26 U.S.C. § 4221 : US Code - Section 4221: Certain tax-free sales

Search 26 U.S.C. § 4221 : US Code - Section 4221: Certain tax-free sales

(a) General rule
Under regulations prescribed by the Secretary, no tax shall be
imposed under this chapter (other than under section 4121 or 4081)
on the sale by the manufacturer (or under subchapter A or C of
chapter 31 on the first retail sale) of an article -
(1) for use by the purchaser for further manufacture, or for
resale by the purchaser to a second purchaser for use by such
second purchaser in further manufacture,
(2) for export, or for resale by the purchaser to a second
purchaser for export,
(3) for use by the purchaser as supplies for vessels or
aircraft,
(4) to a State or local government for the exclusive use of a
State or local government, or
(5) to a nonprofit educational organization for its exclusive
use,
but only if such exportation or use is to occur before any other
use. Paragraphs (4) and (5) shall not apply to the tax imposed by
section 4064. In the case of taxes imposed by section 4051,(!1) or
4071, paragraphs (4) and (5) shall not apply on and after October
1, 2011. In the case of the tax imposed by section 4131, paragraphs
(3), (4), and (5) shall not apply and paragraph (2) shall apply
only if the use of the exported vaccine meets such requirements as
the Secretary may by regulations prescribe. In the case of taxes
imposed by subchapter A of chapter 31, paragraphs (1), (3), (4),
and (5) shall not apply.
(b) Proof of resale for further manufacture; proof of export
Where an article has been sold free of tax under subsection (a) -

(1) for resale by the purchaser to a second purchaser for use
by such second purchaser in further manufacture, or
(2) for export, or for resale by the purchaser to a second
purchaser for export,
subsection (a) shall cease to apply in respect of such sale of such
article unless, within the 6-month period which begins on the date
of the sale by the manufacturer (or, if earlier, on the date of
shipment by the manufacturer), the manufacturer receives proof that
the article has been exported or resold for use in further
manufacture.
(c) Manufacturer relieved from liability in certain cases
In the case of any article sold free of tax under this section
(other than a sale to which subsection (b) applies), and in the
case of any article sold free of tax under section 4001(c),
4001(d), or 4053(6), if the manufacturer in good faith accepts a
certification by the purchaser that the article will be used in
accordance with the applicable provisions of law, no tax shall
thereafter be imposed under this chapter in respect of such sale by
such manufacturer.
(d) Definitions
For purposes of this section -
(1) Manufacturer
The term "manufacturer" includes a producer or importer of an
article, and, in the case of taxes imposed by subchapter A or C
of chapter 31, includes the retailer with respect to the first
retail sale.
(2) Export
The term "export" includes shipment to a possession of the
United States; and the term "exported" includes shipped to a
possession of the United States.
(3) Supplies for vessels or aircraft
The term "supplies for vessels or aircraft" means fuel
supplies, ships' stores, sea stores, or legitimate equipment on
vessels of war of the United States or of any foreign nation,
vessels employed in the fisheries or in the whaling business, or
vessels actually engaged in foreign trade or trade between the
Atlantic and Pacific ports of the United States or between the
United States and any of its possessions. For purposes of the
preceding sentence, the term "vessels" includes civil aircraft
employed in foreign trade or trade between the United States and
any of its possessions, and the term "vessels of war of the
United States or of any foreign nation" includes aircraft owned
by the United States or by any foreign nation and constituting a
part of the armed forces thereof.
(4) State or local government
The term "State or local government" means any State, any
political subdivision thereof, or the District of Columbia.
(5) Nonprofit educational organization
The term "nonprofit educational organization" means an
educational organization described in section 170(b)(1)(A)(ii)
which is exempt from income tax under section 501(a). The term
also includes a school operated as an activity of an organization
described in section 501(c)(3) which is exempt from income tax
under section 501(a), if such school normally maintains a regular
faculty and curriculum and normally has a regularly enrolled body
of pupils or students in attendance at the place where its
educational activities are regularly carried on.
(6) Use in further manufacture
An article shall be treated as sold for use in further
manufacture if -
(A) such 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 this chapter to be manufactured
or produced by him; or
(B) in the case of gasoline taxable under section 4081, such
gasoline is sold for use by the purchaser, for nonfuel
purposes, as a material in the manufacture or production of
another article to be manufactured or produced by him.
(7) Qualified bus
(A) In general
The term "qualified bus" means -
(i) an intercity or local bus, and
(ii) a school bus.
(B) Intercity or local bus
The term "intercity or local bus" means any automobile bus
which is used predominantly in furnishing (for compensation)
passenger land transportation available to the general public
if -
(i) such transportation is scheduled and along regular
routes, or
(ii) the seating capacity of such bus is at least 20 adults
(not including the driver).
(C) School bus
The term "school bus" means any automobile bus substantially
all the use of which is in transporting students and employees
of schools. For purposes of the preceding sentence, the term
"school" means an educational organization which normally
maintains a regular faculty and curriculum and normally has a
regularly enrolled body of pupils or students in attendance at
the place where its educational activities are carried on.
(e) Special rules
(1) Reciprocity required in case of civil aircraft
In the case of articles sold for use as supplies for aircraft,
the privileges granted under subsection (a)(3) in respect of
civil aircraft employed in foreign trade or trade between the
United States and any of its possessions, in respect of aircraft
registered in a foreign country, shall be allowed only if the
Secretary of the Treasury has been advised by the Secretary of
Commerce that he has found that such foreign country allows, or
will allow, substantially reciprocal privileges in respect of
aircraft registered in the United States. If the Secretary of the
Treasury is advised by the Secretary of Commerce that he has
found that a foreign country has discontinued or will discontinue
the allowance of such privileges, the privileges granted under
subsection (a)(3) shall not apply thereafter in respect of civil
aircraft registered in that foreign country and employed in
foreign trade or trade between the United States and any of its
possessions.
(2) Tires
(A) Tax-free sales
Under regulations prescribed by the Secretary, no tax shall
be imposed under section 4071 on the sale by the manufacturer
of a tire if -
(i) such tire is sold for use by the purchaser for sale on
or in connection with the sale of another article
manufactured or produced by such purchaser; and
(ii) such other article is to be sold by such purchaser in
a sale which either will satisfy the requirements of
paragraph (2), (3), (4), or (5) of subsection (a) for a tax-
free sale, or would satisfy such requirements but for the
fact that such other article is not subject to tax under this
chapter.
(B) Proof
Where a tire has been sold free of tax under this paragraph,
this paragraph shall cease to apply unless, within the 6-moth
period which begins on the date of the sale by him (or, if
earlier on the date of the shipment by him), the manufacturer
of such tire receives proof that the other article referred to
in clause (ii) of subparagraph (A) has been sold in a manner
which satisfies the requirements of such clause (ii) (including
in the case of a sale for export, proof of export of such other
article).
(C) Subsection (a)(1) does not apply
Paragraph (1) of subsection (a) shall not apply with respect
to the tax imposed under section 4071 on the sale of a tire.
(3) Tires used on intercity, local, and school buses
Under regulations prescribed by the Secretary, the tax imposed
by section 4071 shall not apply in the case of tires sold for use
by the purchaser on or in connection with a qualified bus.