Internal Revenue Service
Revenue Ruling

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Rev. Rul. 66-343

1966-2 C.B. 503

Sec. 6402

IRS Headnote

Interest paid on additional gasoline tax, which was assessed as a result of failure on the part of the taxpayer to obtain exemption certificates for tax-free sales of gasoline to municipalities, shall, upon presentment of the required exemption certificates, be credited or refunded under section 6416(b) of the Internal Revenue Code of 1954. The restriction on interest contained in section 6416(b) refers to interest allowable on overpayments under the provisions of section 6611 of the Code and not to the interest on underpayments imposed by section 6601 of the Code.

Full Text

Rev. Rul. 66-343

Advice has been requested whether, under the circumstances set forth below, interest paid on additional gasoline tax may be credited or refunded in view of the restriction on interest contained in section 6416(b) of the Internal Revenue Code of 1954.

An examination of the taxpayer's records disclosed that the taxpayer had made tax-free sales of gasoline to towns and cities during 1962 and 1963 without having obtained exemption certificates from those customers. As a result, additional tax and interest was assessed and paid in 1964. Subsequently, the taxpayer obtained the exemption certificates and claimed a credit on its next excise tax return for the additional tax and interest paid. Credit was allowed in the amount of the additional tax only, and an assessment was made in an amount equal to the interest claimed as a credit . The taxpayer filed a timely claim for abatement of the assessment.

Section 6416(b) of the Code provides, in part, that credit or refund (without interest) shall be allowed or made in respect of the overpayments determined under the following paragraph:

(2) Specified uses and resales.-The tax paid under chapter 32 (or under section 4041(a)(1) or (h)(1)) in respect of any article shall be deemed to be an overpayment if such article was, by any person-

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(C) sold to a State or local government for the exclusive use of a State or local government.

The restriction on interest contained in section 6416(b) of the Code has reference to the interest allowable on credits or refunds of tax under the general provisions of section 6611 of the Code. This interpretation of the statute is clearly supported by section 48.6416(b)-2(a) of the Manufacturers and Retailers Excise Tax Regulations which states, in part, `No interest shall be allowed on any refund or credit of such overpayment.' The restriction is, therefore, inapplicable to interest imposed on delinquent tax under section 6601 of the Code, which is assessed and collected as part of tax.

Section 6601(f) of the Code specifically provides `Any reference in this title (except subchapter B of chapter 63, relating to deficiency procedures) to any tax imposed by this title shall be deemed also to refer to interest imposed by this section on such tax.' Thus, the word `tax' appearing in section 6416(b)(2) of the Code must be read as including any interest collected on such tax under the provisions of section 6601(a) of the Code. It follows that the word `overpayment' in section 6416(b)(2) of the Code also includes such interest.

Accordingly, interest on additional gasoline tax, which was assessed as a result of the taxpayer's failure to obtain exemption certificates for tax-free sales of gasoline to municipalities, shall, upon presentment of the required exemption certificates, be credited or refunded as provided by section 6416(b) of the Code.