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Revenue Ruling 60-213

Rev. Rul. 60-213 1960-1 C.B. 633

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Headnote

A credit or refund of manufacturers excise tax is allowable to the manufacturer for the amount of tax he erroneously reported and paid on certain nontaxable articles where he has not included the tax in the price of the articles and has not collected the amount of the tax from persons who purchased such articles. However, where a manufacturer’s catalog, price list, or other literature indicates that the sale prices contained therein include manufacturers excise tax where applicable, there is a presumption that such tax has been considered in determining the sale prices which were included in the total amount for the quarter on which the manufacturer computed the tax on a tax-included basis, even though such tax is not listed as a separate item on sale invoices. Accordingly, under such circumstances, in the absence of clear and convincing evidence furnished by taxpayer that a tax was not included in the sales price thereof, a credit or refund of tax erroneously paid on articles which the manufacturer considered taxable is allowable only where the amount of tax has been refunded to the ultimate purchasers or where the manufacturer has obtained the written consent of such ultimate purchasers to the making of the refund.

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ISSUE

Advice has been requested whether a credit or refund of manufacturers excise tax is allowable in the two situations described below.

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FACTS

Situation (1). A manufacturer produces and sells certain articles. Because he was uncertain as to whether sales of such articles are subject to the manufacturers excise tax, he requested a ruling on the matter from the Internal Revenue Service. Pending receipt of such a ruling, the manufacturer timely filed returns and paid manufacturers excise tax on his sales in order to avoid accrual of interest if the articles should be determined to be taxable. Only for purposes of reporting and paying the excise tax and not with any intent of implying that he had included such excise tax in the sale prices of the articles, the manufacturer computed the amount of tax by taking 1/11th of the total price for which he sold the articles that he thought might be subject to a ten percent tax. The manufacturer’s published price list does not indicate that the excise tax is included in the sale prices, nor do the sale invoices show any excise tax as a separate item. Evidence indicates that the manufacturer did not give consideration to the excise tax in determining the sale prices of the articles. Subsequently, the Service held that the articles sold by the manufacturer are not subject to the manufacturers excise tax. The manufacturer then filed a claim for refund of the excise tax he erroneously paid. Situation (2). A manufacturer lists in his price catalog numerous taxable and nontaxable articles. The catalog contains a footnote which states that “all prices include Federal excise tax where applicable.” The amount of excise tax is not listed as a separate item on sale invoices. In computing his liability for excise tax, the manufacturer added the total sales during a quarter of all items which he considered to be subject to excise tax. He then took 1/11th of the total, where a ten percent rate is applicable, and reported that amount on his return. In so doing, the manufacturer erroneously reported and paid excise tax on sales of certain nontaxable articles of his manufacture. He then filed a claim for refund of such excise tax that he mistakenly had paid.

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LAW AND ANALYSIS

Insofar as pertinent here, section 6416(a)(1) of the Internal Revenue Code of 1954 provides that no credit or refund of any overpayment of the manufacturers excise taxes shall be allowed or made unless the person who paid the tax establishes, under regulations prescribed by the Secretary of the Treasury or his delegate, (1) that he has not included the tax in the price of the article with respect to which it was imposed and has not collected the amount of the tax from the person who purchased such article, or (2) that he has repaid the amount of the tax to the ultimate purchaser of the article, or (3) that he has filed with the Secretary or his delegate the written consent of the ultimate purchaser to the allowance of the credit or the making of the refund.

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HOLDING

Under the circumstances described in situation (1) above, it is held that the manufacturer has complied with the requirements of section 6416(a)(1) of the Code because he has not included the tax in the price of the articles and has not collected the amount of the tax from persons who purchased such articles. Accordingly, a credit or refund of manufacturers excise tax is allowable to the manufacturer for the amount of tax he erroneously reported and paid on certain nontaxable articles of his manufacture. However, where a manufacturer’s catalog, price list, or other literature indicates that the sale prices contained therein include manufacturers excise tax where applicable, there is a presumption that such tax has been considered in determining the sale prices which were included in the total amount for the quarter on which the manufacturer computed the tax on a tax-included basis, even though such tax is not listed as a separate item on sale invoices. Accordingly, under the circumstances described in situation (2) above, in the absence of clear and convincing evidence furnished by taxpayer that a tax was not included in the sales price thereof, a credit or refund of tax paid on articles which the manufacturer erroneously considered taxable is allowable only where the amount of tax has been refunded to the ultimate purchasers or where the manufacturer has obtained the written consent of such ultimate purchasers to the making of the refund.