[Federal Register Volume 59, Number 161 (Monday, August 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20222]
[[Page Unknown]]
[Federal Register: August 22, 1994]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 47 and 48
[TD 8561]
RINs 1545-AR38, 1545-AR94, 1545-AR95 and 1545-AS32
Tax-Free Exports of Vaccines, Vaccine Floor Stocks Tax of 1993,
and Fuel Floor Stocks Taxes Under the Omnibus Budget Reconciliation Act
of 1993
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations relating to the
export of certain vaccines and to the floor stocks tax on vaccines held
on August 10, 1993. This document also contains final regulations
relating to the floor stocks taxes on gasoline, diesel fuel, and
aviation fuel held on October 1, 1993; on diesel fuel held on January
1, 1994; and on commercial aviation fuel held on October 1, 1995. These
regulations reflect changes to the law made by the Omnibus Budget
Reconciliation Act of 1987 and the Omnibus Budget Reconciliation Act of
1993 (OBRA 1993). The regulations provide guidance relating to the
floor stocks taxes, including guidance concerning the person liable for
each tax, exceptions to the taxes, and the time for reporting and
paying each tax. In addition, the regulations provide guidance to
manufacturers of exported vaccines.
DATES: These regulations are effective August 22, 1994.
For dates of applicability, see Secs. 47.2-1, 47.3-1, 48.4221-3(e),
and 48.6416(b)(2)-2(b)(2).
FOR FURTHER INFORMATION CONTACT: Edward Madden (202) 622-4537 (not a
toll-free call).
SUPPLEMENTARY INFORMATION:
Vaccines
Background
The Vaccine Injury Compensation Trust Fund (the Fund) compensates
individuals who are injured as a result of the administration of
certain vaccines. Revenue for the Fund is provided by a manufacturers
tax (section 4131) on these vaccines. The tax, as originally enacted,
was in effect only from 1988 through 1992, but OBRA 1993 applied the
tax to vaccine sales after August 10, 1993.
OBRA 1993 also imposes a floor stocks tax, which does not appear in
the Internal Revenue Code (Code), on these vaccines. The floor stocks
tax is a one-time tax on taxable vaccines that were sold by the
manufacturer, producer, or importer on or before August 10, 1993, on
which no tax was imposed by section 4131, and that were held at the
last moment of August 10, 1993, for sale or use. The rates of floor
stocks tax are equal to the tax rates for sales by the manufacturer,
producer, or importer.
On September 20, 1993, a notice of proposed rulemaking (PS-7-93)
relating to tax-free exports of vaccine was published in the Federal
Register (58 FR 48801).
On November 29, 1993, temporary regulations (TD 8497) relating to
the vaccine floor stocks tax were published in the Federal Register (58
FR 62524). A notice of proposed rulemaking (PS-50-93) cross-referencing
the temporary regulations was published in the Federal Register for the
same day (58 FR 62558).
No comments responding to PS-7-93 were received. Written comments
responding to PS-50-93 were received, but no public hearing was
requested or held. After consideration of all comments, the proposed
vaccine export regulations and the proposed vaccine floor stocks
regulations are adopted by this Treasury decision, and the temporary
regulations relating to the vaccine floor stocks tax are removed.
Summary of Comments
All of the comments received on PS-50-93 addressed the de minimis
exception to the floor stocks tax. The proposed regulations provide
that any person whose liability for tax does not exceed $1,000 is not
required to report or pay the floor stocks tax. One comment requested
that the de minimis amount be increased to $10,000. The de minimis
exception was established for the administrative convenience of the IRS
to eliminate the necessity of processing returns from persons holding
small amounts of vaccines and having a small tax liability. The $1,000
de minimis amount is adequate for this purpose and the comment is,
therefore, not adopted.
Another comment suggested that the exception be applied on a
physician-by-physician basis so that a group practice (such as a
partnership or professional corporation) would have a de minimis amount
proportionate to the size of the group. As noted, increasing the amount
of the de minimis exception is not consistent with its purpose.
Further, if adopted, this suggestion could increase the administrative
burdens of the tax. For example, allocation problems would arise if a
physician is engaged in practice through more than one group (such as a
partnership and a clinic or hospital). Accordingly, this suggestion is
not adopted. The comment also suggested that the de minimis exception
be treated as an exemption and that only amounts of tax in excess of
$1,000 be reported or paid. This suggestion is inconsistent with the
limited purpose of the exception--to eliminate small returns. It is,
therefore, not adopted.
Fuel Floor Stocks
Background
OBRA 1993 makes several changes to the Code with respect to the
taxation of motor fuels. First, effective October 1, 1993, it increases
the rates of excise taxes on gasoline, diesel fuel, and aviation fuel.
The gasoline tax, under section 4081, increases from 14.1 cents per
gallon to 18.4 cents per gallon; the diesel fuel tax, under section
4091, increases from 20.1 cents per gallon to 24.4 cents per gallon;
and the aviation fuel tax, under section 4091, increases from 17.6
cents per gallon to 21.9 cents per gallon. These new rates include the
0.1-cent-per-gallon tax that funds the Leaking Underground Storage Tank
(LUST) Trust Fund. Second, effective January 1, 1994, OBRA 1993
generally moves the point of imposition of tax on diesel fuel to the
terminal rack. Third, effective October 1, 1995, OBRA 1993 increases
the tax on fuel used in commercial aviation by 4.3 cents per gallon.
OBRA 1993 also imposes three floor stocks taxes, which are not
codified, on these fuels. The taxes are to be paid by persons holding
fuel on the effective dates of the changes.
The first floor stocks tax is a one-time tax on gasoline, diesel
fuel, and aviation fuel that are held at the first moment of October 1,
1993, at a point in the distribution chain where these fuels would not
otherwise be subject to the increased tax rates. The rate of the
October 1, 1993, floor stocks tax is 4.3 cents per gallon.
The second floor stocks tax is a one-time tax on diesel fuel held
by any person at the first moment of January 1, 1994, if (A) no tax was
imposed on the fuel under section 4041(a) or 4091 as in effect on
December 31, 1993, and (B) tax would have been imposed by section 4081,
as amended by OBRA 1993, on any prior removal, entry, or sale of the
fuel had section 4081 applied to the fuel for periods before January 1,
1994. The rate of the January 1, 1994, floor stocks tax is 24.4 cents
per gallon.
The third floor stocks tax is a one-time tax on commercial aviation
fuel held by any person at the first moment of October 1, 1995, on
which the LUST tax was imposed under section 4091 before October 1,
1995. The rate of the October 1, 1995, floor stocks tax is 4.3 cents
per gallon.
On November 29, 1993, temporary regulations (TD 8498) were
published in the Federal Register (58 FR 62526). A notice of proposed
rulemaking (PS-49-93) cross-referencing the temporary regulations was
published in the Federal Register for the same day (58 FR 62559).
On December 27, 1993, temporary regulations (TD 8512) amending the
existing temporary regulations to allow diesel fuel dyed past the
terminal rack to qualify for exemption from the floor stocks tax were
published in the Federal Register (58 FR 68304). A notice of proposed
rulemaking (PS-76-93) cross-referencing the temporary regulations was
published in the Federal Register for the same day (58 FR 68338). On
January 31, 1994, a correction to TD 8498 was published in the Federal
Register (59 FR 4251).
Written comments responding to these notices were received, but no
public hearing was requested or held. After consideration of all the
comments, the proposed floor stocks regulations are adopted by this
Treasury decision and the corresponding temporary regulations are
removed. The comments made with respect to the temporary and proposed
regulations are discussed below.
Summary of Comments
Three comments were received. One of the comments suggested that
the requirement that diesel fuel be dyed at the time of its removal
from the terminal in order to be exempt from the floor stocks tax was
too restrictive and that any diesel fuel held for an exempt purpose
that is eventually used for an exempt purpose should be free from floor
stocks tax. This comment was addressed in TD 8512, which allows diesel
fuel that was dyed past the terminal rack to qualify for exemption from
the floor stocks tax. Two comments suggested that fuel held in storage
tanks below the standpipe (dead storage) should not be subject to floor
stocks tax. This suggestion was addressed in the preamble to the
temporary regulations (TD 8498) and, for the reasons there stated, is
not adopted.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. It also has been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to
these regulations, and, therefore, a Regulatory Flexibility Analysis is
not required. Pursuant to section 7805(f) of the Internal Revenue Code,
the notices of proposed rulemaking preceding these regulations were
submitted to the Small Business Administration for comment on their
impact on small business.
Drafting Information
The principal author of these regulations is Edward Madden, Office
of Assistant Chief Counsel (Passthroughs and Special Industries).
However, other personnel from the IRS and Treasury Department
participated in their development.
List of Subjects
26 CFR Part 47
Excise taxes, Reporting and recordkeeping requirements.
26 CFR Part 48
Excise taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR chapter I is amended as follows:
Paragraph 1. Part 47 is revised to read as follows:
PART 47--FLOOR STOCKS TAXES
Subpart A--[Reserved]
Sec.
47.1-1 through 47.1-5 [Reserved]
Subpart B--Vaccine Floor Stocks Tax of 1993
47.2-1 Scope of this subpart B and effective date.
47.2-2 Definitions relating to the vaccine floor stocks tax.
47.2-3 Imposition of vaccine floor stocks tax.
47.2-4 De minimis exception to vaccine floor stocks tax.
47.2-5 Requirements with respect to payment and return.
Subpart C--Fuel Floor Stocks Taxes Under the Omnibus Budget
Reconciliation Act of 1993
47.3-1 Scope of this subpart C and effective date.
47.3-2 Definitions relating to the floor stocks taxes under this
subpart C.
47.3-3 Imposition of the October 1, 1993, floor stocks tax on fuel
held on October 1, 1993.
47.3-4 Exceptions to the October 1, 1993, floor stocks tax.
47.3-5 Requirements with respect to payment and return for the
October 1, 1993, floor stocks tax.
47.3-6 Imposition of the January 1, 1994, floor stocks tax on
diesel fuel held on January 1, 1994.
47.3-7 Exception to the January 1, 1994, floor stocks tax.
47.3-8 Requirements with respect to payment and return for the
January 1, 1994, floor stocks tax.
47.3-9 Imposition of the October 1, 1995, floor stocks tax on
commercial aviation fuel held on October 1, 1995.
47.3-10 Exceptions to the October 1, 1995, floor stocks tax.
47.3-11 Requirements with respect to payment and return for the
October 1, 1995, floor stocks tax.
Authority: 26 U.S.C. 7805.
Section 47.2-5 also issued under section 13421(c) of Pub. L.
103-66 (107 Stat.312, 565).
Subpart A--[Reserved]
Secs. 47.1-1 through 47.1-5 [Reserved]
Subpart B--Vaccine Floor Stocks Tax of 1993
Sec. 47.2-1 Scope of this subpart B and effective date.
The regulations in this subpart B relate to the vaccine floor
stocks tax imposed by section 13421(c) of the Omnibus Budget
Reconciliation Act of 1993 (Pub. L. 103-66; 107 Stat. 312, 565). The
tax is imposed on untaxed vaccines held at the last moment of August
10, 1993. The regulations in this subpart B describe the specific
articles subject to tax, the rates of tax, and the persons liable for
tax. The regulations in this subpart B also provide an exception to the
tax and requirements for payment of tax and filing a return reporting
the tax. The regulations in this subpart B are effective on August 10,
1993.
Sec. 47.2-2 Definitions relating to the vaccine floor stocks tax.
(a) Terms used in section 4131. For purposes of this subpart, terms
that are also used in section 4131 have the same meaning as when so
used.
(b) Other terms. For purposes of this section--
Act refers to the Omnibus Budget Reconciliation Act of 1993.
Controlled group means--
(1) Any controlled group of corporations within the meaning of
section 1563(a), except that the phrase ``more than 50 percent'' is
substituted for the phrase ``at least 80 percent'' each place it
appears therein and a controlled group of corporations includes members
that are described in section 1563(b)(2) (relating to excluded
members); and
(2) Any other group of organizations, at least one member of which
is not a corporation, that is a brother-sister group under common
control or a combined group under common control, with terms having the
following meanings for this purpose:
(i) Organization means a sole proprietorship, a partnership, a
trust, an estate, or a corporation.
(ii) Brother-sister group under common control means two or more
organizations if--
(A) The same five or fewer persons who are individuals, estates, or
trusts own (directly and with the application of Sec. 1.414(c)-4 of
this chapter) a controlling interest of each organization;
(B) Taking into account the ownership of each person only to the
extent that person's ownership is identical with respect to each
organization, such persons are in effective control of each
organization; and
(C) The five or fewer persons whose ownership is considered for
purposes of the controlling interest requirement for each organization
are the same persons whose ownership is considered for purposes of the
effective control requirement.
(iii) Controlling interest means--
(A) In the case of a corporation, ownership of stock possessing at
least 50 percent of the total combined voting power of all classes of
stock entitled to vote or at least 50 percent of the total value of the
shares of all classes of stock of the corporation;
(B) In the case of a trust or estate, ownership of an actuarial
interest (determined under Sec. 1.52-1(f) of this chapter) of at least
50 percent of the trust or estate;
(C) In the case of a partnership, ownership of at least 50 percent
of the profit interest or capital interest of the partnership; and
(D) In the case of a sole proprietorship, ownership of the sole
proprietorship.
(iv) Effective control has the meaning given that term in
Sec. 1.52-1(d)(3) of this chapter.
(v) Combined group under common control has the meaning given that
term in Sec. 1.52-1(e) of this chapter.
Sec. 47.2-3 Imposition of vaccine floor stocks tax.
(a) Vaccines subject to tax. Section 13421(c) of the Act imposes a
floor stocks tax on any taxable vaccine (as defined in section
4132(a)(1) of the Internal Revenue Code)--
(1) Which was sold by the manufacturer, producer, or importer on or
before August 10, 1993;
(2) On which no tax was imposed under section 4131 (or on which
such tax was imposed and subsequently credited or refunded); and
(3) Which is held at the last moment of August 10, 1993, by any
person for sale or use.
(b) Rates of tax. The rate of floor stocks tax on each taxable
vaccine is the rate of tax specified in section 4131(b)(1) of the
Internal Revenue Code.
(c) Person liable for tax. The person liable for the floor stocks
tax on any vaccine subject to tax is the person that holds the vaccine
at the last moment of August 10, 1993. For purposes of the floor stocks
tax, a vaccine is held at the last moment of August 10, 1993, by the
person that has title to the vaccine (whether or not delivery to that
person has been made) at such time, as determined under applicable
local law. There is no exemption from the floor stocks tax for the
United States or for State or local governments. Each business unit
that has, or is required to have, its own employer identification
number is treated as a separate person for purposes of the floor stocks
tax.
Sec. 47.2-4 De minimis exception to vaccine floor stocks tax.
(a) De minimis exception--(1) In general. Except as otherwise
provided in this section, if the aggregate amount of floor stocks tax
payable by a person does not exceed $1,000, that person is not required
to report or pay the tax.
(2) All amounts held subject to tax if threshold exceeded. If the
aggregate amount of floor stocks tax payable by a person exceeds
$1,000, that person is required to report and pay the total amount of
tax as determined without regard to this section.
(3) Controlled groups. A member of a controlled group (as defined
in Sec. 47.2-2) is not excepted from reporting and paying floor stocks
tax under this section if the aggregate amount of floor stocks tax
payable by all members of the controlled group exceeds $1,000.
(b) Examples. The following examples illustrate the rules of this
section:
Example 1. A holds 50 doses of DPT vaccine and 60 doses of polio
vaccine on the last moment of August 10, 1993. A is not a member of
a controlled group. A is not required to report and pay the floor
stocks tax on any of the taxable vaccines because the aggregate
amount of floor stocks tax payable by A (determined without regard
to this section) does not exceed $1,000 ((50 x $4.56 per dose of DPT
vaccine) + (60 x $0.29 per dose of polio vaccine) = $245.40).
Example 2. D, E, and F are members of the same controlled group.
On the last moment of August 10, 1993, D holds 100 doses of DPT
vaccine and 160 doses of polio vaccine; E holds 80 doses of DPT
vaccine, 10 doses of MMR vaccine and 60 doses of polio vaccine; and
F holds 20 doses of MMR vaccine and 10 doses of DT vaccine. Without
regard to this section, D is liable for a tax of $502.40
((100 x $4.56 per dose of DPT vaccine)+(160 x $0.29 per dose of
polio vaccine)); E is liable for a tax of $426.60 ((80 x $4.56 per
dose of DPT vaccine)+(10 x $4.44 per dose of MMR
vaccine)+(60 x $0.29 per dose of polio vaccine)); and F is liable
for a tax of $89.40 ((20 x $4.44 per dose of MMR vaccine)+(10 X
$0.06 per dose of DT vaccine)). Because the aggregate amount of
floor stocks tax payable by all members of the group ($1,018.40)
exceeds $1,000, each member of the controlled group must report and
pay the floor stocks tax.
Sec. 47.2-5 Requirements with respect to payment and return.
(a) Payment of tax. The floor stocks tax is to be paid without
assessment or notice on or before February 28, 1994.
(b) Filing of return--(1) Form 720. Except as provided in
Sec. 47.2-4(a) (relating to the de minimis exception), every person
liable for the floor stocks tax must make a return of the tax on Form
720, Quarterly Federal Excise Tax Return. The return is to be prepared
and filed in accordance with the instructions relating to the return.
(2) Time for filing--(i) In general. The Form 720 required by
paragraph (b)(1) of this section must be filed on or before February
28, 1994, and is a return for the fourth calendar quarter of 1993. A
first return reporting only floor stocks tax is also a final return and
therefore, in accordance with the instructions to Form 720, the box for
``final return'' must be marked.
(ii) Return reporting other taxes. A person must file only one Form
720 for a quarter. If a person is required under part 40 of this
chapter to file Form 720 for the fourth calendar quarter of 1993 for
other excise taxes earlier than February 28, 1994, that person files a
single Form 720 for the quarter by February 28, 1994. This paragraph
(b)(2)(ii) does not extend the time for making deposits or paying any
excise tax.
Subpart C--Fuel Floor Stocks Taxes Under the Omnibus Budget
Reconciliation Act of 1993
Sec. 47.3-1 Scope of this subpart C and effective date.
The regulations in this subpart C relate to the fuel floor stocks
taxes imposed by sections 13241(h), 13243, and 13245 of the Omnibus
Budget Reconciliation Act of 1993 (Act). The tax under section 13241(h)
of the Act is imposed on previously taxed gasoline, diesel fuel, and
aviation fuel held by any person at the first moment of October 1, 1993
(the October 1, 1993, floor stocks tax). The tax under section 13243 of
the Act is imposed on untaxed diesel fuel that does not satisfy the
requirements of section 4082 (as amended by section 13242 of the Act)
and that is held by any person at the first moment of January 1, 1994,
at a point in the distribution chain outside the bulk transfer/terminal
system (the January 1, 1994, floor stocks tax). The tax under section
13245 of the Act is imposed on commercial aviation fuel on which tax
was imposed under section 4091 (even if only at the Leaking Underground
Storage Tank Trust Fund financing rate) before October 1, 1995, and
that is held by any person at the first moment of October 1, 1995 (the
October 1, 1995, floor stocks tax). The regulations in this subpart
describe the specific fuels subject to tax, the rates of tax, and the
persons liable for tax. The regulations in this subpart also provide
exceptions to tax and requirements for payment of tax and filing a
return reporting tax. This subpart is effective on October 1, 1993.
Sec. 47.3-2 Definitions relating to the floor stocks taxes under this
subpart C.
Act is the Omnibus Budget Reconciliation Act of 1993.
Aviation fuel is any liquid (other than any product taxable under
section 4081) that is commonly or commercially known or sold as a fuel
that is suitable for use in an aircraft.
Commercial aviation fuel is any aviation fuel that is held for use
or sale for use in a business of transporting persons or property for
compensation or hire by air.
Controlled group means--
(1) Any controlled group of corporations within the meaning of
section 1563(a), except that the phrase ``more than 50 percent'' is
substituted for the phrase ``at least 80 percent'' each place it
appears therein and a controlled group of corporations includes members
that are described in section 1563(b)(2) (relating to excluded
members); and
(2) Any other group of organizations, at least one member of which
is not a corporation, that is a brother-sister group under common
control or a combined group under common control, with terms having the
following meanings for this purpose:
(i) Organization means a sole proprietorship, a partnership, a
trust, an estate, or a corporation.
(ii) Brother-sister group under common control means two or more
organizations if--
(A) The same five or fewer persons who are individuals, estates, or
trusts own (directly and with the application of Sec. 1.414(c)-4 of
this chapter) a controlling interest of each organization;
(B) Taking into account the ownership of each person only to the
extent that person's ownership is identical with respect to each
organization, such persons are in effective control of each
organization; and
(C) The five or fewer persons whose ownership is considered for
purposes of the controlling interest requirement for each organization
are the same persons whose ownership is considered for purposes of the
effective control requirement.
(iii) Controlling interest means--
(A) In the case of a corporation, ownership of stock possessing at
least 50 percent of the total combined voting power of all classes of
stock entitled to vote or at least 50 percent of the total value of the
shares of all classes of stock of the corporation;
(B) In the case of a trust or estate, ownership of an actuarial
interest (determined under Sec. 1.52-1(f) of this chapter) of at least
50 percent of the trust or estate;
(C) In the case of a partnership, ownership of at least 50 percent
of the profit interest or capital interest of the partnership; and
(D) In the case of a sole proprietorship, ownership of the sole
proprietorship.
(iv) Effective control has the meaning given that term in
Sec. 1.52-1(d)(3) of this chapter.
(v) Combined group under common control has the meaning given that
term in Sec. 1.52-1(e) of this chapter.
Diesel fuel means any liquid (other than gasoline) that is suitable
for use in a diesel-powered highway vehicle, diesel-powered train, or,
after December 31, 1993, diesel-powered boat.
Fuel means gasoline, diesel fuel, and aviation fuel (including
after September 30, 1995, commercial aviation fuel).
Gasoline means--
(1) All products (including gasohol) that are commonly or
commercially known or sold as gasoline and are suitable for use as a
motor fuel (other than products that are not sold as gasoline and have
an American Society for Testing Materials octane number of less than 75
as determined by the motor method); and
(2) Gasoline blend stocks (as defined in Sec. 48.4081-1(j) of this
chapter).
Person includes each business unit that has, or is required to
have, its own employer identification number.
Sec. 47.3-3 Imposition of the October 1, 1993, floor stocks tax on
fuel held on October 1, 1993.
(a) Fuels subject to tax. Section 13241(h)(1) of the Act imposes a
floor stocks tax on gasoline (including gasohol), diesel fuel, and
aviation fuel--
(1) On which tax was imposed under section 4081 or 4091 before
October 1, 1993; and
(2) That is held at the first moment of October 1, 1993, by any
person.
(b) Rate of tax. The rate of the October 1, 1993, floor stocks tax
is 4.3 cents per gallon.
(c) Person liable for tax. The person liable for tax on any fuel
subject to the October 1, 1993, floor stocks tax is the person that
holds the fuel at the first moment of October 1, 1993. Fuel is held by
a person if the person has title to the fuel (whether or not delivery
to that person has been made) at such time, as determined under
applicable local law.
Sec. 47.3-4 Exceptions to the October 1, 1993, floor stocks tax.
(a) Exception for fuel held for an exempt use--(1) Gasoline. The
October 1, 1993, floor stocks tax does not apply to gasoline held
exclusively for an exempt use. In determining whether gasoline is held
exclusively for an exempt use, the following rules in paragraphs (a)(1)
(i) through (iii) of this section apply:
(i) An exempt use, with respect to gasoline, is any use of gasoline
(other than use in producing gasohol) that is described in section
6420, 6421, or 6427 and that entitles the ultimate purchaser to a
credit or payment equal to the tax imposed by section 4081. Thus, for
example, exempt use of gasoline includes use on a farm for farming
purposes; use in an off-highway business use; use in certain intercity,
local, and school buses; exclusive use by a State or local government
or nonprofit educational organization; and use in commercial aircraft.
(ii) Gasoline is held exclusively for an exempt use only if the
person that holds gasoline at the first moment of October 1, 1993,
actually uses the gasoline in an exempt use.
(iii) Gasoline is not held exclusively for an exempt use if, at the
first moment of October 1, 1993, the gasoline is held for resale
(including resale to a person that will use the gasoline in an exempt
use). Thus, for example, gasoline held by a gasoline service station
for sale to a farmer for use on a farm for farming purposes is not
exempt from the October 1, 1993, floor stocks tax. However, the farmer
would be eligible to claim an income tax credit for an amount equal to
the tax under sections 34 and 6420.
(2) Diesel fuel. The October 1, 1993, floor stocks tax does not
apply to diesel fuel held exclusively for an exempt use. In determining
whether diesel fuel is held exclusively for an exempt use, the
following rules in paragraphs (a)(2) (i) through (iv) of this section
apply:
(i) An exempt use, with respect to diesel fuel, is any use of
diesel fuel (other than use in producing a diesel fuel/alcohol mixture
or as fuel in a diesel-powered train) that is described in section 6427
and that entitles the ultimate purchaser to a credit or payment equal
to the tax imposed by section 4091. Thus, for example, exempt uses of
diesel fuel include use other than as a fuel in a diesel-powered
highway vehicle (as defined in Sec. 48.4041-8(b)(4) of this chapter),
use on a farm for farming purposes, exclusive use by a State or local
government or nonprofit educational organization, and use in an off-
highway business use.
(ii) Diesel fuel held for use in a diesel-powered train is not
exempt from the October 1, 1993, floor stocks tax under this paragraph
(a)(2) unless the fuel is held by a State or local government. Thus,
the exemptions for use other than as fuel in a diesel-powered highway
vehicle and off-highway business use do not apply to fuel used in a
diesel-powered train. See section 6427(l)(3) as amended by section
13241 of the Act.
(iii) Diesel fuel is held exclusively for an exempt use only if the
person that holds the fuel at the first moment of October 1, 1993,
actually uses the diesel fuel in an exempt use.
(iv) Diesel fuel is not held exclusively for an exempt use if, at
the first moment of October 1, 1993, the diesel fuel is held for resale
(including resale to a person that will use the diesel fuel in an
exempt use). Thus, for example, diesel fuel held by a retailer for sale
to a construction company for use in the construction company's off-
road machinery is not exempt from the October 1, 1993, floor stocks
tax. However, the construction company would be eligible to claim a
credit or payment equal to the tax under section 6427.
(3) Aviation fuel. The October 1, 1993, floor stocks tax does not
apply to aviation fuel held exclusively for an exempt use. In
determining whether aviation fuel is held exclusively for an exempt
use, the following rules in paragraphs (a)(3) (i) through (iii) of this
section apply:
(i) An exempt use, with respect to aviation fuel, is any use of
aviation fuel that is described in section 6427 and that entitles the
ultimate purchaser to a credit or payment equal to the tax imposed by
section 4091. Thus, for example, exempt use of aviation fuel includes
any use on a farm for farming purposes, exclusive use by a State or
local government or nonprofit educational organization, and use other
than use as a fuel in an aircraft in noncommercial aviation (as defined
in section 4041(c)).
(ii) Aviation fuel is held exclusively for an exempt use only if
the person that holds the aviation fuel at the first moment of October
1, 1993, actually uses the aviation fuel in an exempt use.
(iii) Aviation fuel is not held exclusively for an exempt use if,
at the first moment of October 1, 1993, the aviation fuel is held for
resale (including resale to a person that will use the aviation fuel in
an exempt use). Thus, for example, aviation fuel held by a fixed-base
operator for sale to an airline for use in commercial aviation is not
exempt from the October 1, 1993, floor stocks tax. However, the airline
would be eligible to claim a credit or payment equal to the tax under
section 6427.
(b) Exception for gasoline or diesel fuel held in vehicle fuel
supply tank. The October 1, 1993, floor stocks tax does not apply to
gasoline or diesel fuel held at the first moment of October 1, 1993, in
the fuel supply tank of a motor vehicle (as defined in Sec. 48.4041-
8(c) of this chapter) or motorboat. This exception does not apply to
fuel held in the fuel supply tank of a train or an aircraft.
(c) Exception for certain amounts of fuel--(1) In general. The
October 1, 1993, floor stocks tax does not apply to--
(i) Gasoline that a person holds at the first moment of October 1,
1993, if the aggregate amount of gasoline held by that person at that
moment does not exceed 4,000 gallons; and
(ii) Diesel fuel or aviation fuel that a person holds at the first
moment of October 1, 1993, if the aggregate amount of diesel fuel or
the aggregate amount of aviation fuel held by that person at that
moment does not exceed 2,000 gallons.
(2) Additional rules--(i) Coordination with other exemptions. In
determining the aggregate amount of gasoline, diesel fuel, or aviation
fuel held by a person at the first moment of October 1, 1993, there is
excluded the amount of gasoline, diesel fuel, or aviation fuel exempt
from the October 1, 1993, floor stocks tax by reason of paragraph (a)
of this section (relating to fuel held for exempt uses), or paragraph
(b) of this section (relating to gasoline and diesel fuel held in the
fuel supply tank of a motor vehicle or motorboat).
(ii) All amounts held subject to tax if threshold exceeded. The
October 1, 1993, floor stocks tax applies to all amounts of gasoline,
diesel fuel, or aviation fuel (as the case may be) held by a person
(and not exempt from tax under paragraph (a) or (b) of this section) if
the aggregate amount of fuel held by the person at the first moment of
October 1, 1993, exceeds 4,000 gallons in the case of gasoline or 2,000
gallons in the case of diesel fuel or aviation fuel.
(iii) Controlled groups. A member of a controlled group (as defined
in Sec. 47.3-2) holds more than 4,000 gallons of gasoline if the
aggregate amount of all gasoline held by all members of the controlled
group exceeds 4,000 gallons. A member of a controlled group holds more
than 2,000 gallons of diesel fuel or aviation fuel if the aggregate
amount of all diesel fuel or aviation fuel, as the case may be, held by
all members of the controlled group exceeds 2,000 gallons.
(3) Examples. The following examples illustrate the rules of this
section:
Example 1. On October 1, 1993, A holds 10,000 gallons of
gasoline, 6,000 gallons of which are held exclusively for use on a
farm for farming purposes. The remaining 4,000 gallons are held for
use in A's highway vehicles. A is not a member of a controlled
group. A is not liable for the floor stocks tax on any of the 10,000
gallons because the aggregate amount of fuel held by A for uses
other than exempt uses does not exceed 4,000 gallons.
Example 2. On October 1, 1993, B holds 1,900 gallons of diesel
fuel and 3,900 gallons of gasoline. B is not a member of a
controlled group. B is not liable for the floor stocks tax on diesel
fuel because B's holdings of diesel fuel do not exceed 2,000
gallons. B is not liable for the floor stocks tax on gasoline
because B's holdings of gasoline do not exceed 4,000 gallons.
Example 3. On October 1, 1993, C holds 4,100 gallons of gasoline
for resale at a service station. C is liable for a floor stocks tax
of $176.30 (4,100 X $.043) on that gasoline.
Sec. 47.3-5 Requirements with respect to payment and return for the
October 1, 1993, floor stocks tax.
(a) Payment of tax. The October 1, 1993, floor stocks tax is to be
paid without assessment or notice on or before November 30, 1993.
(b) Filing of returns--(1) Form 720. Every person liable for the
October 1, 1993, floor stocks tax must make a return of the tax on Form
720, Quarterly Federal Excise Tax Return. The return is to be prepared
and filed in accordance with the instructions relating to the return.
(2) Time for filing--(i) In general. The Form 720 required by
paragraph (b)(1) of this section must be filed on or before November
30, 1993, and is a return for the third calendar quarter of 1993. A
first return reporting only the October 1, 1993, floor stocks tax is
also a final return and therefore, in accordance with the instructions
to Form 720, the box for ``final return'' must be marked.
(ii) Return reporting other taxes. A person must file only one Form
720 for a quarter. If a person is required under part 40 of this
chapter to file Form 720 for the third calendar quarter of 1993 for
other excise taxes earlier than November 30, 1993, that person files a
single Form 720 for the quarter on or before November 30, 1993. This
paragraph (b)(2)(ii) does not extend the time for making deposits or
paying any excise tax.
Sec. 47.3-6 Imposition of the January 1, 1994, floor stocks tax on
diesel fuel held on January 1, 1994.
(a) Fuel subject to tax. Section 13243 of the Act imposes a floor
stocks tax on diesel fuel held at the first moment of January 1, 1994,
by any person if--
(1) No tax was imposed on the diesel fuel under section 4041(a) or
4091 as in effect on December 31, 1993; and
(2) Tax would have been imposed by section 4081, as amended by
section 13242 of the Act, on any prior removal, entry, or sale of the
diesel fuel had section 4081 applied to the diesel fuel for periods
before January 1, 1994.
(b) Rate of tax. The rate of the January 1, 1994, floor stocks tax
is 24.4 cents per gallon.
(c) Person liable for tax. The person liable for tax on any diesel
fuel subject to the January 1, 1994, floor stocks tax is the wholesale
distributor or other registered producer, recreational boat operator,
or other person that holds the fuel at the first moment of January 1,
1994. Fuel is held by a person if the person has title to the fuel
(whether or not delivery to that person has been made) at such time, as
determined under applicable local law.
Sec. 47.3-7 Exception to the January 1, 1994, floor stocks tax.
(a) In general. The January 1, 1994, floor stocks tax does not
apply to diesel fuel held exclusively for an exempt use. In determining
whether diesel fuel is held exclusively for an exempt use, the
following rules apply:
(1) An exempt use, with respect to diesel fuel, is any use of
diesel fuel (other than in producing a diesel fuel/alcohol mixture or
as fuel in a diesel-powered train) that is described in section 6427
(as in effect on January 1, 1994) and that would entitle the ultimate
purchaser to a credit or payment equal to any tax imposed by section
4081 (as in effect on such date). Thus, for example, exempt uses of
diesel fuel include use other than as a fuel in a diesel-powered
highway vehicle (as defined in Sec. 48.4041-8(b)(4) of this chapter),
use on a farm for farming purposes, exclusive use by a State or local
government or nonprofit educational organization, and use in an off-
highway business use.
(2) Diesel fuel held for use in a diesel-powered train is not
exempt from the January 1, 1994, floor stocks tax under paragraph
(a)(1) of this section unless the fuel is held by a State or local
government. Thus, the exemptions for use other than as fuel in a
diesel-powered highway vehicle and off-highway business use do not
apply to fuel used in a diesel-powered train. For circumstances in
which diesel fuel held for use in a diesel-powered train may be exempt
from the January 1, 1994, floor stocks tax, see paragraph (b) of this
section (relating to the exemption for dyed fuel) and Sec. 47.3-
6(a)(1), which exempts fuel that was previously taxed under section
4041(a) or 4091 (as in effect on December 31, 1993).
(3) Diesel fuel is held exclusively for an exempt use only if the
person that holds the fuel at the first moment of January 1, 1994,
actually uses the diesel fuel in an exempt use.
(4) Diesel fuel is not held exclusively for an exempt use if, at
the first moment of January 1, 1994, the diesel fuel is held for resale
(including resale to a person that will use the diesel fuel in an
exempt use). Thus, for example, except in the case of dyed fuel
described in paragraph (b) of this section, diesel fuel held by a
heating oil retailer for sale for use as home heating oil is not exempt
from the January 1, 1994, floor stocks tax. However, a homeowner who
uses the fuel for heating purposes would be eligible to claim a credit
or may be eligible for a payment equal to the tax under section 6427.
(b) Exception for dyed fuel. The January 1, 1994, floor stocks tax
does not apply to diesel fuel that satisfies the dyeing requirements of
Sec. 48.4082-1T(b) of this chapter by March 31, 1994, or by the time
the fuel is sold by the person holding the fuel at the first moment of
January 1, 1994, whichever is earlier. Thus, for example, diesel fuel
held by a heating oil retailer for sale for use as home heating oil is
exempt from the January 1, 1994, floor stocks tax if the retailer or
another person has dyed the fuel and the fuel satisfies the
requirements of Sec. 48.4082-1T(b) of this chapter.
Sec. 47.3-8 Requirements with respect to payment and return for the
January 1, 1994, floor stocks tax.
(a) Payment of tax. The January 1, 1994, floor stocks tax is to be
paid without assessment or notice on or before July 31, 1994.
(b) Filing of returns--(1) Form 720. Every person liable for the
January 1, 1994, floor stocks tax must make a return of the tax on Form
720, Quarterly Federal Excise Tax Return. The return is to be prepared
and filed in accordance with the instructions relating to the return.
(2) Time for filing--(i) In general. The Form 720 required by
paragraph (b)(1) of this section must be filed on or before July 31,
1994, and is a return for the second calendar quarter of 1994. A first
return reporting only January 1, 1994, floor stocks tax is also a final
return and therefore, in accordance with the instructions to Form 720,
the box for ``final return'' must be marked.
(ii) Return reporting other taxes. A person must file only one Form
720 for a quarter. If a person is required under part 40 of this
chapter to file Form 720 for the second calendar quarter of 1994 for
other excise taxes on or before August 31, 1994, that person files a
single Form 720 for the quarter on or before August 31, 1994. This
paragraph (b)(2)(ii) does not extend the time for making deposits or
paying any excise tax.
Sec. 47.3-9 Imposition of the October 1, 1995, floor stocks tax on
commercial aviation fuel held on October 1, 1995.
(a) Fuel subject to tax. Section 13245 of the Act imposes a floor
stocks tax on commercial aviation fuel on which tax was imposed under
section 4091 before October 1, 1995, and which is held on the first
moment of that date by any person. Tax is imposed under section 4091
even if imposed only at the Leaking Underground Storage Tank Trust Fund
financing rate under that section.
(b) Rate of tax. The rate of the October 1, 1995, floor stocks tax
is 4.3 cents per gallon.
(c) Person liable for tax. The person liable for tax on any
commercial aviation fuel subject to the October 1, 1995, floor stocks
tax is the person that holds the commercial aviation fuel at the first
moment of October 1, 1995. Fuel is held by a person if the person has
title to the fuel (whether or not delivery to that person has been
made) at such time, as determined under applicable local law.
Sec. 47.3-10 Exceptions to the October 1, 1995, floor stocks tax.
(a) Exception for commercial aviation fuel held for use as supplies
for vessels or aircraft. The October 1, 1995, floor stocks tax does not
apply to commercial aviation fuel held exclusively for use as supplies
for vessels or aircraft within the meaning of section 4221(d)(3). In
determining whether commercial aviation fuel is held exclusively for
such use, the following rules in paragraphs (a) (1) and (2) of this
section apply:
(1) Commercial aviation fuel is held exclusively for use as
supplies for vessels or aircraft only if the person that holds the
commercial aviation fuel at the first moment of October 1, 1995,
actually uses the aviation fuel in that exempt use.
(2) Commercial aviation fuel is not held exclusively for use as
supplies for vessels or aircraft if, at the first moment of October 1,
1995, the commercial aviation fuel is held for resale (including resale
to a person that will use the aviation fuel as supplies for vessels or
aircraft). Thus, for example, commercial aviation fuel held by a fixed
base operator for sale to an airline for use in foreign trade is not
exempt from the October 1, 1995, floor stocks tax. However, the airline
would be eligible to claim a credit or payment equal to the tax under
section 6427.
(b) Exception for certain amounts of fuel--(1) In general. The
October 1, 1995, floor stocks tax does not apply to commercial aviation
fuel that a person holds at the first moment of October 1, 1995, if the
aggregate amount of commercial aviation fuel held by that person at
that moment does not exceed 2,000 gallons.
(2) Additional rules relating to the 2,000 gallon exception--(i)
Coordination with other exemptions. In determining the aggregate amount
of commercial aviation fuel held by a person at the first moment of
October 1, 1995, there is to be excluded the amount of commercial
aviation fuel exempt from the October 1, 1995, floor stocks tax by
reason of paragraph (a) of this section (relating to fuel held for an
exempt use).
(ii) All amounts held subject to tax if threshold exceeded. The
October 1, 1995, floor stocks tax applies to all amounts of commercial
aviation fuel held by a person (and not exempt from tax under paragraph
(a) of this section) if the aggregate amount of commercial aviation
fuel held by the person at the first moment of October 1, 1995, exceeds
2,000 gallons.
(iii) Controlled groups. A member of a controlled group (as defined
in Sec. 47.3-2) holds more than 2,000 gallons of commercial aviation
fuel if the aggregate amount of all commercial aviation fuel held by
all members of the controlled group exceeds 2,000 gallons.
(3) Example. The following example illustrates the rules of this
paragraph (b):
Example. D, E, and F are members of the same controlled group.
On October 1, 1995, D holds 2,000 gallons of commercial aviation
fuel. E holds 1,500 gallons of commercial aviation fuel, and F holds
500 gallons of commercial aviation fuel. None of the commercial
aviation fuel is held for an exempt use. Because the aggregate
amount held by all members of the group is 4,000 gallons, which
exceeds 2,000 gallons, all commercial aviation fuel held by each
member is subject to the floor stocks tax. Thus, D is liable for tax
of $86.00 (2,000 x $.043), E is liable for tax of $64.50
(1,500 x $.043), and F is liable for tax of $21.50 (500 x $.043).
Sec. 47.3-11 Requirements with respect to payment and return for the
October 1, 1995, floor stocks tax.
(a) Payment of tax. The October 1, 1995, floor stocks tax is to be
paid without assessment or notice on or before April 30, 1996.
(b) Filing of returns--(1) Form 720. Every person liable for the
October 1, 1995, floor stocks tax must make a return of the tax on Form
720, Quarterly Federal Excise Tax Return. The return is to be prepared
and filed in accordance with the instructions relating to the return.
(2) Time for filing--(i) In general. The Form 720 required by
paragraph (b)(1) of this section must be filed on or before April 30,
1996, and is a return for the first calendar quarter of 1996. A first
return reporting only October 1, 1995, floor stocks tax is also a final
return and therefore, in accordance with the instructions to Form 720,
the box for ``final return'' must be marked.
(ii) Return reporting other taxes. A person must file only one Form
720 for a quarter. If a person is required under part 40 of this
chapter to file Form 720 for the first calendar quarter of 1996 for
other excise taxes on or before May 31, 1996, that person files a
single Form 720 for the quarter on or before May 31, 1996. This
paragraph (b)(2)(ii) does not extend the time for making deposits or
paying any excise tax.
PART 48--MANUFACTURERS AND RETAILERS EXCISE TAXES
Par. 2. The authority citation for part 48 is amended by adding the
following entries in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 48.4221-3(e) also issued under 26 U.S.C. 4221(a).
Section 48.6416(b)(2)-2(b) also issued under 26 U.S.C. 6416(b).
* * * * *
Par. 3. Section 48.4221-3 is amended by adding paragraph (e) to
read as follows:
Sec. 48.4221-3 Tax-free sale of articles for export, or for resale by
the purchaser to a second purchaser for export.
* * * * *
(e) Vaccines. The exemption provided by section 4221(a)(2) applies
after August 10, 1993, to the tax imposed on vaccines by section 4131,
but only if--
(1) The vaccine is sold by the manufacturer after August 10, 1993;
and
(2) In the case of vaccine sold to, or sold for resale to, the
United States or any of its agencies or instrumentalities, the United
States or such agency or instrumentality notifies the manufacturer that
the vaccine is intended for uses other than the vaccination of persons
described in 42 U.S.C. 300aa-11(c)(1)(B)(i)(II) (relating to certain
U.S. citizens who are vaccinated outside the United States).
Par. 4. Section 48.6416(b)(2)-2 is amended by:
1. Redesignating the text of paragraph (b) following the heading as
paragraph (b)(1).
2. Adding a heading to paragraph (b)(1).
3. Revising the first sentence of paragraph (b)(1).
4. Adding paragraph (b)(2).
5. The revisions and additions read as follows:
Sec. 48.6416(b)(2)-2 Exportations, uses, sales, and resales included.
* * * * *
(b) Exportation of tax-paid articles--(1) In general. Subject to
the limitations of section 6416(b)(2) and paragraph (b)(2) of this
section, tax paid under chapter 31 or 32 on the sale of any article
will be considered to be an overpayment under section 6416(b)(2)(A) if
the article is exported by any person. * * *
(2) Rule for exportation of vaccines. Paragraph (b)(1) of this
section applies to tax paid under section 4131 on the sale of a
vaccine, but only if the sale by the manufacturer occurs after August
10, 1993, and, in the case of vaccine sold to the United States or any
of its agencies or instrumentalities, the condition of Sec. 48.4221-
3(e)(2) is satisfied.
* * * * *
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: July 21, 1994.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 94-20222 Filed 8-19-94; 8:45 am]
BILLING CODE 4830-01-U
