Tax-Free Exports of Vaccines, Vaccine Floor Stocks Tax of 1993, and Fuel Floor Stocks Taxes Under the Omnibus Budget Reconciliation Act of 1993

Federal RegisterAug 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 The tax, as originally enacted,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

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

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

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;

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.

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

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;

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.

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.

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.

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.

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

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.