sale for the purpose of these taxes, in which event the tax is measured by the rental payments. The sale (or rental) price:

(a) Excludes the retailers' excise tax itself, whether or not separately stated;

(b) Excludes, if separately stated, any retail sales tax imposed by any State, Territory, or political subdivision thereof, or the District of Columbia, irrespective of whether liability for such tax is imposed on the vendor or vendee;

(c) Includes any charges for packaging or packaging materials; and

(d) Excludes all other service charges such as for transportation, delivery, insurance, and installation.

If after the tax has been paid, the sale price is adjusted for any reason, such as by discount, rebate, allowance, or return of containers, the amount of the tax applicable to such sale price also shall be adjusted by credit or refund. The retailer, in turn, is entitled to a refund or credit from the Internal Revenue Service for such tax adjustment.

§ 1-11.101-1 Jewelry and related items.

A tax of 10 percent of the sale price is imposed upon the following supplies sold at retail: all articles commonly or commercially known as jewelry, whether real or imitation; pearls, precious and semiprecious stones, and imitations thereof; articles made of, ornamented, mounted, or fitted with precious metals or imitations thereof; watches, clocks, cases and movements for watches and clocks, which includes all time measuring devices except watches designed especially for use by the blind; gold, goldplated, silver, or sterling flatware or hollow ware and silver-plated hollow ware (which excludes silver-plated flatware); opera glasses; lorgnettes; and marine glasses, field glasses, binoculars and similar instruments, except those which, because of their size or weight, are ordinarily mounted on tripods or other bases. The tax does not apply to any articles used for religious purposes; to surgical and dental instruments; to frames or mountings for eyeglasses; to fountain pens, mechanical pencils, or smokers' pipes if the only parts of such articles which consist of precious metals are essential parts not used for ornamentation; or to buttons, insignia, and any other devices prescribed for use with the uniforms of the Armed Forces. If

the manufacturers' excise tax has been imposed on a pen, mechanical pencil, or cigarette lighter, which is further processed so as to make it subject to the retailers' excise tax on jewelry, the retailer, in computing the retailers' excise tax due on the sale, is entitled to a credit or refund in the amount of the manufacturers' excise tax paid on the

article.

§ 1-11.101-2 Furs.

A tax of 10 percent of the sales price is imposed upon the following supplies sold at retail: articles made of fur on the hide or pelt, and articles of which such fur is the component of chief value that is, its value is more than three times that of the next most valuable component. The tax is not imposed upon the sale of raw fur. If fur on the hide or pelt is supplied to a dresser or dyer of fur skins or a manufacturer or repairer of fur articles, who produces a taxable article for the use of the supplier of the fur, the transaction is deemed to be a sale at retail and is subject to the tax.

§ 1-11.101-3 Toilet preparations.

A tax of 10 percent of a sales price is imposed upon the following supplies sold at retail: perfume, essences, extracts, toilet waters, cosmetics, petroleum jellies, hair oils, pomades, hair dressings, hair restoratives, hair dyes, aromatic cachous, toilet powders, and any other similar substance, article, or preparation by whatsoever name known which are used or applied, or intended to be used or applied for toilet purposes, but not including any article intended to be used or applied only in the care of babies.

§ 1-11.101-4 Luggage and handbags.

A tax of 10 percent of the sales price is imposed upon the following supplies (including fittings or accessories sold therewith) sold at retail: trunks; valises, traveling bags; suitcases; satchels; overnight bags; hat boxes for use by travelers; beach and bathing suit bags; brief cases made of leather or imitation leather; salesmen's sample and display cases; purses; handbags; pocketbooks; wallets; billfolds; card, pass, and key cases; toilet cases; and any other cases, bags, and kits, without regard to size, shape, construction, or material, for use in carrying toilet articles or wearing apparel.

§ 1-11.101-5 Special fuels.

(a) Diesel fuel. A tax at the indicated rates is imposed upon diesel fuel, other than that taxable as gasoline under section 4081 of the Internal Revenue Code (see section 1-11.102-3), which is (1) sold by any person to an owner, lessee, or other operator of a diesel-powered highway vehicle, for use as a fuel in such vehicle; or (2) used by any person as a fuel in a diesel-powered highway vehicle unless there was a taxable sale of such liquid pursuant to (1), as follows:

(i) At 3 cents per gallon, if sold for use or if used as fuel in a dieselpowered highway vehicle

(A) Which, at the time of such sale or use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country;

or

(B) Which, if owned by the United States, is used on the highway; or (ii) At 2 cents per gallon, if sold for use or if used as fuel in a dieselpowered highway vehicle

(A) Which, at the time of such sale or use, is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country; or

(B) Which, if owned by the United States, is not used on the highway; and

(iii) At an additional 1 cent per gallon, if fuel on which a tax of 2 cents was paid pursuant to (a) (ii), is used as fuel in a diesel-powered highway vehicle

(A) Which, at the time of such use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country; or

(B) Which, if owned by the United States, is used on the highway. No tax is imposed on diesel fuel sold for use or used as fuel in a nonhighway vehicle, such as certain military vehicles, construction equipment, and equipment designed for use at mines, factories, railroad stations, and farms.

(b) Special motor fuels. A tax at the indicated rates is imposed upon benzol, benzene, naphtha, liquefied petroleum gas, or any other liquid (other than kerosene, gas oil, fuel oil, or a product taxable as diesel fuel under (a) above, or as gasoline under section 4081 of the Internal Revenue Code (see section

1-11.102-3), which is (1) sold by any person to an owner, lessee, or other operator of a motor vehicle, motorboat, or airplane for use as a fuel for the propulsion thereof, or (2) used by any person as a fuel for the propulsion of a motor vehicle, motorboat, or airplane, unless there was a taxable sale of such liquid pursuant to (1) as follows:

(i) At 3 cents per gallon, if such liquid is sold for use or is used as a fuel for a highway vehicle

(A) Which, at the time of such sale or use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country;

or

(B) Which, if owned by the United States, is used on the highway; or (ii) At 2 cents per gallon, if such liquid is sold for use or is used as a fuel for the propulsion of a motorboat or airplane, or a motor vehicle

(A) Which, at the time of such sale or use, is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country; or

(B) Which, if owned by the United States, is not used on the highway; and

(iii) At an additional 1 cent per gallon, if a liquid on which a tax of 2 cents was paid pursuant to (b)(ii), is used as fuel in a highway vehicle

(A) Which, at the time of such use, is registered, or required to be registered, for highway use under the laws of any State or foreign country; or

(B) Which, if owned by the United States is used on the highway.

(c) Refund or credit to retailer. A retailer, who has paid a tax on diesel fuel or special motor fuel, is entitled to a refund or credit of the tax paid, if such retailer has not included the tax in the sales price or otherwise collected the tax from the purchaser, has repaid the tax to the purchaser, or has the purchaser's written consent to take the refund or credit, as follows:

(1) A refund or credit of 3 cents or 2 cents per gallon, as appropriate, if a liquid upon which a tax of either 3 cents or 2 cents per gallon has been paid, is not used as fuel in a diesel-powered highway vehicle or to propel a motor vehicle, motorboat, or airplane;

(2) A refund or credit of 1 cent per gallon, if diesel fuel, upon which a tax of 3 cents per gallon has been paid pursuant to (a) (i), is used as a fuel for a diesel-powered highway vehicle

(i) Which, at the time of such use is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country;

or

(ii) Which, if owned by the United States, is not used on the highway; or

(3) A refund of 1 cent per gallon, if special motor fuel, upon which a tax of 3 cents per gallon has been paid pursuant to (b) (1), is used to propel a motorboat or airplane, or motor vehicle

(i) Which, at the time of such use is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country;

or

(ii) Which,

if owned by the United States, is not used on the highway.

These refunds or credits shall be utilized, in accordance with agency procedures, by adjustment of the contract price whenever it is economically advantageous to do so.

(d) Refund or credit to manufacturer. If the manufacturers' excise tax on gasoline (see section 1-11.102-3) has been paid on any material used in the production of a special motor fuel taxable under (b) above, the manufacturer of the gasoline is entitled to a refund or credit of such tax, subject to the conditions similar to those stated in the opening lines of (c) above. The contract price for special motor fuels purchased by any agency shall not include an amount for manufacturers' excise tax on gasoline used in the production of such special motor fuel.

§ 1-11.102 Manufacturers' excise taxes. Chapter 32 of the Internal Revenue Code (which supersedes Ch. 29, I.R.C. 1939) as implemented by Treasury Regulations 44 and 46, imposes manufacturers' excise taxes upon various types of supplies, enumerated in sections 1-11.102-1 through 1-11.102-14 sold by a manufacturer, producer, or importer. In general, the tax attaches at the time title passes from the manufacturer and is based on the sale price. A lease of supplies is treated as a sale for the purpose of these

taxes, in which event the tax is measured by the rental payments even though such payments exceed the price or fair value of the supply (with the exception of a special rule which applies to the rental of trailers suitable for use with passenger automobiles, permitted by section 4216 (d), I.R.C.). The sale (or rental) price excludes the tax itself and all service charges connected with the sale, such as transportation, delivery, insurance, or installation charges, except charges for packaging and packaging materials, which are included. If after the tax has been paid, the sale price is adjusted for any reason, such as by discount, rebate, allowance, or return of containers, the amount of the tax applicable to such sale price also should be adjusted. The manufacturer, in turn, is entitled to a refund or credit from the Internal Revenue Service for such tax adjustment. Supplies subject to the retailers' excise tax on jewelry (see section 1-11.101-1) are not subject to manufacturers' excise taxes.

(a) A tax at the indicated rates is imposed upon the following supplies (including parts and accessories sold therewith) sold by a manufacturer, producer, or importer:

(1) Chassis and bodies of trucks, buses, truck and bus trailers and semitrailers, and tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer10 percent; except that this tax does not apply to equipment designed for off-theroad use, such as certain military vehicles, construction equipment, and equipment designed for use at mines, factories, railroad stations, and farms;

(2) Chassis and bodies of automobiles, and trailers and semitrailers (other than house trailers) suitable for use with passenger automobile s-10 percent through June 30, 1958, and 7 percent thereafter; and

(3) Parts or accessories-8 percent through June 30, 1958, and 5 percent thereafter. Parts or accessories are defined to include any article

(i) The primary use of which is to improve, repair, replace, or serve as a component part of a motor vehicle;

(ii) Designed to be attached to or used in connection with a motor vehicle or to add to its utility or ornamentation;

or

(iii) The primary use of which is in connection with a motor vehicle whether or not essential to its operation or use.

Spark plugs, storage batteries, leaf springs, coils, timers, and tire chains, which are suitable for use on or in connection with, or as component parts of, a taxable motor vehicle are treated as parts or accessories whether or not primarily adapted for such use. The tax on parts or accessories does not apply to any article sold for use (or for a single resale for use) as material in the manufacture of, or as a component part of, any article, whether or not such article is subject to a manufacturers' excise tax. If, after August 31, 1955, a manufacturer uses a tax-paid part or accessory as material in the manufacture of, or as a component part of, any article, such manufacturer is entitled to a credit or refund of the tax paid on the part or accessory. The contract price of supplies purchased by any agency shall not include an amount for the manufacturers' excise tax on automotive parts or accessories purchased for use, or after August 31, 1955 used, in the manufacture of any article.

(b) The tax on automotive parts or accessories does not apply to tires, inner tubes, and automobile radio and television receivers. If a manufacturer of motor vehicles sells these articles in connection with the sale of a taxable motor vehicle, he may take a credit against the motor vehicle tax in the amount of the motor vehicle tax rate applied to his purchase price of the tires, inner tubes, and automobile radio and television receivers. The contract price for supplies purchased by any agency shall not include an amount for the manufacturers' excise tax on motor vehicles and automotive parts or accessories to the extent that these credits are available to the manufacturer.

§ 1-11.102-2 Tires and tubes.

(a) A tax at the indicated rates is imposed on the following supplies, made wholly or in part of rubber, including synthetic and substitute rubber, sold by a manufacturer, producer, or importer:

(1) Tires of the type used on highway vehicles, which includes motor vehicles which are highway vehicles, and vehicles of the type used with motor vehicles which are highway vehicles-8 cents per pound;

(2) Other tires, which include pneumatic and solid tires, casings, hoops, strips, and bands of all kinds which are designed to fit the wheel of any type of vehicle, that is capable of transporting a person or burden-5 cents per pound;

(3) Inner tubes, which include any type of air container for pneumatic tires-9 cents per pound on total weight, including air valves and stems; and

(4) Tread rubber, which includes any material commonly or commercially known as tread rubber or camelback of a type used in retreading or recapping tires-3 cents per pound. An exemption exists for the sale of tread rubber or camelback by a manufacturer to a purchaser for use by that purchaser other than for recapping or retreading tires of the type used on highway vehicles. In addition, if tread rubber, upon which the tax has been paid, is sold for use or is used other than for recapping or retreading tires of the type used on highway vehicles, the manufacturer is entitled to a refund or credit of the tax, provided that the credit under paragraph (b) of this section 1-11.102-2 is not available. The contract price for supplies purchased by any agency will not include an amount for the manufacturers' excise tax on tread rubber to the extent that this exemption or refund or credit is available to the manufacturer.

In determining weights of taxable tires under (1) and (2), metal rims or rim bases are excluded, but any other material or fastening device that forms a part of the tire is included. The tax imposed under (1) and (2) does not apply to tires which are more than 20 inches in diameter and not more than 134 inches in cross-section, if such tires are of all-rubber construction with fabric or metal reinforcement, nor does it apply to tires of extruded tiring with an internal wire fastening agent.

(b) The exemption for sales for further manufacture does not apply to taxable tires and tubes (see section 111.203). However, if tax-paid tires and tubes are sold in connection with the sale by a manufacturer of a taxable motor vehicle, a credit against the tax on the motor vehicle is allowed to the extent of the motor vehicle tax rate applied to the manufacturers' purchase price on the tires and tubes (see section 1-11.1021(b)).

§ 1-11.102-3

Gasoline.

(a) A tax of 3 cents per gallon is imposed on gasoline sold by a producer or importer. Gasoline means all products commonly or commercially known as gasoline, including casing-head and natural gasoline, but excluding kerosene, gas oil, or fuel oil, and also excluding any product taxable as a special motor fuel under section 4041 of the Internal Revenue Code (see section 1-11.105-5). The tax does not apply to the sale of gasoline to a producer, which is defined to include a refiner, compounder, blender, or dealer who sells gasoline exclusively to producers of gasoline.

(b) The ultimate purchaser of gasoline is entitled to a refund of 1 cent per gallon for gasoline not used as fuel in a highway vehicle:

(1) Which, at the time of such use is registered, or is required to be registered, for highway use under the laws of any State or foreign country; or

(2) Which, if owned by the United States, is used on the highway. In accordance with agency procedures, necessary data shall be compiled, to the extent economically advantageous, to support a direct application to the Internal Revenue Service for refund. Such application shall be in accord with pertinent requirements of the Internal Revenue Service.

§ 1-11.102-4 Lubricating oils.

(a) A tax at the indicated rates is imposed upon the following classes of lubricating oils sold, other than to another manufacturer or producer for resale, by a manufacturer or producer (but not upon oil sold by an importer):

(1) Cutting oils, which means oils sold for use in cutting and machining operations, including forging, drawings, rolling, shearing, punching, and stamping on metals-3 cents per gallon; and

(2) Other lubricating oils, which means all oils, regardless of origin, which are sold as lubricating oil or are suitable for use as a lubricant, not including products commonly known as grease6 cents per gallon. Certain products, other than those commonly known as grease, are not considered to be lubricating oils, and accordingly are not subject to the tax. These include petrolatum, and fatty oils of vegetable, animal, fish,

and marine origin which in their natural state are not sold as lubricating oils.

(b) An exemption is available for lubricating oils sold by a manufacturer directly to a purchaser who uses the oil for nonlubricating purposes. In applying this exemption, oils can be grouped into two classes:

(1) Oils which are exempted if the manufacturer obtains an exemption certificate from the purchaser in the form prescribed by the Treasury Regulations; and

(2) Oils which are exempted without an exemption certificate. Oils of the second class include crude neatsfoot oil; electrical transformer insulating oil; white oil; and lubricating oils which are packaged in sealed containers of one gallon or less, labeled and sold for nonlubricating purposes.

If,

With the exception of oils which are packaged in sealed containers of one gallon or less, labeled and sold for nonlubricating purposes, oils of neither class may be sold tax-free to dealers for resale even though it is known that the oil will be used for nonlubricating purposes. however, oil upon which a tax has been paid is used for nonlubricating purposes, the manufacturer is entitled to a refund or credit, irrespective of whether the oil was sold directly to the consumer by the manufacturer or was sold through a dealer. A refund or credit is also allowed when lubricating oil, upon which the 6 cent per gallon tax has been paid, is used as a cutting oil taxable at 3 cents per gallon. When it is economically advantageous to do so, the exemption or refund or credit for oil sold for use or used for nonlubricating purposes, and the refund or credit for lubricating oil used as cutting oil, shall be utilized in accordance with agency procedures by a tax exclusive purchase or by adjustment of the contract price.

§ 1-11.102-5 Refrigeration equipment.

A tax at the indicated rates is imposed upon the following supplies (including parts or accessories sold therewith) sold by a manufacturer, producer, or importer:

(a) Household type refrigerators, which include units not exceeding 14 cubic feet net storage space for single or multiple cabinet installations having, or designed for use with, a mechanical refrigerating unit operated by electricity,