By: Mike Kastner, NTEA Managing Director
This article was published in the January 2017 edition of NTEA News.
NTEA President Matt Wilson delivered testimony on behalf of the work truck industry at an Internal Revenue Service (IRS) hearing in Washington, DC, on proposed changes to administration of Federal Excise Tax (FET) on heavy trucks, trailers and bodies.
Last spring, IRS proposed several administrative changes to FET — with one of the most burdensome being elimination of the blanket resale exemption certificate. Instead, a separate certificate would be required for every sale made for resale.
NTEA led an industry effort to submit detailed written comments opposing the proposed IRS changes. In late October, IRS announced it would hold a public hearing during the week of Thanksgiving.
Every organization and company testifying at the hearing opposed elimination of the blanket certificate. In fact, no one supported any portion of the proposed regulations.
Proposed FET changes
Blanket certificates
The proposed regulations would eliminate the option of what has become 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. For instance, when an OEM sells a tractor to a dealer so that the dealer can sell it at retail, the transfer between the OEM and dealer should not be subject to FET. Currently, sellers of taxable vehicles can have one exemption certificate for sales for resale to a particular buyer. The certificate would cover all sales for resale to that buyer for three years. Under this proposal, every sale for resale would need a separate certificate.
During the hearing, testimony was given that 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 eliminating three-year blanket exemption certificates, IRS would 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 this would help IRS in its efforts to collect FET.
Body identification numbers
In response to the proposal requiring the addition of 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, current methodology would be company-specific.
The Association detailed costs associated with creating a body identification system for an individual business. Further, NTEA stated creation of a nationwide system was not within the appropriate scope of this rulemaking and would require a separate rulemaking indicating the need for such a system, along with a complete cost and benefits analysis.
Incomplete chassis cabs
NTEA questioned the IRS regulations as they pertain to incomplete chassis cabs and towing capabilities. Just because an incomplete chassis cab may be equipped with towing capability, it should not automatically be deemed a tractor. The Association requested that, if a purchaser certified it would complete the chassis cab as a truck, the incomplete vehicle 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.
Next steps
There is no time requirement for IRS deliberations on this rulemaking. Structurally, IRS could next come out with a supplemental notice asking for additional information, terminate the rulemaking (as indicated by all of the testimony) or issue a final rule adopting the proposal as proposed or as amended.
While IRS determines its next move, NTEA and others will work to inform the committees in Congress with jurisdiction on these issues about the IRS proposal and our concerns.
View a copy of NTEA’s written comments to IRS at ntea.com/irstestimony. For questions or more information, contact Mike Kastner at mkastner@ntea.com.