40.4220-7 Duty of vendor to ascertain use of exemption certificate.

40.4220-8 Other tax-free sales.

AUTHORITY: The provisions of this Part 40 issued under sec. 7805, I.R.C. 1954; 68A Stat. 917; 26 U.S.C. 7805.

CROSS REFERENCE: For partial supersedure of regulations contained in this part with respect to the subject matter within the scope thereof, see Part 48 of this chapter.

Subpart A-Introduction

SOURCE: The provisions of this Part 140 contained in Treasury Decision 6320, 23 F.R. 7840, Oct. 10, 1958; 25 F.R. 14021, Dec. 31, 1960, unless otherwise noted.

§ 40.0-1 Introduction.

(a) In general. The regulations in this part are designated "Manufacturers and Retailers Excise Tax Regulations." The regulations in this part relate to the taxes imposed by chapters 31 and 32 of the Internal Revenue Code of 1954, as amended, and to certain related administrative provisions of subtitle F of such Code. Chapter 31 of the Code imposes a tax on the sale at retail of articles specified in such chapter and chapter 32 of the Code imposes a tax on the sale by the manufacturer, producer, or importer of articles specified in that chapter. References in the regulations in this part to the "Internal Revenue Code" or the "Code" are references to the

Internal Revenue Code of 1954, as amended, unless otherwise indicated. References to a section or other provision of the law are references to a section or other provision of the Internal Revenue Code, as amended, unless otherwise indicated.

(b) Division of regulations. The regulations in this part are divided into 14 subparts. Subpart A contains provisions relating to the arrangement and numbering of the sections of the regulations in this part, general definitions and use of terms, scope of regulations, and the extent to which the regulations in this part supersede prior regulations relating to the excise taxes imposed by chapters 31 and 32 of the Internal Revenue Code. The other subparts of the regulations in this part and the subject matter to which they relate are as follows:

Subpart B-Jewelry and related items.
Subpart C-Furs.

Subpart D-Toilet preparations.

Subpart E-Luggage, handbags, etc.
Subpart F-Special fuels.

Subpart G-Special provisions applicable to retailers taxes.

Subpart H-Motor vehicles, tires, tubes, tread rubber, gasoline, and lubricating oil. Subpart I-Refrigeration equipment, electric,

gas, and oil appliances, and electric light bulbs.

Subpart J-Radio and television sets, phonographs, phonograph records, and musical instruments.

Subpart K-Sporting goods, photographic equipment, and firearms.

Subpart L-Business machines, pens, mechanical pencils and lighters, and matches.

Subpart M-Special provisions applicable to manufacturers taxes. Subpart N Refunds and other administrative provisions of special application to retailers and manufacturers taxes.

(c) Arrangement and numbering. Each section of the regulations in Subpart B through Subpart N of this part is preceded by the section, subsection, or paragraph of the Internal Revenue Code which it interprets. The sections of the regulations can readily be distinguished from sections of the Code since

(1) The sections of the regulations are printed in larger type;

(2) The sections of the regulations are preceded by a section symbol and the part number, arabic numeral 40 followed by a decimal point (§ 40.); and

(3) The sections of the Code are preceded by "Sec.".

Each section of the regulations setting forth law or regulations is designated by a number composed of the part number followed by a decimal point (40.) and the number of the corresponding provision of the Internal Revenue Code. In the case of a section setting forth regulations, this designation is followed by a hyphen and a number identifying such section.

§ 40.0-2 General definitions and use of

terms.

As used in the regulations in this part, unless otherwise expressly indicated:

(a) The terms defined in the provisions of law contained in the regulations in this part shall have the meanings so assigned to them.

(b) The Internal Revenue Code of 1954 means the Act approved August 16, 1954 (68A Stat.), entitled "An Act to revise the internal revenue laws of the United States", as amended.

(c) District director means district director of internal revenue.

(d) Calendar quarter means a period of 3 calendar months ending on March 31, June 30, September 30, or December

(e) Subpart F. [Reserved] (f) Subpart G. [Reserved]

(g) Subpart H. The regulations in Subpart H of this part, unless otherwise specified in such subpart, relate to: (1) Motor vehicles. [Reserved]

(2) Tires, tubes, and tread rubber. Sales made by the manufacturer, producer, or importer on or after July 1, 1956, of tires, tubes, and tread rubber. (3) Gasoline. [Reserved] (4) Lubricating oil. [Reserved] (h) Subpart I. [Reserved]

(i) Subpart J. The regulations in Subpart J of this part relate to sales made by the manufacturer, producer, or importer on or after September 1, 1955, of the articles specified in that subpart.

Excise Taxes on Sales by the Manufacturer___

26 CFR (1939) Part 314.

Regulations 46 (1940 Edition, as amended),

26 CFR (1939) Part 316.

Retailers Excise Taxes___.

Excise Tax on Diesel Fuel.

amended), 26 CFR (1939) Part 302.

Regulations 51 (1941 Edition, as amended),

26 CFR (1939) Part 320.

Regulations 119, 26 CFR (1939) Part 324.

Subpart M-Special Provisions Applicable to Manufacturers Taxes

SOURCE: $ 40.4220 to 40.4220-8 contained in Treasury Decision 6404, 24 F.R. 6199, Aug. 1, 1959; 25 F.R. 14021, Dec. 31, 1960. § 40.4220 Statutory provisions; exemption for sales or resales to manufacturers.

SEC. 4220. Exemption for sales or resales to manufacturers. Under regulations prescribed by the Secretary or his delegate, no tax under this chapter shall be imposed with respect to the sale of

(1) Any article (other than an automobile part or accessory taxable under section 4061(b), a refrigerator component taxable under section 4111, a radio or television component taxable under section 4141, or a camera lens taxable under section 4171)

(A) For use by the vendee as material in the manufacture or production of, or as a component part of, an article enumerated in this chapter; or

(B) For resale by the vendee for such use by his vendee, if such article is in due course so resold; or

(2) An automobile part or accessory taxable under section 4061(b), a refrigerator component taxable under section 4111, a radio or television component taxable under section 4141, or a camera lens taxable under section 4171

(A) For use by the vendee as material in the manufacture or production of, or as a component part of, any article; or

(B) For resale by the vendee for such use by his vendee, if such article is in due course so resold.

For purposes of this chapter, the manufacturer or producer to whom an article is sold under paragraph (1)(A) or (2)(A) or resold under paragraph (1)(B) or (2) (B) shall be considered the manufacturer or producer of such article. The provisions of paragraphs (1) and (2) shall not apply with respect to tires, inner tubes, or automobile radio or television receiving sets taxable under section 4141.

[Sec. 4220 as amended by sec. 1 (c), Act of Aug. 11, 1955 (Pub. Law 367, 84th Cong., 69 Stat. 689)]

(2) For resale by the vendee for such use by his vendee if the article is in due course so resold.

(b) Automobile parts or accessories, refrigerator components, radio or television components, and camera lenses. No tax attaches under chapter 32 of the Internal Revenue Code to the sale by the manufacturer, producer, or importer of an automobile part or accessory taxable under section 4061(b), a refrigerator component taxable under section 4111, a radio or television component taxable under section 4141, or a camera lens taxable under section 4171

(1) For use by the vendee as material in the manufacture or production of, or a component part of, any article (whether taxable or nontaxable); or

as

(2) For resale by the vendee for such use by his vendee, if the article is in due course so resold.

(c) Tires, inner tubes, automobile radio or television receiving sets. The provisions of section 4220 (1) and (2) and paragraphs (a) and (b) of this section do not apply with respect to tires and inner tubes taxable under section 4071, or automobile radio or automobile television receiving sets taxable under section 4141. Therefore, these articles may not be sold tax free for use in the manufacture or production of, or as component parts of, any article (whether taxable or nontaxable), or for resale for such use. See section 6416(c) as in effect prior to January 1, 1959, with respect to the credit provided when these articles are sold prior to such date on or in connection with, or with the sale of, an article taxable under section 4061 (a) (relating to automobiles, trucks, etc.).

(d) Use in further manufacture. An article is used as material in the manufacture or production of, or as a component part of, another article, if it is incorporated in, or is a part or accessory of, the other article when such other article is sold by the manufacturer, producer, or importer thereof. However, an article which is consumed in the manufacturing process so that it is not a physical part of the manufactured article when sold by the manufacturer is not used as material in the manufacture or production of, or as a component part of, such other article. Thus, lubricating oil or gasoline consumed in testing automobile engines, or in operating plant