Opinion ID: 308206
Heading Depth: 1
Heading Rank: 1

Heading: Excise Taxes on Porsches Imported by Hoffman-Porsche and

Text: 3 Mercedes Imported by Eastern and Sold at Retail by 4 Hoffman Motor. 5 Hoffman Motor was both a retailer and an importer. It had a New York City retail showroom. In the case of Porsche and Mercedes Benz automobiles, Hoffman acted as a retailer but did not import directly. Rather, when a retail customer ordered a Porsche or a Mercedes from it, Hoffman Motor would then purchase a car from Hoffman-Porsche or Eastern, as the case might be. No New York City sales tax would be paid on that purchase although title passed and a consideration was received. Later Hoffman Motor would sell the car to the retail customer at a price including the New York City sales tax 1 and the federal excise tax based upon the usual wholesale price at which such cars were sold by Hoffman-Porsche or Eastern to unrelated dealers. Hoffman Motor's only compensation for the transfer was $5.00 per car for clerical purposes. Hoffman-Porsche or Eastern paid salesmen's commissions; sales, income and gross receipts taxes; excise taxes; and a proportionate share of the Hoffman Motor showroom expenses. Taxpayer contends that the transfer from Hoffman-Porsche or Eastern to Hoffman Motor was merely a paper transaction and not a wholesale sale, done in this form (i. e., by having Hoffman Motor sell to the retail customer) to avoid New York's legal requirement that each licensed auto retailer maintain a separate showroom. Taxpayer also claims that in the case of Porsches it was necessary to do business with a subsidiary as importer to satisfy Porsche's requirement that Porsche be included in the name of the importer. 6 IRS and the court below found that there was a sale at wholesale from Hoffman-Porsche or Eastern to Hoffman Motor, subject to excise tax under Sec. 4061(a)(2) of the 1954 Code 2 on the basis of the actual sales price charged by Hoffman-Porsche to Hoffman Motor. Taxpayer argues that since the transaction was purely a paper one it should not be treated as a wholesale sale so that the tax should be based on a constructive sales price under Sec. 4216 of the 1954 Code 3 and under Treas.Reg. Sec. 316.15(c) (1940). 4 In the sample Porsche sale agreed upon below by the parties as typical the average wholesale dealer's price was $3,031.82 (the price at which Hoffman-Porsche sold to dealers other than Hoffman Motor) and the actual price charged by Hoffman-Porsche to Hoffman Motor was $3,646.82. Naturally under taxpayer's theory-based on the argument that we should look through form to substance-the lower price is the one on which the excise tax should be based. In the same case the excise tax at 10 per cent of $3,031.82 was $303.18 which, added to the price to Hoffman Motor, made a retail selling price of $3,950 in addition to which the customer paid a $67.50 New York City sales tax.