Rev. Rul. 60-156

Advice has been requested whether, in determining the manufacturer's sale price of automobiles for purposes of the manufacturers excise tax, there may be deducted an amount equal to the cost of preparing and affixing the labels required by the Automobile Information Disclosure Act, 15 U.S.C. 1232.

The Automobile Information Disclosure Act requires that every manufacturer of new automobiles distributed in commerce shall, prior to the delivery of any new automobile to any dealer, securely affix to the windshield or side window of such automobile a label on which such manufacturer shall endorse certain prescribed information concerning such automobile. In addition to other entries, the manufacturer must state on the label the method of transportation used in making delivery of the automobile, if driven or towed from final assembly point to place of delivery. The manufacturer also must state the amount charged, if any, to the dealer for the transportation of the automobile to the location at which it is delivered to the dealer. The Act provides penalties for any manufacturer who willfully fails to affix to any new automobile manufactured or imported by him the required label.

It has been stated that because of the nature of some of the information which must be endorsed on the labels, they sometimes cannot be completed and affixed to the automobiles prior to the time the automobiles are shipped from the factory. For this reason, it has been contended that, for purposes of computing the manufacturers excise tax, a manufacturer should be permitted to deduct from the price for which he sells the automobile an amount equal to the cost of preparing and affixing the labels.

Section 4216(a) of the Internal Revenue Code of 1954 provides that in determining, for purposes of the manufacturers excise tax, the price for which an article is sold, there shall be included any charge for coverings and containers of whatever nature, and any charge incident to placing the article in condition packed ready for shipment, but there shall be excluded the amount of the manufacturers excise tax, whether or not stated as a separate charge. That section further provides that a transportation, delivery, insurance, installation, or other charge (not required by the foregoing sentence to be included) shall be excluded from the price only if the amount thereof is established to the satisfaction of the Secretary of the Treasury or his delegate in accordance with the regulations.

In determining the price for which an article is sold, for purposes of computing the manufacturers excise tax, any charge which is required by the manufacturer, producer, or importer to be paid as a condition to the sale of the taxable article and which is not one of the charges which may be excluded under the provisions of section 4216(a) of the Code is includible in the sale price upon which a tax is based.

The requirement for repairing and affixing the labels is imposed by the statute upon the manufacturer of the automobiles. The labels must be prepared and affixed to the automobiles prior to delivery to dealers. Therefore, any costs of preparing and affixing the labels are attributable to placing the automobiles in condition ready for sale by the manufacturer. Affixing the labels is a necessary element of the manufacturer's sale rather than an element of transportation or delivery. The fact that, in some instances, the labels are not completed and affixed to the automobiles at the time they are shipped from the factory is not considered significant.

Accordingly, it is held that, in determining the manufacturer's sale price of automobiles for purposes of computing the manufacturers excise tax, there may not be deducted an amount equal to the cost of preparing and affixing the labels required by the Automobile Information Disclosure Act.