obtaining such certificates from those consumers, the dealers or distributors must furnish to the manufacturer a written statement declaring: (1) that the oil was repackaged in containers of five gallons or less; (2) that the containers were labeled to indicate that the oil was for nonlubricating use only; (3) that any advertising of the oil indicated that it was for nonlubricating use. This statement may be used by the manufacturer to support his claim for credit or refund of the tax paid by him on his sale of the oil to the dealers or distributors.

In Situation 3 , wherein manufacturers, dealers, and distributors sell lubricating oil for nonlubricating use to consumers who furnish their own containers, it is held that a properly executed certificate of nonlubricating use must be obtained from each consumer to support a nontaxable sale or a claim for credit or refund of the tax paid.