
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC4216]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                 Subtitle D--Miscellaneous Excise Taxes
 
                 CHAPTER 32--MANUFACTURERS EXCISE TAXES
 
    Subchapter F--Special Provisions Applicable to Manufacturers Tax
 
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.

(Aug. 16, 1954, ch. 736, 68A Stat. 493; Aug. 9, 1955, ch. 677, Secs. 1, 
2, 69 Stat. 613; Pub. L. 85-859, title I, Secs. 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, Secs. 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, 
Secs. 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.)


                               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, Secs. 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.''

                  Section Referred to in Other Sections

    This section is referred to in sections 4003, 4052, 4162, 4217, 
4223, 5702, 6416 of this title.
