Rev. Proc. 80-19

Section 1. Purpose

The purpose of this Revenue Procedure is to modify and supersede Rev. Proc. 79-9, 1979-1 C.B. 488, which specifies 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.

In attempting to comply with Rev. Proc. 79-9, manufacturers and importers encountered difficulties not previously anticipated. Therefore, the procedure is being restated with modifications.

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 of 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 use of the average weight schedule by giving no less than 10 days written notice to the Commissioner. The termination shall not affect the manufacturer's liability for tires and tubes sold prior to the effective date of termination. 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 "fiscal year" means the period July 1 to June 30. The term "category" means a particular type, size, grade, and classification of tire or inner tube. The term "specification weight" means the weight of the tire determined by composition formula. A category will often include tires of differing specification weights but alike as to type, size, grade, and classification. The term "ordinary production" means the regular production of the tire as against, for example, a small test run. 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.

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 each plant's ordinary production for the prior fiscal year for use in compiling the industry group's table of average weights to be used for the next calendar year for each category.

1 The specification weight of the tires in each category of tires produced in the plant, rounded off to two decimal places,

2 The quantity of tires produced for domestic consumption in each such category,

3 If in one of its plants a manufacturer produces two or more tires differing in specification weight in a single category, the single specification weight figure submitted to the industry group for that category by the manufacturer shall be weighted by volume of production for domestic consumption. For example, manufacturer N produces two tires differing in specification weight but falling within the same category, X. In the prior fiscal year N produced for domestic consumption 50,000 category X tires with a specification weight of 30 pounds and 100,000 category X tires with a specification weight of 30.50 pounds. The specification weight figure that N furnishes the industry group for category X is computed as follows.

           (1) (2) (3)

A multiple-plant manufacturer may have individual plant information submitted to the industry group from a company-designated consolidation point. Such information must be provided to the industry group no later than the date the individual plant would be required to report it. This also applies to 3.04 and 3.05 below.

.04 Manufacturers, Weighing tires.

1 If a manufacturer reported (or is to report) the specification weight for a category of tire produced in a plant in the prior fiscal year, and within that category only one tire by specification weight was produced in the plant, then in the first month of ordinary production of the same tire (by specification weight) during the period beginning with the last month of the prior fiscal year and ending with the last month of the current fiscal year, the manufacturer must select and weigh a random sample of at least 10 of those tires from that month's production or, if less, the entire ordinary production for the month. The manufacturer will divide the sum of the actual weights of the tires by the number of tires in the sample to compute an average actual weight of the sampled tires. This average actual weight shall be rounded off to two decimal places. The average weight so obtained for that month will be submitted to the industry group by the 10th of the second succeeding month. The manufacturer must correlate the average actual weight to the specification weight reported to the industry group.

2 Where a plant produced in the prior fiscal year tires falling within the same category but differing in specification weight, the manufacturer must also select and weigh a random sample of tires in the category. However, in computing an average actual weight for a category in which a manufacturer had multiple specification weights in the prior fiscal year, it necessarily follows that the manufacturer would only select and weigh samples of those tires (by each specification weight) considered in arriving at the prior year's specification weight figure. New tires being produced in the current fiscal year in the category by the manufacturer would be disregarded. By way of example, if a plant in the prior fiscal year produced within category X tires A, B, and C, differing only in specification weight, the manufacturer would provide the industry group a specification weight figure computed in accordance with 3.033. When during the current fiscal year the manufacturer computes an average actual weight figure for that category, it would only consider tires A, B, and C, and not new tire D, which although falling within category X, was not produced in the prior fiscal year.

The average actual weight for a multiple specification weight category shall, as in 3.033, be weighted by the prior year's volume for domestic production, and be determined in the same manner as the specification weight reported (or to be reported) to the industry group. Using the example in 3.033, assume that in the current fiscal year N begins production in one of its plants of category X tires in August. Although the specification weight figure for the category that was furnished to the industry group was 30.33 pounds, a production-weighted figure, in reality N is manufacturing in category X tires with specification weights of either 30 or 30.5 pounds. N must select and weigh a random sample of at least ten tires of each specification weight to be sampled or, if less, the entire ordinary production for the month of tires of a specification weight to be sampled. N will then compute the average actual weight for the sampled tires of each specification weight and multiply each resultant figure by the prior year's volume of production of tires of that specification weight for domestic consumption. N must then add the two totals and divide by the total of the prior year's production of that category of tires in that plant to arrive at an average actual weight figure, production-weighted, to be submitted to the industry group by October 10.

The following is illustrative of the procedure to be followed:

     (1) (2) (3) (4) (5)

3 Where a manufacturer in one of its plants begins production in a particular month of tires of one or more specification weights in a category but not of tires of all of the specification weights in the category which were reported (or are to be reported) in the category for the prior fiscal year, the manufacturer shall proceed as follows. By the 10th day of the second succeeding month after the manufacturer begins production of the tires in the plant it must submit to the industry group a partial report. The manufacturer shall indicate that it is not a final report and will furnish to the industry group the average actual sample weight of each tire (by specification weight) in the category put into production in the plant, and must correlate the actual weights to the category for which a specification weight was originally submitted. The manufacturer will submit revised reports as tires of other specification weights in the category that were reported the prior fiscal year are placed into production at the plant. By the 10th day of the second succeeding month after all tires (by specification weight) to be sampled in the category have been placed in production, the manufacturer must furnish the industry group the average actual weight for the category, determined following the procedure in 3.042 above.

4 In those instances where a manufacturer will not, during the period beginning with the last month of the prior fiscal year and ending with the last month of the current fiscal year, produce in a plant tires of all of the specification weights in a category which it reported (or is to report) in that category for the prior fiscal year, it should so inform the industry group within a reasonable period of time after it has determined that this will be the case and, in no event, later than August 10th of the following fiscal year. The manufacturer will indicate that as a result it cannot provide for that category an average actual weight.

.05 Manufacturers, Exceptions.

Where there was no ordinary production in that plant by that manufacturer of tires in a category in the prior fiscal year, or, that manufacturer had no specification weight for tires in the category in the prior fiscal year, the manufacturer may use the industry group's average weight schedule for such category during the current fiscal year notwithstanding section 3.13. During the first month of production in the plant of tires in that category in the current fiscal year, the manufacturer will submit to the industry group the specification weight of tires in such category if available. By the 10th of the second succeeding month after the tires in such category are first placed in production, a random sample average actual weight of each of the tires (by specification weight) in that category will be submitted to the industry group.

Where there is no category in the industry group's average weight schedule for a 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 industry group's table of average weights to be used for the next calendar year for each category.

1 (a) If in the prior fiscal year the importer imported within a category tires of a single specification weight, the importer may furnish the industry group with the average actual weight of a random sample of tires in the category. The sample shall have consisted of at least 10 tires or, if less, the entire ordinary importation for the prior fiscal year. The importer may, at its option, furnish the information described in 3.061(b) below. If the importer is importing tires falling within the same category but differing in specification weight, the importer must provide the information described in 3.061(b) below.

(b) An importer importing within a category tires of a single specification weight may, in the alternative, furnish the industry group with the specification weight for that category. An importer importing tires within a category differing in specification weight must provide the specification weights for that category. The specification weights may be obtained from sources within or outside the United States, and there shall be maintained within the United States at least one copy of the composition formula for each specification weight at one stated location in the United States. Thus, if there are, for example, 10 importers of the identical tire, only one need maintain the specification formula. As in the case of manufacturers, where an importer imports into the United States tires that differ in specification weight but that fall in the same category, the importer shall furnish to the industry group an average specification weight figure which is weighted by volume of importation into the United States and computed as described in 3.033.

2 The importer must also furnish the industry the quantity of tires imported for domestic consumption by category.

3 In the case of an importer who in the prior fiscal year imported within a category tires of a single specification weight, in the first month of the importation of the same tires in such category during the period beginning with the last month of the prior fiscal year and ending with the last month of the current fiscal year, the importer must select and weigh or have weighed, a random sample of at least 10 tires from that month's importation, or, if less, the entire importation for the month of those tires in that category. The importer shall determine the average actual weight and furnish this figure to the industry group by the 10th of the second succeeding month. The importer must correlate the average weight to the category for which an average actual weight or specification weight figure is submitted in accordance with 3.061. In the case of an importer who imported tires of differing specification weights within a category in the prior fiscal year, such importer shall follow the procedures set forth for manufacturers in 3.04 in reporting average actual weight. As in the case of manufacturers, the importer, in determining average actual weight for a particular category, shall disregard tires in that category being imported by it in the current fiscal year but not imported by it in the prior fiscal year.

.07 Importers of tires. Exceptions.

Where any of the following circumstances are present:

1 Tires in a category are first being imported by that importer in the current fiscal year, or

2 There is not a copy of the specification formula available in the United States,

the importer may use the industry group's average weight schedule for such category during the current fiscal year, notwithstanding section 3.13. During the first month's importation of tires in such category during the current fiscal year the importer will weigh or have weighed a random sample of at least 10 tires in the category or, if less, the entire ordinary importation for the month. The importer will compute the average actual weight for the tires in the category and provide such figure to the industry group by the 10th of the second succeeding month.

Where there is no category in the industry group's average weight schedule for a tire, the importer will in addition submit to the industry group a complete description of the tire and 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 with respect to articles imported for domestic consumption in the prior fiscal year for use in compiling the industry group's 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 weight data is needed for a particular category of tires the importer of such tires will supply the specification weight or the average weight of a random sample.

.09 Importers of articles equipped with tires who do not import tires separately. Exceptions.

Where the importer had no importation of articles equipped with tires in a category for domestic consumption in the prior fiscal year, and the importer is now importing articles with tires in that category, the importer may use the industry group's average weight schedule for such category during the current fiscal year, notwithstanding section 3.13.

If notified by the industry group that weight data is needed for a particular tire, the importer of such tires will furnish the industry group the specification weight or the average weight of a random sample.

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

.10 If a participant receives a request from the industry group for weight data on a particular tire, or 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 Service finds that the data submitted by a participant to the industry group is inaccurate, if the inaccuracy if other than of a de minimis nature 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 of each year, effective for 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 for a category 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 provide the specification weight, or the average weight of a random sample, at the importer's option, in accordance with section 3.061. The information on imported tires will be added, by category, to domestic production for the purpose of determining weighted averages.

.03 Any corrections will be made by supplement 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 second 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 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 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 detailed 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 Service for verification.

.04 Each participant will maintain all summary, subsidiary, and detailed 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 data, 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

Rev. Proc. 79-9 is modified and superseded. 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 were revoked by Rev. Proc. 79-9 as of January 1, 1980.

Sec. 7. Effective Date

This revenue procedure is effective June 23, 1980.

Sec. 8. Agreement and Application Form

APPLICATION AND AGREEMENT ON TIRES AND INNER TUBES

The undersigned has read Revenue Procedure 80-19 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 80-19, which is 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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