# Prop. Treas. Reg. § 48.4221-2: Tax-free sale of articles to be used for, or resold  for, further manufacture.

Proposed regulation, not in force. PS-66-93, 94-25763, published 1994-10-19 <https://www.federalregister.gov/documents/1994/10/19/94-25763/gasoline-and-diesel-fuel-excise-tax-rules-relating-to-gasohol-tax-on-compressed-natural-gas>. Interprets 26 U.S.C. § 4221.

Par. 19. Section 48.4221-2 is amended by: 1. Removing from the first sentence of paragraph (a)(1) the language ``(other than a tire or inner tube taxable under section 4071, which are given special treatment under sections 4221(e)(2) and (4), and Secs. 48.4221-7 and 48.4221-8)'' and adding ``(other than a tire taxable under section 4071, which is given special treatment under section 4221(e)(2) and Sec. 48.4221-7)'' in its place. 2. Removing paragraph (a)(2) and redesignating paragraph (a)(3) as paragraph (a)(2). 3. Revising paragraph (b). 4. The revised provision reads as follows:

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(b) Circumstances under which an article is considered to have been sold for use in further manufacture--(1) An article shall be treated as sold for use in further manufacture if the article is sold for use by the buyer as material in the manufacture or production of, or as a component part of, another article taxable under chapter 32 of the Internal Revenue Code.

(2) An article is used as material in the manufacture or production of, or as a component of, another article if it is incorporated in, or is a part or accessory of, the other article when the other article is sold by the manufacturer. In addition, an article is considered to be used as material in the manufacture of another article if it is consumed in whole or in part in testing such other article. However, an article that is consumed in the manufacturing process other than in testing, so that it is not a physical part of the manufactured article, is not considered to have been used as material in the manufacture of, or as a component part of, another article.

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