(1)In general. The regulations under section 4221 provide rules under which the manufacturer, producer, or importer of an article subject to tax under chapter 32 (or the retailer of an article subject to tax under subchapter A or C of chapter 31) may sell the article tax free under section 4221.
(2)Limitations. The following restrictions must be taken into account in applying the regulations under section 4221:
(i) The exemptions under section 4221 (a)(4) and (a)(5) do not apply to the tax imposed by section 4064 (gas guzzler tax).
(ii) The exemptions under section 4221 do not apply to the tax imposed by section 4081 (taxable fuel tax).
(iii) The exemptions under section 4221 do not apply to the tax imposed by section 4091 (aviation fuel tax). For rules relating to tax-free sales of aviation fuel, see section 4092 and the regulations thereunder.
(iv) The exemptions under section 4221 do not apply to the tax imposed by section 4121 (coal tax).
(v) The exemptions under section 4221 (a)(3) through (a)(5) do not apply to the tax imposed by section 4131 (vaccine tax). In addition, the exemption under section 4221(a)(2) applies to the vaccine tax only to the extent provided in § 48.4221-3(e) (relating to tax-free sales of vaccine for export).
(vi) The exemptions under section 4221(a) apply only in those cases where the exportation or use referred to is to occur before any other use.
(vii) The exemptions under section 4221(a)(3) through (a)(6) do not apply to the tax imposed by section 4191 (medical device tax).
(b)Manufacturer relieved of liability in certain cases—
(1)General rule. Under the provisions of section 4221(c), if an article subject to tax under Chapter 32 of the Code is sold free of tax by the manufacturer of the article for an exempt purpose referred to in section 4221(c) and paragraph (b)(2) of this section, the manufacturer shall be relieved of any tax liability under Chapter 32 with respect to such sale if the manufacturer in good faith accepts a proper certification by the purchaser that the article or articles will be used by the purchaser in the stated exempt manner. See paragraph (b)(2) of this section for a list of the exempt purposes referred to in section 4221(c).
(2) The following are situations wherein section 4221(c) is applicable with respect to sales made tax free on the assumption that one of the following sections of the Code provides exemption for such sales:
(i)Section 4221(a)(1), to the extent that it relates to sales for further manufacture by a first purchaser (see § 48.4221-2),
(ii)Section 4221(a)(3), relating to supplies for vessels and aircraft (see § 48.4221-4),
(iii)Section 4221(a)(4), relating to sales to State or local governments (see § 48.4221-5),
(iv)Section 4221(a)(5), relating to sales to nonprofit educational organizations (see § 48.4221-6), and
(v)Section 4221(e)(3) relating to the sale of tires used on intercity, local, or school buses (see § 48.4221-8).
(3)Duty of seller to ascertain validity of tax-free sale. If the manufacturer at the time of its sale has reason to believe that the article sold by it is not intended for the exempt purpose indicated by the purchaser, or that the purchaser has failed to register as required, the manufacturer is not considered to have accepted certification from the purchaser in good faith, and is not relieved from liability under the provisions of section 4221(c).
(4)Information to be furnished to purchaser. A manufacturer selling articles free of tax under this section after December 31, 1978, shall indicate to the purchaser that (i) certain articles normally subject to tax are being sold tax free and (ii) the purchaser is obtaining those articles tax free for an exempt purpose under an exemption certificate or its equivalent. The manufacturer may transmit this information by any convenient means, such as coding of sales invoices, provided that the information is presented with sufficient particularity so that the purchaser is informed that he has obtained the articles tax free and:
(i) The purchaser can compute and remit the tax due if an article sold tax free for further manufacture is diverted to a taxable use,
(ii) The manufacturer can remit the tax due with respect to an article purchased tax free for resale for use in further manufacture or for export if, within the 6-month period described in § 48.4221-2(c) or § 48.4221-3(c), the manufacturer does not receive proof that the article has been exported or resold for use in further manufacture, or
(iii) The purchaser can notify the manufacturer if an article otherwise purchased tax free is diverted to a taxable use.
(c)Evidence required in support of tax-free sales—
(1)Purchasers required to be registered. Every purchaser who is required to be registered (see § 48.4222(a)-1) shall furnish to the seller, as evidence in support of each tax-free sale made by the seller to such purchaser, the exempt purpose for which the article or articles are being purchased and the registration number of the purchaser. Such information must be in writing and may be noted on the purchase order or other document furnished by the purchaser to the seller in connection with each sale.
(2)Purchasers not required to be registered. For the evidence which purchasers not required to register must furnish to the seller in support of each tax-free sale made by the seller to such purchasers, see paragraph (b) of § 48.4221-3 for sales or resales to a foreign purchaser for export, paragraph (d) of § 48.4221-4 for sales of supplies to vessels or aircraft, paragraph (c) of § 48.4221-5 for sales to State and local governments, and paragraph (c) of § 48.4222(b)-1 for sales and purchases by the United States.
[T.D. 6687, 28 FR 11782, Nov. 5, 1963, as amended by T.D. 7834, 47 FR 42345, Sept. 27, 1982; T.D. 8036, 50 FR 29963, July 23, 1985; T.D. 8659, 61 FR 10463, Mar. 14, 1996; T.D. 8879, 65 FR 17160, Mar. 31, 2000; T.D. 9604, 77 FR 72938, Dec. 7, 2012]
Title 26 published on 2013-04-01
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