Rev. Rul. 72-323

Advice has been requested as to the application of the manufacturers excise tax on sales of gasoline by the producer or importer, imposed by section 4081 of the Internal Revenue Code of 1954, in the situation described below.

A parent corporation purchases gasoline from a producer and resells such gasoline in bulk to several wholly-owned subsidiaries. Each subsidiary operates a service station that resells the gasoline to consumers. The parent corporation does not sell gasoline to unrelated purchasers, and each subsidiary operates as a separate entity from the parent corporation.

The specific question presented is whether the parent corporation described above comes within the definition of "wholesale distributor," as that term is used in section 4082 of the Code, and section 48.4082-1(e)(1) of the applicable regulations.

Section 4081(a) of the Code imposes a tax on gasoline sold by the producer or importer thereof, or by any producer of gasoline.

Section 4083 of the Code provides that the tax imposed by section 4081 shall not apply in the case of sales of gasoline to a producer of gasoline.

Section 4082(a) of the Code defines the term "producer" to include a refiner, compounder, blender, or wholesale distributor, and a dealer selling gasoline exclusively to producers of gasoline, as well as a producer.

Section 4082(d) of the Code provides that the term "wholesale distributor" includes any person who (1) sells gasoline to producers, to retailers, or to users who purchase in bulk quantities for delivery into bulk storage tanks, and (2) elects to register with respect to the tax imposed by section 4081.

Section 48.4082-1(e)(1) of the Manufacturers and Retailers Excise Tax Regulations provides that the term "wholesale distributor" includes any person who (i) holds himself out to the public as being engaged in the trade or business of selling gasoline to producers of gasoline (including other wholesale distributors), to retailers of gasoline, or to users of gasoline who purchase in bulk quantities for delivery into bulk storage tanks; (ii) actually makes more than casual sales of gasoline to the persons described in (i); and (iii) has elected to be treated as a producer of gasoline.

Section 48.4083-1(a) of the regulations provides that gasoline may be sold tax-free by a producer or importer of gasoline to other producers of gasoline, but only if (1) both the seller and the purchaser are registered in accordance with the provisions of section 4101 of the Code, and (2) the purchaser has notified the seller in writing that he is registered with the District Director of Internal Revenue. The parent corporation in the instant case is regularly engaged in making bona-fide sales of gasoline in bulk quantities to its wholly-owned retailer subsidiaries. However, since the corporation only sells to its subsidiaries, it cannot be said that it holds itself out to the public as being engaged in the business of selling either to producers, retailers, or bulk purchasers of gasoline, within the meaning of section 48.4082-1(e)(1) of the regulations. Accordingly, it is held that the parent corporation does not come within the definition of "wholesale distributor" set forth in section 4082(d) of the Code and section 48.4082-1(e)(1) of the regulations, and, therefore, may not register to purchase gasoline tax free from producers under the provisions of section 48.4083-1(a) of the regulations.