Rev. Rul. 72-563

Advice has been requested whether the transactions described below are "sales" for purposes of the manufacturers excise taxes on gasoline and lubricating oil imposed by sections 4081 and 4091 of the Internal Revenue Code of 1954.

As a part of its advertising and sales promotion program, a producer of gasoline and lubricating oil furnishes such products "free of charge" to a stock car operator for use by him in stock car races. In return therefor, the recipient agrees to display the producer's identifying trademark and other promotional material in such a manner as to indicate his use of the producer's products for racing purposes.

Section 4081 of the Code imposes a tax on gasoline sold by the producer or importer thereof, or by any producer of gasoline. Section 4091 of the Code imposes a tax on lubricating oil sold in the United States by the manufacturer or producer.

Section 314.1(f) of Regulations 44, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, defines the term "sale" as an agreement whereby the seller transfers the property (that is, the title or the substantial incidents of ownership) in goods to the buyer for a consideration called the price, which may consist of money, services, or other things.

Revenue Ruling 59-126, C.B. 1959-1, 321, holds that the manufacturers excise taxes on the sale of gasoline and lubricating oil imposed by sections 4081 and 4091 of the Code do not apply to gasoline and lubricating oil given away by the producer thereof for use in stock car races for promotional purposes. Moreover, the giving away of such gasoline and lubricating oil does not constitute a taxable "use" by the producer under section 4218(a) of the Code.

In the instant case, the producer of the gasoline and oil transfers ownership of these products to the stock car operator on the condition that the operator advertise the products in the manner described. By undertaking to advertise the producer's products, the operator agrees to provide the producer with an advertising or promotional service in exchange for oil and gasoline. Since the applicable regulation defines a "sale" as an agreement whereby the seller transfers the property in goods to the buyer for a price, which may consist of money, services, or other things, the transaction in this case contains all the elements of a "sale" as defined in the regulation.

Accordingly, it is held that the transaction is a sale within the meaning of section 314.1(f) of the regulations and the producer is liable for the taxes imposed by sections 4081 and 4091 of the Code on his transfers of gasoline and lubricating oil, respectively.

Under the authority granted by section 7805(b) of the Code, the conclusion of this Revenue Ruling will not be applied to transactions entered into by a producer prior to January 1, 1973.

Revenue Ruling 59-126 is hereby revoked.