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Revenue Ruling 58-315

Rev. Rul. 58-315 1958-1 C.B. 473

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Headnote

An importer of articles subject to the manufacturers excise taxes may, under certain conditions, compute and prepay the tax at the time the taxable articles are imported, rather than when they are sold.

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ISSUE

The Internal Revenue Service has been asked whether importers of articles subject to the manufacturers excise taxes may be permitted to compute and prepay the tax at the time articles are imported, in a manner similar to that provided in Revenue Ruling 56-261, C.B. 1956-1, 556, for retailers of articles subject to the retailers excise taxes.

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FACTS

Manufacturers excise taxes are imposed by chapter 32 of the Internal Revenue Code of 1954 upon the sale by the manufacturer, producer, or importer of motor vehicles, tires and tubes, petroleum products, household-type equipment, etc., radio and television sets, phonographs and records, musical instruments, sporting goods, photographic equipment, firearms, business machines, pens and mechanical pencils and lighters, and matches. The incidence of the above taxes is upon the sale of the articles by the manufacturer, producer, or importer.

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LAW AND ANALYSIS

However, the Service will interpose no objection to the computation and prepayment of the tax at the time the taxable articles are imported, provided:
  1. The tax so prepaid is computed on the wholesale selling price of the articles;
  2. The tax applicable to the wholesale price of any taxable articles previously imported by the company and on hand at the beginning of the period for which the prepayment plan is adopted is included in the Form 720, Quarterly Federal Excise Tax Return, filed for that period;
  3. The importer maintains:
  • (a) an accurate record of the inventory upon which tax is prepaid when the plan is adopted, and
  • (b) an accurate record of all taxable articles imported by the company showing the date of import and the purchase prices, as well as a record of the markup over purchase price used in arriving at the established wholesale selling price in each case; and
  1. The prepayment method is used with respect to all articles subject to tax which the company imports for sale.
Occasions may arise where, subsequent to the time of prepayment of tax under this plan, articles will be sold at prices higher than those used as a basis for computing the tax prepayment. In such cases, the additional tax resulting from the increase in wholesale sale prices must be included in the quarterly return for the period in which the articles are sold. On the other hand, there may be occasions where there will be excess prepayments of tax for which a credit or refund will be allowable. Such excess prepayments might arise from the sale of the imported articles at prices lower than the established wholesale prices upon which the prepayment was based, from a reduction in the applicable tax rate, or from the loss, destruction, or return to suppliers, of articles upon which tax has been prepaid. Interest will not be allowed upon such excess prepayments.

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PROCEDURE

Each importer who desires permission to prepay tax at the time of purchase of taxable articles, based upon the established wholesale sale price of the articles, should file a request in writing with his local District Director of Internal Revenue describing fully the nature of his business and the kinds of taxable articles imported. Prepayment of the tax by the importer under this procedure should not be commenced until approval has been received from the District Director. Approval by District Directors of such requests will be conditioned upon the acceptance by the importer of the requirements set forth herein and of the responsibility for maintaining such records and accounts as will enable internal revenue officers to determine whether the correct amount of tax has been paid the Government. Where a person, who has received the approval of his local District Director of Internal Revenue to so compute and prepay the tax, desires at a later time to discontinue such prepayment method, he should advise the District Director to that effect.