Rev. Rul. 80-273 1980-2 C.B. 315, 1980-41 I.R.B. 15.

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Revenue Ruling 80-273

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Headnote

Constructive sale price; retail sales; no sales to wholesalers. The constructive sale price for computing the taxes imposed by sections 4061(b)(1), 4161(a), 4161(b) and 4181 of the Code on articles sold at retail by manufacturers, producers, or importers who do not sell like articles to wholesale distributors is 75 percent of the actual selling price after the adjustments provided by section 4216(a), unless it can be shown on an industry-wide basis that a lower percentage should apply; Rev. Rul. 87 modified.

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FACTS

The Internal Revenue Service has established a new basis for computing the manufacturers excise tax on the sale at retail of automotive parts or accessories, fishing equipment, bows and arrows, and firearms in situations where the manufacturers, producers, or importers do not sell like articles to wholesale distributors.

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LAW AND ANALYSIS

Sections 4061(b)(1), 4161(a), 4161(b), and 4181 of the Internal Revenue Code impose manufacturers excise taxes on the sale of automotive parts or accessories, fishing equipment, bows and arrows, and firearms, respectively. Section 4216(a) of the Code relates to the allowance of certain adjustments to the sale price for purposes of computing manufacturers excise tax liability. Section 4216(b)(1)(A) of the Code provides that if an article is sold at retail, the manufacturers excise tax shall (if based on the price for which the article is sold) be computed on whichever of the following prices is the lower: (i) the price for which such article is sold, or (ii) the highest price for which such articles are sold to wholesale distributors, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Secretary. Section 48.4216(b)-2(b) of the Manufacturers and Retailers Excise Tax Regulations provides that in determining the highest price for which articles are sold by manufacturers to wholesale distributors (the constructive sale price) there must be taken into consideration the normal industry practices with respect to section 4216(a) inclusions and exclusions. However, once a constructive sale price has been determined by the Secretary, no further adjustment of such price shall be made. Rev. Ruls. 79-32 and 79-33, 1979-1 C.B. 355 and 356, provide that the basis for computing manufacturers excise tax where truck trailer and semitrailer chassis and bodies, and truck chassis and bodies and truck-tractors, respectively, are sold at retail is 90 percent of the actual selling price after taking into account the adjustments provided by section 4216(a) of the Code unless it can be shown that a lower percentage should apply to a particular segment of the industry. Under section 4216(b)(1)(A), the manufacturer’s cost is no longer a factor with respect to articles taxable under section 4061(a).

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HOLDING

The constructive sale price for computing the taxes imposed by sections 4061(b)(1), 4161(a), 4161(b), and 4181 of the Code, where the articles are sold at retail by manufacturers, producers, or importers who do not sell like articles to wholesale distributors, is 75 percent of the actual selling price after taking into account the adjustments provided by section 4216(a) unless it can be shown on an industry-wide basis that a lower percentage should apply. No further adjustments under section 4216 are allowable. The manufacturer’s cost is not to be a factor in determining the constructive sale price.

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EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 87, 1953-1 C.B. 464, which holds that certain custom-made racks for delivery trucks are taxable automotive parts or accessories, is modified to indicate that the constructive sale price for such articles sold only at retail is 75 percent of the actual selling price after taking into account the allowable adjustments.

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PROSPECTIVE APPLICATION

Under the authority granted by section 7805(b) of the Code, this revenue ruling is effective with respect to sales of the aforementioned articles by manufacturers, producers, and importers on and after January 1, 1981.