SOURCE: 29 FR 10254, July 24, 1964, unless otherwise noted.

§ 1-11.000 Scope of part.

(a) This part deals with Federal taxes imposed by the Internal Revenue Code upon certain supplies and services procured by executive agencies; exemptions from such Federal taxes; policy for obtaining exemption from State and local taxes; and contract clauses required or authorized for insertion in contracts.

(b) The problems presented in connection with the administration of the tax aspect of a contract or transaction are widely varied. The right to immunity, exemption, refund, credit, or drawback depends upon the nature of the tax, the particular tax law, the party sought to be taxed, the items being procured, and the provisions of the contract. These problems are essentially legal; therefore, when questions arise, contracting officers should request the assistance of legal counsel. Subpart 1-11.1-Federal Excise Taxes

SOURCE: 31 FR 6370, Apr. 27, 1966, unless otherwise noted.

§ 1-11.100 Scope of subpart.

This subpart deals with Federal excise taxes involved in the procurement of certain supplies and services. It is for the general information of Government personnel and does not purport to present the full scope of the applicable provisions of law and implementing regulations as they may be amended from time to time.

§ 1-11.101 Retailers excise taxes. § 1-11.101-1 Special fuels.

(a) Diesel fuel. A tax at the indicated rates is imposed upon any liquid, other than that taxable as gasoline under section 4081 of the Internal Revenue Code (see § 1-11.102-3), which is (i) sold by any person to an owner, lessee, or other operator of a diesel-powered highway vehicle, for use as a fuel in such vehicle, or (ii) used by any person as a fuel in a diesel-powered highway vehicle unless there was a taxable sale of such liquid pursuant to (i) above, as follows:

(1) At 4 cents per gallon, if sold for use or if used as fuel in a dieselpowered highway vehicle

(i) Which, at the time of such sale or use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country;

or

(ii) Which, if owned by the United States, is used on the highway; or

(2) At 2 cents per gallon, if sold for use or if used as fuel in a dieselpowered highway vehicle

(i) Which, at the time of such sale or use, is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country; or

(ii) Which, if owned by the United States, is not used on the highway; and

(3) At an additional 2 cents per gallon, if fuel on which a tax of 2 cents was paid pursuant to subparagraph (2) of this paragraph is used as fuel in a diesel-powered highway vehicle

(i) Which, at the time of such use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country; or

(ii) Which, if owned by the United States, is used on the highway.

No tax is imposed on diesel fuel sold for use or used as fuel in a nonhighway vehicle, such as certain military vehicles, construction equipment, and equipment designed for use at mines, factories, railroad stations, and farms.

(b) Special motor fuels. A tax at the rates indicated in paragraph (b) (1) through (3) of this section is imposed upon benzol, benzene, naphtha, liquefied petroleum gas, casing-head and natural gasolines, or any other liquid (other than kerosene, gas oil, fuel oil), or a product taxable as diesel fuel under paragraph (a) of this section or as gasoline under section 4081 of the Internal Revenue Code (see § 111.102-3), which is (i) sold by any person to an owner, lessee, or other operator of a motor vehicle, motorboat, or airplane for use as a fuel for the propulsion thereof, or (ii) used by any person as a fuel for the propulsion of a motor vehicle, motorboat, or airplane, unless there was a taxable sale

of such liquid pursuant to (i) above, as follows:

(1) At 4 cents per gallon, if such liquid is sold for use or is used as a fuel for a highway vehicle

(i) Which, at the time of such sale or use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country;

or

(ii) Which, if owned by the United States, is used on the highway; or

(2) At 2 cents per gallon, if such liquid is sold for use or is used as a fuel for the propulsion of a motorboat or airplane, or a motor vehicle

(i) Which, at the time of such sale or use, is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country; or

(ii) Which, if owned by the United States, is not used on the highway; and

(3) At an additional 2 cents per gallon, if a liquid on which a tax of 2 cents was paid pursuant to subparagraph (2) of this paragraph is used as fuel in a highway vehicle

(i) Which, at the time of such use, is registered, or required to be registered, for highway use under the laws of any State or foreign country; or

(ii) Which, if owned by the United States, is used on the highway.

(c) Procedures. (1) The sale of diesel fuel to an owner, lessee, or other operator of a diesel-powered highway vehicle, or of special motor fuel to an owner, lessee, or other operator of a motor vehicle, motorboat, or airplane is considered as a taxable sale by the Internal Revenue Service only (i) if the liquid is delivered by the seller into the fuel supply tank of the vehicle, motorboat, or airplane, or (ii) where not so delivered, the purchaser indicates in writing to the seller prior to or at the time of the sale that the entire quantity of the liquid covered by the sale is for use by him for a taxable purpose as a fuel in such a vehicle, motorboat, or airplane. If such a written statement is not furnished by the purchaser, he is liable for the tax at the applicable rate on that quantity of the liquid which is used by him as fuel in such a vehicle, motorboat, or

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airplane, or which is sold by him in a taxable transaction.

(2) If it is known in advance of procurement that the entire quantity of any bulk purchase of diesel or special motor fuel is to be used for taxable purposes (as indicated elsewhere in this section), bids may be solicited on a tax inclusive basis and the written statement referred to in paragraph (b)(1) of this section should be furnished to the contractor.

(3) All other bulk purchases of diesel and special motor fuels will be on a tax exclusive basis and the agencies will be responsible for making payment of the tax at the applicable rate, directly to Internal Revenue Service. Such payment shall be made quarterly on TD Form 720, "Quarterly Federal Excise Tax Return." A certificate of Export is not required to support a tax-free sale of diesel fuel exported to a foreign country or shipped to a possession of the United States or to Puerto Rico.

§ 1-11.102 Manufacturers excise taxes.

§ 1-11.102-1 Motor vehicles.

(a) A tax at the rates indicated below is imposed upon the following articles (including parts and accessories sold therewith) sold by a manufacturer, producer, or importer:

(1) Chassis and bodies of trucks, buses, truck and bus trailers, and semitrailers, and tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer-10 percent; except that this tax does not apply to equipment designed for off-the-road use, such as certain military vehicles (including oxygen or bomb dollies), construction equipment, and equipment designed for use at mines, factories, railroad stations, and farms;

(2) Chassis and bodies of automobiles, and of trailers and semitrailers (other than house trailers) suitable for use with passenger automobiles-10 percent prior to June 22, 1965; 7 percent from June 22, 1965 through December 31, 1965; 6 percent from January 1, 1966 through March 15, 1966; 7 percent from March 16, 1966 through March 31, 1968; 2 percent from April 1, 1968 through De

cember 31, 1968; 1 percent after December 31, 1968; and

(3) Parts or accessories for trucks and buses-when sold separately from a truck, bus, or other item taxable as indicated in paragraph (a)(1) of this section-8 percent. Parts or accessories are defined to include any article—

(i) The primary use of which is to improve, repair, replace, or serve as a component part of a truck or bus;

(ii) Designed to be attached to or used in connection with a truck or bus or to add to its utility or ornamentation; or

(iii) The primary use of which is in connection with a truck or bus whether or not essential to its operation or

use.

Spark plugs, storage batteries, leaf springs, coils, timers, and tire chains, which are suitable for use on or in connection with, or as component parts of, a taxable vehicle are treated as parts or accessories whether or not primarily adapted for such use. However, the term "parts or accessories" does not include tires or inner tubes. The tax on parts or accessories does not apply to any article sold for use (or for a single resale for use) as material in the manufacture of, or as a component part of, any article whether or not such article is subject to a manufacturers excise tax. The contract price of supplies purchased by any agency shall not include an amount for the manufacturers excise tax on parts or accessories purchased for use in the manufacture of any article.

(b) Bodies are exempt from tax when sold by the manufacturer to a manufacturer of motor vehicles to be sold by the purchaser; however, a chassis manufacturer who purchases a body tax free is required to pay a tax on his sale of the completed vehicle as the manufacturer of both the chassis and the body. A manufacturer of motor vehicle chassis cannot sell such chassis tax free to manufacturers of motor vehicle bodies.

§ 1-11.102-2 Tires and tubes.

(a) A tax at the rates indicated in paragraphs (a) (1) through (5) of this section is imposed on the following

supplies, made wholly or in part of rubber, including synthetic and substitute rubber, sold by a manufacturer, producer, or importer:

(1) Tires of the type used on highway vehicles, which includes motor vehicles which are highway vehicles, and vehicles of the type used with motor vehicles which are highway vehicles10 cents per pound;

(2) Other tires, which are designed to fit the wheel of any type of vehicle capable of transporting a person or burden (other than laminated tires which consist wholly of scrap rubber from used tire casings with an internal metal fastening agent)—5 cents per pound;

(3) Inner tubes, which include any type of air container for pneumatic tires-10 cents per pound on total weight, including air valves and stems;

(4) Laminated tires (not of the type used on highway vehicles) which consist wholly of scrap rubber from used tire casings with an internal metal fastening agent-1 cent per pound; and

(5) Tread rubber, which includes any material commonly or commercially known as tread rubber or camelback of a type used in retreading or recapping tires-5 cents per pound. An exemption exists for the sale of tread rubber or camelback by a manufacturer to a purchaser for use by that purchaser other than for recapping or retreading tires of the type used on highway vehicles. In addition, if tread rubber, upon which the tax has been paid, is sold for use or is used other than for recapping or retreading tires of the type used on highway vehicles, the manufacturer is entitled to a refund or credit of the tax: Provided, That the credit under paragraph (b) of this section is not available. The contract price for supplies purchased by an agency will not include an amount for the manufacturers excise tax on tread rubber to the extent that this exemption or refund or credit is available to the manufacturer. In determining weight of taxable tires under paragraphs (a) (1) and (2) of this section, metal rims or rim bases are excluded, but any other material or fastening device that forms a part of the tire is included. The tax imposed under paragraphs (a) (1) and (2) of this section

does not apply to tires which are not more than 20 inches in diameter and not more than 13⁄4 inches in cross section, if such tires are of all-rubber construction without fabric or metal reinforcement, nor does it apply to tires of extruded tiring with an internal wire fastening agent.

(b) The exemption for sales for further manufacture does not apply to taxable tires and tubes (see § 111.202). However, if tax-paid tires and tubes normally sold in connection with the sale by a manufacturer of a taxable motor vehicle are sold therewith, a credit against the tax on the motor vehicle is allowed to the extent of the motor vehicle tax rate applied to the manufacturers purchase price on the tires and tubes. The contract price for supplies purchased by any agency shall not include an amount for manufacturers excise tax on tires and tubes to the extent that this credit is available to the manufacturer.

§ 1-11.102-3 Gasoline.

(a) A tax of 4 cents per gallon is imposed on gasoline sold by a producer or importer. Gasoline means all products commonly or commercially

known or sold as gasoline which are suitable for use as a motor fuel. The tax does not apply to the sale of gasoline to a producer, which is defined to include a refiner, compounder, blender, or dealer who sells gasoline exclusively to producers of gasoline.

(b) Under section 6421 of the Internal Revenue Code, the ultimate purchaser of gasoline is entitled to a refund of 2 cents per gallon for gasoline used for certain nonhighway purposes. Agencies may, to the extent economically feasible, avail themselves of such refunds. Applications for refunds shall be in accordance with pertinent requirements of the Internal Revenue Service.

§ 1-11.102-4 Lubricating oils.

(a) A tax of 6 cents per gallon is imposed on lubricating oil (other than cutting oils) sold by the manufacturer or producer unless sold to another manufacturer or producer of lubricating oils for resale. Lubricating oil means all oils which are either sold for