Rev. Rul. 63-191

Advice has been requested concerning the applicability of the manufacturers excise tax, imposed by section 4061 of the Internal Revenue Code of 1954, to sales of the articles described below.

Several companies manufacture and sell street-sweeper vehicles and street-sweeper mechanisms for use as integral parts of those vehicles. The street-sweeper vehicles are designed and constructed so that they not only sweep the streets but also load the sweepings into the vehicles and transport the sweepings over the highway. Although the sweeper mechanisms usually are sold as integral parts of the vehicles, sometimes the manufacturers sell them as separate articles for use as repair or replacement parts. Specifically, advice is requested concerning the application of the tax under the circumstances set forth below.

Company X purchases an automobile truck chassis and, by shortening the wheel base, converts it into a chassis for a street sweeper vehicle. The company then produces a complete vehicle by mounting on the converted chassis various items of equipment including a gutter `broom,' a main rear pick-up `broom,' a dirt conveyor, a hopper and dump for carrying the sweepings, a power take-off, and related equipment such as a water tank, hose, nozzles, and pumps.

Company Y purchases an automobile truck chassis and, after modification, uses it in constructing a street-sweeper vehicle. The company cuts out the chassis frame and removes the propeller bearings and shaft, the springs, the exhaust piping, and the rear portion of the floor of the cab. A specially designed sweeper frame is mounted on the remaining portion of the chassis. Then, street-sweeper equipment is mounted on the special frame. The equipment consists of a dirt box for carrying the sweepings, an elevator assembly, a control mechanism, a dust abatement tank assembly, and `broom' assemblies.

Company Z purchases automobile truck chassis for use without significant modification as chassis for street-sweeper vehicles. No operation which constitutes `further manufacturing' is performed on the chassis. This company manufactures the bodies for its street-sweeper vehicles and also manufactures certain mechanisms for use as integral parts of those bodies. These bodies are constructed like the conventional highway type enclosed automobile truck body. However, a flue or duct-type chute, running from this type of body to a street-sweeper mechanism, is attached to the side of the truck body and consists of a single gutter `broom' with a vacuum attachment. It is mounted in a framework having three small wheels. The mechanism is operated by a man riding outside of the truck cab sitting in a seat attached to the truck body.

Section 4061(a)(1) of the Code imposes a tax on sales by the manufacturer, producer, or importer of automobile truck chassis and bodies, 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). For purposes of the imposition of this tax, section 4061(a)(1) also provides that the sale of an automobile truck, etc., shall be considered to be a sale of the chassis and of the body.

Section 4061(b) of the Code imposes a tax on sales by the manufacturer, producer, or importer of parts or accessories (other than tires and inner tubes and other than automobile radio and television receiving sets) for any of the motor vehicle articles enumerated in section 4061(a) of the Code.

Section 40.4061(b)-2(a) of the Manufacturers and Retailers Excise Tax Regulations provides that, in general, the term `parts or accessories' includes (1) any article, the primary use of which is to improve, repair, replace, or serve as a component part of an automobile truck or bus chassis or body, or other automobile chassis or body, or taxable tractor, (2) any article designed to be attached to or used in connection with such chassis, body, or tractor to add to its utility or ornamentation, and (3) any article, the primary use of which is in connection with such chassis, body, or tractor, whether or not essential to its operation or use.

Company X and company Y purchase automobile truck chassis which require modification to permit their use as chassis for the vehicles sold by those companies. To accomplish this modification, X shortens the wheel base, whereas Y more extensively converts the chassis. In each case, the conversion of the chassis in the manner stated constitutes an act of further manufacture, because a new and different chassis is the result of the conversion. Therefore, X and Y are the manufacturers of the chassis for the street-sweeper vehicles they sell. On the other hand, under the circumstances stated, company Z does not manufacture the chassis for the vehicles it sells. Rather, that company merely resells the chassis it purchases.

Based on the facts and circumstances referred to above, the motor vehicle articles (chassis and bodies) described are, for purposes of the tax imposed by section 4061(a)(1) of the Code, designed to transport property over the highways. The street-sweeper mechanisms sold by the manufacturers on or in connection with the motor vehicles are integral parts of those articles for purposes of the tax. Moreover, the various items of equipment assembled and mounted on the chassis by X, Y , and Z constitute in the aggregate automobile truck bodies for purposes of section 4061(a)(1) of the Code. Therefore, each of these companies is the manufacturer of the bodies of the vehicles which it sells.

Insofar as separate sales of the street-sweeper mechanisms are concerned, the mechanisms are designed to be installed on taxable motor vehicle articles and, by virtue of their use in loading the sweepings into the vehicles, they essentially augment the utility of the vehicles in transporting property over the highway. Therefore, these street-sweeper mechanisms are automobile `parts or accessories' as that term is defined by section 40.4061(b)-2(a) of the regulations.

Accordingly, under the circumstances described, it is held that the manufacturers excise tax imposed by section 4061(a)(1) of the Code applies to the price for which the chassis and bodies (including the street-sweeper mechanisms and related equipment) are sold by companies X and Y and to the price for which the bodies (including the street-sweeper mechanisms and chutes) are sold by company Z .

It is further held that the manufacturers excise tax on automobile `parts or accessories,' imposed by section 4061(b) of the Code, applies to the complete street-sweeper mechanisms described above when sold separately by the manufacturer thereof.

However, under the authority granted by section 7805(b) of the Code, to the extent that this Revenue Ruling relates to the complete street-sweeper mechanisms described above, the conclusion will not be applied to sales made prior to November 1, 1963, irrespective of whether the mechanisms are sold separately or on or in connection with the street-sweeper vehicles.