Rev. Rul. 63-255

For purposes of determining the applicability of the manufacturers excise tax on automobile parts or accessories, advice has been requested whether the restoration of automobile spark plugs in the manner and for the purpose described below is considered to be `rebuilding' (which constitutes manufacturing).

A company is engaged in the business of restoring and selling automobile spark plugs. The company purchases used spark plugs from garages and service stations. The spark plugs are then sorted and only the restorable plugs are retained and processed.

The first step performed by the company in restoring the used plugs is to wash them in detergent and water and dry them in ovens. After sandblasting the plugs to remove all carbon deposits, the electrodes are filed and the plugs are cadmium-plated to retard corrosion and make the plugs look new.

Finally, the plugs are sorted as to brand and type, stamped with the word `Repaired' and packaged eight to a box. These restored plugs are guaranteed for 10,000 miles.

Section 4061(b) of the Internal Revenue Code of 1954 imposes a tax on the sale by the manufacturer, producer, or importer of parts or accessories (other than tires and inner tubes, and other than automobile radio and television receiving sets) for any of the articles enumerated in section 4061(a) of the Code.

Section 48.4061(b)-3(a) of the Manufacturers and Retailers Excise Tax Regulations provides that rebuilding of automobile parts or accessories, as distinguished from reconditioning or repairing, constitutes manufacturing, and the rebuilder of such parts or accessories is liable for the tax imposed by section 4061(b) with respect to his sales of such rebuilt parts or accessories. Reboring or other machining, rewinding and comparable major operations constitute rebuilding. The person owning the part or accessory being rebuilt is the manufacturer of the article and is liable for the tax on his sale of the rebuilt part or accessory. The tax attaches whether the machining or other operation is performed by the rebuilder himself or by some other person on his behalf.

The spark plug restoring process described above, when viewed in the totality of the operation, constitutes a `comparable major operation' within the meaning of section 48.4061(b)-3(a) of the regulations. Therefore, such operation is `rebuilding' (manufacturing) for purposes of the manufacturers excise tax.

Accordingly, it is held that the rebuilt automobile spark plugs are subject to the manufacturers excise tax on automobile parts or accessories, imposed by section 4061(b) of the Code, when sold by the `rebuilder' (manufacturer).

This Revenue Ruling will not be applied to sales of the rebuilt spark plugs made prior to January 9, 1964, under the authority set forth in section 7805(b) of the Code.