Rev. Rul. 54-61

Advice is requested concerning the application of the tax under section 3403(a) of the Internal Revenue Code to the sale by a manufacturer of new truck or truck trailer bodies produced from new or salvaged materials furnished by the manufacturer to replace bodies which have been wrecked.

Under section 3403(a) of the Code, tax at the rate of 8 percent is imposed on the sale by the manufacturer of automobile truck chassis, automobile truck bodies, truck and bus trailer and semitrailer chassis, and truck and bus trailer and semitrailer bodies.

It is held that where a manufacturer furnishes either new or salvaged materials and produces new truck or truck trailer bodies to replace bodies which have been wrecked, the sale of the bodies by the manufacturer is subject to tax under section 34-03(a) of the Code. However, under the provisions of section 3443(a) of the Code, a credit may be allowed to a manufacturer in the amount of excise tax which has been paid on any new parts purchased and used by him in the manufacture of bodies with respect to which tax has been reported or paid. (See section 316.204, Regulations 46.)

Sales by a manufacturer of truck or truck trailer bodies to dealers or other for resale are considered sales at wholesale. Where the manufacturer's vendee purchases such a body for use and not for resale, the transaction is considered a sale at retail.

The following sets forth the method of computing the tax with respect to sales by manufacturers of truck or truck trailer bodies at wholesale, wholesale and retail, and retail only.

With respect to sale of bodies at wholesale, the tax imposed by section 3403(a) of the Code should be based on the wholesale price subject to the following adjustments provided by section 3441(a) of the Code. To the wholesale price there should be added any charge for the transportation or delivery of the bodies; and there should be excluded any expenses actually incurred by the manufacturer (1) in effecting delivery of the bodies to the purchasers, (2) for installation of the completed bodies on chassis, (3) for insuring shipments to the purchasers, and the amount of tax if not entered on the invoice as a separate charge.

Under the authority of section 3441(b)(1) of the Code, the tax on retail sales of bodies by a manufacturer who also sells such articles at wholesale, is to be based upon his highest established wholesale price to independent dealers, subject to the same adjustments hereinbefore stated in connection with sales at wholesale.

The tax on sales of bodies by a manufacturer who sells only at retail is to be computed, under the authority of section 3441(b)(1) of the Code, on the price for which such articles are sold by manufacturers or producers in the ordinary course of trade as determined by the Commissioner. Such determination has been made with respect to truck or truck trailer bodies and it has been found to represent 75 percent of the established retail price, subject to adjustment with respect to the above-mentioned additions and exclusions provided by section 3441(a) of the Code. This results in the adjusted price on which the tax is to be based. If the tax is not included in the retail price, it is to be computed at 8 percent of the adjusted price. Where the tax is included in the retail price, it may be computed at two twenty-sevenths ( 8/108 ) of the adjusted price in order to provide for the exclusion of the tax from the price on which it is based. In any case where the tax base determined in this manner with respect to sales by a manufacturer who sells only at retail results in a price which is less than the manufacturer's cost of the body when in condition ready for delivery to the purchaser, the tax should be computed at 8 percent of such cost.

It is further held that where a manufacturer merely replaces certain parts of a used truck or truck trailer body belonging to a customer, such operation is considered to constitute a repair operation and the tax imposed under section 3403(a) of the Code does not apply to the amount charged for such repairs. However, the manufacturer is liable for tax under section 3403(c) of the Code with respect to any taxable parts or accessories of his manufacture or which were purchased by him tax-free for further manufacture, which are sold to the customer in connection with the repair operation.