[Code of Federal Regulations]
[Title 26, Volume 16]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR48.4223-1]

[Page 182-183]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 48_MANUFACTURERS AND RETAILERS EXCISE TAXES--Table of Contents
 
                Subpart N_Exemptions, Registration, Etc.
 
Sec. 48.4223-1  Special rules relating to further manufacture.

    (a) Purchasing manufacturer to be treated as the manufacturer. For 
purposes of Chapter 32, a manufacturer or producer to whom an article is 
sold or resold tax free under section 4221(a)(1) of the Code for use by 
it in further manufacture shall be treated as the manufacturer or 
producer of such article. If a manufacturer who purchases an article tax 
free for further manufacture does not use the article for further 
manufacture, the sale of the article by it, or its use of the article 
other than in further manufacture, shall, for purposes of the taxes 
imposed by Chapter 32 of the Code, be treated as a sale or use of the 
article by the manufacturer thereof. See paragraphs (b) and (c) of this 
section for determination of taxable sale price where an article 
purchased tax free for further manufacture is resold, or used other than 
in further manufacture.
    (b) Computation of tax. Except as provided in paragraph (c) of this 
section, the tax liability referred to in paragraph (a) of this section 
shall be based on the price for which the article was sold by the 
purchasing manufacturer, or, where the manufacturer uses the article for 
a purpose other than which it was purchased, the tax shall be based on 
the price at which such or similar articles are sold, in the ordinary 
course of trade by manufacturers, producers, or importers thereof. See 
section 4218(e) and Sec. 48.4218-5.
    (c) Election. (1) Instead of computing the tax as described under 
paragraph (b) of this section, the purchasing manufacturer who has 
incurred liability for tax on its sale or use of an article as provided 
by paragraph (a) of this section may compute the tax incurred under 
Chapter 32 by using as the tax base either the price for which the 
article was sold to it by the first purchaser, if any, or the price for 
which such article was sold by the actual manufacturer, producer, or 
importer of such article. The purchasing manufacturer must have in its 
possession information upon which to substantiate such basis for tax. 
For purposes of this paragraph, the price for which the article was sold 
by the actual manufacturer or by the first purchaser shall be

[[Page 183]]

determined as provided in section 4216 and the regulations thereunder. 
However, such price shall not be adjusted for any discount, rebate, 
allowance, return, or repossession of a container or covering, or 
otherwise.
    (2) The election under this paragraph shall be in the form of a 
statement attached to the return reporting the tax applicable to the 
sale or use of the article which gave rise to such tax liability. Such 
election, once made, may not be revoked.