Important Revenue decision on repairs.
of Internal Revenue has just decided that in section ninety-four, as amended by the act of March 3, imposing a tax of one and three-fifths cents upon cars, engines, carriages, and other articles
repaired, whose value is increased thereby ten per centum, the words "other articles" was meant to include all manufactured articles subject to an excise tax under the several clauses of the ninety-fourth section.
All goods, wares or merchandise, therefore, subject to an excise tax, whenever repaired so as to increase their value ten per centum, will be assessed for the above tax.
The following points are to be considered in determining when a tax accrues in cases of repair: First.
The article repaired.
The amount of value added.
The ratio of such added value to the entire value of the article after having been repaired.
In case any separate portion of an article is supplied anew, that portion is to be taxed just as well in its use for repairing as though used for a new
If a railroad company put a car, engine or boiler into a shop for repairs, all new parts supplied are to be regarded as pertaining to the entire car, engine, boiler, &c., and no tax accrues unless the cost of making repairs equals or exceeds one-eleventh of the value of the car, engine, &c., after the repairs have been made.
But if such repairs increase the value of the whole ten per centum or upwards, or if the cost of making the repairs, including labor and materials, equals one-eleventh of the value of the thing repaired, a tax accrues, and is to be paid on the cost of repairing.
When the article repaired is a unit, though made up of taxable parts, repairs are to be regarded as pertaining to the unit.
If the repairs are upon a ship, the hull, as finished, constitutes the unit.
If an engine, everything pertaining to the engine, excepting the boiler,
which the law provides for taxing separately.
If a car is repaired, the repair pertains to such car as an entirety, including all its parts — the body, the wheels, the axles, &c.
This rule will, in all cases, be observed, unless the owner sends the disjointed parts of an article to the machinist to be repaired and refitted to its original place; then the machinist must report the thing repaired, and the question of liability to tax will depend upon the ratio of increased
value to the entire value of the thing repaired.
The law having prescribed no mode of estimating the increased value of an article repaired for use, without a sale of the same either before or after the repairs were made, the cost of repairing has been assumed by this office as the measure of value on which the tax shall be assessed.