Publication 510 - Excise Taxes - 2004 (Page 20 of 48) in pdf

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The price for which an article is sold includes

diction where the sale occurs determine when

Sales of articles of native Indian handi-

craft, such as bows and arrow compo-

the total consideration paid for the article,

title passes.

nents, manufactured by Indians on

whether that consideration is in the form of

If the taxable article is used by the manufac-

reservations, in Indian schools, or under

money, services, or other things. However, you

turer, the tax attaches at the time use begins.

U.S. jurisdiction in Alaska.

include certain charges made when a taxable

The manufacturer is liable for the tax.

article is sold and you exclude others. To figure

the price on which you base the tax, use the

Requirements for Exempt Sales

Partial payments. The tax applies to each

following rules.

partial payment received when taxable articles

The following requirements must be met for a

are:

1) Include both the following charges in the

sale to be exempt from the manufacturers tax.

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price.

Leased,

Registration requirements. The manufac-

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Sold conditionally,

a) Any charge for coverings or containers

turer, first purchaser, and second purchaser in

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(regardless of their nature).

the case of resales must be registered. See the

Sold on installment with chattel mortgage,

Form 637 instructions for more information.

b) Any charge incident to placing the arti-

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cle in a condition packed ready for ship-

Exceptions to registration requirements.

Sold on installment with title to pass in the

ment.

Registration is not required for any of the follow-

future.

ing.

To figure the tax, multiply the partial payment by

2) Exclude all the following amounts from the

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State or local governments.

the tax rate in effect at the time of the payment.

price.

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Foreign purchasers of articles sold or re-

a) The manufacturers excise tax, whether

Exemptions

sold for export.

or not it is stated as a separate charge.

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The United States.

The following sales by the manufacturer are

b) The transportation charges pursuant to

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exempt from the manufacturers tax.

Parties to a sale of supplies for vessels

the sale. (The cost of transportation of

and aircraft.

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goods to a warehouse before their

Sale of an article to a state or local gov-

bona fide sale is not excludable.)

ernment for the exclusive use of the state

Certification requirement. If the purchaser is

or local government. (This exemption does

c) Delivery, insurance, installation, retail

required to be registered, the purchaser must

not apply to the taxes on coal, gas guz-

dealer preparation charges, and other

give the manufacturer its registration number

zlers, and vaccines.) State is defined in

charges you incur in placing the article

and certify the exempt purpose for which the

Definitions under Fuel Taxes, earlier.

in the hands of the purchaser under a

article will be used. The information must be in

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bona fide sale.

Sale of an article to a nonprofit educa-

writing and may be noted on the purchase order

tional organization for its exclusive use.

d) Discounts, rebates, and similar al-

or other document furnished by the purchaser to

(This exemption does not apply to the

lowances actually granted to the pur-

the seller in connection with the sale.

taxes on coal, gas guzzlers, and vac-

chaser.

For a sale to a state or local government, an

cines.) Nonprofit educational organization

exemption certificate must be signed by an of-

e) Local advertising charges. A charge

is defined under Communications Tax.

ficer or employee authorized by the state or local

made separately when the article is

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government. See section 48.4221 – 5(c) of the

Sale of an article for use by the purchaser

sold and that qualifies as a charge for

regulations for the certificate requirements.

as supplies for vessels. (This exemption

“local advertising” may, within certain

For sales for use as supplies for vessels and

does not apply to the taxes on coal and

limits, be excluded from the sale price.

aircraft, if the manufacturer and purchaser are

vaccines.) Supplies for vessels means

not registered, the owner or agent of the vessel

f) Charges for warranty paid at the

ships’ stores, sea stores, or legitimate

must provide an exemption certificate to the

purchaser’s option. However, a charge

equipment on vessels of war of the United

manufacturer before or at the time of sale. See

for a warranty of an article that the

States or any foreign nation, vessels em-

section 48.4221 – 4(d) of the regulations for the

manufacturer requires the purchaser to

ployed in the fisheries or whaling busi-

certificate requirements.

pay to obtain the article is included in

ness, or vessels actually engaged in

the sale price on which the tax is fig-

foreign trade.

Proof of export requirement. Within 6

ured.

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months of the date of sale or shipment by the

Sale of an article for use by the purchaser

manufacturer, whichever is earlier, the manu-

for further manufacture, or for resale by

Bonus goods. Allocate the sale price if you

facturer must receive proof of exportation. See

the purchaser to a second purchaser for

give free nontaxable goods with the purchase of

section 48.4221 – 3(d) of the regulations for evi-

use by the second purchaser for further

taxable merchandise. Figure the tax only on the

dence that qualifies as proof of exportation.

manufacture. (This exemption does not

sale price attributable to the taxable articles.

apply to the tax on coal.) Use for further

Proof of resale for further manufacture re-

manufacture means use in the manufac-

quirement. Within 6 months of the date of sale

Example. A manufacturer sells a quantity of

ture or production of an article subject to

or shipment by the manufacturer, whichever is

taxable articles and gives the purchaser certain

the manufacturers excise taxes. If you buy

earlier, the manufacturer must receive proof that

nontaxable articles as a bonus. The sale price of

articles tax free and resell or use them

the article has been resold for use in further

the shipment is $1,500. The normal sale price is

other than in the manufacture of another

manufacture. See section 48.4221 – 2(c) of the

$2,000: $1,500 for the taxable articles and $500

article, you are liable for the tax on their

regulations for evidence that qualifies as proof of

for the nontaxable articles. Since the taxable

resale or use just as if you had manufac-

resale.

items represent 75% of the normal sale price,

tured and sold them.

the tax is based on 75% of the actual sale price,

Information to be furnished to purchaser.

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Sale of an article for export or for resale by

or $1,125 (75% of $1,500). The remaining $375

The manufacturer must indicate to the pur-

the purchaser to a second purchaser for

is allocated to the nontaxable articles.

chaser that the articles normally would be sub-

export. The article may be exported to a

ject to tax and are being sold tax free for an

Taxable Event

foreign country or to a possession of the

exempt purpose because the purchaser has

United States. (A vaccine shipped to a

provided the required certificate.

Tax attaches when the title to the article sold

possession of the United States is not

considered to be exported.) If an article is

Credits or Refunds

passes from the manufacturer to the buyer.

sold tax free for export and the manufac-

When the title passes depends on the intention

turer does not receive proof of export, de-

of the parties as gathered from the contract of

The manufacturer may be eligible to obtain a

sale. In the absence of expressed intention, the

scribed later, the manufacturer is liable for

credit or refund of the manufacturers tax for

legal rules of presumption followed in the juris-

the tax.

certain uses, sales, exports, and price readjust-

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Publication 510 - Excise Taxes - 2004 Page 20

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