§4052 Definitions and special rules

Summary

Defines how the excise tax works for certain articles before their first retail sale and gives simple rules for figuring the taxable price. If someone uses an article before it is first sold at retail, that person must pay the tax as if they had sold it at retail, unless they used it as a material or part in making another article. The price used for the tax includes charges to get the item ready for use but does not include the excise tax itself or a separately stated state or local sales tax. If a sale is not at arm’s length or is below fair market price, the tax is figured on the usual retail price of similar items. For long-term leases treated as a first retail sale, the tax is based on what the lessor paid plus installed parts and a presumed retailer markup set by the IRS. The same markup rule can apply when the manufacturer, producer, or importer (or a related person) is liable for the tax. Repairs or changes to an item do not count as making it newly manufactured if the repair cost is 75 percent or less of the retail price of a similar new item, except in a narrow case where the repaired item would be taxable when new but the original new item was not. Buyers who are buying for resale or for a long-term lease may simply sign a sworn statement on the invoice to show that status; the IRS cannot require them to register first. Definitions in one line each: “first retail sale” — the first sale after production, not for resale or a long-term lease; “long-term lease” — any lease lasting 1 year or more (lease-term rules follow the usual tax rules); “presumed markup percentage” — the average retailer markup for the type of item as set by the IRS; “related person” — generally someone in the same controlled group (see section 5061(e)(3)); items that do not by themselves make a person a manufacturer — things like coupling devices, wrecker cranes, loading/unloading gear, aerial ladders/towers, snow/ice control gear, earthmoving or construction equipment, spreaders, sleeper cabs, cab shields, and wood or metal floors.