26 USC 4223 - Special rules relating to further manufacture

Collapse to view only § 4223. Special rules relating to further manufacture

§ 4221. Certain tax-free sales
§ 4222. Registration
§ 4223. Special rules relating to further manufacture
[§ 4224. Repealed.
§ 4225. Exemption of articles manufactured or produced by Indians
[§ 4226. Repealed.
§ 4227. Cross reference

§ 4221. Certain tax-free sales

(a) General rule

Under regulations prescribed by the Secretary, no tax shall be imposed under this chapter (other than under section 4121 or 4081) on the sale by the manufacturer (or under subchapter C of chapter 31 on the first retail sale) of an article—

(1) 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,

(2) for export, or for resale by the purchaser to a second purchaser for export,

(3) for use by the purchaser as supplies for vessels or aircraft,

(4) to a State or local government for the exclusive use of a State or local government,

(5) to a nonprofit educational organization for its exclusive use, or

(6) to a qualified blood collector organization (as defined in section 7701(a)(49)) for such organization’s exclusive use in the collection, storage, or transportation of blood,

but only if such exportation or use is to occur before any other use. Paragraphs (4), (5), and (6) shall not apply to the tax imposed by section 4064. In the case of taxes imposed by section 4051 or 4071, paragraphs (4) and (5) shall not apply on and after October 1, 2028. In the case of the tax imposed by section 4131, paragraphs (3), (4), and (5) shall not apply and paragraph (2) shall apply only if the use of the exported vaccine meets such requirements as the Secretary may by regulations prescribe. In the case of taxes imposed by subchapter C or D, paragraph (6) shall not apply.

(b) Proof of resale for further manufacture; proof of export

Where an article has been sold free of tax under subsection (a)—

(1) for resale by the purchaser to a second purchaser for use by such second purchaser in further manufacture, or

(2) for export, or for resale by the purchaser to a second purchaser for export,

subsection (a) shall cease to apply in respect of such sale of such article unless, within the 6-month period which begins on the date of the sale by the manufacturer (or, if earlier, on the date of shipment by the manufacturer), the manufacturer receives proof that the article has been exported or resold for use in further manufacture.

(d) Definitions

For purposes of this section—

(1) Manufacturer

(2) Export

(3) Supplies for vessels or aircraft

(4) State or local government

(5) Nonprofit educational organization

(6) Use in further manufacture

An article shall be treated as sold for use in further manufacture if—

(A) such article is sold for use by the purchaser as material in the manufacture or production of, or as a component part of, another article taxable under this chapter to be manufactured or produced by him; or

(B) in the case of gasoline taxable under section 4081, such gasoline is sold for use by the purchaser, for nonfuel purposes, as a material in the manufacture or production of another article to be manufactured or produced by him.

(7) Qualified bus

(A) In general

The term “qualified bus” means—

(i) an intercity or local bus, and

(ii) a school bus.

(B) Intercity or local bus

The term “intercity or local bus” means any automobile bus which is used predominantly in furnishing (for compensation) passenger land transportation available to the general public if—

(i) such transportation is scheduled and along regular routes, or

(ii) the seating capacity of such bus is at least 20 adults (not including the driver).

(e) Special rules

(1) Reciprocity required in case of civil aircraft

(2) Tires

(A) Tax-free sales

Under regulations prescribed by the Secretary, no tax shall be imposed under section 4071 on the sale by the manufacturer of a tire if—

(i) such tire is sold for use by the purchaser for sale on or in connection with the sale of another article manufactured or produced by such purchaser; and

(ii) such other article is to be sold by such purchaser in a sale which either will satisfy the requirements of paragraph (2), (3), (4), or (5) of subsection (a) for a tax-free sale, or would satisfy such requirements but for the fact that such other article is not subject to tax under this chapter.

(B) Proof

(3) Tires used on intercity, local, and school buses

(Added Pub. L. 85–859, title I, § 119(a), Sept. 2, 1958, 72 Stat. 1282; amended Pub. L. 86–70, § 22(a), June 25, 1959, 73 Stat. 146; Pub. L. 86–344, § 2(b), Sept. 21, 1959, 73 Stat. 617; Pub. L. 86–418, § 1, Apr. 8, 1960, 74 Stat. 38; Pub. L. 86–624, § 18(e), July 12, 1960, 74 Stat. 416; Pub. L. 87–61, title II, § 205(a), June 29, 1961, 75 Stat. 126; Pub. L. 89–44, title II, § 208(d), title VIII, § 801(c), (d)(1), June 21, 1965, 79 Stat. 141, 158; Pub. L. 91–172, title I, § 101(j)(26), Dec. 30, 1969, 83 Stat. 529; Pub. L. 92–178, title IV, § 401(a)(3)(A), Dec. 10, 1971, 85 Stat. 531; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95–227, § 2(b)(2), Feb. 10, 1978, 92 Stat. 12; Pub. L. 95–600, title VII, § 701(ff)(2)(A), Nov. 6, 1978, 92 Stat. 2924; Pub. L. 95–618, title II, §§ 201(c)(1), 232(a), 233(c)(1), (2), Nov. 9, 1978, 92 Stat. 3183, 3189, 3191, 3192; Pub. L. 96–222, title I, § 108(c)(5), Apr. 1, 1980, 94 Stat. 227; Pub. L. 97–424, title V, §§ 515(b)(1), 516(b)(2), Jan. 6, 1983, 96 Stat. 2181, 2183; Pub. L. 98–369, div. A, title VII, § 735(c)(8), July 18, 1984, 98 Stat. 983; Pub. L. 99–499, title V, § 521(d)(4), Oct. 17, 1986, 100 Stat. 1779; Pub. L. 99–514, title XVII, § 1703(c)(2)(C), Oct. 22, 1986, 100 Stat. 2776; Pub. L. 100–17, title V, § 502(b)(4), Apr. 2, 1987, 101 Stat. 257; Pub. L. 100–203, title IX, § 9201(b)(1), title X, § 10502(d)(4), Dec. 22, 1987, 101 Stat. 1330–330, 1330–444; Pub. L. 101–239, title VII, § 7841(d)(17), Dec. 19, 1989, 103 Stat. 2429; Pub. L. 101–508, title XI, §§ 11211(d)(3), 11221(b), (d)(1), (2), Nov. 5, 1990, 104 Stat. 1388–427, 1388–444; Pub. L. 102–240, title VIII, § 8002(b)(3), Dec. 18, 1991, 105 Stat. 2203; Pub. L. 103–66, title XIII, § 13161(b)(1), Aug. 10, 1993, 107 Stat. 452; Pub. L. 105–178, title IX, § 9002(b)(1), June 9, 1998, 112 Stat. 500; Pub. L. 105–206, title VI, § 6023(17), July 22, 1998, 112 Stat. 825; Pub. L. 108–357, title VIII, § 853(d)(2)(F), Oct. 22, 2004, 118 Stat. 1613; Pub. L. 109–59, title XI, § 11101(b)(1), Aug. 10, 2005, 119 Stat. 1944; Pub. L. 109–280, title XII, § 1207(b)(1)–(3)(A), Aug. 17, 2006, 120 Stat. 1070; Pub. L. 111–152, title I, § 1405(b)(1), Mar. 30, 2010, 124 Stat. 1065; Pub. L. 112–30, title I, § 142(d), Sept. 16, 2011, 125 Stat. 356; Pub. L. 112–102, title IV, § 402(d), Mar. 30, 2012, 126 Stat. 282; Pub. L. 112–140, title IV, § 402(c), June 29, 2012, 126 Stat. 403; Pub. L. 112–141, div. D, title I, § 40102(d)(1), July 6, 2012, 126 Stat. 845; Pub. L. 113–295, div. A, title II, § 221(a)(103)(B)(i), Dec. 19, 2014, 128 Stat. 4052; Pub. L. 114–94, div. C, title XXXI, § 31102(d)(1), Dec. 4, 2015, 129 Stat. 1727; Pub. L. 115–141, div. U, title IV, § 401(a)(221), Mar. 23, 2018, 132 Stat. 1194; Pub. L. 116–94, div. N, title I, § 501(b)(1), Dec. 20, 2019, 133 Stat. 3118; Pub. L. 117–58, div. H, title I, § 80102(d)(1), Nov. 15, 2021, 135 Stat. 1327.)

§ 4222. Registration

(a) General rule

(b) Exceptions

(1) Purchases by State and local governments

(2) Under regulations

(3) Certain purchases and sales by the United States

[(4) Repealed. Pub. L. 89–44, title II, § 208(e), June 21, 1965, 79 Stat. 141]

(5) Supplies for vessels or aircraft

Under regulations prescribed by the Secretary, the registration of any person under this section may be denied, revoked, or suspended if the Secretary determines—

(1) that such person has used such registration to avoid the payment of any tax imposed by this chapter, or to postpone or in any manner to interfere with the collection of any such tax, or

(2) that such denial, revocation, or suspension is necessary to protect the revenue.

The denial, revocation, or suspension under this subsection shall be in addition to any penalty provided by law for any act or failure to act.

(d) Registration in the case of certain other exemptions

(e) Definitions

(Added Pub. L. 85–859, title I, § 119(a), Sept. 2, 1958, 72 Stat. 1284; amended Pub. L. 89–44, title II, § 208(e), title VIII, § 802(c), June 21, 1965, 79 Stat. 141, 159; Pub. L. 92–178, title IV, § 401(a)(3)(B), Dec. 10, 1971, 85 Stat. 531; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95–600, title VII, § 701(ff)(2)(B), Nov. 6, 1978, 92 Stat. 2925; Pub. L. 95–618, title II, §§ 201(e), 231(f)(2), Nov. 9, 1978, 92 Stat. 3184, 3189; Pub. L. 97–424, title V, § 515(b)(2), Jan. 6, 1983, 96 Stat. 2181; Pub. L. 98–369, div. A, title VII, § 735(c)(9), July 18, 1984, 98 Stat. 983; Pub. L. 100–647, title I, § 1017(c)(16), Nov. 10, 1988, 102 Stat. 3577; Pub. L. 101–508, title XI, §§ 11212(b)(2), 11221(d)(3), Nov. 5, 1990, 104 Stat. 1388–431, 1388–444; Pub. L. 103–66, title XIII, § 13161(b)(2), Aug. 10, 1993, 107 Stat. 452; Pub. L. 105–34, title XIV, § 1431(a), Aug. 5, 1997, 111 Stat. 1050; Pub. L. 105–206, title VI, § 6023(17), July 22, 1998, 112 Stat. 825; Pub. L. 113–295, div. A, title II, § 221(a)(103)(B)(ii), Dec. 19, 2014, 128 Stat. 4053.)

§ 4223. Special rules relating to further manufacture

(a) Purchasing manufacturer to be treated as the manufacturer

(b) Computation of taxIf the manufacturer or producer referred to in subsection (a) incurs liability for tax under this chapter on his sale or use of an article referred to in subsection (a) and the tax is based on the price for which the article is sold, the article shall be treated as having been sold by him—

(1) at the price for which the article was sold by him (or, where the tax is on his use of the article, at the price referred to in section 4218(c)); or

(2) if he so elects and establishes such price to the satisfaction of the Secretary—

(A) at the price for which the article was sold to him; or

(B) at the price for which the article was sold by the person who (without regard to subsection (a)) is the manufacturer, producer, or importer of such article.

For purposes of this subsection, the price for which the article was sold shall be determined as provided in section 4216. For purposes of paragraph (2) no adjustment or readjustment shall be made in such price by reason of any discount, rebate, allowance, return or repossession of a container or covering, or otherwise. An election under paragraph (2) shall be made in the return reporting the tax applicable to the sale or use of the article, and may not be revoked.

(Added Pub. L. 85–859, title I, § 119(a), Sept. 2, 1958, 72 Stat. 1285; amended Pub. L. 86–418, § 2(b), Apr. 8, 1960, 74 Stat. 38; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98–369, div. A, title VII, § 735(c)(10), July 18, 1984, 98 Stat. 983.)

[§ 4224. Repealed. Pub. L. 89–44, title I, § 101(b)(5), June 21, 1965, 79 Stat. 136]

§ 4225. Exemption of articles manufactured or produced by Indians

No tax shall be imposed under this chapter on any article of native Indian handicraft manufactured or produced by Indians on Indian reservations, or in Indian schools, or by Indians under the jurisdiction of the United States Government in Alaska.

(Added Pub. L. 85–859, title I, § 119(a), Sept. 2, 1958, 72 Stat. 1286.)

[§ 4226. Repealed. Pub. L. 94–455, title XIX, § 1904(a)(4), Oct. 4, 1976, 90 Stat. 1811]

§ 4227. Cross reference

For exception for a sale to an Indian tribal government (or its subdivision) for the exclusive use of an Indian tribal government (or its subdivision), see section 7871.

(Aug. 16, 1954, ch. 736, 68A Stat. 496, § 4226; renumbered § 4227, June 29, 1956, ch. 462, title II, § 207(a), 70 Stat. 391; amended Pub. L. 89–44, title II, § 208(f), June 21, 1965, 79 Stat. 141; Pub. L. 94–455, title XIX, § 1904(a)(5), Oct. 4, 1976, 90 Stat. 1811; Pub. L. 97–473, title II, § 202(b)(8), Jan. 14, 1983, 96 Stat. 2610; Pub. L. 98–369, div. A, title VII, § 735(c)(11), July 18, 1984, 98 Stat. 983; Pub. L. 99–514, title XVIII, § 1899A(49), Oct. 22, 1986, 100 Stat. 2961.)