[Code of Federal Regulations]
[Title 27, Volume 2]
[Revised as of April 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 27CFR53.132]

[Page 192-193]
 
            TITLE 27--ALCOHOL, TOBACCO PRODUCTS AND FIREARMS
 
 CHAPTER I--ALCOHOL AND TOBACCO TAX AND TRADE BUREAU, DEPARTMENT OF THE 
                                TREASURY
 
PART 53_MANUFACTURERS EXCISE TAXES_FIREARMS AND AMMUNITION--Table of Contents
 
                Subpart K_Exemptions, Registration, Etc.
 
Sec.  53.132  Tax-free sale of articles to be used for, or resold for, further 

manufacture.

    (a) Further manufacture--(1) In general. Under prescribed 
conditions, an article subject to tax under Chapter 32 of the Code may 
be sold tax free by the manufacturer, pursuant to section 4221(a)(1) of 
the Code, for use by the purchaser in further manufacture, or for resale 
by the purchaser to a second purchaser for use by the second purchaser 
in further manufacture. See section 4221(d) (6) of the Code and 
paragraph (b) of this section for the circumstances under which an 
article is considered to have been sold for use in further manufacture. 
See section 6416(b)(3) of the Code and Sec.  53.180 for the 
circumstances under which credit or refund is available when tax-paid 
articles are used in further manufacture.
    (2) Proof of resale for use in further manufacture. See section 
4221(b)(1) of the Code and paragraph (c) of this section for provisions 
under which the exemption provided in section 4221(a)(1) of the Code 
shall cease to apply in the case of an article sold by the manufacturer 
to a purchaser for resale to a second purchaser for use in further 
manufacture unless the manufacturer receives timely proof of resale for 
further manufacture.
    (b) Circumstances under which an article is considered to have been 
sold for use in further manufacture. (1) For purposes of the exemption 
from the manufacturers excise tax provided by section 4221(a)(1) of the 
Code, an article shall be treated as sold for use in further manufacture 
if the article is sold for use by the purchaser as material in the 
manufacture or production of, or as a component part of, another article 
taxable under chapter 32 of the Code;
    (2) An article is used as material in the manufacture or production 
of, or as a component of, another article if it is incorporated in, or 
is a part or accessory of, the other article when the other article is 
sold by the manufacturer. In addition, an article is considered to be 
used as material in the manufacture of another article if it is consumed 
in whole or in part in testing such other article; for example, shells 
or cartridges that are used by the manufacturer of firearms to test new 
firearms. However, an article that is consumed in the manufacturing 
process other than in testing, so that it is not a physical part of the 
manufactured article, is not considered to have been used as material in 
the manufacture of, or as a component part of, another article.
    (c) Proof of resale for further manufacture--(1) Cessation of 
exemption. The exemption provided in section 4221(a)(1) of the Code and 
described in paragraph (a) of this section in respect of an article sold 
by the manufacturer to a purchaser for resale to a second purchaser for 
use by the second purchaser in further manufacture shall cease to apply 
on the first day following the close of the 6-month period which begins 
on the date of the sale of such article by the manufacturer, or the date 
of shipment of the article by the manufacturer, whichever is earlier, 
unless, within such 6-month period, the manufacturer receives proof, in 
the form prescribed by paragraph (c)(2) of this section, that the 
article was actually resold by the purchaser to a second purchaser for 
such use. If, on the first day following the close of the 6-month 
period, such proof has not been received, the manufacturer shall become 
liable for tax at that time at the rate in effect when the sale was made 
but otherwise in the same manner as if the article had been sold by it 
on such first day at a taxable price equivalent to that at which the 
article was actually sold. If the manufacturer later obtains such proof, 
it may file a claim for refund or credit of this tax. The payment of 
this tax by the manufacturer is not considered an overpayment by the 
subsequent manufacturer or producer for which the subsequent 
manufacturer or producer is entitled to a credit or refund under section 
6416(b)(3) of the Code. See section 4221(d)(6) of the Code and paragraph 
(b) of this section for the circumstances under which an article is 
considered to have been sold for use in further manufacture.

[[Page 193]]

    (2) Proof of resale--(i) Certificate of purchaser. The proof of 
resale to be received by the manufacturer, as required under section 
4221(b)(1) of the Code, may consist of either a copy of the invoice of 
the manufacturer's vendee directed to his purchaser which discloses the 
certificate of registry number held by each party or a statement 
described in this paragraph. In the case of an invoice of manufacturer's 
vendee, it must appear from such invoice (or by statement attached 
thereto) that the article was in fact resold for use in further 
manufacture. In lieu of such an invoice, proof of resale may consist of 
a statement, executed and signed by the manufacturer's vendee which 
includes the following:
    (A) Date statement was executed.
    (B) Name and address of manufacturer's vendee (if other than the 
person executing statement).
    (C) Certificate of registry number held by vendee.
    (D) Specify article(s) purchased tax-free, by whom purchased, 
certificate of registry number of second purchaser, date of purchase(s), 
whether articles were purchased as material in the manufacture or 
production of, or as a component part or parts of, an article or 
articles taxable under Chapter 32 of the Code.
    (E) Statement that person executing statement or manufacturer's 
vendee possesses proof of tax-free resale of the article(s) in the form 
of purchase orders and sales invoices and identifying the person who 
will maintain custody of such proof for 3 years from the date of the 
statement and will make such proof available for inspection by TTB 
during such 3 year period.
    (F) Statement that a previous statement has not been executed in 
respect of such certificate of resale and that the person signing the 
statement is aware that fraudulent use of the statement may subject the 
person signing the statement and all parties making fraudulent use of 
the statement to all applicable criminal penalties under the Code.
    (G) Name, signature, and title of individual executing statement.
    (ii) Period covered. Any statement executed and signed by the 
manufacturer's vendee, as provided in paragraph (c)(2)(i) of this 
section, may be executed with respect to any one or more articles 
purchased tax free from a manufacturer and resold for use in further 
manufacture within the 6-month period prescribed in section 4221(a)(1) 
of the Code and paragraph (c)(1) of this section. Such statement (or 
other prescribed proof of resale) must be retained for inspection by the 
appropriate TTB officer as provided in section 6001 of the Code.
    (iii) TTB I 5600.37. A preprinted statement, TTB I 5600.37, 
Statement of Manufacturer's Vendee, which is available as provided in 
Sec.  53.21(b), when completed, contains all necessary information for a 
properly executed statement. Extra copies of TTB I 5600.37 may be 
reproduced as needed.

[T.D. ATF-308, 56 FR 303, Jan. 3, 1991, as amended by T.D. ATF-380, 61 
FR 37005, July 16, 1996]