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Manufacturers and Producers

1. Am I a manufacturer?

You are a manufacturer if you manufacture or produce a taxable article from scrap, salvage, junk material, new material, or raw material by:

• processing, manipulating, or changing the form of an article; or

• combining or assembling two or more articles.

[Refer to 27 CFR 53.11 (definition of manufacturer)]

2. If I manufacture an article and sell it in knockdown condition, am I liable for FAET?

Yes. If you manufacture an article and sell it in knockdown condition (unassembled but complete as to all component parts), you are liable for FAET.

[Refer to 27 CFR 53.11 (definition of manufacturer)]

3. If I purchase an article in knockdown condition and assemble it, am I liable for FAET?

If you purchase an article in knockdown condition and assemble it, your liability for FAET will depend on the following factors:

• the amount of labor, material, and overhead required to assemble the article; and
• whether you assemble the article for business or personal use.

[Refer to 27 CFR 53.11 (definition of manufacturer)]

4. If I manufacture an article only for my personal use, am I still liable for FAET?

If you manufacture a firearm for your personal use, you are not liable for FAET. (Note: this exemption does not apply to partnerships and corporations)

5. If I manufacture an article and use it in the course of my business, am I liable for FAET?

Yes. If you manufacture an article and use it in the course of your business, you are liable for tax. FAET will attach on an article once you begin using it during the course of your business. Some examples of business uses of articles include:

• Sales samples;
• Demonstration models;
• Use by security force; and
• Use by writers in preparing articles.

[Refer to 26 U.S.C. 4218 , 27 CFR 53.111 , and 27 CFR 53.112 ]

6. How do I determine my FAET if I manufacture and use an article in the course of my business?

You must calculate your FAET on the price that other manufacturers, producers, or importers sell those same (or similar) articles in the ordinary course of trade.

[Refer to 26 U.S.C. 4223(b) , 27 CFR 53.115 , and 27 CFR 53.143(b) ]

7. What if more than one person is involved in the manufacturing process?

If more than one person is involved in the manufacturing process, liability for FAET will depend on what each person furnishes or contributes to the manufacturing process. You must consider such factors as labor, materials, manufacturing facilities, patents, trademarks, title, and price controls. The person who actually causes the manufacture of the product is liable for FAET.

Example	If you furnish:	and the other company furnishes:	then…
1	materials labor manufacturing facilities	patents trademark title sales control production control ownership of tools	the other company is the manufacturer and liable for FAET.
2	materials labor Title	patents	the other company is the manufacturer and liable for FAET.
3	materials labor title sales controls tools and dies	trademark materials price controls	you are the manufacturer and liable for FAET.
4	materials labor title sales controls product controls	patents	you are the manufacturer and liable for FAET.
5	materials labor manufacturing facilities ownership of tools	title proprietary interest right to use	the other company is the manufacturer and liable for FAET.