Rev. Rul. 58-507

The Internal Revenue Service has been requested to determine whether the transactions described below are considered to be taxable sales of automobile seat covers.

Section 4061(b) of the Internal Revenue Code of 1954 imposes a tax upon the sale 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 articles enumerated in section 4061(a). Automobile seat covers are automobile accessories within the meaning of section 4061(b). See S.T. 944, C.B. 1952-2, 255, as clarified by Rev. Rul. 54-330, C.B. 1954-2, 409. Moreover, covers made of plastic, terry cloth, corduroy, or other similar materials, which are held out as being suitable for use as automobile seat covers, furniture covers, bath mats, table covers, playpen covers, etc., but which by reason of their size, shape, and design are more suitable for use as automobile seat covers than for any other use, are subject to the manufacturers excise tax as automobile parts or accessories. See Revenue Ruling 56-349, C.B. 1956-2, 793.

The particular transactions in question and the conclusions regarding the taxability thereof are set forth in the succeeding paragraphs.

SITUATION No. 1.-A customer has partially worn-out seat covers on his car. The leather trim at the top of the seat covers, which in the instant case extends down approximately nine inches, is in good condition. A dealer uses the leather trim, together with new material, to make another set of seat covers for the customer.

Conclusion . The dealer incurs no manufacturers excise tax liability on the charge made, since the customer's own material formed a large part of the seat covers.

SITUATION No. 2.-A dealer purchases bolts of cloth which were produced for use in a certain kind of automobile. Some of the bolts are upholstery material; the rest are slip cover material. The dealer uses the upholstery material to renew the upholstery of automobile seats or to replace parts of the automobile seat upholstery which have been damaged, such as by cigarette burns. The slip cover material is used to produce complete seat covers where the customer prefers to cover a worn or burned seat, rather than to have the seat renewed or a part of it replaced.

Conclusion . Where bolts of upholstery material are used in the manner stated, the dealer incurs no manufacturers excise tax liability, since the dealer's operations are in the nature of `repairs' rather than the manufacture and sale of seat covers. On the other hand, where the bolts of slip cover material are used to produce detachable seat covers, the sale or use of such covers by the dealer is subject to the tax imposed by section 4061(b) of the code.

SITUATION No. 3.-A customer's automobile seats were burned, only the spring being left. The seats are covered with cotton padding and new upholstery material.

Conclusion . No manufacturers excise tax liability is incurred with respect to charges for this operation, since the dealer's operations are in the nature of `repairing' the existing seat rather than `manufacturing and selling' an automobile seat or seat cover.