[Code of Federal Regulations]
[Title 26, Volume 15]
[Revised as of April 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR48.4218-4]

[Page 174-175]
 
                       TITLE 26--INTERNAL REVENUE
 
                  CHAPTER I--INTERNAL REVENUE SERVICE,
                       DEPARTMENT OF THE TREASURY
                               (Continued)
 
PART 48--MANUFACTURERS AND RETAILERS EXCISE TAXES--Table of Contents
 
     Subpart M--Special Provisions Applicable to Manufacturers Taxes
 
Sec. 48.4218-4  Use in further manufacture.

    For purposes of section 4218 and Sec. 48.4218-1, an article is used 
as material in the manufacture or production of, or as a component part 
of, another article, if it is incorporated in, or is a part or accessory 
of, the other article. Lubricating oil in the crankcase of a new truck 
is an example of a taxable article use as material in the manufacture or 
production of, or as a component part of, another article. In addition, 
an article (other than gasoline used as a fuel) is considered to be used 
as material in the manufacture of another article if it is partly or 
entirely consumed in testing such other article; for example, shells or 
cartridges used in testing new firearms. similarly, if an article is 
partly or wholly consumed in quality testing a production run of like 
articles (as, for example, an automotive part destroyed in stress 
testing) such article is also considered to have been used as material 
in the manufacture of another article. However, if a taxable article 
that has been used tax free and only partly consumed in testing is later 
sold, or put to a taxable use, by the manufacturer, tax attaches to such 
sale or use. 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 used as material in the manufacture or 
production of, or as a component part of, such other article. Thus, 
lubricating oil consumed in operating plant machinery in the

[[Page 175]]

course of the manufacture of automobile truck chassis is not used as 
material in the manufacture or production of, or as a component part of, 
the truck chassis.

[T.D. 6687, 28 FR 11781, Nov. 5, 1963, as amended by T.D. 7536, 43 FR 
13521, Mar. 31, 1978]