Rev. Rul. 62-162

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 bumpers in the manner and for the purpose described below is considered to be `rebuilding' (which constitutes `manufacturing') as distinguished from `reconditioning.'

A company is engaged in the business of restoring and selling automobile bumpers. The company obtains unserviceable bumpers (either by outright purchase or in exchange transactions) from automobile collision shops, garages, and other sources. These bumpers have been bent or otherwise damaged in collisions, etc. The company restores them to serviceable condition in the manner described below for the purpose of sale (either outright or on an exchange basis).

The first step performed by the company in restoring an unserviceable bumper is to straighten and reshape it. After removing all defects, the bumper is ground. The old chrome deposits are stripped off in temperature controlled chemical tanks and the bumper is polished to remove all imperfections. The bumper is electroplated first with a copper base, then with nickel and, finally, with chromium. This restored bumper is then wrapped in protective paper and placed in stock for sale as a replacement part.

The situation in the instant case should be distinguished from a situation in which the company might similarly restore a bumper belonging to the owner of an automobile for his personal use. The latter situation, which is referred to as `repairing,' does not involve the manufacturers excise tax simply because there is no sale of the restored bumper.

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 40.4061(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.

Section 40.4061(b)-3(b) of the regulations provides that the mere disassembling, cleaning, and reassembling (with any necessary replacements of worn parts) of automobile parts or accessories are regarded as reconditioning operations rather than the manufacturing or production of rebuilt parts or accessories.

It is held that the restoration of bumpers for sale by the process described above constitutes `rebuilding' (manufacturing) within the meaning of section 40.4061(b)-3(a) of the regulations. Accordingly, the manufacturers excise tax on automobile parts or accessories, imposed by section 4061(b) of the Code, applies to the company's sales of the rebuilt bumpers.

This Revenue Ruling will not be applied to sales made prior to November 1, 1962, under the authority set forth in section 7805(b) of the Code.