nation" includes aircraft owned by the United States or by any foreign nation and constituting a part of the armed forces thereof.

(4) State or local government.-The term "State or local government" means any State, Alaska, Hawaii, the District of Columbia, or any political subdivision of any of the foregoing.

(5) Nonprofit educational organization.-For definition of the term "nonprofit educational organization" see § 148.1-4(b) of the regulations in this part.

(6) Sold for use in further manufacture.-An article shall be treated as sold for use in further manufacture if—

(i) such article (other than an article referred to in subdivision (ii)) 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 chapter 32 to be manufactured or produced by him; or

(ii) in the case of an automobile part or accessory taxable under section 4061 (b), a radio or television component taxable under section 4141, or a camera lens taxable under section 4171, such article is sold for use by the purchaser as material in the manufacture or production of, or as a component part of, any other article (taxable or nontexable) to be manufactured or produced by him.

(e) Temporary registration (1) Prior registration.-Any person who has been issued a certificate of registry before January 1, 1959, which is still in effect (i) authorizing him either to sell or purchase articles tax free for use in further manufacture of other articles, or for resale for such use, or (ii) as a producer or importer of gasoline or manufacturer or producer of lubricating oil, may, on and after January 1, 1959, and until the temporary rules set forth in this section are superseded by subsequent regulations, use such registration for tax-free sales and purchases as provided by this section.

(2) Other temporary registration.-Any person who is eligible to sell or purchase articles tax free as provided in paragraph (b) of this section and who does not have a prior certificate of registry as referred to in subparagraph (1) of this paragraph may, on and after January 1, 1959, and until the temporary rules set forth in this section are superseded by permanent regulations, make such tax-free sales or purchases in accordance with the following procedure. Such person shall prior to making a tax-free purchase or sale address a communication to the district director for the district in which is located his principal place of business (or if he has no principal place of business in the United States, with the Director of International Operations, Internal Revenue Service, Washington, D. C.) setting forth: (i) his name, or trade name if one is used, and address; (ii) the nature of the business (manufacturer, exporter, reseller for further manufacture, or nonprofit educational organization, etc.); and (iii) a general description of the types of tax-free sales or purchases intended to be made. In the case of a religious institution (other than a church) and a nonprofit educational organization, additional information shall be furnished showing that the institu tion or organization is exempt from income tax as an institution or organization described in section 501 (c) (3) of the Internal Revenue Code (or the corresponding provisions of prior revenue laws.) Upon the filing of this information with the district director, the seller or

purchaser, as the case may be, shall be considered to be temporarily registered for purposes of selling or purchasing articles tax free as indicated in paragraph (b) of this section.

(f) Evidence of tax-free sale.-The purchaser shall note on the purchase order or other document furnished to the seller by the purchaser the exempt purpose for which the article or articles are being purchased and the registration number of the purchaser as provided in subparagraph (1) of paragraph (e) of this section, or if the purchaser has temporarily registered as provided in subparagraph (2) of paragraph (e) of this section, the date of such registration and the district director with whom registered.

(g) Failure to register.-If either the seller or purchaser is not registered as provided in paragraph (e) of this section, tax-free sale for any of the purposes specified in paragraph (b) of this section may not be made, except as indicated in paragraph (1) of this section. Where tax is paid but the article is used or resold for use for an exempt purpose, a claim for refund may be filed on Form 843, or credit taken on a subsequent return, in accordance with the provisions of section 6402 (a) or 6416, as the case may be.

(h) Duty of seller to ascertain use of registration or exemption certificate.-A manufacturer or reseller making a sale for a tax-free purpose as provided by this section must use reasonable diligence to satisfy himself that the tax-free sale is warranted by law. If the manufacturer has knowledge at the time of his sale that the article sold by him is not intended for use or resale as indicated by the purchaser, the manufacturer is liable for the tax and is not relieved of liability by reason of the registration of the purchaser or the furnishing of an exemption certificate or statement by the purchaser. (i) Exceptions to the requirement for registration (1) State and local governments.-A State or local government purchasing articles direct from the manufacturer for its exclusive use may, but is not required to, register as provided in this section of the regulations. To establish the right to sell articles tax free to a State or local government which is not registered, the manufacturer must comply with the provisions of § 314.24 of Regulations 44 (26 CFR (1939) Part 314) and § 316.24 of Regulation 46 (26 CFR (1939) Part 316), as prescribed under and made applicable to the Internal Revenue Code of 1954 by Treasury Decision 6091, 19 F. R. 5167, August 17, 1954.

(2) Sales or resales for export to foreign purchaser.-In the case of sales for export or for resale for export, where the first purchaser or the second purchaser is located in a foreign country or possession of the United States, such purchaser is not required to register as provided in paragraph (e) of this section. To establish the right to sell articles tax free for export to a purchaser who is not registered and who is located in a foreign country or a possession of the United States, the manufacturer must obtain from such purchaser the information required in § 314.25 of Regulations 44 (26 CFR (1939) Part 314) and 316.25 of Regulations 46 (26 CFR (1939) Part 316). For requirements as to proof of exportation see section 4221 (b).

(3) Sales of mechanical pencils, fountain pens, and ball point pens for export.-A manufacturer of mechanical pencils, fountain pens, and ball point pens and a purchaser of these articles may not

register under the provisions of these regulations in order to sell or purchase these articles tax free for export or for resale for export. To establish the right to sell mechanical pencils, fountain pens, and ball point pens tax free for export or for resale by the purchaser to a second purchaser for export, the manufacturer must comply with the provisions of § 316.25 of Regulations 46 (26 CFR (1939) Part 316). For requirements as to proof of exportation see section 4221(b).

(4) United States.-The registration requirements of this section do not apply to purchases and sales by the United States. The United States or any of its agencies or instrumentalities may purchase and sell taxable articles for any of the exempt purposes specified in paragraph (b) of this section provided the purchase order or other document relating to such purchases clearly indicates that the articles are being purchased tax free as authorized by chapter 32 of the Code. § 148.14 TAX-FREE SALES OR SERVICES TO CERTAIN NONPROFIT EDUCATIONAL ORGANIZATIONS-(a) In general.-Sales to, or facilities or services furnished, a nonprofit educational organization, as defined paragraph (b), are not subject to the tax imposed by:

in

(1) chapter 31 of the Internal Revenue Code of 1954, relating

to retailers excise taxes.

(2) chapter 32 of the Internal Revenue Code of 1954, relating to manufacturers excise taxes,

(3) section 4251 of the Internal Revenue Code of 1954, relating to the tax on communication services or facilities, or

(4) section 4261 of the Internal Revenue Code of 1954, relating to the tax imposed upon the transportation of persons. (b) Definition of nonprofit educational organization. The term "nonprofit educational organization" means an organization exempt from income tax under section 501 (a) of the Internal Revenue Code of 1954 whose primary function is the presentation of formal instruction and which normally maintains a regular faculty and curriculm' and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. 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), provided such school normally maintains a regular faculty and curriculm and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.

(c) Retailers excise taxes (1) Exemption.-Section 4057 of the Code provides an exemption from the retailers excise tax with respect to the sale after December 31, 1958, of any article, including liquid fuel referred to in section 4041 of the Code, to a nonprofit educational organization, as defined in paragraph (b), for its exclusive use. In addition section 4057 provides an exemption from the tax on the use of liquid fuel imposed by section 4041 with respect to the use after such date by a nonprofit educational organization of such liquid fuel. In the case of a school operated as an activity of an organization described in section 501 (c) (3), referred to in paragraph (b) of this section, the sale must be for the exclusive use of such school, or in the case of liquid fuel, such liquid fuel must be used by such school.

(2) Evidence required to establish tax-free sales to nonprofit educational organization; general rule-(i) Except as provided in subparagraph (3) of this paragraph, to establish the right to exemption under section 4057, the retailer must obtain from the purchaser and retain in his possession a properly executed exemption certificate as set forth in paragraph (h)(1). Such certificate shall show that the organization has received a determination letter from a district director or a ruling from the Commissioner holding the organization to be exempt from income tax as an organization described in section 501(c)(3) or that it has received such determination letter or ruling under the corresponding provisions of prior revenue laws. The exemption certificate must also show the date of such determination letter or ruling and that such determination letter or ruling is still in effect and has not been withdrawn or revoked. Unless exemption from income tax has been established by such a determination letter or ruling, the retailer does not have the right to make tax-free sales. The organization, in order to enable the retailer to establish his right to sell tax free, shall apply to the district director for the district in which its principal office is located for a determination of its status. Application for a determination should be made by filing Form 1023 with such district director. Copies of the form and instructions as to the appropriate procedure to be followed in filing it may be obtained from the appropriate district director.

(ii) The exemption certificate must also include a statement that the organization (or the school operated as an activity of an organization which has such a determination letter or ruling) 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.

(3) Evidence required to establish tax-free sales to a school operated as an activity of a church, parish, or other religious body.—(i) In the case of sales to a school operated as an activity of a church, parish, or other religious body, to establish the right to exemption under section 4057 the retailer must obtain from the purchaser and retain in his possession a properly executed exemption certificate as set forth in paragraph (h)(2). Such certificate shall show that the purchaser is either

(a) A school operated as an activity of a church, parish, or other religious body within the meaning of section 503(b)(1);

or

(b) A church, parish, or other religious body within the meaning of section 503 (b) (1) which operates a school as one of its activities,

and that the purchase is for the exclusive use of that school.

(ii) The exemption certificate must also include a statement that 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.

(4) Frequency of certificates.-Where only occasional sales are made by a retailer to a nonprofit educational organization, as defined in paragraph (b) of this section, a separate exemption certificate

should be furnished for each order. However, where sales by the retailer to the educational organization are regularly or frequently made, a certificate covering all orders for a specified period not to exceed 4 calendar quarters will be acceptable. Such certificate and proper records of invoices, orders, etc., relative to tax-free sales must be readily accessible for inspection by internal revenue officers and retained as provided in section 6001 of the Code and the regulations thereunder.

(5) Exemption certificate.—(i) For form of certificates for exemption from retailers excise taxes for use by a nonprofit educational organization other than a school operated as an activity of a church, parish, or other religious body, see paragraph (h) (1) of this section.

(ii) For form of certificates for exemptions from retailers excise taxes for use by a school operated as an activity of a church, parish, or other religious body, see paragraph (h) (2) of this section.

(6) Prima facie evidence of exempt use.-In the absence of circumstances indicating a different use, the exemption certificate procured by the retailer from the purchasing nonprofit educational organization will be acceptable as prima facie evidence that the article is purchased for the exclusive use of such organization.

(7) Exemption certificate not obtained prior to filing of retailer's excise tax return.-If the sale is otherwise exempt but the exemption certificate is not obtained prior to the time the retailer files a return covering taxes due for the period in which the sale was made, the retailer must include the tax on such sale in his return for that period. However, if the certificate is later obtained, a credit may be taken on a subsequent return or a claim for refund of the tax paid on such sale may be filed on Form 843, within the period of limitation prescribed by section 6511(b) of the Code and § 301.6511(b)-1.

(d) Manufacturers excise taxes-(1) Exemption.-Section 4221 (a) (5) of the Code provides an exemption from the manufacturers excise tax with respect to the sale after December 31, 1958 of an article by the manufacturer, producer, or importer thereof to certain nonprofit educational organizations, as defined in paragraph (b) of this section, for their exclusive use. However, the exemption authorized by that section does not apply with respect to the sale of any article unless both the manufacturer, producer, or importer and the nonprofit educational organization are registered as provided in § 148.1-3 of these temporary rules. See such section of these temporary rules for the requirements relating to the tax-free sale of articles subject to the manufacturers excise tax to a non-profit educational organization for its exclusive use.

(e) Communication services or facilities furnished to nonprofit educational organizations (1) Exemption.-Under the provisions of section 4294 (a) of the Code, amounts paid after December 31, 1958, for communication services or facilities furnished to a nonprofit educational organization, as defined in paragraph (b) of this section, are exempt from the tax imposed by section 4251, if such amounts are paid by such organization. In the case of a school operated as an activity of an organization described in section 501(c)(3), which is exempt from income tax, the exemption from the communications tax only