Originally published in the March 2018 edition of Tech Trends
Generally, a subsequent sale of a chassis, body or tractor is not subject to Federal Excise Tax if it was sold in a prior, taxable sale. However, there is an exception to this rule for trailers and semi-trailers, which can be a source of confusion.
- Under Treasury Regulations Section 145.4052-1(a)(2)(iii), “the sale of a chassis or body of a trailer or semitrailer…less than six months after a taxable sale of the article shall be treated as a taxable sale.” This means a subsequent sale of a trailer would trigger Internal Revenue Code (IRC) Section 4051 tax, if the sale occurs less than six months after its initial, taxable purchase from the dealer.
- Where a subsequent sale of a trailer triggers IRC Section 4051 tax, you may be able to claim a tax credit for the amount equal to the tax the dealer paid on the sale of the trailer to you (i.e., the tax paid as a result of the prior taxable sale). See Treasury Regulations Section 145.4052-1(a)(4).
- In order to claim this credit, you would need to submit specific information to the Internal Revenue Service, along with the form claiming the tax credit. This information is described in Treasury Regulations Section 145.4052-1(a)(4).
It is important to understand any credit you claim may not exceed the amount of tax triggered by the subsequent sale of the trailer. In other words, if the initial sale of the trailer by the dealer to you triggered more tax than the subsequent sale of the trailer by you, you cannot claim a credit for the extra amount of tax the dealer paid. Additionally, if the initial sale of the trailer by the dealer to you triggered less tax than your sale to the customer, you cannot claim a credit for the extra amount of tax you are responsible to pay. The credit is always based on the lesser amount of tax triggered by either the initial or subsequent sale within the six-month period.
If you are unfamiliar with claiming a credit under Treasury Regulations Section 145.4052-1(a)(4), consult with your tax advisor to confirm you have complied with all the necessary requirements.
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