Rev. Rul. 74-535

Advice has been requested whether the special constructive sale price formula set forth in Rev. Rul. 72-461, 1972-2 C.B. 572, may be used in computing the manufacturers excise tax imposed by section 4061(a) of the Internal Revenue Code of 1954 where a truck body and hoist are sold together under the circumstances described below.

A distributor of automotive parts and accessories purchases from a manufacturer hoists that are subject to the tax imposed by section 4061(b) of the Code. The distributor purchases from another manufacturer truck bodies that are subject to the tax imposed by section 4061(a). Both the hoists and the truck bodies are sold to the distributor by the manufacturers in transactions subject to the manufacturers excise tax. The distributor sometimes combines a hoist and a body and sells them together to dealers for resale to consumers.

Rev. Rul. 69-195, 1969-1 C.B. 276, holds that the combining or assembling of a body and hoist for sale or use is an act of further manufacture, and the manufacturer is therefore liable for the manufacturers excise tax imposed by section 4061(a) of the Code on its sale or use of the combined bodies and hoists.

Rev. Rul. 72-461 (which amplifies Revenue Ruling 69-195) relates to the method to be used by a retail dealer in computing the manufacturers excise tax imposed by section 4061(a)(1) of the Code on his sales at retail of truck bodies and hoists that he has further manufactured in the manner described in Rev. Rul. 69-195. Inasmuch as the dealer is selling the combined body and hoist at retail, he is entitled to compute his tax under the constructive sale price provisions of section 4216(b)(1) and to use the special formula set forth in Rev. Rul. 72-461.

The method of computing the manufacturers excise tax set forth in Rev. Rul. 72-461 is applicable only to retail sales.

In the instant case the person who combines a hoist and body is not a dealer selling the combined hoist and body at retail but is a distributor selling to a dealer at wholesale. Section 4216(b) of the Code does not provide for the computation of a constructive sales price in the case of sales at wholesale except in certain specifically defined instances not here relevant. See H.R. Rep. No. 481, 85th Cong., 2d Sess. (1957), 1958-3 C.B. 372, 392, and S. Rep. No. 2090, 85th Cong., 2d Sess. (1958), 1958-3 C.B. 584, 604. Accordingly, such distributor is not entitled to use the special formula set forth in Rev. Rul. 72-461. Therefore, he must compute his tax on the actual price for which he sells the combined hoist and body to a dealer, as determined under the provisions of section 4216(a).

Under the provisions of sections 6416(b)(3)(A) and 6416(b)(3)(B) of the Code, respectively, the distributor in computing his tax liability, is entitled, as a subsequent manufacturer, to a credit for the manufacturers excise tax previously paid by the manufacturer of the truck body on his sale to the distributor and the tax paid by the manufacturer of the hoist on his sale to the distributor.