[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: 27CFR53.143]

[Page 202]
 
            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.  53.143  Special rules relating to further manufacture.

    (a) Purchasing manufacturer to be treated as the manufacturer. For 
purposes of Chapter 32 of the Code, a manufacturer or producer to whom 
an article is sold or resold tax free under section 4221(a)(1) of the 
Code for use by it in further manufacture shall be treated as the 
manufacturer or producer of such article. If a manufacturer who 
purchases an article tax free for further manufacture does not use the 
article for further manufacture, the sale of the article by it, or its 
use of the article other than in further manufacture, shall, for 
purposes of the taxes imposed by chapter 32 of the Code, be treated as a 
sale or use of the article by the manufacturer thereof. See paragraphs 
(b) and (c) of this section for determination of taxable sale price 
where an article purchased tax free for further manufacture is resold, 
or used other than in further manufacture.
    (b) Computation of tax. Except as provided in paragraph (c) of this 
section, the tax liability referred to in paragraph (a) of this section 
shall be based on the price for which the article was sold by the 
purchasing manufacturer, or, where the manufacturer uses the article for 
a purpose other than that for which it was purchased, the tax shall be 
based on the price at which such or similar articles are sold, in the 
ordinary course of trade, by manufacturers, producers, or importers 
thereof. See section 4218(e) of the Code and Sec.  53.115.
    (c) Election. (1) Instead of computing the tax as described under 
paragraph (b) of this section, the purchasing manufacturer who has 
incurred liability for tax on its sale or use of an article as provided 
by paragraph (a) of this section may compute the tax incurred under 
chapter 32 of the Code by using as the tax base either the price for 
which the article was sold to it by the first purchaser, if any, or the 
price for which such article was sold by the actual manufacturer, 
producer, or importer of such article. The purchasing manufacturer must 
have in its possession information upon which to substantiate such basis 
for tax. For purposes of this paragraph, the price for which the article 
was sold by the actual manufacturer or by the first purchaser shall be 
determined as provided in section 4216 of the Code and Sec. Sec.  53.91-
53.102. However, such price shall not be adjusted for any discount, 
rebate, allowance, return, or repossession of a container or covering, 
or otherwise.
    (2) The election under this paragraph shall be in the form of a 
statement attached to the return reporting the tax applicable to the 
sale or use of the article which gave rise to such tax liability. Such 
election, once made, may not be revoked.