§ 4216 — Definition Of Price

(a) In determining, for the purposes of this chapter, the price for which an article is sold, there shall be included any charge for coverings and containers of whatever nature, and any charge incident to placing the article in condition packed ready for shipment, but there shall be excluded the amount of tax imposed by this chapter, whether or not stated as a separate charge. A transportation, delivery, insurance, installation, or other charge (not required by the foregoing sentence to be included) shall be excluded from the price only if the amount thereof is established to the satisfaction of the Secretary in accordance with the regulations. (1) If an article is— (A) sold at retail, (B) sold on consignment, or (C) sold (otherwise than through an arm’s length transaction) at less than the fair market price, (2) If an article is sold at retail or to a retailer, and if— (A) the manufacturer, producer, or importer of such article regularly sells such articles at retail or to retailers, as the case may be, (B) the manufacturer, producer, or importer of such article regularly sells such articles to one or more wholesale distributors in arm’s length transactions and he establishes that his prices in such cases are determined without regard to any tax benefit under this paragraph, and (C) the transaction is an arm’s length transaction, (3) Except as provided in paragraph (4), for purposes of paragraph (1), if— (A) the manufacturer, producer, or importer of an article regularly sells such article to a distributor which is a member of the same affiliated group of corporations (as defined in section 1504(a)) as the manufacturer, producer, or importer, and (B) such distributor regularly sells such article to one or more independent retailers, but does not regularly sell to wholesale distributors, (4) For purposes of paragraph (1), if— (A) the manufacturer, producer, or importer of an article regularly sells (except for tax-free sales) only to a distributor which is a member of the same affiliated group of corporations (as defined in section 1504(a)) as the manufacturer, producer, or importer, (B) the distributor regularly sells (except for tax-free sales) such article only to retailers, and (C) the normal method of sales for such articles within the industry by manufacturers, producers, or importers is to sell such articles in arm’s-length transactions to distributors, (5) For purposes of paragraphs (1) and (3), the lowest price shall be determined— (A) without requiring that any given percentage of sales be made at that price, and (B) without including any fixed amount to which the purchaser has a right as a result of contractual arrangements existing at the time of the sale. (c) In the case of— (1) a lease (other than a lease to which section 4217(b) applies), (2) a contract for the sale of an article wherein it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments, (3) a conditional sale, or (4) a chattel mortgage arrangement wherein it is provided that the sales price shall be paid in installments, (d) If installment accounts, with respect to payments on which tax is being computed as provided in subsection (c), are sold or otherwise disposed of, then subsection (c) shall not apply with respect to any subsequent payments on such accounts (other than subsequent payments on returned accounts with respect to which credit or refund is allowable by reason of section 6416(b)(5)), but instead— (1) there shall be paid an amount equal to the difference between (A) the tax previously paid on the payments on such installment accounts, and (B) the total tax which would be payable if such installment accounts had not been sold or otherwise disposed of (computed as provided in subsection (c)); except that (2) if any such sale is pursuant to the order of, or subject to the approval of, a court of competent jurisdiction in a bankruptcy or insolvency proceeding, the amount computed under paragraph (1) shall not exceed the sum of the amounts computed by multiplying (A) the proportionate share of the amount for which such accounts are sold which is allocable to each unpaid installment payment by (B) the rate of tax under this chapter in effect on the date such unpaid installment payment is or was due. (1) In determining, for purposes of this chapter, the price for which an article is sold, there shall be excluded a charge for local advertising (as defined in paragraph (4)) to the extent that such charge— (A) does not exceed 5 percent of the price for which the article is sold (as determined under this section by excluding any charge for local advertising), (B) is a separate charge made when the article is sold, and (C) is intended to be refunded to the purchaser or any subsequent vendee in reimbursement of costs incurred for local advertising. (2) In the case of articles upon the sale of which tax was imposed under the same section of this chapter— (A) The sum of (i) the aggregate of the charges for local advertising excluded under paragraph (1), plus (ii) the aggregate of the readjustments for local advertising under section 6416(b)(1) (relating to credits or refunds for price readjustments), shall not exceed (B) 5 percent of the aggregate of the prices (determined under this section by excluding all charges for local advertising) at which such articles were sold in sales on which tax was imposed by such section of this chapter. (3) Except to the extent provided by paragraphs (1) and (2), no charge or expenditure for advertising shall serve, for purposes of this section or section 6416(b)(1), as the basis for an exclusion from, or as a readjustment of, the price of any article. (4) For purposes of this section and section 6416(b)(1), the term “local advertising” means only advertising which— (A) is initiated or obtained by the purchaser or any subsequent vendee, (B) names the article for which the price is determinable under this section and states the location at which such article may be purchased at retail, and (C) is broadcast over a radio station or television station, appears in a newspaper or magazine, or is displayed by means of an outdoor advertising sign or poster.