UNIFORM SYSTEM OF EXEMPTIONS; REGISTRATION; ETC.

SEC. 119. UNIFORM SYSTEM OF EXEMPTIONS; REGISTRATION; ETC. (a) In General.— Chapter 32 (manufacturers excise taxes) is amended by striking out sections 4220 to 4225, inclusive, and by inserting after section 4219 the following: “Subchapter G— Exemptions, Registration, Etc. “Sec. 4221. Certain tax-free sales. “Sec. 4222. Registration. “Sec. 4223. Special rules relating to further manufacture. “Sec. 4224. Exemption for articles taxable as jewelry. “Sec. 4225. Exemption of articles manufactured or produced by Indians. “Sec. 4220. Floor stocks taxes. “Sec. 4227. Cross references. “SEC. 4221. CERTAIN TAX-FREE SALES. “(a) General Rule.—Under regulations prescribed by the Secretary or his delegate, no tax shall be imposed under this chapter on the sale by the manufacturer 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. “(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 6month period which begins on the date of the sale by the manufacturer (or, it 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 72 Stat. 1283 (other than a sale to which subsection (b) applies), and in the case of any article sold free of tax under section 4063 (b), 4083, or 4093, 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. “(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, Alaska, Hawaii, the District of Columbia, or any political subdivision of any of the foregoing. “(5) Nonprofit educational organization.—The term ‘nonprofit educational organization’ means an educational organization described in section 503 (b) (2) which is exempt from income tax under section 501 (a). “(6) Use in further manufacture.— An article shall be treated as sold for use in further manufacture if— “(A) such article (other than an article referred to in subparagraph (B)) 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 a part or accessory taxable under section 4061 (b), a radio or television component taxable under section 4141, or a camera lens taxable under section 4171, 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 to be manufactured or produced by him. “(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 Sates. If the Secretary of the Treasury is advised by the Secretary of Commerce that lie has found that a foreign country has discontinued or will discontinue the allowance of such privileges, the privileges granted under subsection (a) (3) 72 Stat. 1284 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, tubes, and automobile receiving sets.— “(A) Tax-free sales.— Under regulations prescribed by the Secretary or his delegate, no tax shall be imposed under section 4071 or 4141 on the sale by the manufacturer of a tire, inner tube, or automobile radio or television receiving set if— “(i) such tire, tube, or receiving set 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, tube, or receiving set has been sold free of tax under this paragraph, this paragraph shall cease to apply unless, within the 6month 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, tube, or receiving set 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 or 4141 on the sale of a tire, inner tube, or automobile radio or television receiving set. “(3) Musical instruments sold for religious use.—Under regulations prescribed by the Secretary or his delegate, the tax imposed by section 4151 shall not apply to musical instruments sold to a religious institution for exclusively religious purposes. “(f) Sales of Mechanical Pencils and Pens for Export.—Under regulations prescribed by the Secretary or his delegate, mechanical pencils, fountain pens, and ball point pens subject to the tax imposed by section 4201 may be sold by the manufacturer free of tax for export or for resale for export upon receipt by him of notice of intent to export or to resell for export. “SEC. 4222. REGISTRATION. “(a) General Rule.—Except as provided in subsection (b), section 4221 shall not apply with respect to the sale of any article unless the manufacturer, the first purchaser, and the second purchaser (if any) are all registered under this section. Registration under this section shall be made at such time, in such manner and form, and subject to such terms and conditions, as the Secretary or his delegate may by regulations prescribe. A registration under this section may be used only in accordance with regulations prescribed under this section. “(b) Exceptions.— “(1) Purchases by state and local governments.—Subsection (a) shall not apply to any State or local government in connection with the purchase by it of any article if such State or local government complies with such regulations relating to the use or exemption certificates in lieu of registration as the Secre- 72 Stat. 1285 tary or his delegate shall prescribe to carry out the purpose of this paragraph. “(2) Export.—Subject to such regulations as the Secretary or his delegate may prescribe for the purpose of this paragraph, in the case of any sale or resale for export, the Secretary or his delegate may relieve the purchaser or the second purchaser, or both, from the requirement of registering under this section. “(3) Certain purchases and sales by the united states.—Subsection (a) shall apply to purchases and sales by the United States only to the extent provided by regulations prescribed by the Secretary or his delegate. “(4) Mechanical pencils, fountain pens, and ball point pens.—Subsection (a) shall not apply in the case of mechanical pencils, fountain pens, and ball point pens subject to the tax imposed by section 4201 sold by the manufacturer for export or for resale for export. “(c) Revocation or Suspension of Registration.—Under regulations prescribed by the Secretary or his delegate, the registration of any person under this section may be revoked or suspended if the Secretary or his delegate determines— “(1) that such person has used such registration to avoid the payment of any tax imposed by this chapter, or to postpone or in any manner to interfere with the collection of any such tax, or “(2) that such revocation or suspension is necessary to protect the revenue. The revocation or suspension under this subsection shall be in addition to any penalty provided by law for any act or failure to act. “(d) Registration in the Case of Certain Other Exemptions.—The provisions of this section may be extended to, and made applicable with respect to, the exemptions provided by sections 4063 (b), 4083, 4093, and 4182 (b), and the exemptions authorized under section 4293 in respect of the taxes imposed by this chapter, to the extent provided by regulations prescribed by the Secretary or his delegate. “(e) Definitions.—Terms used in this section which are defined in section 4221 (d) shall have the meaning given to them by section 4221 (d). “SEC. 4223. SPECIAL RULES RELATING TO FURTHER MANUFACTURE. “(a) Purchasing Manufacturer To Be Treated as the Manufacturer.—For purposes of this chapter, a manufacturer or producer to whom an article is sold or resold free of tax under section 4221 (a) (1) for use by him in further manufacture shall be treated as the manufacturer or producer of such article. “(b) Computation of Tax.—If the manufacturer or producer referred to in subsection (a) incurs liability for tax under this chapter on his sale or use of an article referred to in subsection (a) and the tax is based on the price for which the article is sold, the article shall be treated as having been sold by him— “(1) at the price for which the article was sold by him (or, where the tax is on his use of the article, at the price referred to in section 4218 (d)); or “(2) if he so elects and establishes such price to the satisfaction of the Secretary or his delegate— “(A) at the price for which the article was sold to him; or “(B) at the price for which the article was sold by the person who (without regard to subsection (a)) is the manufacturer, producer, or importer of such article. 72 Stat. 1286 For purposes of this subsection, the price for which the article was sold shall be determined as provided in section 4216. For purposes of paragraph (2) no adjustment or readjustment shall be made in such price by reason of any discount, rebate, allowance, return or repossession of a container or covering, or otherwise. An election under paragraph (2) shall be made in the return reporting the tax applicable to the sale or use of the article, and may not be revoked. “SEC. 4224. EXEMPTION FOR ARTICLES TAXABLE AS JEWELRY.“No tax shall be imposed under this chapter on any article taxable under section 4001 (relating to jewelry tax). This section shall not apply to any clock or watch, or to any case or movement for a clock or watch, sold (1) as a part or accessory, or (2) on or in connection with or with the sale of any article. “SEC. 4225. EXEMPTION OF ARTICLES MANUFACTURED OR PRODUCED BY INDIANS.“No tax shall be imposed under this chapter on any article of native Indian handicraft manufactured or produced by Indians on Indian reservations, or in Indian schools, or by Indians under the jurisdiction of the United States Government in Alaska.” (b) Technical Amendments.— (1) Section 4041 is amended by adding at the end thereof the following new subsection: “(e) Exemption for Use as Supplies for Vessels.—Under regulations prescribed by the Secretary or his delegate, no tax shall be imposed under subsection (b) in the case of any fuel sold for use or used as supplies for vessels or aircraft (within the meaning of section 4221 (d) (3)).” (2) Part II of subchapter C of chapter 32 is amended by striking out section 4152, and by striking out “Sec. 4152. Exemption for religious or educational use.” in the table of sections for such part. (3) The table of sections for subchapter F of chapter 32 is amended by striking out “Sec. 4220. Exemptions for sales or resales to manufacturers.” and all that follows. (4) Section 4601 (applicability of tariff provisions) is amended by adding at the end thereof the following: “Articles manufactured or produced with the use of articles upon the importation of which tax has been paid under subchapter A, B, C, or D of this chapter, if laden for use as supplies on vessels referred to in section 4221 (d) (3), shall be held to be exported for purposes of this section.”