§4223 Special Rules Relating to Further Manufacture

Summary

If someone buys a product tax-free because they will use it to make something else, the buyer is treated like the maker of that product for tax rules. If that buyer later must pay tax on selling or using the product and the tax is based on the sale price, the sale is treated as if the buyer sold it at one of two prices. By default, it is the price the buyer actually charged (or the usual price used when the tax is on use). Or, if the buyer chooses and proves it to the IRS, it can be the price the buyer paid for the product or the price charged by the original maker or importer. The price is figured under the tax rules. If the buyer picks the alternative price, no later changes are allowed for discounts, returns, or container returns, and the choice is made on the tax return and cannot be undone.