26 U.S.C. § 4221
§ 4221. Certain tax-free sales
No plain-English explainer yet. Below is the official text. Explainers are being added section by section.
History
Added in 1958 by the Technical Amendments Act of 1958. Last changed November 15, 2021 by the Public Law 117-58.
Every change, newest first (39)
- November 15, 2021Public Law 117-58
- December 20, 2019Further Consolidated Appropriations Act, 2020 (SECURE Act)
- March 23, 2018Consolidated Appropriations Act, 2018
- December 4, 2015Public Law 114-94
- December 19, 2014Tax Increase Prevention Act of 2014
- July 6, 2012Public Law 112-141
- June 29, 2012Public Law 112-140
- March 30, 2012Public Law 112-102
- September 16, 2011Public Law 112-30
- March 30, 2010Public Law 111-152
- August 17, 2006Public Law 109-280
- August 10, 2005Public Law 109-59
- October 22, 2004American Jobs Creation Act of 2004
- July 22, 1998IRS Restructuring and Reform Act of 1998
- June 9, 1998Public Law 105-178
- August 10, 1993Omnibus Budget Reconciliation Act of 1993
- December 18, 1991Public Law 102-240
- November 5, 1990Omnibus Budget Reconciliation Act of 1990
- December 19, 1989Omnibus Budget Reconciliation Act of 1989
- December 22, 1987Omnibus Budget Reconciliation Act of 1987
- April 2, 1987Public Law 100-17
- October 22, 1986Tax Reform Act of 1986
- October 17, 1986Public Law 99-499
- July 18, 1984Deficit Reduction Act of 1984
- January 6, 1983Public Law 97-424
- April 1, 1980Public Law 96-222
- November 9, 1978Public Law 95-618
- November 6, 1978Revenue Act of 1978
- February 10, 1978Public Law 95-227
- October 4, 1976Tax Reform Act of 1976
- December 10, 1971Public Law 92-178
- December 30, 1969Tax Reform Act of 1969
- June 21, 1965Public Law 89-44
- June 29, 1961Public Law 87-61
- July 12, 1960Public Law 86-624
- April 8, 1960Public Law 86-418
- September 21, 1959Public Law 86-344
- June 25, 1959Public Law 86-70
- September 2, 1958Technical Amendments Act of 1958 · added this section
The law as written
Current through Public Law 119-102. Amendment notes omitted.
Structure
Under regulations prescribed by the Secretary, no tax shall be imposed under this chapter (other than under section 4121 or 4081) on the sale by the manufacturer (or under subchapter C of chapter 31 on the first retail sale) of an article—
for use by the purchaser for further manufacture, or for resale by the purchaser to a second purchaser for use by such second purchaser in further manufacture,
for export, or for resale by the purchaser to a second purchaser for export,
for use by the purchaser as supplies for vessels or aircraft,
to a State or local government for the exclusive use of a State or local government,
to a nonprofit educational organization for its exclusive use, or
to a qualified blood collector organization (as defined in section 7701(a)(49)) for such organization’s exclusive use in the collection, storage, or transportation of blood,
but only if such exportation or use is to occur before any other use. Paragraphs (4), (5), and (6) shall not apply to the tax imposed by section 4064. In the case of taxes imposed by section 4051 or 4071, paragraphs (4) and (5) shall not apply on and after October 1, 2028. In the case of the tax imposed by section 4131, paragraphs (3), (4), and (5) shall not apply and paragraph (2) shall apply only if the use of the exported vaccine meets such requirements as the Secretary may by regulations prescribe. In the case of taxes imposed by subchapter C or D, paragraph (6) shall not apply.
Where an article has been sold free of tax under subsection (a)—
for resale by the purchaser to a second purchaser for use by such second purchaser in further manufacture, or
for export, or for resale by the purchaser to a second purchaser for export,
subsection (a) shall cease to apply in respect of such sale of such article unless, within the 6-month period which begins on the date of the sale by the manufacturer (or, if earlier, on the date of shipment by the manufacturer), the manufacturer receives proof that the article has been exported or resold for use in further manufacture.
In the case of any article sold free of tax under this section (other than a sale to which subsection (b) applies), and in the case of any article sold free of tax under section 4053(6), if the manufacturer in good faith accepts a certification by the purchaser that the article will be used in accordance with the applicable provisions of law, no tax shall thereafter be imposed under this chapter in respect of such sale by such manufacturer.
For purposes of this section—
The term “manufacturer” includes a producer or importer of an article, and, in the case of taxes imposed by subchapter C of chapter 31, includes the retailer with respect to the first retail sale.
The term “export” includes shipment to a possession of the United States; and the term “exported” includes shipped to a possession of the United States.
The term “supplies for vessels or aircraft” means fuel supplies, ships’ stores, sea stores, or legitimate equipment on vessels of war of the United States or of any foreign nation, vessels employed in the fisheries or in the whaling business, or vessels actually engaged in foreign trade or trade between the Atlantic and Pacific ports of the United States or between the United States and any of its possessions. For purposes of the preceding sentence, the term “vessels” includes civil aircraft employed in foreign trade or trade between the United States and any of its possessions, and the term “vessels of war of the United States or of any foreign nation” includes aircraft owned by the United States or by any foreign nation and constituting a part of the armed forces thereof.
The term “State or local government” means any State, any political subdivision thereof, or the District of Columbia.
The term “nonprofit educational organization” means an educational organization described in section 170(b)(1)(A)(ii) which is exempt from income tax under section 501(a). The term also includes a school operated as an activity of an organization described in section 501(c)(3) which is exempt from income tax under section 501(a), if such school normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.
An article shall be treated as sold for use in further manufacture if—
such article is sold for use by the purchaser as material in the manufacture or production of, or as a component part of, another article taxable under this chapter to be manufactured or produced by him; or
in the case of gasoline taxable under section 4081, such gasoline is sold for use by the purchaser, for nonfuel purposes, as a material in the manufacture or production of another article to be manufactured or produced by him.
The term “qualified bus” means—
an intercity or local bus, and
a school bus.
The term “intercity or local bus” means any automobile bus which is used predominantly in furnishing (for compensation) passenger land transportation available to the general public if—
such transportation is scheduled and along regular routes, or
the seating capacity of such bus is at least 20 adults (not including the driver).
The term “school bus” means any automobile bus substantially all the use of which is in transporting students and employees of schools. For purposes of the preceding sentence, the term “school” means an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are carried on.
In the case of articles sold for use as supplies for aircraft, the privileges granted under subsection (a)(3) in respect of civil aircraft employed in foreign trade or trade between the United States and any of its possessions, in respect of aircraft registered in a foreign country, shall be allowed only if the Secretary of the Treasury has been advised by the Secretary of Commerce that he has found that such foreign country allows, or will allow, substantially reciprocal privileges in respect of aircraft registered in the United States. If the Secretary of the Treasury is advised by the Secretary of Commerce that he has found that a foreign country has discontinued or will discontinue the allowance of such privileges, the privileges granted under subsection (a)(3) shall not apply thereafter in respect of civil aircraft registered in that foreign country and employed in foreign trade or trade between the United States and any of its possessions.
Under regulations prescribed by the Secretary, no tax shall be imposed under section 4071 on the sale by the manufacturer of a tire if—
such tire is sold for use by the purchaser for sale on or in connection with the sale of another article manufactured or produced by such purchaser; and
such other article is to be sold by such purchaser in a sale which either will satisfy the requirements of paragraph (2), (3), (4), or (5) of subsection (a) for a tax-free sale, or would satisfy such requirements but for the fact that such other article is not subject to tax under this chapter.
Where a tire has been sold free of tax under this paragraph, this paragraph shall cease to apply unless, within the 6-month period which begins on the date of the sale by him (or, if earlier, on the date of the shipment by him), the manufacturer of such tire receives proof that the other article referred to in clause (ii) of subparagraph (A) has been sold in a manner which satisfies the requirements of such clause (ii) (including in the case of a sale for export, proof of export of such other article).
Paragraph (1) of subsection (a) shall not apply with respect to the tax imposed under section 4071 on the sale of a tire.
Under regulations prescribed by the Secretary, the tax imposed by section 4071 shall not apply in the case of tires sold for use by the purchaser on or in connection with a qualified bus.