Rev. Rul. 54-25

Advice is requested concerning the method of computing the tax imposed by section 3403 of the Internal Revenue Code with respect to sales of automobiles by an importer who sells only at retail.

Under the authority of section 3441(b)(1) of the Code, the tax on sales of automobiles by an importer who sells only at retail is to be computed on the price for which such articles are sold by manufacturers or producers in the ordinary course of trade as determined by the Commissioner. Such determination has been made with respect to automobiles and has been found to represent an amount equal to 75 percent of the established retail list price subject to the adjustments provided by section 3441(a) of the Code. Such adjustments are to be made as follows: To 75 percent of the list price should be (A) added any separate charge made by the importer for transportation or delivery of the car to the purchaser and (B) deducted the amounts of (1) the transportation or delivery expense actually incurred by the importer in effecting delivery to the purchaser, and (2) any expense for insuring the shipment to the purchaser (but not including insurance on the shipment to the importer). This computation reflects the fair market price in the case where the amount of the tax is to be passed on as a separate item on the invoice to the purchaser. In such case the tax will be computed at the statutory rate of 10 percent of such fair market price. However, where the amount of the tax is not passed on as a separate item but is included in the invoice price, the foregoing computation reflects not only the fair market price but the tax thereon as well. In that case, and in compliance with the rule set forth in section 316.11 of Regulations 46, the tax may be determined by taking one-eleventh ( 10/110 ) of such amount, so as to eliminate the tax from the tax base as required by the law.

In the event the tax base determined in the above-described manner results in a price which is less than the importer's cost of the automobiles including duty, insurance, and other charges incident to placing the automobiles in condition ready for delivery to his customers, the tax shall be computed at 10 percent of such cost.