Code of Federal Regulations Title 26. Internal Revenue § 26.48.4216(b)–1 Constructive sale price;  scope and application

(b) Specific applications.(1)Section 4216(b)(1) applies to:

(2)Section 4216(b)(2) applies generally to arm's-length sales of an article at retail or to retailers, or both, where the manufacturer also sells the same article to wholesale distributors.

(3)Section 4216(b)(3) provides a formula for determining a constructive sale price for sales of taxable articles between members of an affiliated group of corporations (as “affiliated group” is defined in section 1504(a)) in those instances where the purchasing corporation regularly resells to retailers but does not regularly resell to wholesale distributors, and except for situations where section 4216(b)(4) or (5) applies.

(4)Section 4216(b)(4) provides a special method for computing a constructive sale price for sales of taxable articles between affiliated corporations where the purchasing corporation sells only to retailers, and the normal method of selling within the industry is for manufacturers to sell to wholesale distributors.

(5)Section 4216(b)(5) provides a special method for computing a constructive sale price for sales of articles subject to a tax imposed by section 4061(a) (trucks, buses, tractors, etc.) between affiliated corporations, where the purchasing corporation regularly sells such articles in arm's-length transactions to independent retailers.

(1) Sale at retail.A “sale at retail,” or a “retail sale”, is a sale of an article to a purchaser who intends to use or lease the article rather than resell it. The fact that articles are sold in wholesale lots, or at wholesale prices, will not change the character of such sales as “sales at retail” if the purchaser is not engaged in the business of reselling such articles, and acquires them for the purpose of using them rather than reselling them.

(2) Retail dealers.A “retail dealer”, or “retailer”, is a person engaged in the business of selling articles at retail.

(3) Wholesale distributor.The term “wholesale distributor” means a person engaged in the business of selling articles to persons engaged in the business of reselling such articles.