Rev. Rul. 75-510

Advice has been requested as to the applicability of the tax on lubricating oils imposed by section 4091 of the Internal Revenue Code of 1954 to sales of lubricating oil under the circumstances described below.

A company manufactures a lubricating oil that is designed and sold for light-duty lubricating applications on power tools, hinges, door locks, door latches, door knobs, valves, casters, drawers, and other household-type equipment or appliances. The oil is extremely light bodied and is non-detergent. The company packages and sells the oil in four-ounce spout cans only and markets it for sale in hardware and other retail stores.

Section 4091 of the Code imposes a tax on lubricating oil (other than cutting oils) which is sold in the United States by the manufacturer or producer. 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 6424 of the Code provides that if lubricating oil (other than cuting oils, as defined in section 4092(b), and other than oil which has previously been used) is used otherwise than in a highway motor vehicle, the ultimate purchaser of such lubricating oil is entitled to receive a payment by the Secretary of the Treasury or his delegate for each gallon of lubricating oil so used, except with respect to any lubricating oil which the Secretary or his delegate determines was exempt from the tax imposed by section 4091.

The question presented in the instant case is whether the company may sell its lubricating oil product without tax, by reason of the fact the oil is manufactured, packaged, and sold in such a manner as to indicate that it is seldom (if ever) used in a highway motor vehicle and is not intended for such use.

Lubricating oil may be sold tax free only as specifically provided in the statute and regulations. Section 4093 of the Code provides that no tax shall be imposed upon lubricating oils sold to a manufacturer or producer of lubricating oils for resale by him. Under the provisions of section 4221, lubricating oil may be sold tax free for further manufacture of another taxable article, for export, for use as supplies for vessels or aircraft, to a State or local government for its exclusive use, or to a nonprofit educational organization for its exclusive use. In addition, Section 48.4091-6(a) of the regulations provides that if the Commissioner of Internal Revenue determines that an oil suitable for use as a lubricant is seldom so used, but is used almost exclusively for nonlubricating purposes, the sale by the manufacturer of such oil direct to a purchaser for nonlubricating use by him or for resale by him for nonlubricating use may be made tax free.

Sales of the described oil by the manufacturer in the instant case do not fall within any of the exempt provisions mentioned above. The oil manufactured by the company in the instant case is suitable for use as a lubricant and is sold for use as a lubricant, and there is no provision of the law or regulations whereby a manufacturer may sell lubricating oil for lubricating purposes tax free merely because the oil is not intended for use in a highway motor vehicle. Therefore, such sales may not be made tax free and the tax imposed by section 4091 of the Code applies to such sales.

Although the law contains provisions (see sections 6424 and 39 of the Code) under which the ultimate purchaser of lubricating oil who uses it otherwise than in a highway motor vehicle is entitled to a payment or credit in the amount of the tax imposed on the manufacturer or producer, these provisions generally will not be of any practical significance in this situation because of the small amounts involved. For example, the amount of the tax attributable to a single four-ounce can of oil is less than one-fifth of a cent.