26 U.S.C. § 4216 — Definition of price

Page 2928 TITLE 26—INTERNAL REVENUE CODE [§ 4191 tax imposed on the sale or transfer of such arti- cles. (c) Small manufacturers, etc. (1) In general The tax imposed by section 4181 shall not apply to any pistol, revolver, or firearm de- scribed in such section if manufactured, pro- duced, or imported by a person who manufac- tures, produces, and imports less than an ag- gregate of 50 of such articles during the cal- endar year. (2) Controlled groups All persons treated as a single employer for purposes of subsection (a) or (b) of section 52 shall be treated as one person for purposes of paragraph (1). (d) Records Notwithstanding the provisions of sections 922(b)(5) and 923(g) of title 18, United States Code, no person holding a Federal license under chapter 44 of title 18, United States Code, shall be required to record the name, address, or other information about the purchaser of shotgun am- munition, ammunition suitable for use only in rifles generally available in commerce, or com- ponent parts for the aforesaid types of ammuni- tion. (Aug. 16, 1954, ch. 736, 68A Stat. 490; Pub. L. 91–128, § 5, Nov. 26, 1969, 83 Stat. 269; Pub. L. 109–59, title XI, § 11131(a), Aug. 10, 2005, 119 Stat. 1959.) Editorial Notes AMENDMENTS 2005—Subsecs. (c), (d). Pub. L. 109–59 added subsec. (c) and redesignated former subsec. (c) as (d). 1969—Subsec. (c). Pub. L. 91–128 added subsec. (c). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2005 AMENDMENT Pub. L. 109–59, title XI, § 11131(b), Aug. 10, 2005, 119 Stat. 1959, provided that: ‘‘(1) IN GENERAL.—The amendments made by this sec- tion [amending this section] shall apply to articles sold by the manufacturer, producer, or importer after Sep- tember 30, 2005. ‘‘(2) NO INFERENCE.—Nothing in the amendments made by this section shall be construed to create any inference with respect to the proper tax treatment of any sales before the effective date of such amend- ments.’’ SHORT TITLE OF 1969 AMENDMENT Pub. L. 91–128, § 1(a), Nov. 26, 1969, 83 Stat. 261, pro- vided that: ‘‘This Act [amending this section and sec- tions 4911, 4912, 4914, 4915, 4919, 4920, 6011, and 6680 of this title and enacting provisions set out as notes under sec- tion 6680 of this title] may be cited as the ‘Interest Equalization Tax Extension Act of 1969’.’’ [Subchapter E—Repealed] Editorial Notes PRIOR PROVISIONS A prior subchapter E consisted of sections 4191, 4192, 4201, and 4211 of this title, prior to repeal by Pub. L. 89–44, title II, § 206, title VII, § 701(a), June 21, 1965, 79 Stat. 140, 155, applicable with respect to articles sold on or after June 22, 1965. Section 4191, act Aug. 16, 1954, ch. 736, 68A Stat. 491, imposed a tax equivalent to 10 percent of the selling price upon over fifty specified office and business ma- chines including adding machines, bookkeeping ma- chines, cash registers, punch card and computing ma- chines, typewriters, and tabulating machines. Section 4192, acts Aug. 16, 1954, ch. 736, 68A Stat. 491; Sept. 2, 1958, Pub. L. 85–859, title I, § 114(a), 72 Stat. 1278, granted an exemption for cash registers used in reg- istering over-the-counter retail sales and for stencil cutting machines. Section 4201, acts Aug. 16, 1954, ch. 736, 68A Stat. 492; Sept. 14, 1960, Pub. L. 86–779, § 9(a), 74 Stat. 1003, im- posed a tax equivalent to 10 percent of the selling price on mechanical pencils, fountain pens, and ballpoint pens and 10 cents on mechanical cigarette lighters. Section 4211, act Aug. 16, 1954, ch. 736, 68A Stat. 492, imposed a tax of 2 cents per 1,000 for matches, except fancy wooden matches, and a tax of 51⁄2 cents per 1,000 on fancy wooden matches. [§ 4191. Repealed. Pub. L. 116–94, div. N, title I, § 501(a), Dec. 20, 2019, 133 Stat. 3118] Section, added Pub. L. 111–152, title I, § 1405(a)(1), Mar. 30, 2010, 124 Stat. 1064; amended Pub. L. 114–113, div. Q, title I, § 174(a), Dec. 18, 2015, 129 Stat. 3071; Pub. L. 115–120, div. D, § 4001(a), Jan. 22, 2018, 132 Stat. 38, im- posed on the sale of any taxable medical device by the manufacturer, producer, or importer a tax equal to 2.3 percent of the price for which so sold. For prior sections 4191, 4192, 4201, and 4211, see Prior Provisions note set out preceding this section. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal applicable to sales after Dec. 31, 2019, see sec- tion 501(d) of Pub. L. 116–94, set out as an Effective Date of 2019 Amendment note under section 4221 of this title. Subchapter F—Special Provisions Applicable to Manufacturers Tax Sec. 4216. Definition of price. 4217. Leases. 4218. Use by manufacturer or importer considered sale. 4219. Application of tax in case of sales by other than manufacturer or importer. [4220 to 4225. Repealed.] Editorial Notes AMENDMENTS 1958—Pub. L. 85–859, title I, §§ 117(d), 119(b)(3), Sept. 2, 1958, 72 Stat. 1281, 1286, substituted ‘‘Leases’’ for ‘‘Lease considered sale’’ in item 4217, and struck out items 4220 to 4225. 1956—Act June 29, 1956, ch. 462, title II, § 207(b), 70 Stat. 392, added item 4226 and redesignated former item 4226 as 4227. § 4216. Definition of price (a) Containers, packing and transportation charges. In determining, for the purposes of this chap- ter, 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 Page 2929 TITLE 26—INTERNAL REVENUE CODE § 4216 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. (b) Constructive sale price (1) In general 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, the tax under this chapter shall (if based on the price for which the article is sold) be com- puted on the price for which such articles are sold, in the ordinary course of trade, by manu- facturers or producers thereof, as determined by the Secretary. In the case of an article sold at retail, the computation under the preceding sentence shall be on whichever of the fol- lowing prices is the lower: (i) the price for which such article is sold, or (ii) the highest price for which such articles are sold to whole- sale distributors, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Secretary. This para- graph shall not apply if paragraph (2) applies. (2) Special rule If an article is sold at retail or to a retailer, and if— (A) the manufacturer, producer, or im- porter of such article regularly sells such ar- ticles at retail or to retailers, as the case may be, (B) the manufacturer, producer, or im- porter of such article regularly sells such ar- ticles to one or more wholesale distributors in arm’s length transactions and he estab- lishes that his prices in such cases are deter- mined without regard to any tax benefit under this paragraph, and (C) the transaction is an arm’s length transaction, the tax under this chapter shall (if based on the price for which the article is sold) be com- puted on whichever of the following prices is the lower: (i) the price for which such article is sold, or (ii) the highest price for which such articles are sold by such manufacturer, pro- ducer, or importer to wholesale distributors (other than special dealers). (3) Constructive sale price in case of certain articles Except as provided in paragraph (4), for pur- poses of paragraph (1), if— (A) the manufacturer, producer, or im- porter of an article regularly sells such arti- cle to a distributor which is a member of the same affiliated group of corporations (as de- fined 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 dis- tributors, the constructive sale price of such article shall be 90 percent of the lowest price for which such distributor regularly sells such ar- ticle in arm’s-length transactions to such independent retailers. The price determined under this paragraph shall not be adjusted for any exclusion (except for the tax imposed on such article) or readjustments under sub- sections (a) and (e) and under section 6416(b)(1). If both this paragraph and para- graph (4) apply with respect to an article, the constructive sale price for such article shall be the lower of the constructive sale price deter- mined under this paragraph or paragraph (4). (4) Constructive sale price in case of certain other articles For purposes of paragraph (1), if— (A) the manufacturer, producer, or im- porter 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 retail- ers, and (C) the normal method of sales for such ar- ticles within the industry by manufacturers, producers, or importers is to sell such arti- cles in arm’s-length transactions to distribu- tors, the constructive sale price for such article shall be the price at which such article is sold to retailers by the distributor, reduced by a percentage of such price equal to the percent- age which (i) the difference between the price for which comparable articles are sold to wholesale distributors, in the ordinary course of trade, by manufacturers or producers there- of, and the price at which such wholesale dis- tributors in arm’s-length transactions sell such comparable articles to retailers, is of (ii) the price at which such wholesale distributors in arm’s-length transactions sell such com- parable articles to retailers. The price deter- mined under this paragraph shall not be ad- justed for any exclusion (except for the tax imposed on such article) or readjustment under subsections (a) and (e) and under section 6416(b)(1). (5) Definition of lowest price For purposes of paragraphs (1) and (3), the lowest price shall be determined— (A) without requiring that any given per- centage 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) Partial payments In the case of— (1) a lease (other than a lease to which sec- tion 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 notwith- standing 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, Page 2930 TITLE 26—INTERNAL REVENUE CODE § 4216 there shall be paid upon each payment with re- spect to the article a percentage of such pay- ment equal to the rate of tax in effect on the date such payment is due. (d) Sales of installment accounts If installment accounts, with respect to pay- ments on which tax is being computed as pro- vided in subsection (c), are sold or otherwise dis- posed 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 ac- counts, 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 in- solvency 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 allo- cable 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. The sum of the amounts payable under this sub- section and subsection (c) in respect of the sale of any article shall not exceed the total tax. (e) Exclusion of local advertising charge from sale price (1) Exclusion 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 ar- ticle is sold, and (C) is intended to be refunded to the pur- chaser or any subsequent vendee in reim- bursement of costs incurred for local adver- tising. In the case of any such charge (or portion thereof) which is not so refunded before the first day of the fifth calendar month following the calendar year during which the article was sold, the exclusion provided by the preceding sentence shall cease to apply as of such first day. (2) Aggregate amount which may be excluded 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 re- funds for price readjustments), shall not ex- ceed (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. The preceding sentence shall be applied to each manufacturer, producer, and importer as of the close of each calendar quarter, taking into account the items specified in subpara- graphs (A) and (B) for such calendar quarter and preceding calendar quarters in the same calendar year. (3) No adjustment for other advertising charges Except to the extent provided by paragraphs (1) and (2), no charge or expenditure for adver- tising shall serve, for purposes of this section or section 6416(b)(1), as the basis for an exclu- sion from, or as a readjustment of, the price of any article. (4) Local advertising defined 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 pur- chaser 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 tel- evision station, appears in a newspaper or magazine, or is displayed by means of an outdoor advertising sign or poster. (Aug. 16, 1954, ch. 736, 68A Stat. 493; Aug. 9, 1955, ch. 677, §§ 1, 2, 69 Stat. 613; Pub. L. 85–859, title I, §§ 115, 116, 117(b), Sept. 2, 1958, 72 Stat. 1279–1281; Pub. L. 86–781, § 1, Sept. 14, 1960, 74 Stat. 1017; Pub. L. 87–770, § 2(a), Oct. 9, 1962, 76 Stat. 768; Pub. L. 87–858, § 1(a), Oct. 23, 1962, 76 Stat. 1134; Pub. L. 89–44, title II, §§ 207(a), (b), 208(a), (b), title VIII, § 801(b), June 21, 1965, 79 Stat. 140, 141, 158; Pub. L. 91–172, title IX, § 932(a), Dec. 30, 1969, 83 Stat. 725; Pub. L. 91–614, title III, § 301(a), (b), Dec. 31, 1970, 84 Stat. 1844; Pub. L. 92–178, title IV, § 401(g)(4), Dec. 10, 1971, 85 Stat. 533; Pub. L. 94–455, title XIX, §§ 1904(a)(2), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1811, 1834; Pub. L. 95–458, § 1(a), (b), Oct. 14, 1978, 92 Stat. 1255; Pub. L. 98–369, div. A, title VII, § 735(c)(6), July 18, 1984, 98 Stat. 982.) Editorial Notes AMENDMENTS 1984—Subsec. (b)(1). Pub. L. 98–369, § 735(c)(6)(A), in provisions following subpar. (C) struck out ‘‘(other than an article the sale of which is taxable under sec- tion 4061(a))’’ in second sentence, before ‘‘the computa- tion under the preceding sentence’’, and struck out pro- vision that in the case of an article the sale of which is taxable under section 4061(a) and which is sold at re- tail, the computation under the first sentence of this paragraph shall be a percentage (not greater than 100 percent) of the actual selling price based on the highest price for which such articles are sold by manufacturers and producers in the ordinary course of trade (deter- Page 2931 TITLE 26—INTERNAL REVENUE CODE § 4216 mined without regard to any individual manufacturer’s or producer’s cost). Subsec. (b)(2)(B) to (D). Pub. L. 98–369, § 735(c)(6)(B), inserted ‘‘and’’ at end of subpar. (B), redesignated sub- par. (D) as (C), and struck out former subpar. (C) which related to articles upon which tax is imposed under sec- tion 4061(a) of this title. Subsec. (b)(3). Pub. L. 98–369, § 735(c)(6)(D), substituted ‘‘paragraph (4)’’ for ‘‘paragraphs (4) and (5)’’. Subsec. (b)(5), (6). Pub. L. 98–369, § 735(c)(6)(C), (E), re- designated par. (6) as par. (5), substituted ‘‘(1) and (3)’’ for ‘‘(1), (3) and (5)’’, and struck out former par. (5) which related to constructive sale price in the case of automobiles, trucks, etc. Subsec. (f). Pub. L. 98–369, § 735(c)(6)(F), struck out subsec. (f) which related to certain trucks incor- porating used components. 1978—Subsec. (b)(1). Pub. L. 95–458 substituted ‘‘arti- cle sold at retail (other than an article the sale of which is taxable under section 4061(a)), the computa- tion’’ for ‘‘article sold at retail, the computation’’ and inserted provision requiring the computation of tax on articles taxable under section 4061(a) which are sold at retail to be a percentage, but not greater than 100% of the actual selling price based on the highest price for which the articles are sold by manufacturers and pro- ducers in the ordinary course of trade, determined without regard to individual manufacturer’s or pro- ducer’s cost. 1976—Subsec. (a). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Secretary’’. Subsec. (b). Pub. L. 94–455, §§ 1904(a)(2)(B), 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Sec- retary’’ in two places in par. (1), and substituted ‘‘sub- sections (a) and (e)’’ for ‘‘subsections (a) and (f)’’ in pars. (3), (4), and (5), after ‘‘or readjustments under’’. Subsecs. (d) to (g). Pub. L. 94–455, § 1904(a)(2)(A), re- designated subsecs. (e) to (g) as (d) to (f), respectively. 1971—Subsec. (b)(2)(C), (5). Pub. L. 92–178, § 401(g)(4)(A), substituted ‘‘(relating to trucks, buses, tractor, etc.)’’ for ‘‘(relating to automobiles, trucks, etc.)’’. Subsec. (g). Pub. L. 92–178, § 401(g)(4)(B), inserted ref- erence to ‘‘tractors,’’ after ‘‘buses,’’. 1970—Subsec. (b)(3). Pub. L. 91–614, § 301(b), sub- stituted ‘‘Constructive sale price’’ for ‘‘Fair market price’’ in heading, ‘‘constructive sale price’’ for ‘‘fair market price’’ three places in text, substituted ‘‘para- graphs (4) and (5)’’ for ‘‘paragraph (4)’’ and ‘‘paragraph (1)’’ for ‘‘paragraph (1)(C)’’. Subsec. (b)(4). Pub. L. 91–614, § 301(b)(2), substituted ‘‘Constructive sale price’’ for ‘‘Fair market price’’ in heading, ‘‘constructive sale price’’ for ‘‘fair market price’’ in text, and ‘‘paragraph (1)’’ for ‘‘paragraph (1)(C)’’. Subsec. (b)(5), (6). Pub. L. 91–614, § 301(a), added pars. (5) and (6). 1969—Subsec. (b)(3), (4). Pub. L. 91–172 added pars. (3) and (4). 1965—Subsec. (b)(2). Pub. L. 89–44, § 208(a), struck out reference to special dealers and to articles upon which tax is imposed under section 4191 or 4211 of this title. Subsec. (b)(3). Pub. L. 89–44, § 208(b), struck out par. (3) which related to special dealers. Subsec. (c). Pub. L. 89–44, § 207(a), struck out ‘‘that portion of the total tax which is proportionate to the portion of the total amount to be paid represented by such payment’’ in text following par. (4) and inserted in lieu thereof ‘‘a percentage of such payment equal to the rate of tax in effect on the date such payment is due’’. Subsec. (e)(1). Pub. L. 89–44, § 207(b)(1), substituted ‘‘total tax which would be payable if such installment accounts had not been sold or otherwise disposed of (computed as provided in subsection (c)) for ‘‘total tax’’. Subsec. (e)(2). Pub. L. 89–44, § 207(b)(2), substituted, as factor (A) in the formula for computing the maximum amount, the proportionate share of the amount for which such accounts are sold which is allocable to each unpaid installment payment for the amount for which such accounts are sold, and, as factor (B) in the for- mula, the rate of tax on the date that such unpaid in- stallment payment is or was due for the rate of tax which applied on the day on which the transaction giv- ing rise to such installment accounts took place. Subsec. (g). Pub. L. 89–44, § 801(b), added subsec. (g). 1962—Subsec. (b)(2)(C). Pub. L. 87–858 inserted ‘‘in the case of articles upon which tax is imposed under sec- tion 4061(a) (relating to automobiles, trucks, etc.), 4191 (relating to business machines), or 4211 (relating to matches),’’ before ‘‘the normal method’’. Subsec. (f)(4)(C). Pub. L. 87–770 substituted ‘‘, appears in a newspaper or magazine, or is displayed by means of an outdoor advertising sign or poster’’ for ‘‘or ap- pears in a newspaper’’. 1960—Subsec. (f). Pub. L. 86–781 added subsec. (f). 1958—Subsec. (b). Pub. L. 85–859, § 115, inserted provi- sions in par. (1) requiring, in the case of an article sold at retail, the computation to be on either the price for which the article is sold, or the highest price for which the articles are sold to wholesale distributors, in the ordinary course of trade, by manufacturers or pro- ducers thereof, whichever is lower, and added pars. (2) and (3). Subsec. (c). Pub. L. 85–859, § 117(b), substituted ‘‘sec- tion 4217(b)’’ for ‘‘subsection (d)’’. Subsec. (d). Pub. L. 85–859, § 117(b), repealed subsec. (d) which related to tax on leases of certain trailers. Subsec. (e). Pub. L. 85–859, § 116, added subsec. (e). 1955—Subsec. (c)(1). Act Aug. 9, 1955, § 1, inserted ‘‘(other than a lease to which subsection (d) applies)’’. Subsec. (d). Act Aug. 9, 1955, § 2, added subsec. (d). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98–369 effective, except as oth- erwise provided, as if included in the provisions of the Highway Revenue Act of 1982, title V of Pub. L. 97–424, to which such amendment relates, see section 736 of Pub. L. 98–369, set out as a note under section 4051 of this title. EFFECTIVE DATE OF 1978 AMENDMENT Pub. L. 95–458, § 1(c), Oct. 14, 1978, 92 Stat. 1255, pro- vided that: ‘‘The amendments made by this section [amending this section] shall apply to articles sold by the manufacturer or producer on or after the first day of the first calendar quarter beginning 30 days or more after the date of enactment of this Act [Oct. 14, 1978].’’ EFFECTIVE DATE OF 1976 AMENDMENT Amendment by section 1904(a)(2) of Pub. L. 94–455 ef- fective on first day of first month which begins more than 90 days after Oct. 4, 1976, see section 1904(d) of Pub. L. 94–455, set out as a note under section 4041 of this title. EFFECTIVE DATE OF 1971 AMENDMENT Amendment by Pub. L. 92–178 applicable with respect to articles sold on or after the day after Dec. 10, 1971, see section 401(h)(1) of Pub. L. 92–178, set out as a note under section 4061 of this title. EFFECTIVE DATE OF 1970 AMENDMENT Pub. L. 91–614, title III, § 301(c), Dec. 31, 1970, 84 Stat. 1844, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘The amendments made by this section [amending this section] shall apply with respect to articles sold after December 31, 1970; except that section 4216(b)(6) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by subsection (a)) shall also apply to (1) the application of paragraph (1) of such section 4216(b) to articles sold after June 30, 1962, and before January 1, 1971, and (2) the application of paragraph (3) of such section 4216(b) to articles sold after December 31, 1969, and before January 1, 1971.’’ EFFECTIVE DATE OF 1969 AMENDMENT Pub. L. 91–172, title IX, § 932(b), Dec. 30, 1969, 83 Stat. 725, provided that: ‘‘The amendment made by sub- Page 2932 TITLE 26—INTERNAL REVENUE CODE § 4217 section (a) [amending this section] shall apply with re- spect to articles sold after December 31, 1969.’’ EFFECTIVE DATE OF 1965 AMENDMENT Amendment by section 207(a), (b) of Pub. L. 89–44 ef- fective June 22, 1965, and amendment by section 208 of Pub. L. 89–44 applicable with respect to articles sold on or after June 22, 1965, except insofar as such amend- ments related to the taxes imposed by sections 4061(b), 4091, or 4131 and, as to such taxes, applicable with re- spect to articles sold on or after January 1, 1966, see section 701(a) of Pub. L. 89–44, set out as a note under section 4161 of this title. Pub. L. 89–44, title VIII, § 801(e), June 21, 1965, 79 Stat. 158, provided that: ‘‘The amendments made by sub- sections (a), (b), and (d) [amending this section and sec- tions 4063, 4221, and 6416 of this title] shall apply with respect to articles sold on or after the day after the date of the enactment of this Act [June 21, 1965]. The amendment made by subsection (c) [amending section 4221 of this title] shall apply with respect to articles sold on or after January 1, 1965.’’ EFFECTIVE DATE OF 1962 AMENDMENTS Pub. L. 87–858, § 1(b), Oct. 23, 1962, 76 Stat. 1134, pro- vided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply with respect to ar- ticles sold by the manufacturer, producer, or importer on or after October 1, 1962.’’ Pub. L. 87–770, § 2(b), Oct. 9, 1962, 76 Stat. 768, provided that: ‘‘The amendment made by subsection (a) [amend- ing this section] shall apply with respect to articles sold on or after the first day of the first calendar quar- ter beginning more than 20 days after the date of the enactment of this Act [Oct. 9, 1962].’’ EFFECTIVE DATE OF 1960 AMENDMENT Pub. L. 86–781, § 3, Sept. 14, 1960, 74 Stat. 1018, provided that: ‘‘The amendments made by this Act [amending this section and section 6416 of this title] shall apply with respect to articles sold on or after the first day of the first calendar quarter beginning more than twenty days after the date of the enactment of this Act [Sept. 14, 1960].’’ EFFECTIVE DATE OF 1958 AMENDMENT Amendment by Pub. L. 85–859 effective on first day of first calendar quarter which begins more than 60 days after Sept. 2, 1958, see section 1(c) of Pub. L. 85–859, Sept. 2, 1958, 72 Stat. 1275. EFFECTIVE DATE OF 1955 AMENDMENT Act Aug. 9, 1955, ch. 677, § 4, 69 Stat. 614, as amended by act Oct. 22, 1986, Pub. L. 99–514, § 2, 100 Stat. 2095, provided that: ‘‘The amendments made by subsection (a) [probably should refer to amendments made by sec- tions 1 to 3 of act Aug. 9, 1955, amending this section and section 4217 of this title] shall take effect on the first day of the first month which begins more than 10 days after the date of the enactment of this act [Aug. 9, 1955]. In the application of section 4216(d) of the In- ternal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by this Act) to any article which has been leased before the effective date specified in the preceding sen- tence, under regulations prescribed by the Secretary of the Treasury or his delegate— ‘‘(1) the fair market value of such article shall be the fair market value determined as of such effective date; ‘‘(2) only payments under a lease received on or after such effective date shall be considered in deter- mining when the total tax (as defined in such section 4216(d)) has been paid; ‘‘(3) any lease existing on such effective date, or if there is none, the first lease entered into after such effective date, shall be considered an initial lease (ex- cept that fair market value shall be determined as provided in paragraph (1) of this sentence); and ‘‘(4) any lease existing on such effective date shall be considered as having been entered into on such date.’’ § 4217. Leases (a) Lease considered as sale For purposes of this chapter, the lease of an article (including any renewal or any extension of a lease or any subsequent lease of such arti- cle) by the manufacturer, producer, or importer shall be considered a sale of such article. (b) Limitation on tax In the case of any lease described in sub- section (a) of an article taxable under this chap- ter, if the tax under this chapter is based on the price for which such articles are sold, there shall be paid on each lease payment with respect to such article a percentage of such payment equal to the rate of tax in effect on the date of such payment, until the total of the tax payments under such lease and any prior lease to which this subsection applies equals the total tax. (c) Definition of total tax For purposes of this section, the term ‘‘total tax’’ means— (1) except as provided in paragraph (2), the tax computed on the constructive sale price for such article which would be determined under section 4216(b) if such article were sold at retail on the date of the first lease to which subsection (b) applies; or (2) if the first lease to which subsection (b) applies is not the first lease of the article, the tax computed on the fair market value of such article on the date of the first lease to which subsection (b) applies. Any such computation of tax shall be made at the applicable rate specified in this chapter in effect on the date of the first lease to which sub- section (b) applies. (d) Special rules (1) Lessor must also be engaged in selling Subsection (b) shall not apply to any lease of an article unless at the time of making the lease, or any prior lease of such article to which subsection (b) applies, the person mak- ing the lease or prior lease was also engaged in the business of selling in arm’s length trans- actions the same type and model of article. (2) Sale before total tax becomes payable If the taxpayer sells an article before the total tax has become payable, then the tax payable on such sale shall be whichever of the following is the smaller: (A) the difference between (i) the tax im- posed on lease payments under leases of such article to which subsection (b) applies, and (ii) the total tax, or (B) a tax computed, at the rate in effect on the date of the sale, on the price for which the article is sold. For purposes of subparagraph (B), if the sale is at arm’s length, section 4216(b) shall not apply. (3) Sale after total tax has become payable If the taxpayer sells an article after the total tax has become payable, no tax shall be imposed under this chapter on such sale.