Chapter 32, Subchapter F, Section 4216, Subsection (b) · 26 U.S.C. Chapter 32

Contents

(b)

(1)If an article is—

(A)sold at retail,

(B)sold on consignment, or

(C)sold (otherwise than through an arm’s length transaction) at less than the fair market price,

the tax under this chapter shall (if based on the price for which the article is sold) be computed on the price for which such articles are sold, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Secretary. In the case of an article sold at retail, the computation under the preceding sentence shall be on whichever of the following prices is the lower: (i) the price for which such 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, as determined by the Secretary. This paragraph shall not apply if paragraph (2) applies.

(2)If an article is sold at retail or to a retailer, and if—

(A)the manufacturer, producer, or importer of such article regularly sells such articles at retail or to retailers, as the case may be,

(B)the manufacturer, producer, or importer of such article regularly sells such articles to one or more wholesale distributors in arm’s length transactions and he establishes that his prices in such cases are determined without regard to any tax benefit under this paragraph, and

(C)the transaction is an arm’s length transaction,

the tax under this chapter shall (if based on the price for which the article is sold) be computed on whichever of the following prices is the lower: (i) the price for which such 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).

(3)Except as provided in paragraph (4), for purposes of paragraph (1), if—

(A)the manufacturer, producer, or importer of an article regularly sells such article to a distributor which is a member of the same affiliated group of corporations (as defined in section 1504(a)) as the manufacturer, producer, or importer, and

(B)such distributor regularly sells such article to one or more independent retailers, but does not regularly sell to wholesale distributors,

the constructive sale price of such article shall be 90 percent of the lowest price for which such distributor regularly sells such article in arm’s-length transactions to such independent retailers. The price determined under this paragraph shall not be adjusted for any exclusion (except for the tax imposed on such article) or readjustments under subsections (a) and (e) and under section 6416(b)(1). If both this paragraph and paragraph (4) apply with respect to an article, the constructive sale price for such article shall be the lower of the constructive sale price determined under this paragraph or paragraph (4).

(4)For purposes of paragraph (1), if—

(A)the manufacturer, producer, or importer of an article regularly sells (except for tax-free sales) only to a distributor which is a member of the same affiliated group of corporations (as defined in section 1504(a)) as the manufacturer, producer, or importer,

(B)the distributor regularly sells (except for tax-free sales) such article only to retailers, and

(C)the normal method of sales for such articles within the industry by manufacturers, producers, or importers is to sell such articles in arm’s-length transactions to distributors,

the constructive sale price for such article shall be the price at which such article is sold to retailers by the distributor, reduced by a percentage of such price equal to the percentage which (i) the difference between the price for which comparable articles are sold to wholesale distributors, in the ordinary course of trade, by manufacturers or producers thereof, and the price at which such wholesale distributors in arm’s-length transactions sell such comparable articles to retailers, is of (ii) the price at which such wholesale distributors in arm’s-length transactions sell such comparable articles to retailers. The price determined under this paragraph shall not be adjusted for any exclusion (except for the tax imposed on such article) or readjustment under subsections (a) and (e) and under section 6416(b)(1).

(5)For purposes of paragraphs (1) and (3), the lowest price shall be determined—

(A)without requiring that any given percentage of sales be made at that price, and

(B)without including any fixed amount to which the purchaser has a right as a result of contractual arrangements existing at the time of the sale.

United States Government work; public domain under 17 U.S.C. § 105.

Defined terms · 39

Show every defined term

automobile
means any 4-wheeled vehicle propelled by fuel—
biasply tire
means a pneumatic tire on which the ply cords that extend to the beads are laid at alternate angles substantially less than 90 degrees to the centerline of the tread.
commercial aviation
means any use of an aircraft in a business of transporting persons or property for compensation or hire by air, unless properly allocable to any transportation exempt from the taxes imposed by sections 4261 and 4271 by reason of section 4281 or 4282 or by reason of subsection (h) or (i) of section 4261.
diesel fuel
means—
export
includes shipment to a possession of the United States;
exported
includes shipped to a possession of the United States.
fuel
means gasoline and diesel fuel.
fuel economy
means the average number of miles traveled by an automobile per gallon of gasoline (or equivalent amount of other fuel) consumed, as determined by the EPA Administrator in accordance with procedures established under subsection (c).
gasoline blend stock
means any petroleum product component of gasoline.
importer
means the person entering the vaccine for consumption, use, or warehousing.
intercity or local bus
means any automobile bus which is used predominantly in furnishing (for compensation) passenger land transportation available to the general public if—
local advertising
means only advertising which—
manufacturer
includes a producer or importer of an article, and, in the case of taxes imposed by subchapter C of chapter 31, includes the retailer with respect to the first retail sale.
model type
means a particular class of automobile as determined by regulation by the EPA Administrator.
model year
means the calendar year.
nonprofit educational organization
means an educational organization described in section 170(b)(1)(A)(ii) which is exempt from income tax under section 501(a).
nontaxable use
means— The term “nontaxable use” does not include the use of kerosene in an aircraft and such term shall not include any use described in section 6421(e)(2)(C).
qualified bus
means—
related person
has the meaning given such term by section 465(b)(3)(C).
rubber
includes synthetic and substitute rubber.
school
means an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are carried on.
school bus
means any automobile bus substantially all the use of which is in transporting students and employees of schools.
sport fishing equipment
means—
State or local government
means any State, any political subdivision thereof, or the District of Columbia.
super single tire
means a single tire greater than 13 inches in cross section width designed to replace 2 tires in a dual fitment.
supplies for vessels or aircraft
means fuel supplies, ships’ stores, sea stores, or legitimate equipment on vessels of war of the United States or of any foreign nation, vessels employed in the fisheries or in the whaling business, or vessels actually engaged in foreign trade or trade between the Atlantic and Pacific ports of the United States or between the United States and any of its possessions.
taxable fuel
means—
taxable tire
means any tire of the type used on highway vehicles if wholly or in part made of rubber and if marked pursuant to Federal regulations for highway use.
taxable vaccine
means any of the following vaccines which are manufactured or produced in the United States or entered into the United States for consumption, use, or warehousing:
tires of the type used on highway vehicles
means tires of the type used on— Such term shall not include tires of a type used exclusively on vehicles described in section 4053(8).
ton
means 2,000 pounds.
total gas guzzler tax
means the tax imposed by section 4064, computed at the rate in effect on the date of the first lease.
total tax
means— Any such computation of tax shall be made at the applicable rate specified in this chapter in effect on the date of the first lease to which subsection (b) applies.
transmix
means a byproduct of refined products pipeline operations created by the mixing of different specification products during pipeline transportation.
two-party exchange
means a transaction, other than a sale, in which taxable fuel is transferred from a delivering person registered under section 4101 as a taxable fuel registrant to a receiving person who is so registered where all of the following occur:
United States
has the meaning given to it by paragraph (1) of section 638.
vaccine
means any substance designed to be administered to a human being for the prevention of 1 or more diseases.
vessels
includes civil aircraft employed in foreign trade or trade between the United States and any of its possessions, and the term “vessels of war of the United States or of any foreign nation” includes aircraft owned by the United States or by any foreign nation and constituting a part of the armed forces thereof.
vessels of war of the United States or of any foreign nation
includes aircraft owned by the United States or by any foreign nation and constituting a part of the armed forces thereof.