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the printers are not producers because they never meet the
necessary requirement of owning the paper products for Federal
income tax purposes. See Charles Peckat Manufacturing Co. v.
Jarecki, 196 F.2d 849 (7th Cir. 1952).4
Nor do we believe that a product such as petitioner’s paper
products may be considered within the meaning of section 263A
(g)(2) when the product, in its finished form, requires such an
extensive involvement on the part of the taxpayer vis-a-vis the
purported producer, and the taxpayer has the exclusive right to
sell the finished product. See id.; see also Polaroid Corp. v.
United States, 235 F.2d 276 (1st Cir. 1956). Petitioner’s
transfer of the cartoon characters to the printers gave the
printers only the bare right to possess the characters or
reproductions thereof. It did not give the printers any right to
sell the characters (or reproductions thereof) either alone or as
4 The case of Charles Peckat Manufacturing Co. v. Jarecki,
196 F.2d 849 (7th Cir. 1952), is instructive to our analysis.
There, the taxpayer owned a patent on a certain bracket for
automobile visors and contracted with an independent machine shop
to fabricate the bracket for it. The machine shop’s entire output
had to be sold to the taxpayer at a per-piece price, and the
machine shop never had a proprietary interest in the bracket.
The court held that the taxpayer manufactured the bracket for
purposes of the Federal excise tax. The court focused on the
control maintained by the taxpayer over the manufacturing process
and observed that the fabricator "never had a proprietary
interest in the completed product" because the bracket was
subject to the patent that the taxpayer controlled. Id. at 852.
The court stated: “it is not unusual in taxing statutes for the
term 'manufacturer' to include one who has contracted with others
to actually fabricate the product". Id. at 851.
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