By Mike Kastner, NTEA Managing Director
This article was published in the February 2018 edition of NTEA News.
Under the previous Administration, Internal Revenue Service (IRS) proposed new and burdensome administrative rules for the 12 percent Federal Excise Tax (FET) on the sale of heavy trucks, tractors and trailers.
These proposed rules are still under consideration and likely slated for some measure of finality this year. Recently, NTEA and truck dealer representatives from NADA met with the Assistant Secretary of Treasury for Tax Policy and IRS acting commissioner to discuss these potentially harmful regulations. This is the highest level Administration meeting ever held with industry on FET regulations.
The meeting was productive, with the Administration open to hearing our concerns and interested in learning how the proposed rule would affect the industry on a day-to-day basis. Most importantly, they expressed an interest in learning more from the industry as they work to craft any new rules.
In March 2016, IRS issued a notice purportedly finalizing old, temporary regulations on FET applicable to heavy trucks, tractors and trailers. This marked the first time in more than 30 years that the public was invited to provide comments on the vast majority of FET regulations. However, the proposal went well beyond making permanent the existing regulations.
The proposed regulations would eliminate the option of what’s known as a “blanket” resale exemption certificate. The sale of a taxable vehicle is only taxable at the retail level. When one entity sells a vehicle to another for purposes of resale, that sale should not be taxable (such as from an OEM to a dealer or from a dealer to an upfitter).
Currently, sellers of taxable vehicles can have one exemption certificate covering sales for resale to a particular buyer for three years. Under this proposal, every sale for resale would need a separate certificate. One OEM currently holding 180 blanket certificates would need more than 50,000 individual certificates in the same time period under the proposed regulations.
Additional certificate information
Beyond the elimination of the three-year blanket exemption certificates, IRS proposes to require additional information on the separate certificates. This would include vehicle identification numbers (VINs), date and location of sale and a new body identification number. None of these details would assist IRS in collecting FET.
Body identification numbers
In response to the IRS proposal to require adding a body identification field to the exemption certificate, NTEA informed IRS that no such federally recognized or imposed numbering system exists. While some body manufacturers may serialize their production, their current methodology would be company-specific.
NTEA enumerated the costs associated with creating a body identification system for an individual company. Further, the Association stated that creation of such a nationwide system was not within the appropriate scope of this rulemaking and would require a separate rulemaking indicating the need for it, along with a complete cost and benefits analysis.
NTEA questioned the IRS regulations as they pertain to incomplete chassis-cabs and towing capabilities. Just because an incomplete chassis-cab may be equipped to have towing capability, it should not automatically be deemed a tractor. NTEA requested that, if a purchaser certified it would complete the chassis-cab as a truck, the incomplete chassis-cab should be treated as a truck for FET purposes, even if it has a secondary towing function. This is important because trucks and tractors have different FET thresholds.
GVWR and GCWR records
The proposed regulations would require the seller to retain gross vehicle weight rating (GVWR) records for all vehicles it sells, and gross combined weight rating (GCWR) information for all tractors its sells. NTEA pointed out there is no need for sellers to retain such information in cases where the seller is not asserting the articles or vehicles are rated below the taxable threshold. The Association also emphasized that manufacturers were not legally required to provide GCWR information to a reseller, and there was no industry standard document in which that information is provided by manufacturers. Therefore, NTEA and NADA requested that no record retention requirement be imposed regarding GCWRs.
After the IRS regulations were proposed, NTEA led an effort with NADA/American Truck Dealers and the Truck Engine Manufacturers Association to provide Office of Budget Management and IRS with comments concerning their notice.
In November 2016, then-NTEA President Matt Wilson delivered testimony on behalf of the work truck industry at an IRS hearing in Washington, DC. Several other groups and companies testified, all in opposition to the FET proposal. With the election of President Trump, NTEA met with the transition team to make them aware of the industry-opposed changes being proposed by IRS.
At the beginning of this year, the government published its list of regulations expected to be completed in the next six months under the guise of regulatory relief. This IRS FET proposal was on the list. Recognizing that the Trump Administration is committed to regulatory reform and reducing the burden on regulated communities, NTEA felt it vital to once again meet with the Administration to be sure they were aware of the cost to industry of what the IRS was proposing.
Meeting with the Department of Treasury’s highest level tax policy official elevated the FET issue to new heights and brings new scrutiny to the IRS-proposed regulations.
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