Internal Revenue Service
Revenue Ruling

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Rev. Rul. 65-41

1965-1 C.B. 454

IRS Headnote

In determining sale price for purposes of the retailers and manufacturers excise taxes imposed under chapters 31 and 32 of the Internal Revenue Code of 1954, the total price charged is presumed to include the amount of the tax due. However, such presumption of tax inclusion has no reference to the condition to allowance of credit or refund established by section 6416(a) of the Code.

Full Text

Rev. Rul. 65-41

Advice has been requested as to the effect of the `presumption' of tax inclusion referred to in section 320.7(a) of Regulations 51, on (a) the definition of price set forth in section 4051 of the Internal Revenue Code of 1954, and (b) the conditions to allowance of credit or refund set forth in section 6416(a) of the Code.

Question 1 .-In computing the amount of liability for the tax imposed on retailers sales by chapter 31 of the Code, should an amount representing the tax due be excluded from the price charged only where it has been established that the retailer has either included the tax in the amount charged for the article, or has billed the tax as a separate charge.

Question 2 .-If it must be assumed under all circumstances that an amount representing the tax due is included in the price charged for the article when computing retailers excise tax liability, is a conclusive presumption thereby established that the retailer has passed on the tax to his customer, for purposes of the condition to allowance of credit or refund set forth in section 6416(a) of the Code.

Insofar as applicable, section 4051 of the Code provides that, for purposes of chapter 31, when determining the price for which an article is sold, there shall be excluded the amount of tax imposed by that chapter, whether or not it is stated as a separate charge.

Section 320.7(a) of Regulations 51, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that, in determining taxable sale price, if the Federal tax is not billed as a separate item, it will be presumed that the amount of the tax is included in the price charged for the article, and such an amount will be excluded by an appropriate computation.

Section 6416(a) of the Code, insofar as applicable, states as one of three possible procedures for meeting the condition to allowance of credit or refund of retailers excise tax set forth in said section, that the claimant establish he has not included the tax in the price of the article with respect to which it has been imposed, and has not collected the amount of the tax from the person who purchased such article.

With respect to question 1 above, when computing retailers excise tax liability, an amount representing the tax due must be excluded from the price charged for the article regardless of whether the retailer has actually included an amount representing the tax in the price.

However, with respect to question 2 , the presumption of tax inclusion referred to in section 320.7(a) of Regulations 51, is intended to apply only to the computing of the amount of tax liability. It is not intended to have any bearing on the question of qualification for a refund or credit of overpaid tax. Therefore, the fact that the amount of a purportedly overpaid retailers excise tax was computed by excluding from the selling price an amount representing the tax, does not preclude a claimant from establishing that he has not, in fact, included the tax in the selling price of the article, for purposes of the condition to allowance imposed by section 6416(a) of the Code. See Samuel B. Biermann v. Shea , 28 Fed.Supp. 213 (1939).

The conclusions expressed above are equally applicable to the manufacturers excise taxes imposed under chapter 32 of the Code, both as to computation of tax liability under section 4216(a) and to the condition to allowance of credit or refund under section 6416(a).