Rev. Rul. 65-317 1965-2 C.B. 422 Caution: Amplified by Rev. Rul. 69-598 Caution: Amplified by Rev. Rul. 66-66

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Revenue Ruling 65-317

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Headnote

Automobiles imported under described conditions are not “incidentally” imported, within the meaning of section 48.4218-2(b) of the Manufacturers and Retailers Excise Tax Regulations.

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ISSUE

Advice has been requested as to whether the manufacturers excise tax imposed by section 4061(a) of the Internal Revenue Code of 1954 applies to automobiles imported and used under the situations described below.

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FACTS

Two methods of importation of foreign-made vehicles have been presented for consideration: (a) A resident of the United States orders an automobile not previously sold in the United States from a dealer located outside the United States, and pays the purchase price directly to the foreign dealer. The automobile is shipped to the United States under consignment to the purchaser, who clears the automobile through customs for his personal use. (b) A resident of the United States orders an automobile not previously sold in the United States from a dealer or other person in the United States who does not in fact assume the typical risks or responsibilities of an importer purchasing the vehicle for resale but acts as the purchaser’s agent in purchasing the automobile from a foreign dealer. The purchaser pays the purchase price to his agent who forwards the purchase order and payment to the foreign dealer. The automobile is shipped to the United States under consignment to the person in the United States acting in his capacity as agent for the purchaser. This person clears the automobile through customs as agent for the purchaser, and delivers the automobile to the purchaser for his personal use. The question presented is whether the purchaser, in either situation, has “incidentally” imported an automobile for his personal use within the meaning of section 48.4218-2(b) of the Manufacturers and Retailers Excise Tax Regulations, and is therefore not subject to the tax on “use” of imported automobiles imposed by sections 4061(a) and 4218(a) of the Code.

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LAW AND ANALYSIS

Section 4061(a)(2) of the Code imposes a tax on the sale by the manufacturer, producer, or importer of automobile chassis and bodies other than those taxable under section 4061(a)(1) of the Code. A sale of an automobile for purposes of section 4061(a)(2) of the Code is considered to be the sale of the chassis and the body. Section 4218(a) of the Code provides that if any person manufactures, produces, or imports an article (other than specified articles not involved here) and uses it (otherwise than as material in the manufacture or production of, or as a component part of, another article taxable under chapter 32 of the Code, to be manufactured or produced by him) he is liable for tax under chapter 32 as if such article were sold by him. Section 48.4218-2(b) of the regulations provides that the use tax imposed by section 4218 of the Code shall not apply to an individual who incidentally manufactures, produces, or imports a taxable article for his personal use or causes a taxable article to be manufactured, produced, or imported for his personal use. Section 48.4061(a)-2 of the regulations imposes certain bonding requirements on importers of articles taxable under section 4061(a) of the Code. One of the exceptions from the bonding requirements provided by section 48.4061(a)-2(b)(2) of the regulations covers an individual who incidentally imports an article for his personal use. A primary purpose of the tax on use imposed by section 4218 of the Code is to equalize the tax burden as between (a) manufacturers or importers who use in their business taxable articles manufactured or imported by them, and (b) those manufacturers or importers who use similar articles in their business, but must obtain them from other manufacturers or importers in tax-paid purchases. Were it not for the tax on use, a manufacturer or importer of electric light bulbs, for example, could use in all his offices and plants, light bulbs manufactured or imported by him without incurring manufacturers excise tax liability, whereas other businessmen who do not manufacture or import light bulbs could only obtain light bulbs through tax-paid purchases. After the adoption of the Revenue Act of 1932, it became necessary to emphasize the fact that the tax on use imposed by section 622 of the Act did not apply to casual manufacturers of taxable articles for personal, as distinguished from business, use. Section 48.4218-2(b) of the regulations is not intended to provide a direct, or indirect, excise tax advantage to individuals who import articles for their own use, merely because the intended use in the United States is of a personal nature rather than for a business purpose. As used in the regulation the term “incidentally … imports” does not describe any situation where the primary objective is the acquisition of the article imported. The term refers to a combination of circumstances wherein the importation is incidental or consequent to other primary purposes, such as the return of an individual to the United States with his personal effects after residence abroad, or a trip overseas for some otherwise significant purpose. To permit the importation and use of automobiles under the circumstances described in the situation (a) or (b) without imposition of the tax imposed by section 4061(a) of the Code, would unquestionably put domestic manufacturers and merchant importers of automobiles at a competitive disadvantage. The transactions described do not reflect any primary purpose to which the importation could be ascribed as incidental. Thus, the articles are not “incidentally” imported, as that term is used in section 48.4218-2(b) of the regulations.

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HOLDING

Accordingly, the resident purchaser is the importer of the vehicles in both situations, and the tax imposed by section 4061(a) of the Code applies to the importer’s use of the imported vehicles. Furthermore, inasmuch as the vehicles are not, in the sense intended, “incidentally” imported for personal use, the bonding requirements of section 48.4061(a)-2 of the regulations apply to the importations.

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EFFECTIVE DATE

Under the authority granted by section 7805(b) of the Code, this Revenue Ruling will be applied only as to articles taxable under section 4061(a) of the Code imported on or after February 1, 1966.