Rev. Rul. 58-582

Advice has been requested concerning the applicability of the manufacturers excise tax to sales of so-called `truck body kits' in the situations described below.

(1) A manufacturer produces and sells a truck body kit which includes, as a minimum, a front end section, two sides, and a top section. The manufacturer also produces parts required to complete a truck body, such as floors, doors, gates, linings, etc. Generally, the kits are sold to distributors; however, in some instances they are sold at the factory and installed on the customer's chassis by the kit manufacturer.

(2) A distributor combines a truck body kit purchased from the kit manufacturer with parts or accessories of his own manufacture or with parts or accessories purchased from sources other than the kit manufacturer. The distributor installs the complete truck body on a customer's chassis.

(3) A truck fleet operator purchases a truck body kit and either produces or purchases separately the necessary parts or accessories to complete a truck body. The fleet operator assembles a complete body and installs it on a chassis for use in his business.

Section 406(a)(1) of the Internal Revenue Code of 1954 imposes a tax on the sale by the manufacturer, producer, or importer of automobile truck chassis, automobile truck bodies, automobile bus chassis, automobile bus bodies, truck and bus trailer and semitrailer chassis, truck and bus trailer and semitrailer bodies and tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer (including in each case parts or accessories therefor sold on or in connection therewith or with the sale thereof). Section 4218(a) of the Code provides, with certain exceptions not here applicable, that if any person manufactures, produces, or imports an article and uses it, otherwise than as material in the manufacture or production of, or as a component part of, another taxable article manufactured by him, he shall be liable for the tax in the same manner as if such article was sold by him, and the tax shall be computed on the price at which such or similar articles are sold, in the ordinary course of trade, by manufacturers, producers, or importers thereof, as determined by the Secretary of the Treasury or his delegate.

Section 316.4 of Regulations 46, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that the term `manufacturer' includes a person who produces a taxable article by combining two or more articles. This section further provides that a manufacturer who sells a taxable article in a knockdown condition, but complete as to all component parts, is liable for the tax, and not the person who buys and assembles a taxable article from such component parts.

It is held that a truck body kit consisting of front end section, two sides, and a top section is an article which has reached such a stage of manufacture as to constitute a truck body as contemplated by section 4061(a)(1) of the Code. Therefore, under the circumstances described in (1) above, the manufacturer is liable for tax under that section of the Code on his sale of the truck body kit. Where the kits are sold to a distributor at wholesale, the tax base is the actual wholesale price, subject to the adjustments under section 4216(a) of the Code. The tax also applies to any parts or accessories, such as floors, doors, etc., sold by the manufacturer on or in connection with the sale of the kit. Where a kit manufacturer who sells primarily at wholesale assembles the components of a kit and installs the assembled body on a customer's chassis for his use rather than for resale, the transaction is considered to be a sale at retail and tax is based, under section 4216(b)(1) of the Code, on the manufacturers highest established wholesale price for such kits, plus any charges for parts or accessories and for assembling the complete body. No tax, however, applies to a charge for installing the complete body on the customer's chassis.

It is further held that, under the circumstances described in (2) above, the distributor is liable for the tax on his sale of the complete truck body, whether assembled or in a knockdown condition, including any charge for assembling the complete body. If the body kits or the parts or accessories were purchased taxpaid, the distributor may claim a credit or refund of such tax. A distributor is not liable for tax, however, on his sale of a complete truck body assembled by him where he purchases a body kit and the parts or accessories therefor from one manufacturer under such circumstances that the manufacturer has sold a complete body in knockdown condition.

Under the circumstances described in (3) above, the fleet operator is liable for tax on his use of the completed body. As set forth in Revenue Ruling 54-490, C.B. 1954-2, 416, the Tax imposed by 4061(a)(1) of the Code applies to the customer's cost of producing the completed body, plus ten percent of such cost.

The mere addition, by a purchaser of a body kit, of parts or accessories which are insubstantial with respect to the body as completed (such as mudflaps, running lights, emblems, or similar articles) does not characterize such a purchaser as a truck body manufacturer.

The Internal Revenue Service has previously held that a purchaser of a truck body kit incurs no tax liability on his resale or use of the assembled body even though he performs such operations as the addition of a floor, doors, lining, etc., in connection with such body. That position has received publicity in the industry involved and has been relied upon as a basis for not paying the tax under such circumstances. Therefore, under the authority of section 7805(b) of the Code, this ruling, to the extent that it holds taxable the sale or use of a complete truck body by a person who purchases a taxable truck body kit and performs thereon some act of further manufacture, will not be applied to sales or use prior to January 1, 1959.