§ 1-11.102

§ 1-11.102-1

Manufacturers excise taxes.
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 semitrailer10 percent; except that this tax does not apply to equipment designed for off-theroad 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 December 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

(ii) 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 vehicles-10 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

machining operations on metals. Oils as to which the Commissioner has made such a determination may be sold tax free whether in bulk or otherwise. However, the Commissioner may require that the oil be specifically represented to the purchaser, whether by labeling or otherwise, as being suitable for use only in cutting and machining operations on metals.

(3) Lubricating oils which are sold for use, or for resale for use in cutting and machining operations on metals, but which may not be sold tax free under one of the procedures described above, may be sold tax free, provided the manufacturer obtains from the purchaser a properly executed cutting oil certificate. The form set forth in § 1-11.501-3 shall be utilized for this purpose.

(d) The ultimate purchaser of lubricating oil (other than cutting oils, imported lubricating oils, or re-refined oil) is entitled to a refund of 6 cents per gallon on oil purchased tax paid which is used otherwise than as a lubricant in a highway motor vehicle.

§ 1-11.102-5 Fishing equipment.

A tax of 10 percent is imposed upon fishing equipment (including parts or accessories sold therewith) sold by a manufacturer, producer, or importer.

§ 1-11.102-6 Firearms, shells, and cartridges.

(a) A tax is imposed at the rate of 10 percent upon pistols and revolvers; and at the rate of 11 percent on other firearms, shells, and cartridges sold by a manufacturer, producer, or importer. The tax does not attach when such articles are purchased with funds appropriated for the Military Departments.

(b) Chapter 53A of the Internal Revenue Code imposes a transfer tax and a tax on the manufacture of machineguns and certain other firearms. Transfer to, or manufacture for, the United States is specifically exempted.

§ 1-11.103 Excise taxes on facilities and

services.

Chapter 33 of the Internal Revenue Code imposes excise taxes on communications and certain transportation of persons by air. In general, the tax is based upon the amount paid for the service and is imposed upon the person paying for the service.

Subpart 1-11.2-Exemptions From Federal Excise Taxes

§ 1-11.200 Scope of subpart.

This subpart sets forth the applicability and scope of general exemptions, credits, and refunds from the Federal excise taxes outlined in Subpart 1-11.1, and the policy governing when such exemptions, credits, and refunds are to be claimed. Particular exemptions restricted to a single tax are set forth in Subpart 1-11.1 in the discussion of each tax.

§ 1-11.201 Retailers excise taxes.

No retailers excise tax is imposed:

(a) On the sale of special fuels for the exclusive use of any State, any political subdivision thereof, or the District of Columbia, or with respect to the use thereof by any of the foregoing.

(b) On the sale of special fuels for export or for shipment to a possession of the United States (which for the purpose of this exemption includes Puerto Rico), and in due course so exported or shipped

(1) This exemption shall be utilized by purchasing on a tax-exclusive basis and furnishing the required proof of exportation or shipment to a possession if:

(i) The purchase is substantial, and

(ii) Exportation or shipment to a possession is intended to follow not more than 6 months after title passes to the Government.

(2) To qualify for the exemption of sales for export or for shipment to a possession

(i) The supplies must be identified as having been sold by the manufacturer (if the tax is a retailers excise tax) for export or shipment to a possession. The words "for export or shipment to a possession" incorporated into or stamped on a contract or purchase order are acceptable to the Internal Revenue Service as evidence that the sale is for export or for shipment to a possession. In solicitations and contracts, the terms of which imply that the supplies will be either exported or shipped to a possession (e.g., delivery to a port of embarkation or special packing requirements for overseas shipment) where the purchase is not substantial and it is therefore desired to purchase on a Federal Excise tax-inclusive basis, the solicitations and the contract should clearly state that proof of export certificates will not be issued.

(ii) The supplies must be exported or shipped to a possession in due course. Proof of export or shipment will be furnished to the contractor in the form set forth in § 1-11.501-1.

(c) On the sale of special fuels to retailers for resale (sales by the United States, or any agency or instrumentality thereof, are not exempt unless specifically made exempt by statute).

(d) On the sale of special motor fuels for use or used in the propulsion of vessels of war or military aircraft of the type enumerated in § 1-11.202(d).

(e) On the sale of special fuels to a nonprofit educational organization or with respect to the use thereof by a nonprofit educational organization. [31 FR. 6372, Apr. 27, 1966]

§ 1-11.202

Manufacturers excise taxes. No manufacturers excise tax is imposed:

(a) On the sale of any article for use by the purchaser for further manufacture or for resale to a second purchaser in further manufacture. (An article shall be treated as sold for use in further manufacture if sold for use by the purchaser as material in the manufacture or production of, or as a component part of. another taxable article to be manufactured or produced. In the case of truck or bus parts and accessories it is not necessary that the produced article be a taxable article. This exemption does not apply to tires or inner tubes.);

(b) On the sale of any article for export, or for shipment to a possession of the United States (which for the purpose of this exemption includes Puerto Rico). This exemption shall be obtained only when the purchase is substantial and exportation or shipment to a possession is intended to follow not more than 6 months after title passes. For proper utilization of this exemption, see § 111.201(b);

(c) On the sale of any article for resale to a second purchaser for export. If articles upon which a manufacturers excise tax has been paid are resold by a dealer for export, or for shipment to a possession, the manufacturer is entitled to a credit or refund of the tax paid. If it is economically advantageous to do so, this credit or refund shall be utilized by purchase from a dealer on a tax-exclusive basis and execution of the required exemption certificate set forth in § 1-11.501-1;

(d) On sales of supplies for use as fuel supplies, ships' stores, sea stores,

or legitimate equipment on vessels of war of the United States or any foreign nation, including aircraft owned by the United States or by any foreign nation and constituting a part of the armed forces thereof, and guided missiles and pilotless aircraft owned or chartered by the United States. This exemption and the exemption from the retailers excise tax on special motor fuels (see § 1-11.201 (d) shall be utilized by purchasing on a tax-exclusive basis and furnishing the required exemption certificate (see § 111.501-2) only if:

(1) The purchase is substantial;

(2) The contracting officer determines at the time of the purchase that the supplies are intended for use in vessels of war or military aircraft; and

(3) The administrative burden of insuring that the supplies are used for exempt purposes does not make use of the exemption uneconomical. Administrative difficulties normally will not exist if the particular supply is suited exclusively for use in vessels or aircraft.

If supplies upon which a manufacturers excise tax has been paid are sold by a dealer for any of the exempt uses enumerated above, the manufacturer is entitled to a credit or refund of the tax paid. If it is economically advantageous to do so, this credit or refund shall be utilized by purchases from a dealer on a tax-exclusive basis and execution of the required exemption certificate set forth in § 1-11.501-2;

(e) On the sale of any article for the exclusive use of a State or local government (including the District of Columbia); and

(f) On the sale of any article to a nonprofit educational organization for its exclusive use.

[29 F.R. 10254, July 24, 1964, as amended at 31 F.R. 6372, Apr. 27, 1966]

§ 1-11.203 Supplies and services for the exclusive use of the United States. By virture of action taken by the Secretary of the Treasury, pursuant to section 4293 of the Internal Revenue Code, exemption is available, and shall be obtained, to the extent indicated, from the following Federal excise taxes:

(a) Tax on communication services and facilities furnished directly to the United States (as distinguished from being furnished to a Government contractor) and paid for directly by the Government. (Such exemption is obtained without any exemption certificate);

As used in this section, the term "State and local taxes" includes taxes of the several States, the District of Columbia, the possessions of the United States, Puerto Rico, and political subdivisions thereof.

§ 1-11.302 Applicability.

(a) As a general rule, purchases made by the Government itself are exempt from State and local sales and use taxes; similarly, personal and real property are exempt from State and local property taxes when the property is both owned and possessed by the Government. These exemptions shall be made use of to the fullest extent available when Government property is located in a State or local tax jurisdiction, or when purchases are made directly by the Government. by asserting the Government's immunity from taxation of its property by States and localities, and in case of purchases, by executing an approved tax exemption certification.

(b) However, when purchases are not made by the Government itself, but by a prime contractor of the Government or by a subcontractor under a prime contract, the right to an exemption of the transaction from a sales or use tax may not rest on the Government's immunity from direct taxation by States and localities. It may rest instead on provisions of the particular State or local law involved, or in some cases, the transaction may not in fact be expressly exempt from the tax. Similarly, when property is owned by the Government, but the property is in the possession of a contractor or subcontractor on tax day, situations may arise where States or localities believe they may have the right to tax the property directly or to tax the contractor's or subcontractor's possession of, interest in, or use of that property.

(c) Whenever there is any doubt as to the availability of the Government's im

munity or exemption from any State or local tax, the matter shall be handled in accordance with § 1-11.000(b).

Subpart 1-11.4—Contract Clauses § 1-11.401 Fixed-price type contracts. The clauses prescribed in this subpart are for use in fixed-price type contracts except those to be performed entirely outside the United States, its possessions, and Puerto Rico.

§ 1-11.401-1 Advertised and certain negotiated contracts.

(a) Use of clause. Except as provided in § 1-11.401-4, the clause set forth in paragraph (c) of this § 1-11.401-1 shall be used in:

(1) All formally advertised contracts except construction contracts;

(2) All formally advertised construction contracts when the contract price may reasonably be expected to exceed $10,000;

(3) Negotiated fixed-price type contracts in excess of $10,000 where the contracting officer is satisfied, because of competition or otherwise, that the contract price does not include any contingency for State and local taxes; and

(4) At the discretion of the contracting officer in negotiated fixed-price type contracts in excess of $2,500 but not in excess of $10,000. However, this clause shall not be used in purchases made pursuant to Subpart 1-3.6.

(b) Description. The clause provides that the contract price includes all applicable taxes. It provides for an increase or decrease in the contract price to compensate for changes in applicable Federal excise taxes or duties. It does not provide for any adjustment in the contract price to compensate for changes in State or local taxes (but see § 1-11.401-4(b)). (c) Contract clause.

FEDERAL, STATE, AND LOCAL TAXES

(a) Except as may be otherwise provided in this contract, the contract price includes all applicable Federal, State, and local taxes and duties.

(b) Nevertheless, with respect to any Federal excise tax or duty on the transactions or property covered by this contract, if a statute, court decision, written ruling, or regulation takes effect after the contract date, and

(1) Results in the Contractor being required to pay or bear the burden of any such Federal excise tax or duty or increase in the rate thereof which would not otherwise have been payable on such transactions or property, the contract price shall be increased by