Rev. Proc. 79-9

Section 1. Purpose.

The purpose of this Revenue Procedure is to specify the method under which tire manufacturers, producers, and importers may determine tire and tube weights on an average weight basis for the purpose of computing the manufacturers excise tax imposed by section 4071(a) of the Internal Revenue Code of 1954.

Sec. 2. Background

.01 Section 4071(a) of the Code imposes an excise tax on tires, tubes, and tread rubber sold by the manufacturer, producer, or importer. The tax is based on the weight of the article at a rate computed on each pound including any fraction thereof.

.02 Section 4071(c) of the Code provides that the weight shall be based on total weight except that the metal rims or rim bases are excluded in the case of tires. Total weight shall be determined under regulations prescribed by the Secretary.

.03 Section 48.4071-2(b) of the Manufacturers and Retailers Excise Tax Regulations provides that a manufacturer who has received permission from the Commissioner, subject to conditions prescribed by the Commissioner, may determine total weight of tires and inner tubes manufactured and sold by the manufacturer on the basis of the average weight for each type, size, grade, and classification shown in schedules published by the tire industry. The average weights shall be established in accordance with the method approved by the Commissioner and shall apply for such periods as the Commissioner may prescribe. The Commissioner may terminate the approval granted any manufacturer. In the case of the termination of the approval granted any manufacturer, the termination shall become effective 10 days from the date of the receipt by the manufacturer of the notice of termination. A manufacturer may terminate its privilege to use average weight by giving no less than 10 days written notice to the Commissioner. The termination of approval shall not affect the manufacturer's liability for tires and tubes sold prior to the effective date of termination. (1) The authority of the Commissioner under section 48.4071-2(b) and 301.7701-9 in these matters has been delegated to the Director, Examination Division.

.04 In accordance with the above, the Rubber Manufacturers Association has published schedules of average weights that have been used for some time.

.05 The regulations under section 48.4071-2(b) do not specify how the average weight is to be computed. Therefore, in order to specify the method of computing average weights, this revenue procedure prescribes the use of an industry-wide weighted average, the size of the sample to be used by manufacturers, producers, and importers, and the conditions under which a manufacturer, producer, or importer may use the industry schedule of average weights for each type, size, grade, and classification of tire and inner tube.

.06 For the purpose of this revenue procedure, the term "manufacturer" includes a producer and "tire" includes an inner tube. The term "prior fiscal year" means the prior 12 months ended June 30th. The term "category" means a particular type, size, grade, and classification of tire or inner tube. The term "industry group" means the Rubber Manufacturers Association or any other organization that establishes to the satisfaction of the Commissioner schedules of average tire weights for determining the tax under section 4071. The term "specification weight" means the weight of the tire determined by composition formula. The term "ordinary production" means the regular production of the tire as against, for example, a small test run.

Sec. 3. Application

.01 A manufacturer or importer wishing to determine total weight of tires and inner tubes manufactured or imported and sold by it on the basis of the average weight for each category must request permission to do so by submitting an application with three copies to the Director, Examination Division, CP:E, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C. 20224, in substantially the form shown in section 8 of this procedure. At the same time the applicant must send a copy to the industry group responsible for compiling the average weight schedules. The application must be signed by the applicant.

.02 Upon approval the Service will furnish copies to the industry group, the appropriate district director, and the applicant.

.03 Manufacturers, annual information to be supplied.

The manufacturer must furnish the industry group annually by August 10th, the following information from the production for the prior fiscal year for use in compiling the table of average weights to be used for the next calendar year for each category.

1 The specification weight of tires by category.

2 The quantity of tires produced for domestic consumption by category.

.04 Manufacturers, weighing tires.

If the specification weight for a tire was reported to the industry group for the prior fiscal year, then, in the first month of the ordinary production of that tire in the current fiscal year the manufacturer must select a random sample of each category. The sample will, by category, consist of 10 tires from that month's production. The sum of the actual weights of the selected tires in each category is to be divided by 10 to arrive at the average weight of these particular tires. A list of the average weights so obtained for that month will be submitted to the industry group by the 10th of the next month. The manufacturer must identify each average weight on the list to the tire for which the specification weight was originally submitted.

.05 Manufacturers, exceptions.

Where a manufacturer is unable to comply with section 3.03 because;

1 There was no production of the tire by the manufacturer for domestic consumption in the prior fiscal year although the tire has been previously produced by that manufacturer,

2 The tire is a new tire not in prior production by that manufacturer,

3 There was no ordinary production by that manufacturer of such tire in the prior fiscal year, or

4 That manufacturer had no specification weight for this tire in the prior fiscal year,

the manufacturer may use the average weight schedule for such tires, notwithstanding section 3.13. During the first month of production of this tire in the current fiscal year the manufacturer will submit to the industry group the specification weight of such tire by category. By the 10th of the next month a random sample average weight of that tire will be submitted to the industry group. The sample shall be obtained by selecting 10 tires from the first month's production of that tire. The sum of the actual weights of the selected tires is to be divided by 10.

Where there is no category in the average weight schedule for the tire, the manufacturer will submit to the industry group a complete description of the tire with its uses and specification weight.

.06 Importers of tires.

Importers must furnish the industry group annually, by August 10th, the following information obtained from tires imported for domestic consumption in the prior fiscal year for use in compiling the table of average weights to be used for the next calendar year for each category.

1 The average weight of a random sample of a tire by category. The sample shall consist of 10 tires from the imported tires of that category. The sum of the actual weights of those tires is to be divided by 10.

2 The quantity of tires imported for domestic consumption by category.

.07 Importers of tires, exceptions.

Where an importer is unable to comply with section 3.06 because;

1 There was no importation by that importer of the tire for domestic consumption in the prior fiscal year although the tire has been previously imported by that importer, or

2 The tire is first being imported by that importer in the current fiscal year,

the importer may use the average weight schedule for such tires, notwithstanding section 3.13. During the first month's importation of such tire in the current fiscal year the importer will weigh or have weighed a random sample of the tire by category. The sample will consist of 10 tires by category from those imported that month for domestic consumption. The sum of the actual weights of those tires is to be divided by 10. The information will be submitted to the industry group by the 10th of the next month. Where there is no category in the average weight schedule for such tire, the importer will submit to the industry group a complete description of the tire with its uses.

.08 Importers, of articles equipped with imported tires subject to tax, who do not import tires separately.

Importers must furnish the industry group annually, by August 10th, the following information obtained from articles imported for domestic consumption in the prior fiscal year for use in compiling the table of average weights to be used for the next calendar year for each category.

1 The quantity of tires imported for domestic use by category.

2 If notified by the industry group that the weight is needed for a particular category the importer will supply such weight as provided in section 3.061.

.09 Importers who do not import tires separately.

Exceptions.

Where an importer is unable to comply with section 3.08 because;

1 The importer had no importation of articles with that tire for domestic consumption in the prior fiscal year although articles with that tire have been imported by that importer in previous years, or

2 Articles with that tire are first being imported by that importer in the current fiscal year,

the importer may use the average weight schedule for such tires, notwithstanding section 3.13. Where there is no category in the average weight schedule for such tire, the importer during the first month's importation of articles with that tire in the current fiscal year, will weigh or have weighed a random sample of the tire by category as provided in section 3.07. The information will also contain a complete description of the tire with its uses.

If notified by the industry group that the weight is needed for a particular category in the schedule, the importer will supply such weight as provided in section 3.061.

.10 If a participant receives a request from the industry group for certified weight of a particular tire, or certified verification of other data submitted, the information will be submitted to the industry group within 15 days of the post office marked date of the request.

.11 Where the Internal Revenue Service finds that the data submitted by a participant to the industry group is substantially inaccurate, the participant's tax liability may be redetermined by the Service on the basis of actual weights, and consideration will be given to terminating the approval for that participant to determine total weight on the basis of average weight, as provided in section 48.4071-2(b) of the regulations.

.12 Failure to comply with any of the provisions of this procedure applicable to the participant will result in assessment of the tax as determined by the Service for the particular period in question.

.13 This revenue procedure and the average weights published by the industry group may not be used by a manufacturer or importer to determine tax liability unless such taxpayer has complied with the requirements in this procedure.

.14 This procedure and the average weight schedule may not be used to determine the tax liability for imported used tires.

.15 The information required by this revenue procedure is for use in determining excise tax and the preparation and filing of excise tax returns. Therefore, as provided for in section 7206 of the Code, any person who willfully makes and subscribes, aids or assists in, procures, counsels, or advises in fraudulent or false statements, returns, affidavits, claims, or other documents in connection with the application of this revenue procedure, will be guilty of a felony and, upon conviction, will be fined not more than $5,000, or imprisoned not more than 3 years, or both, together with the costs of prosecution.

Sec. 4. Industry Group.

.01 The industry group will publish by November 1 and effective as of the next calendar year a schedule of weighted average weights as to each category. The schedule will be based on the data submitted by manufacturers or importers who have obtained approval to determine total weight of their tires on the basis of the average weights. The industry group will furnish copies of the schedule, and any additions and corrections, to each participant and to the Commissioner of Internal Revenue.

.02 The industry group will add the number of tires imported on other articles, by category, to the number received from importers of tires. Where the weight of tires imported on other articles is not available from other importers, as provided in section 3.061, the industry group will notify the importer to weigh such tires, in accordance with section 3.061. The information on imported tires will be included, by category, with domestic production for the purpose of determining weighted averages.

.03 An addition or correction will be made in the published schedule of weighted averages if the net tax liability of a tire category in the schedule is changed by one cent or more. The change will be effective beginning the month following issuance of notice of the change.

.04 Where the industry group has reason to believe that any part of the data submitted may be in error, the industry group will request written verification of that part of the data from the participant. See section 3.10.

.05 The Director, Examination Division, will be notified by the industry group of any noncompliance with the requirements of this revenue procedure.

.06 The industry group will not include in any category a tire whose weight is not reasonable for that category.

.07 The industry group will submit to the Internal Revenue Service a list of the categories with the average weight and the weight spread found in each category one month prior to publication of the schedule. Copies of all schedule changes issued will be submitted to the Internal Revenue Service.

Sec. 5. Records.

.01 The industry group will maintain a file, by participant, of all correspondence and average weight data. Each item in the file will be kept for four years, except agreements. Agreements will be kept for at least four years after they are terminated. Each item in section 5.04 and 5.06 will be kept for at least four years.

.02 The industry group will maintain all summary, subsidiary, and detail records involving its computations used to arrive at the average weights in the schedule for four years after the effective year of that schedule.

.03 The above records will be made available to the Internal Revenue Service for verification.

.04 Each participant will maintain all summary, subsidiary, and detail records involving its computations used to arrive at the data submitted to the industry group. This includes tire component formulae where tire specification weight is submitted to the industry group.

.05 Upon request, the records in section 5.04 will be made available to the Internal Revenue Service.

.06 Each taxpayer participant will maintain a file of the data submitted, copies of agreements, correspondence, copies of weight certifications, and other material concerning this procedure.

.07 Where coded record systems are used, machine sensible records of the pertinent information will be maintained.

Sec. 6. Effect on Other Documents.

Taxpayers with agreements under prior rules who wish to continue to use average weights are required to apply for permission to use average weights under this revenue procedure. All prior agreements not under this revenue procedure are revoked as of January 1, 1980.

Sec. 7. Effective Date.

This Revenue Procedure is effective July 1, 1979, and applies to the schedules of weights prepared in 1979 and subsequent years, for use, respectively, in calendar year 1980 and subsequent calendar years.

Sec. 8. Agreement and Application Form

APPLICATION AND AGREEMENT ON TIRES AND INNER TUBES

The undersigned has read Revenue Procedure 79-9 and applies for permission to use the average weight schedules prepared under that Revenue Procedure.

(a) In consideration of the permission granted by acceptance of this application by the Internal Revenue Service, the undersigned understands it is subject to and will comply with the provisions of Revenue Procedure 79-9, which is a part of this agreement.

(b) That Revenue Procedure may subsequently be corrected, amended, revised, and superseded and this agreement includes all such changes unless the undersigned, by written notice, ends this agreement within sixty days of publication of such change in the Internal Revenue Bulletin.

(c) Ten days after the post office marked date of the undersigned's written notice to the Director, Examination Division, ending this agreement under (b), the permission to use average weights is revoked.

(d) In consideration of the permission to use the average weights the undersigned waives any rights to claim refund, credit, or abatement of any part of the tax it has paid under this agreement on the basis (1) that the actual weight of its particular tire or tube is less than that established in the schedule of average weights, (2) that the use of the schedules is not legal, or (3) that the Commissioner or his delegate has exceeded discretionary power in adopting such weights or in accepting this agreement.

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