Internal Revenue Code:Sec. 4216. Definition of price
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle D - Miscellaneous Excise Taxes
CHAPTER 32 - MANUFACTURERS EXCISE TAXES
Subchapter F - Special Provisions Applicable to Manufacturers Tax
Statute
Sec. 4216. Definition of price
(a) Containers, packing and transportation charges.
In determining, for the purposes of this chapter, the price for
which an article is sold, there shall be included any charge for
coverings and containers of whatever nature, and any charge
incident to placing the article in condition packed ready for
shipment, but there shall be excluded the amount of tax imposed by
this chapter, whether or not stated as a separate charge. A
transportation, delivery, insurance, installation, or other charge
(not required by the foregoing sentence to be included) shall be
excluded from the price only if the amount thereof is established
to the satisfaction of the Secretary in accordance with the
regulations.
(b) Constructive sale price
(1) In general
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) Special rule
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) Constructive sale price in case of certain articles
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) Constructive sale price in case of certain other articles
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) Definition of lowest price
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.
(c) Partial payments
In the case of -
(1) a lease (other than a lease to which section 4217(b)
applies),
(2) a contract for the sale of an article wherein it is
provided that the price shall be paid by installments and title
to the article sold does not pass until a future date
notwithstanding partial payment by installments,
(3) a conditional sale, or
(4) a chattel mortgage arrangement wherein it is provided that
the sales price shall be paid in installments,
there shall be paid upon each payment with respect to the article a
percentage of such payment equal to the rate of tax in effect on
the date such payment is due.
(d) Sales of installment accounts
If installment accounts, with respect to payments on which tax is
being computed as provided in subsection (c), are sold or otherwise
disposed of, then subsection (c) shall not apply with respect to
any subsequent payments on such accounts (other than subsequent
payments on returned accounts with respect to which credit or
refund is allowable by reason of section 6416(b)(5)), but instead -
(1) there shall be paid an amount equal to the difference
between (A) the tax previously paid on the payments on such
installment accounts, and (B) the total tax which would be
payable if such installment accounts had not been sold or
otherwise disposed of (computed as provided in subsection (c));
except that
(2) if any such sale is pursuant to the order of, or subject to
the approval of, a court of competent jurisdiction in a
bankruptcy or insolvency proceeding, the amount computed under
paragraph (1) shall not exceed the sum of the amounts computed by
multiplying (A) the proportionate share of the amount for which
such accounts are sold which is allocable to each unpaid
installment payment by (B) the rate of tax under this chapter in
effect on the date such unpaid installment payment is or was due.
The sum of the amounts payable under this subsection and subsection
(c) in respect of the sale of any article shall not exceed the
total tax.
(e) Exclusion of local advertising charge from sale price
(1) Exclusion
In determining, for purposes of this chapter, the price for
which an article is sold, there shall be excluded a charge for
local advertising (as defined in paragraph (4)) to the extent
that such charge -
(A) does not exceed 5 percent of the price for which the
article is sold (as determined under this section by excluding
any charge for local advertising),
(B) is a separate charge made when the article is sold, and
(C) is intended to be refunded to the purchaser or any
subsequent vendee in reimbursement of costs incurred for local
advertising.
In the case of any such charge (or portion thereof) which is not
so refunded before the first day of the fifth calendar month
following the calendar year during which the article was sold,
the exclusion provided by the preceding sentence shall cease to
apply as of such first day.
(2) Aggregate amount which may be excluded
In the case of articles upon the sale of which tax was imposed
under the same section of this chapter -
(A) The sum of (i) the aggregate of the charges for local
advertising excluded under paragraph (1), plus (ii) the
aggregate of the readjustments for local advertising under
section 6416(b)(1) (relating to credits or refunds for price
readjustments), shall not exceed
(B) 5 percent of the aggregate of the prices (determined
under this section by excluding all charges for local
advertising) at which such articles were sold in sales on which
tax was imposed by such section of this chapter.
The preceding sentence shall be applied to each manufacturer,
producer, and importer as of the close of each calendar quarter,
taking into account the items specified in subparagraphs (A) and
(B) for such calendar quarter and preceding calendar quarters in
the same calendar year.
(3) No adjustment for other advertising charges
Except to the extent provided by paragraphs (1) and (2), no
charge or expenditure for advertising shall serve, for purposes
of this section or section 6416(b)(1), as the basis for an
exclusion from, or as a readjustment of, the price of any
article.
(4) Local advertising defined
For purposes of this section and section 6416(b)(1), the term
''local advertising'' means only advertising which -
(A) is initiated or obtained by the purchaser or any
subsequent vendee,
(B) names the article for which the price is determinable
under this section and states the location at which such
article may be purchased at retail, and
(C) is broadcast over a radio station or television station,
appears in a newspaper or magazine, or is displayed by means of
an outdoor advertising sign or poster.
Sources
(Aug. 16, 1954, ch. 736, 68A Stat. 493; Aug. 9, 1955, ch. 677, Sec.
1, 2, 69 Stat. 613; Pub. L. 85-859, title I, Sec. 115, 116, 117(b),
Sept. 2, 1958, 72 Stat. 1279-1281; Pub. L. 86-781, Sec. 1, Sept.
14, 1960, 74 Stat. 1017; Pub. L. 87-770, Sec. 2(a), Oct. 9, 1962,
76 Stat. 768; Pub. L. 87-858, Sec. 1(a), Oct. 23, 1962, 76 Stat.
1134; Pub. L. 89-44, title II, Sec. 207(a), (b), 208(a), (b), title
VIII, Sec. 801(b), June 21, 1965, 79 Stat. 140, 141, 158; Pub. L.
91-172, title IX, Sec. 932(a), Dec. 30, 1969, 83 Stat. 725; Pub. L.
91-614, title III, Sec. 301(a), (b), Dec. 31, 1970, 84 Stat. 1844;
Pub. L. 92-178, title IV, Sec. 401(g)(4), Dec. 10, 1971, 85 Stat.
533; Pub. L. 94-455, title XIX, Sec. 1904(a)(2), 1906(b)(13)(A),
Oct. 4, 1976, 90 Stat. 1811, 1834; Pub. L. 95-458, Sec. 1(a), (b),
Oct. 14, 1978, 92 Stat. 1255; Pub. L. 98-369, div. A, title VII,
Sec. 735(c)(6), July 18, 1984, 98 Stat. 982.)
Miscellaneous
AMENDMENTS
1984 - Subsec. (b)(1). Pub. L. 98-369, Sec. 735(c)(6)(A), in
provisions following subpar. (C) struck out ''(other than an
article the sale of which is taxable under section 4061(a))'' in
second sentence, before ''the computation under the preceding
sentence'', and struck out provision that in the case of an article
the sale of which is taxable under section 4061(a) and which is
sold at retail, the computation under the first sentence of this
paragraph shall be a percentage (not greater than 100 percent) of
the actual selling price based on the highest price for which such
articles are sold by manufacturers and producers in the ordinary
course of trade (determined without regard to any individual
manufacturer's or producer's cost).
Subsec. (b)(2)(B) to (D). Pub. L. 98-369, Sec. 735(c)(6)(B),
inserted ''and'' at end of subpar. (B), redesignated subpar. (D) as
(C), and struck out former subpar. (C) which related to articles
upon which tax is imposed under section 4061(a) of this title.
Subsec. (b)(3). Pub. L. 98-369, Sec. 735(c)(6)(D), substituted
''paragraph (4)'' for ''paragraphs (4) and (5)''.
Subsec. (b)(5), (6). Pub. L. 98-369, Sec. 735(c)(6)(C), (E),
redesignated par. (6) as par. (5), substituted ''(1) and (3)'' for
''(1), (3) and (5)'', and struck out former par. (5) which related
to constructive sale price in the case of automobiles, trucks, etc.
Subsec. (f). Pub. L. 98-369, Sec. 735(c)(6)(F), struck out
subsec. (f) which related to certain trucks incorporating used
components.
1978 - Subsec. (b)(1). Pub. L. 95-458 substituted ''article sold
at retail (other than an article the sale of which is taxable under
section 4061(a)), the computation'' for ''article sold at retail,
the computation'' and inserted provision requiring the computation
of tax on articles taxable under section 4061(a) which are sold at
retail to be a percentage, but not greater than 100% of the actual
selling price based on the highest price for which the articles are
sold by manufacturers and producers in the ordinary course of
trade, determined without regard to individual manufacturer's or
producer's cost.
1976 - Subsec. (a). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out ''or his delegate'' after ''Secretary''.
Subsec. (b). Pub. L. 94-455, Sec. 1904(a)(2)(B), 1906(b)(13)(A),
struck out ''or his delegate'' after ''Secretary'' in two places in
par. (1), and substituted ''subsections (a) and (e)'' for
''subsections (a) and (f)'' in pars. (3), (4), and (5), after ''or
readjustments under''.
Subsecs. (d) to (g). Pub. L. 94-455, Sec. 1904(a)(2)(A),
redesignated subsecs. (e) to (g) as (d) to (f), respectively.
1971 - Subsec. (b)(2)(C), (5). Pub. L. 92-178, Sec. 401(g)(4)(A),
substituted ''(relating to trucks, buses, tractor, etc.)'' for
''(relating to automobiles, trucks, etc.)''.
Subsec. (g). Pub. L. 92-178, Sec. 401(g)(4)(B), inserted
reference to ''tractors,'' after ''buses,''.
1970 - Subsec. (b)(3). Pub. L. 91-614, Sec. 301(b), substituted
''Constructive sale price'' for ''Fair market price'' in heading,
''constructive sale price'' for ''fair market price'' three places
in text, substituted ''paragraphs (4) and (5)'' for ''paragraph
(4)'' and ''paragraph (1)'' for ''paragraph (1)(C)''.
Subsec. (b)(4). Pub. L. 91-614, Sec. 301(b)(2), substituted
''Constructive sale price'' for ''Fair market price'' in heading,
''constructive sale price'' for ''fair market price'' in text, and
''paragraph (1)'' for ''paragraph (1)(C)''.
Subsec. (b)(5), (6). Pub. L. 91-614, Sec. 301(a), added pars. (5)
and (6).
1969 - Subsec. (b)(3), (4). Pub. L. 91-172 added pars. (3) and
(4).
1965 - Subsec. (b)(2). Pub. L. 89-44, Sec. 208(a), struck out
reference to special dealers and to articles upon which tax is
imposed under section 4191 or 4211 of this title.
Subsec. (b)(3). Pub. L. 89-44, Sec. 208(b), struck out par. (3)
which related to special dealers.
Subsec. (c). Pub. L. 89-44, Sec. 207(a), struck out ''that
portion of the total tax which is proportionate to the portion of
the total amount to be paid represented by such payment'' in text
following par. (4) and inserted in lieu thereof ''a percentage of
such payment equal to the rate of tax in effect on the date such
payment is due''.
Subsec. (e)(1). Pub. L. 89-44, Sec. 207(b)(1), substituted
''total tax which would be payable if such installment accounts had
not been sold or otherwise disposed of (computed as provided in
subsection (c)) for ''total tax''.
Subsec. (e)(2). Pub. L. 89-44, Sec. 207(b)(2), substituted, as
factor (A) in the formula for computing the maximum amount, the
proportionate share of the amount for which such accounts are sold
which is allocable to each unpaid installment payment for the
amount for which such accounts are sold, and, as factor (B) in the
formula, the rate of tax on the date that such unpaid installment
payment is or was due for the rate of tax which applied on the day
on which the transaction giving rise to such installment accounts
took place.
Subsec. (g). Pub. L. 89-44, Sec. 801(b), added subsec. (g).
1962 - Subsec. (b)(2)(C). Pub. L. 87-858 inserted ''in the case
of articles upon which tax is imposed under section 4061(a)
(relating to automobiles, trucks, etc.), 4191 (relating to business
machines), or 4211 (relating to matches),'' before ''the normal
method''.
Subsec. (f)(4)(C). Pub. L. 87-770 substituted '', appears in a
newspaper or magazine, or is displayed by means of an outdoor
advertising sign or poster'' for ''or appears in a newspaper''.
1960 - Subsec. (f). Pub. L. 86-781 added subsec. (f).
1958 - Subsec. (b). Pub. L. 85-859, Sec. 115, inserted provisions
in par. (1) requiring, in the case of an article sold at retail,
the computation to be on either the price for which the article is
sold, or the highest price for which the articles are sold to
wholesale distributors, in the ordinary course of trade, by
manufacturers or producers thereof, whichever is lower, and added
pars. (2) and (3).
Subsec. (c). Pub. L. 85-859, Sec. 117(b), substituted ''section
4217(b)'' for ''subsection (d)''.
Subsec. (d). Pub. L. 85-859, Sec. 117(b), repealed subsec. (d)
which related to tax on leases of certain trailers.
Subsec. (e). Pub. L. 85-859, Sec. 116, added subsec. (e).
1955 - Subsec. (c)(1). Act Aug. 9, 1955, Sec. 1, inserted
''(other than a lease to which subsection (d) applies)''.
Subsec. (d). Act Aug. 9, 1955, Sec. 2, added subsec. (d).
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 effective, except as otherwise
provided, as if included in the provisions of the Highway Revenue
Act of 1982, title V of Pub. L. 97-424, to which such amendment
relates, see section 736 of Pub. L. 98-369, set out as a note under
section 4051 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 1(c) of Pub. L. 95-458 provided that: ''The amendments
made by this section (amending this section) shall apply to
articles sold by the manufacturer or producer on or after the first
day of the first calendar quarter beginning 30 days or more after
the date of enactment of this Act (Oct. 14, 1978).''
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1904(a)(2) of Pub. L. 94-455 effective on
first day of first month which begins more than 90 days after Oct.
4, 1976, see section 1904(d) of Pub. L. 94-455, set out as a note
under section 4041 of this title.
EFFECTIVE DATE OF 1971 AMENDMENT
Amendment by Pub. L. 92-178 applicable with respect to articles
sold on or after the day after Dec. 10, 1971, see section 401(h)(1)
of Pub. L. 92-178, set out as a note under section 4061 of this
title.
EFFECTIVE DATE OF 1970 AMENDMENT
Section 301(c) of Pub. L. 91-614, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ''The
amendments made by this section (amending this section) shall apply
with respect to articles sold after December 31, 1970; except that
section 4216(b)(6) of the Internal Revenue Code of 1986 (formerly
I.R.C. 1954) (as added by subsection (a)) shall also apply to (1)
the application of paragraph (1) of such section 4216(b) to
articles sold after June 30, 1962, and before January 1, 1971, and
(2) the application of paragraph (3) of such section 4216(b) to
articles sold after December 31, 1969, and before January 1,
1971.''
EFFECTIVE DATE OF 1969 AMENDMENT
Section 932(b) of Pub. L. 91-172 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply with
respect to articles sold after December 31, 1969.''
EFFECTIVE DATE OF 1965 AMENDMENT
Amendment by section 207(a), (b) of Pub. L. 89-44 effective June
22, 1965, and amendment by section 208 of Pub. L. 89-44 applicable
with respect to articles sold on or after June 22, 1965, except
insofar as such amendments related to the taxes imposed by sections
4061(b), 4091, or 4131 and, as to such taxes, applicable with
respect to articles sold on or after January 1, 1966, see section
701(a) of Pub. L. 89-44, set out as a note under section 4161 of
this title.
Section 801(e) of Pub. L. 89-44 provided that: ''The amendments
made by subsections (a), (b), and (d) (amending this section and
sections 4063, 4221, and 6416 of this title) shall apply with
respect to articles sold on or after the day after the date of the
enactment of this Act (June 21, 1965). The amendment made by
subsection (c) (amending section 4221 of this title) shall apply
with respect to articles sold on or after January 1, 1965.''
EFFECTIVE DATE OF 1962 AMENDMENTS
Section 1(b) of Pub. L. 87-858 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply with
respect to articles sold by the manufacturer, producer, or importer
on or after October 1, 1962.''
Section 2(b) of Pub. L. 87-770 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply with
respect to articles sold on or after the first day of the first
calendar quarter beginning more than 20 days after the date of the
enactment of this Act (Oct. 9, 1962).''
EFFECTIVE DATE OF 1960 AMENDMENT
Section 3 of Pub. L. 86-781 provided that: ''The amendments made
by this Act (amending this section and section 6416 of this title)
shall apply with respect to articles sold on or after the first day
of the first calendar quarter beginning more than twenty days after
the date of the enactment of this Act (Sept. 14, 1960).''
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-859 effective on first day of first
calendar quarter which begins more than 60 days after Sept. 2,
1958, see section 1(c) of Pub. L. 85-859.
EFFECTIVE DATE OF 1955 AMENDMENT
Section 4 of act Aug. 9, 1955, as amended by act Oct. 22, 1986,
Pub. L. 99-514, Sec. 2, 100 Stat. 2095, provided that: ''The
amendments made by subsection (a) (probably should refer to
amendments made by sections 1 to 3 of act Aug. 9, 1955, amending
this section and section 4217 of this title) shall take effect on
the first day of the first month which begins more than 10 days
after the date of the enactment of this act (Aug. 9, 1955). In the
application of section 4216(d) of the Internal Revenue Code of 1986
(formerly I.R.C. 1954) (as added by this Act) to any article which
has been leased before the effective date specified in the
preceding sentence, under regulations prescribed by the Secretary
of the Treasury or his delegate -
''(1) the fair market value of such article shall be the fair
market value determined as of such effective date;
''(2) only payments under a lease received on or after such
effective date shall be considered in determining when the total
tax (as defined in such section 4216(d)) has been paid;
''(3) any lease existing on such effective date, or if there is
none, the first lease entered into after such effective date,
shall be considered an initial lease (except that fair market
value shall be determined as provided in paragraph (1) of this
sentence); and
''(4) any lease existing on such effective date shall be
considered as having been entered into on such date.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 4003, 4052, 4162, 4217,
4223, 5702, 6416 of this title.
