Firearms Excise Tax; Exemption for Small Manufacturers, Producers, and Importers (2005R-449P), 51710-51711 [E7-17901]

Agencies

• Alcohol and Tobacco Tax and Trade Bureau
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 72, Number 175 (Tuesday, September 11, 2007)]
[Rules and Regulations]
[Pages 51710-51711]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-17901]



[[Page 51710]]

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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Part 53

[T.D. TTB-62]
RIN 1513-AB25


Firearms Excise Tax; Exemption for Small Manufacturers, 
Producers, and Importers (2005R-449P)

AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION: Final rule; Treasury decision.

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SUMMARY: This final rule amends the regulations administered by the 
Alcohol and Tobacco Tax and Trade Bureau to reflect the small 
manufacturers excise tax exemption added by section 11131 of the Safe, 
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 
for Users. Section 11131 amended section 4182 of the Internal Revenue 
Code of 1986 to exempt any pistol, revolver, or firearm from excise tax 
if it was manufactured, produced, or imported by a person who 
manufactures, produces, or imports less than an aggregate of 50 such 
articles during the calendar year.

DATES: Effective Date: September 11, 2007.

FOR FURTHER INFORMATION CONTACT: Karl O. Joedicke, Regulations and 
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G 
Street, NW., Washington, DC 20220; telephone 202-927-8210; or e-mail 
Karl.Joedicke@ttb.gov.

SUPPLEMENTARY INFORMATION:

Background

    Section 4181 of the Internal Revenue Code of 1986 (IRC) imposes a 
tax on the sale of firearms, shells, and cartridges by the 
manufacturer, producer, or importer. In addition, under section 4218 of 
the IRC, the use by a manufacturer, producer, or importer of firearms, 
shells, and cartridges is taxable as if it were a sale, except in 
limited circumstances. See 27 CFR 53.111 et seq. The tax is assessed at 
the rate of 10 percent of the sale price for pistols and revolvers, 11 
percent of the sale price for firearms other than pistols and 
revolvers, and 11 percent of the sale price for shells and cartridges. 
The Alcohol and Tobacco Tax and Trade Bureau (TTB) is responsible for 
administering the provisions of the IRC pertaining to the collection of 
the excise tax on firearms and ammunition. The TTB regulations relating 
to section 4181 and related provisions of the IRC are contained in part 
53 of the TTB regulations (27 CFR part 53).

Exemptions and Legislative Change

    Section 4182 of the IRC (26 U.S.C. 4182) provides for certain 
exemptions from the tax imposed by section 4181. Prior to October 1, 
2005, those exemptions covered only sales to the Department of Defense 
and the Coast Guard (when purchased with funds appropriated for the 
military department), and transactions where the National Firearms Act 
Transfer Tax (imposed by IRC section 5811) had been paid. However, on 
August 10, 2005, the President signed into law the Safe, Accountable, 
Flexible, Efficient Transportation Equity Act: A Legacy for Users, 
Public Law 109-59, 119 Stat. 1144 (the Act). Section 11131 of the Act 
added a new subsection (c) to IRC section 4182 to exempt any pistol, 
revolver, or firearm from the tax imposed by section 4181 if it was 
manufactured, produced or imported by a person who manufactures, 
produces, or imports less than an aggregate of 50 such articles during 
the calendar year.

Applicability and Restrictions

The 50-Firearm Limitation

    If a person manufactures, produces, or imports 50 or more firearms 
during the calendar year, he or she would be liable for tax on the 
first 49 firearms sold, as well as on all additional firearms 
manufactured, produced, or imported for the remainder of the calendar 
year, regardless of when they are sold.

Each Calendar Year Stands Alone

    The new exemption provision states that the tax under section 4181 
does not apply to any pistol, revolver, or firearm described in section 
4181 ``if manufactured, produced, or imported by a person who 
manufactures, produces, and imports less than an aggregate of 50 of 
such articles during the calendar year.'' Thus, application of this 
exemption is based on the calendar year in which the manufacture, 
production, or importation of the articles in question took place and 
does not depend on when the sale occurs. In addition, each calendar 
year stands alone for purposes of applying the exemption. The following 
examples illustrate application of this exemption:

    Example 1: Company A manufactures 20 firearms in calendar year 
2006 but does not sell any of them in calendar year 2006. Company A 
then manufactures 40 firearms in calendar year 2007 and sells all 60 
firearms (the 20 manufactured in 2006 plus the 40 manufactured in 
2007) in 2007. Company A would not owe tax on the 60 firearms sold 
in 2007 since Company A manufactured only 20 of those firearms in 
calendar year 2006 and only 40 in calendar year 2007.
    Example 2: Company B imports 49 firearms in calendar year 2006, 
49 firearms in calendar year 2007, and 20 firearms in calendar year 
2008. Company B sells all 118 of these firearms in 2008. Company B 
would not owe tax on these 118 firearms since Company B imported 
less than 50 firearms in 2006, less than 50 firearms in 2007, and 
less than 50 firearms in 2008.
    Example 3: Company C manufactures 50 firearms in calendar year 
2006, 50 firearms in calendar year 2007, and 20 firearms in 2008. 
Company C sells all 120 of these firearms in 2009. Company C would 
be liable for tax on 100 of these firearms (the 50 firearms 
manufactured in 2006 and the 50 firearms manufactured in 2007, but 
not the 20 firearms manufactured in 2008).

Controlled Groups

    The new statutory provision incorporates the controlled group 
provisions of IRC section 52(a) and (b) in determining whether the 50-
gun exemption applies. Therefore, entities in the same controlled group 
must aggregate their manufacture, production, and importation figures 
in making this determination.

Effective Date

    The subsection (c) exemption applies only to articles sold by the 
manufacturer, producer, or importer after September 30, 2005. In this 
regard, section 11131(b) of the Act includes the following note to 26 
U.S.C. 4182:

    (2) No inference. Nothing in the amendments made by this section 
shall be construed to create any inference with respect to the 
proper tax treatment of any sales before the effective date of such 
amendments.

    The 50-gun exemption, therefore, does not affect the tax liability 
of a manufacturer, producer, or importer with respect to articles sold 
prior to October 1, 2005.

Regulatory Flexibility Act

    Because a notice of proposed rulemaking is not required for this 
final rule under 5 U.S.C. 553, the provisions of the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.) do not apply.

Executive Order 12866

    This final rule is not a significant regulatory action as defined 
in Executive Order 12866. Accordingly, this final rule is not subject 
to the requirements of this Executive Order.

Inapplicability of Prior Public Notice and Comment Procedures and 
Delayed Effective Date Requirement

    Based on the October 1, 2005, effective date of the statutory 
change in

[[Page 51711]]

section 11131, TTB believes it must amend and conform its regulations 
to the statutory change contained in section 11131 of the Act as soon 
as practical. Without this regulatory amendment, the existing TTB 
regulations would not reflect the new tax exemption. Moreover, the 
regulatory amendment simply restates the requirements arising from the 
statutory amendment and recognizes an exemption. Therefore, we find 
that good cause exists to publish this final rule without notice, 
public comment, or delayed effective date because the regulatory 
amendment simply reflects the statutory exemption and requirements that 
are already effective. The promulgation of this regulation without 
notice, comment, or delayed effective date ensures that affected 
industry members will have knowledge of the regulatory requirements 
that will enable them to obtain the benefits of the statutory change. 
Accordingly, pursuant to 5 U.S.C. 553(b)(3)(B) and (d)(1) and (3), a 
notice, public comment procedure, and delayed effective date are 
unnecessary.

Drafting Information

    The principal author of this document is Karl O. Joedicke, 
Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade 
Bureau.

List of Subjects in 27 CFR Part 53

    Arms and munitions, Electronic funds transfers, Excise taxes, 
Exports, Imports, Reporting and recordkeeping requirements.

Amendment to the Regulations

0
For the reasons discussed in the preamble, title 27, chapter I, part 53 
of the Code of Federal Regulations is amended as follows:

PART 53--MANUFACTURERS EXCISE TAXES--FIREARMS AND AMMUNITION

0
1. The authority citation for part 53 is revised to read as follows:

    Authority: 26 U.S.C. 4181, 4182, 4216-4219, 4221-4223, 4225, 
6001, 6011, 6020, 6021, 6061, 6071, 6081, 6091, 6101-6104, 6109, 
6151, 6155, 6161, 6301-6303, 6311, 6402, 6404, 6416, 7502, 7805.

0
2. Section 53.62 is amended by adding a new paragraph (c) to read as 
follows:


Sec.  53.62  Exemptions.

* * * * *
    (c) Small manufacturers, producers, and importers--(1) Exemption. 
Section 4182(c) of the Code provides that the tax imposed by section 
4181 of the Code shall not attach to any pistol, revolver, or firearm 
manufactured, produced, or imported by a person who manufactures, 
produces, and imports less than an aggregate of 50 of those articles 
during the calendar year, regardless of when the articles are sold.
    (2) Controlled groups. All persons treated as a single employer for 
purposes of subsection (a) or (b) of section 52 of the Code are treated 
as one person for purposes of paragraph (c)(1) of this section.
    (3) Applicability. The exemption described in paragraph (c)(1) of 
this section applies to articles sold by the manufacturer, producer, or 
importer after September 30, 2005. Application of this exemption is 
based on the calendar year in which the manufacture, production, or 
importation of the articles in question took place and does not depend 
on when the sale occurs. In addition, each calendar year stands alone 
for purposes of applying the exemption.

    Signed: May 9, 2007.
John J. Manfreda,
Administrator.
    Approved: July 11, 2007.
Timothy E. Skud,
Deputy Assistant Secretary Tax, Trade, and Tariff Policy.

    Editorial Note: This document was received at the Office of the 
Federal Register on September 6, 2007.

[FR Doc. E7-17901 Filed 9-10-07; 8:45 am]
BILLING CODE 4810-31-P