Rev. Rul. 60-271

Advice has been requested whether, under the circumstances described below, a vehicle consisting of a semitrailer chassis and a semitrailer `body shell' may be sold by the manufacturer thereof to a semitrailer body manufacturer on a tax free basis.

X company is engaged in the business of manufacturing semitrailer bodies. Y corporation manufactures semitrailer chassis and bodies. Under special arrangements, Y corporation manufactures and sells to X company a vehicle consisting of a chassis and body shell. The body shell has outer walls, a roof, and door openings. X company completes the body by installing floors, doors, ceiling, wall linings, insulation, and refrigeration equipment. The completed semitrailer is then sold by X company.

Section 4061(a)(1) of the Internal Revenue Code of 1954 imposes a tax upon sales by the manufacturer, producer, or importer of certain enumerated motor vehicle articles, including truck and bus trailer and semitrailer chassis and truck and bus trailer and semitrailer bodies. This section further provides that the sale of an automobile truck, bus, truck or bus trailer or semitrailer shall, for the purposes of this paragraph, be considered to be a sale of the chassis and of the body.

In accordance with section 4221(a)(1) of the Code, no manufacturers excise tax shall be imposed on the sale by the manufacturer of an article for use by the purchaser for further manufacture, or for resale by the purchaser to a second purchaser for use by such second purchaser in further manufacture, but only if such use is to occur before any other use. Section 4221(d)(6)(A) of the Code provides that an article shall be treated as sold for use in further manufacture if such article (with certain exceptions not here material) is sold for use by the purchaser as material in the manufacture or production of, or as a component part of, another article to the manufactured or produced by him which will be subject to the manufacturers excise tax. Section 4222(a) of the Code provides, in part, that section 4221 shall not apply with respect to the sale of any article unless the manufacturer, the first purchaser, and the second purchaser (if any) are all registered under this section.

Section 4063(b) of the Code provides that under regulations prescribed by the Secretary of the Treasury or his delegate, the tax under section 4061 shall not apply in the case of sales of bodies by the manufacturer, producer, or importer to a manufacturer or producer of automobile trucks or other automobiles to be sold by such vendee. For the purposes of section 4061, such vendee shall be considered the manufacturer or producer of such bodies.

Section 40.4063-1 of the Manufacturers and Retailers Excise Tax Regulations provides that a manufacturer of automobile truck bodies or other automobile bodies is permitted to sell such bodies tax free to manufacturers (but not an importer) of automobile truck chassis or other automobile chassis. However, there is no similar provision with respect to the sale of automobile truck chassis or other automobile chassis to manufacturers of automobile truck bodies or other automobile bodies.

In the instant case, the body shall has reached such a stage of manufacture at the time it is sold to X company that it is considered to be a semitrailer body. Therefore, when the vehicle consisting of a chassis and body shell is sold by Y corporation, it is considered to be the sale of a semitrailer chassis and a semitrailer body. See Revenue Ruling 58-582, C.B. 1958-2, 768, which holds that a `truck body kit' constitutes an automobile truck body such as contemplated by section 4061(a)(1) of the Code. The `truck body kit' therein described has reached a stage of manufacture comparable to that of the `body shell' described above. The subsequent installation of floors, doors, ceiling, wall linings, insulation, and refrigeration equipment by X company constitutes further manufacture of a new and different semitrailer body.

Accordingly, it is held that, pursuant to the provisions of section 4221(a)(1) of the Code, the body shell may be sold tax free by Y corporation to X company, provided the requirements of section 4222 of the Code and the applicable regulations with respect to tax free sales and registration are met. However, since X company is not a manufacturer of `automobile truck chassis or other automobile chassis,' section 4063(b) of the Code does not apply. The semitrailer chassis, on which X company performs no act of further manufacture, may not be sold tax free by Y corporation to , x company under either 4221(a)(1) or 4063(b) of the Code. Consequently, Y corporation is liable for the manufacturers excise tax imposed by section 4061(a)(1) of the Code on its sale of such chassis.

Upon the sale of the completed semitrailer, X company is liable for the manufacturers excise tax imposed by section 4061(a)(1) of the Code on that portion of the wholesale price of the completed semitrailer which is attributable to the semitrailer body, subject to the adjustments provided by section 4216(a) of the Code. Credit may be claimed by X company for the tax paid on the body shell by Y corporation provided such credit is properly supported by the required evidence. X company is considered to be merely a dealer with respect to the chassis when it sells the completed semitrailer and, thus, incurs no manufacturers excise tax liability thereon.