§ 4216. Definition of price
(a)
Containers, packing and transportation charges.
In determining, for the purposes of this chapter, the price for which an article is sold, there shall be included any charge for coverings and containers of whatever nature, and any charge incident to placing the article in condition packed ready for shipment, but there shall be excluded the amount of tax imposed by this chapter, whether or not stated as a separate charge. A transportation, delivery, insurance, installation, or other charge (not required by the foregoing sentence to be included) shall be excluded from the price only if the amount thereof is established to the satisfaction of the Secretary in accordance with the regulations.
(b)
Constructive sale price
(1)
In general
If an article is—
the tax under this chapter shall (if based on the price for which the article is sold) be computed on the price for which such articles are sold, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Secretary. In the case of an article sold at retail, the computation under the preceding sentence shall be on whichever of the following prices is the lower: (i) the price for which such article is sold, or (ii) the highest price for which such articles are sold to wholesale distributors, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Secretary. This paragraph shall not apply if paragraph (2) applies.
(2)
Special rule
If an article is sold at retail or to a retailer, and if—
(A)
the manufacturer, producer, or importer of such article regularly sells such articles at retail or to retailers, as the case may be,
(B)
the manufacturer, producer, or importer of such article regularly sells such articles to one or more wholesale distributors in arm’s length transactions and he establishes that his prices in such cases are determined without regard to any tax benefit under this paragraph, and
the tax under this chapter shall (if based on the price for which the article is sold) be computed on whichever of the following prices is the lower: (i) the price for which such article is sold, or (ii) the highest price for which such articles are sold by such manufacturer, producer, or importer to wholesale distributors (other than special dealers).
(3)
Constructive sale price in case of certain articles
Except as provided in paragraph (4), for purposes of paragraph (1), if—
(A)
the manufacturer, producer, or importer of an article regularly sells such article to a distributor which is a member of the same affiliated group of corporations (as defined in section
1504
(a)) as the manufacturer, producer, or importer, and
(B)
such distributor regularly sells such article to one or more independent retailers, but does not regularly sell to wholesale distributors,
the constructive sale price of such article shall be 90 percent of the lowest price for which such distributor regularly sells such article in arm’s-length transactions to such independent retailers. The price determined under this paragraph shall not be adjusted for any exclusion (except for the tax imposed on such article) or readjustments under subsections (a) and (e) and under section
6416
(b)(1). If both this paragraph and paragraph (4) apply with respect to an article, the constructive sale price for such article shall be the lower of the constructive sale price determined under this paragraph or paragraph (4).
(4)
Constructive sale price in case of certain other articles
For purposes of paragraph (1), if—
(A)
the manufacturer, producer, or importer of an article regularly sells (except for tax-free sales) only to a distributor which is a member of the same affiliated group of corporations (as defined in section
1504
(a)) as the manufacturer, producer, or importer,
(C)
the normal method of sales for such articles within the industry by manufacturers, producers, or importers is to sell such articles in arm’s-length transactions to distributors,
the constructive sale price for such article shall be the price at which such article is sold to retailers by the distributor, reduced by a percentage of such price equal to the percentage which (i) the difference between the price for which comparable articles are sold to wholesale distributors, in the ordinary course of trade, by manufacturers or producers thereof, and the price at which such wholesale distributors in arm’s-length transactions sell such comparable articles to retailers, is of (ii) the price at which such wholesale distributors in arm’s-length transactions sell such comparable articles to retailers. The price determined under this paragraph shall not be adjusted for any exclusion (except for the tax imposed on such article) or readjustment under subsections (a) and (e) and under section
6416
(b)(1).
(c)
Partial payments
In the case of—
(2)
a contract for the sale of an article wherein it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments,
(4)
a chattel mortgage arrangement wherein it is provided that the sales price shall be paid in installments,
there shall be paid upon each payment with respect to the article a percentage of such payment equal to the rate of tax in effect on the date such payment is due.
(d)
Sales of installment accounts
If installment accounts, with respect to payments on which tax is being computed as provided in subsection (c), are sold or otherwise disposed of, then subsection (c) shall not apply with respect to any subsequent payments on such accounts (other than subsequent payments on returned accounts with respect to which credit or refund is allowable by reason of section
6416
(b)(5)), but instead—
(1)
there shall be paid an amount equal to the difference between
(B)
the total tax which would be payable if such installment accounts had not been sold or otherwise disposed of (computed as provided in subsection (c)); except that
(2)
if any such sale is pursuant to the order of, or subject to the approval of, a court of competent jurisdiction in a bankruptcy or insolvency proceeding, the amount computed under paragraph (1) shall not exceed the sum of the amounts computed by multiplying
(A)
the proportionate share of the amount for which such accounts are sold which is allocable to each unpaid installment payment by
(B)
the rate of tax under this chapter in effect on the date such unpaid installment payment is or was due.
The sum of the amounts payable under this subsection and subsection (c) in respect of the sale of any article shall not exceed the total tax.
(e)
Exclusion of local advertising charge from sale price
(1)
Exclusion
In determining, for purposes of this chapter, the price for which an article is sold, there shall be excluded a charge for local advertising (as defined in paragraph (4)) to the extent that such charge—
(A)
does not exceed 5 percent of the price for which the article is sold (as determined under this section by excluding any charge for local advertising),
(C)
is intended to be refunded to the purchaser or any subsequent vendee in reimbursement of costs incurred for local advertising.
In the case of any such charge (or portion thereof) which is not so refunded before the first day of the fifth calendar month following the calendar year during which the article was sold, the exclusion provided by the preceding sentence shall cease to apply as of such first day.
(2)
Aggregate amount which may be excluded
In the case of articles upon the sale of which tax was imposed under the same section of this chapter—
(A)
The sum of
(ii)
the aggregate of the readjustments for local advertising under section
6416
(b)(1) (relating to credits or refunds for price readjustments), shall not exceed
(B)
5 percent of the aggregate of the prices (determined under this section by excluding all charges for local advertising) at which such articles were sold in sales on which tax was imposed by such section of this chapter.
The preceding sentence shall be applied to each manufacturer, producer, and importer as of the close of each calendar quarter, taking into account the items specified in subparagraphs (A) and (B) for such calendar quarter and preceding calendar quarters in the same calendar year.