[Code of Federal Regulations]
[Title 26, Volume 17]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR148.1-5]

[Page 456-459]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 148_CERTAIN EXCISE TAX MATTERS UNDER THE EXCISE TAX TECHNICAL CHANGES 
ACT OF 1958--Table of Contents
 
Sec. 148.1-5  Constructive sale price.




    Authority: 26 U.S.C. 7805.


    (a) Purpose of this section. The purpose of this section is to set 
forth temporary rules to be used in determining a constructive sale 
price under section 4216(b) of the Internal Revenue Code, as amended by 
section 115 of the Excise Tax Technical Changes Act of 1958, with 
respect to certain sales made on and after January 1, 1959, by a 
manufacturer, producer, or importer. The temporary rules set forth in 
this section have application in the case of articles in respect of 
which the manufacturer's excise tax imposed under Chapter 32 of the Code 
is based on the price for which the article is sold.

[[Page 457]]

    (b) General rule--(1) Sales at retail. Where a manufacturer, 
producer, or importer sells an article at retail, and the special rule 
provided in paragraph (c) of this section does not apply, the basis for 
tax shall be the lower of: (i) the actual price for which the 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. Thus, where a manufacturer, 
producer, or importer sells an article at retail, the tax on his retail 
sale ordinarily will be computed upon the highest price for which 
similar articles are sold by him to wholesale distributors. However, in 
such cases it must be shown that he has an established bona fide 
practice of selling such articles in substantial quantities to wholesale 
distributors. If he has no such sales to wholesale distributors, a fair 
market price will be determined by the Commissioner. In any case the 
price so determined shall not be in excess of the actual price for which 
the article is sold by him at retail.
    (2) Sales on consignment and sales otherwise than through an arm's 
length transaction. For rules relating to the determination of a 
constructive sale price in the case of sales on consignment, or sales 
otherwise than through an arm's length transaction and at less than the 
fair market price, see paragraphs (a) and (d) of Sec. 316.15 of 
Regulations 46 (26 CFR (1939) part 316), as prescribed under and made 
applicable to the Internal Revenue Code of 1954 by Treasury Decision 
6091, 19 FR 5167, August 17, 1954.
    (c) Special rule--(1) Basis for tax. Where a manufacturer, producer, 
or importer sells an article at retail, to a retailer, or to a special 
dealer, and the conditions specified in subparagraph (2) of this 
paragraph are met, a special constructure sale price rule is provided 
for computation of the tax. This rule provides that the tax is to be 
based on the lower of the following prices: (i) The actual price for 
which the article is sold; or (ii) the highest price for which such 
articles are sold by such manufacturer, producer, or importer to 
wholesale distributors (other than special dealers).
    (2) Conditions governing applicability of special rule. In order to 
qualify for application of the special constructive sale price rule to 
the sale by the manufacturer, producer, or importer of an article at 
retail, to a retailer, or to a special dealer, the following four 
conditions must be satisfied.
    (i) The manufacturer, producer, or importer of the article must 
regularly sell such articles at retail, to retailers, or to special 
dealers, as the case may be.
    (ii) The manufacturer, producer, or importer of the article must 
regularly sell such articles to one or more wholesale distributors 
(other than special dealers) in arm's length transactions, and must 
establish that his prices in such cases are determined without regard to 
any tax benefit under this paragraph resulting from a reduction in the 
tax base for his sales at retail, to retailers, or to special dealers.
    (iii) The normal method of sales within the industry embracing the 
article is not to sell at retail, or to retailers, or both.
    (iv) The sale at retail, to a retailer, or to a special dealer must 
be an arm's length transaction.
    (3) Requests for determination. In any case in which a manufacturer, 
producer, or importer desires a determination as to the application of 
this paragraph, he may request such a determination from the 
Commissioner. The request shall contain complete and detailed 
information with respect to each of the conditions specified in 
subparagraph (2) of this paragraph to assist the Commissioner in 
determining whether the constructive sale price provisions of this 
paragraph apply, such as data which will show the normal method of sales 
for the article within the industry by manufacturers, producers, and 
importers (including the dollar volume of sales at various distribution 
levels), and the source of such data; evidence as to the regularity with 
which sales of such articles are made by the manufacturer, producer, or 
importer at retail, to retailers, or to special dealers; information 
that the prices of the manufacturer, producer, or importer to wholesale 
distributors have been determined without regard to any tax benefit

[[Page 458]]

under the special rule of this paragraph; etc.
    (d) Definitions. For purposes of this section:
    (1) Wholesale distributors. The term ``wholesale distributors'' 
means persons who customarily resell to others who in turn resell.
    (2) Special dealer. The term ``special dealer'' means a distributor 
of articles taxable under section 4121 (relating to electric, gas, and 
oil appliances) who does not maintain a sales force to resell the 
article whose constructive sale price is established under paragraph (c) 
of this section but relies on salesmen of the manufacturer, producer, or 
importer of the article for resale of the article to retailers.
    (3) Industry. (i) The term ``industry'' as applied to any article 
generally means the specific category of articles listed in Chapter 32 
of the Internal Revenue Code (other than combinations) that embraces the 
article for which a constructive sale price is to be determined under 
paragraph (c) of this section. For the rule applicable to combinations 
of two or more articles, see subdivision (iv) of this subparagraph.
    (ii) The following are examples of categories of taxable articles 
which comprise separate industries:
    (a) Taxable electric flatirons;
    (b) Taxable electric, gas, and oil appliances of the type used for 
cooking, warming, or keeping warm food or beverages for consumption on 
the premises;
    (c) Taxable electric direct-motor and belt-driven fans and air 
circulators;
    (d) Taxable electric, gas, and oil incinerator units and garbage 
disposal units;
    (e) Taxable electric light bulbs and tubes;
    (f) Taxable radio receiving sets;
    (g) Taxable automobile radio receiving sets;
    (h) Taxable radio and television components;
    (i) Taxable musical instruments;
    (j) Taxable fishing rods, creels, reels and artificial lures, baits, 
and flies;
    (k) Taxable golf bags, balls and clubs;
    (l) Taxable cameras;
    (m) Taxable unexposed photographic film in rolls (including motion 
picture film);
    (n) Taxable check writing, signing, cancelling, perforating, 
cutting, and dating machines, and other check protector machine devices;
    (o) Taxable cash registers; and
    (p) Taxable mechanical pencils, fountain pens and ball point pens.
    (iii) With respect to the tax imposed by section 4061, the following 
categories of articles are to be considered separate industries:
    (a) Taxable automobile trucks (consisting of automobile truck bodies 
and chassis);
    (b) Taxable automobile buses (consisting of automobile bus bodies 
and chassis);
    (c) Taxable truck and bus trailers and semitrailers (consisting of 
chassis and bodies of such trailers and semitrailers);
    (d) Taxable tractors of the kind chiefly used for highway 
transportation in combination with a trailer or semitrailer;
    (e) All other taxable automobile chassis and bodies;
    (f) Taxable trailer and semitrailer chassis and bodies suitable for 
use in connection with passenger automobiles; and
    (g) Taxable automobile parts and accessories.
    (iv) With respect to an article which is:
    (a) Taxable as ``Combinations of household type refrigerators and 
quickfreeze units'' under section 4111,
    (b) Taxable as ``Combinations of any of the foregoing'' under 
sections 4141 and 4191, or
    (c) A combination, other than a combination referred to in (a) or 
(b) of this subdivision, of articles taxable under the same section or 
different sections of Chapter 32 of the Code.

The industry test required by paragraph (c)(2)(iii) of this section for 
such article shall be met if such test is met for the article or 
articles which comprise more than 50 percent in value of the 
combination. In case of a combination consisting of a taxable article 
and a nontaxable article, the category for the taxable article in the 
combination shall constitute the industry for purposes of paragraph 
(c)(2)(iii) of this section.

[T.D. 6355, 24 FR 311, Jan. 14, 1959]

[[Page 459]]

                        PARTS 151	155 [RESERVED]