SECTION 5. SAFE HARBOR

METHODS

.01 Retail sales facility safe harbor method . A motor vehicle dealership may treat its entire sales facility from which it normally and routinely conducts on-site sales to retail customers, including any vehicle lot that is an integral part of its sales facility and that is routinely visited by retail customers, as a retail sales facility under § 1.263A–3(c)(5)(ii)(B). A motor vehicle dealership using this retail sales facility safe harbor method is not required to capitalize handling and storage costs incurred at its retail sales facility.

.02 Reseller without production activi- ties safe harbor method . A motor vehicle dealership may treat itself as a reseller without production activities for purposes of § 1.263A–3. For purposes of this revenue procedure, activities that a motor vehicle dealership, or a contractor, perform on dealership-owned vehicles and customer-owned vehicles are handling activities under §1.263A–3(c)(4), but the costs of these handling activities, other than the cost of vehicle parts, are not required to be capitalized to the extent incurred at the motor vehicle dealership’s retail sales facility. A motor vehicle dealership must capitalize the cost of vehicle parts used on dealership-owned vehicles as an acquisition cost of its vehicles, whether the vehicle parts are acquired directly by the dealership or indirectly through a contractor. See §§ 1.471–3 and 1.263A–3(c)(1). A motor vehicle dealership using the reseller without production activities safe harbor method may use the simplified resale method under § 1.263A–3(d) for its vehicles and other eligible property.

and storage costs incurred at a retail sales facility. §§ 1.263A–3(c)(4)(i) and (c)(5).

.03 Handling costs include the costs of processing, assembling, repackaging, transporting, and other similar activities that do not come within the meaning of the term produce as defined in § 1.263A–2(a)(1). § 1.263A–3(c)(4).

.04 Section 1.263A–3(c)(5)(ii)(B) defines a retail sales facility as a facility where a taxpayer sells merchandise exclusively to retail customers in on-site sales. For purposes of § 1.263A–3(c)(5)(ii)(B), a retail sales facility includes those portions of any specific retail site (i) that are customarily associated with and are an integral part of the operations of that retail site; (ii) that are generally open each business day exclusively to retail customers; (iii) on or in which retail customers normally and routinely shop to select specific items of merchandise; and (iv) that are adjacent to or in immediate proximity to other portions of the specific retail site.

.05 As explained in the example in § 1.263A–3(c)(5)(ii)(B)(2), two lots of an automobile dealership physically separated by an alley or an access road are generally considered one retail sales facility, provided customers routinely shop on both of the lots to select the specific automobiles that they wish to acquire.

.06 Section 1.263A–3(c)(5)(ii)(E) defines a retail customer as the final purchaser of the merchandise.

.07 Section 263A(i) provides that the Treasury Department will prescribe regulations as may be necessary or appropriate to carry out the purposes of § 263A, including providing for simplified procedures for the application of § 263A to property acquired for resale.

.08 Section 1.263A–3(d) provides a simplified resale method for determining the additional § 263A costs (within the meaning of § 1.263A–1(d)(3)) properly allocable to property acquired for resale and other eligible property on hand at the end of the taxable year.

.09 In the Conference Report accompanying the Tax Reform Act of 1986, Public Law No. 99–514 (100 Stat. 2085 (1986)), the conferees directed the Treasury Department to create a simplified method for applying the uniform capitalization rules of § 263A to resellers (resulting in the simplified resale method in § 1.263A–3(d)) and authorized the Treasury Department

to modify the simplified method or permit the use of other methods by rules or regulations for property acquired for resale. H.R. Rep. No. 99–841 (Conf. Rep.), 99th Cong., 2d Sess. II–308 (1986).

.10 Sections 446(e) and 1.446–1(e)(2) state that, except as otherwise provided, a taxpayer must secure the consent of the Commissioner before changing a method of accounting for federal income tax purposes.

.11 Rev. Proc. 2008–52, 2008–2 C.B. 587 (as amplified, clarified, and modified by Rev. Proc. 2009–39, 2009–2 C.B. 371), provides procedures for a taxpayer to obtain automatic consent of the Commissioner to change to a method of accounting described in the APPENDIX of Rev. Proc. 2008–52. Rev. Proc. 97–27, 1997–1 C.B. 680 (as modified and amplified by Rev. Proc. 2002–19, 2002–1 C.B. 696, as amplified and clarified by Rev. Proc. 2002–54, 2002–2 C.B. 432, as modified by Rev. Proc. 2007–67, 2007–2 C.B. 1072, and as clarified and modified by Rev. Proc. 2009–39), provides procedures for a taxpayer to request non-automatic consent to change a method of accounting.