[Federal Register: September 11, 2007 (Volume 72, Number 175)]
[Rules and Regulations]
[Page 51710-51711]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11se07-5]
[[Page 51710]]
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DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau
27 CFR Part 53
[T.D. TTB-62]
RIN 1513-AB25
Firearms Excise Tax; Exemption for Small Manufacturers,
Producers, and Importers (2005R-449P)
AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.
ACTION: Final rule; Treasury decision.
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SUMMARY: This final rule amends the regulations administered by the
Alcohol and Tobacco Tax and Trade Bureau to reflect the small
manufacturers excise tax exemption added by section 11131 of the Safe,
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy
for Users. Section 11131 amended section 4182 of the Internal Revenue
Code of 1986 to exempt any pistol, revolver, or firearm from excise tax
if it was manufactured, produced, or imported by a person who
manufactures, produces, or imports less than an aggregate of 50 such
articles during the calendar year.
DATES: Effective Date: September 11, 2007.
FOR FURTHER INFORMATION CONTACT: Karl O. Joedicke, Regulations and
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G
Street, NW., Washington, DC 20220; telephone 202-927-8210; or e-mail
Karl.Joedicke@ttb.gov.
SUPPLEMENTARY INFORMATION:
Background
Section 4181 of the Internal Revenue Code of 1986 (IRC) imposes a
tax on the sale of firearms, shells, and cartridges by the
manufacturer, producer, or importer. In addition, under section 4218 of
the IRC, the use by a manufacturer, producer, or importer of firearms,
shells, and cartridges is taxable as if it were a sale, except in
limited circumstances. See 27 CFR 53.111 et seq. The tax is assessed at
the rate of 10 percent of the sale price for pistols and revolvers, 11
percent of the sale price for firearms other than pistols and
revolvers, and 11 percent of the sale price for shells and cartridges.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) is responsible for
administering the provisions of the IRC pertaining to the collection of
the excise tax on firearms and ammunition. The TTB regulations relating
to section 4181 and related provisions of the IRC are contained in part
53 of the TTB regulations (27 CFR part 53).
Exemptions and Legislative Change
Section 4182 of the IRC (26 U.S.C. 4182) provides for certain
exemptions from the tax imposed by section 4181. Prior to October 1,
2005, those exemptions covered only sales to the Department of Defense
and the Coast Guard (when purchased with funds appropriated for the
military department), and transactions where the National Firearms Act
Transfer Tax (imposed by IRC section 5811) had been paid. However, on
August 10, 2005, the President signed into law the Safe, Accountable,
Flexible, Efficient Transportation Equity Act: A Legacy for Users,
Public Law 109-59, 119 Stat. 1144 (the Act). Section 11131 of the Act
added a new subsection (c) to IRC section 4182 to exempt any pistol,
revolver, or firearm from the tax imposed by section 4181 if it was
manufactured, produced or imported by a person who manufactures,
produces, or imports less than an aggregate of 50 such articles during
the calendar year.
Applicability and Restrictions
The 50-Firearm Limitation
If a person manufactures, produces, or imports 50 or more firearms
during the calendar year, he or she would be liable for tax on the
first 49 firearms sold, as well as on all additional firearms
manufactured, produced, or imported for the remainder of the calendar
year, regardless of when they are sold.
Each Calendar Year Stands Alone
The new exemption provision states that the tax under section 4181
does not apply to any pistol, revolver, or firearm described in section
4181 ``if manufactured, produced, or imported by a person who
manufactures, produces, and imports less than an aggregate of 50 of
such articles during the calendar year.'' Thus, application of this
exemption is based on the calendar year in which the manufacture,
production, or importation of the articles in question took place and
does not depend on when the sale occurs. In addition, each calendar
year stands alone for purposes of applying the exemption. The following
examples illustrate application of this exemption:
Example 1: Company A manufactures 20 firearms in calendar year
2006 but does not sell any of them in calendar year 2006. Company A
then manufactures 40 firearms in calendar year 2007 and sells all 60
firearms (the 20 manufactured in 2006 plus the 40 manufactured in
2007) in 2007. Company A would not owe tax on the 60 firearms sold
in 2007 since Company A manufactured only 20 of those firearms in
calendar year 2006 and only 40 in calendar year 2007.
Example 2: Company B imports 49 firearms in calendar year 2006,
49 firearms in calendar year 2007, and 20 firearms in calendar year
2008. Company B sells all 118 of these firearms in 2008. Company B
would not owe tax on these 118 firearms since Company B imported
less than 50 firearms in 2006, less than 50 firearms in 2007, and
less than 50 firearms in 2008.
Example 3: Company C manufactures 50 firearms in calendar year
2006, 50 firearms in calendar year 2007, and 20 firearms in 2008.
Company C sells all 120 of these firearms in 2009. Company C would
be liable for tax on 100 of these firearms (the 50 firearms
manufactured in 2006 and the 50 firearms manufactured in 2007, but
not the 20 firearms manufactured in 2008).
Controlled Groups
The new statutory provision incorporates the controlled group
provisions of IRC section 52(a) and (b) in determining whether the 50-
gun exemption applies. Therefore, entities in the same controlled group
must aggregate their manufacture, production, and importation figures
in making this determination.
Effective Date
The subsection (c) exemption applies only to articles sold by the
manufacturer, producer, or importer after September 30, 2005. In this
regard, section 11131(b) of the Act includes the following note to 26
U.S.C. 4182:
(2) No inference. Nothing in the amendments made by this section
shall be construed to create any inference with respect to the
proper tax treatment of any sales before the effective date of such
amendments.
The 50-gun exemption, therefore, does not affect the tax liability
of a manufacturer, producer, or importer with respect to articles sold
prior to October 1, 2005.
Regulatory Flexibility Act
Because a notice of proposed rulemaking is not required for this
final rule under 5 U.S.C. 553, the provisions of the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) do not apply.
Executive Order 12866
This final rule is not a significant regulatory action as defined
in Executive Order 12866. Accordingly, this final rule is not subject
to the requirements of this Executive Order.
Inapplicability of Prior Public Notice and Comment Procedures and
Delayed Effective Date Requirement
Based on the October 1, 2005, effective date of the statutory
change in
[[Page 51711]]
section 11131, TTB believes it must amend and conform its regulations
to the statutory change contained in section 11131 of the Act as soon
as practical. Without this regulatory amendment, the existing TTB
regulations would not reflect the new tax exemption. Moreover, the
regulatory amendment simply restates the requirements arising from the
statutory amendment and recognizes an exemption. Therefore, we find
that good cause exists to publish this final rule without notice,
public comment, or delayed effective date because the regulatory
amendment simply reflects the statutory exemption and requirements that
are already effective. The promulgation of this regulation without
notice, comment, or delayed effective date ensures that affected
industry members will have knowledge of the regulatory requirements
that will enable them to obtain the benefits of the statutory change.
Accordingly, pursuant to 5 U.S.C. 553(b)(3)(B) and (d)(1) and (3), a
notice, public comment procedure, and delayed effective date are
unnecessary.
Drafting Information
The principal author of this document is Karl O. Joedicke,
Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade
Bureau.
List of Subjects in 27 CFR Part 53
Arms and munitions, Electronic funds transfers, Excise taxes,
Exports, Imports, Reporting and recordkeeping requirements.
Amendment to the Regulations
0
For the reasons discussed in the preamble, title 27, chapter I, part 53
of the Code of Federal Regulations is amended as follows:
PART 53--MANUFACTURERS EXCISE TAXES--FIREARMS AND AMMUNITION
0
1. The authority citation for part 53 is revised to read as follows:
Authority: 26 U.S.C. 4181, 4182, 4216-4219, 4221-4223, 4225,
6001, 6011, 6020, 6021, 6061, 6071, 6081, 6091, 6101-6104, 6109,
6151, 6155, 6161, 6301-6303, 6311, 6402, 6404, 6416, 7502, 7805.
0
2. Section 53.62 is amended by adding a new paragraph (c) to read as
follows:
Sec. 53.62 Exemptions.
* * * * *
(c) Small manufacturers, producers, and importers--(1) Exemption.
Section 4182(c) of the Code provides that the tax imposed by section
4181 of the Code shall not attach to any pistol, revolver, or firearm
manufactured, produced, or imported by a person who manufactures,
produces, and imports less than an aggregate of 50 of those articles
during the calendar year, regardless of when the articles are sold.
(2) Controlled groups. All persons treated as a single employer for
purposes of subsection (a) or (b) of section 52 of the Code are treated
as one person for purposes of paragraph (c)(1) of this section.
(3) Applicability. The exemption described in paragraph (c)(1) of
this section applies to articles sold by the manufacturer, producer, or
importer after September 30, 2005. Application of this exemption is
based on the calendar year in which the manufacture, production, or
importation of the articles in question took place and does not depend
on when the sale occurs. In addition, each calendar year stands alone
for purposes of applying the exemption.
Signed: May 9, 2007.
John J. Manfreda,
Administrator.
Approved: July 11, 2007.
Timothy E. Skud,
Deputy Assistant Secretary Tax, Trade, and Tariff Policy.
Editorial Note: This document was received at the Office of the
Federal Register on September 6, 2007.
[FR Doc. E7-17901 Filed 9-10-07; 8:45 am]
BILLING CODE 4810-31-P