Rev. Rul. 71-240

Revenue Ruling 62-68, C.B. 1962-1, 216, provides for an elective method of computing manufacturers excise tax under the constructive sale price provisions of section 4216(b)(1)(C) of the Internal Revenue Code of 1954, on sales between related companies where the selling company resells to one or more independent wholesale distributors. Under this election, the manufacturing company may use a constructive sale price equal to 95 percent of the related selling company's lowest established price to unrelated wholesale distributors in the ordinary course of trade, with no further exclusions from, or readjustments of, such resale price under sections 4216 or 6416, respectively. This elective tax base is in lieu of the actual selling price at which the article leaves the corporate family in the ordinary course of trade; such actual price being subject to the exclusions and readjustments authorized under sections 4216 and 6416.

Held, for purposes of Revenue Ruling 62-68, any intercompany sale price which is less than 95 percent of the selling company's lowest established resale price to unrelated wholesale distributors is considered less than fair market price.

It should be noted that Revenue Ruling 62-68 is not applicable with respect to sales of a type that is explicitly covered by amendments to section 4216 of the Code made by Public Laws enacted since the effective date of Revenue Ruling 62-68.

Revenue Ruling 62-68 is hereby amplified.