Rev. Rul. 69-208

The purpose of this Revenue Ruling is to update and restate the positions set forth in S.T. 591, C.B. XI-2, 508 (1932) and S.T. 828, C.B. XV-1, 380 (1936), under the current statute and regulations. This ruling is concerned with the manufacturers excise tax on gasoline and lubricating oil, currently imposed by sections 4081 and 4091 of the Internal Revenue Code of 1954, respectively.

A dealer (or consumer) who is not otherwise a producer of gasoline or lubricating oil purchases gasoline and lubricating oil and mixes the gasoline with the lubricating oil for the purpose of having the oil act as a lubricant when the resulting liquid is used as a fuel. The amount of lubricating oil used in the mixture is relatively small. The mixture is commercially known as gasoline and is suitable for use as a motor fuel.

Two basic questions are presented by the situation described:

(1) Is the liquid resulting from the mixture of gasoline and lubricating oil "gasoline," for purposes of the tax imposed by section 4081 of the Code?

(2) Does the dealer (or consumer) who mixes gasoline and lubricating oil in the manner described thereby become a "producer" of gasoline, for purposes of the tax imposed by section 4081 of the Code?

Section 4081 of the Code imposes a tax on gasoline sold by the producer or importer thereof, or by any producer of gasoline. A gasoline producer is defined, by section 4082(a) of the Code, as including a refiner, compounder, or blender, or wholesale distributor, and a dealer selling gasoline exclusively to producers of gasoline, as well as a producer. Section 4082(b) defines "gasoline" as all products commonly or commercially known or sold as gasoline which are suitable for use as a motor fuel.

Section 48.4082-1(a)(1) of the Manufacturers and Retailers Excise Tax Regulations states that the mere blending or mixing by any person of gasoline to adapt it for seasonal use or to meet the requirements of particular vendees, or blending which is not a substantial part of the blender's regular year-round business, does not constitute him a producer.

Section 4091 of the Code imposes a tax on the sale of lubricating oil in the United States by the manufacturer or producer.

Section 4221(a)(1) of the Code provides that no manufacturers excise tax shall be imposed on the sale by the manufacturer of an article for use by the purchaser for further manufacture, or for resale by the purchaser to a second purchaser for use by such second purchaser in further manufacture. Section 4221(d)(6)(A) of the Code provides that an article shall be treated as sold for use in further manufacture if such article (with certain exceptions not here material) is sold for use by the purchaser as material in the manufacture or production of, or as a component part of, another article subject to a tax imposed under Chapter 32 to be manufactured or produced by him.

It is held that the liquid resulting from the mixing of gasoline and lubricating oil in the manner described is "gasoline" for purposes of the tax imposed by section 4081 of the Code, because it is commercially known as gasoline and is suitable for use as a motor fuel. It is further held that the dealer (or consumer) does not become a "producer" of gasoline for purposes of the tax imposed by section 4081, merely because of the described mixing.

Since the dealer (or consumer) is not a producer of gasoline, and is not a manufacturer of lubricating oil, the provisions of section 4221(a)(1) of the Code do not apply in his case. Therefore, sales of gasoline or lubricating oil by the producer or manufacturer thereof to the dealer (or consumer) for mixing as described cannot be made free of the taxes imposed by sections 4081 and 4091 of the Code, respectively.

Because the mixture in question is gasoline, under the provisions of sections 39 and 6421 of the Code the ultimate purchaser may claim a credit or refund of two cents per gallon on any such gasoline used other than as a fuel in a highway vehicle registered for use on the public highways.

S.T. 591 and S.T. 828 are hereby superseded, since the conclusions thereof are restated under current law in this Revenue Ruling.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.