By Rose-Michele Nardi Transport Counsel PC
This article was published in the August 2016 edition of NTEA News.
NTEA filed comments on a March 31, 2016, Internal Revenue Service (IRS) notice of proposed rulemaking. The notice sought comments on proposed IRS regulations governing the Federal Excise Tax (FET) on heavy trucks, tractors and trailers. This marked the first time in more than 30 years that the public was invited to offer comments on the vast majority of FET regulations.
The Association led an effort with American Truck Dealers and Truck & Engine Manufacturers Association to provide the Office of Management and Budget and IRS with comments on a variety of FET topics. As the IRS-specific comments totaled 24 pages, this article offers a summary.
Reinstating the blanket certificate option for exempt sales for resale The proposed regulations do not include the currently available option of sellers using a single exemption certificate for all sales for resale to the same purchaser for up to 12 calendar quarters (i.e., a blanket certificate). Instead, a separate certificate arguably would be required for each sale. This would impose a huge administrative burden on many members, as the number of certificates needing to be prepared and executed would exponentially increase. The Associations, in their comments, urged IRS to reinstate the option to use a blanket certificate for exempt sales for resale.
Additional information required by exempt certificates Under the proposed regulations, IRS imposes new informational requirements for various exemption certificates, such as vehicle identification numbers (for chassis), body identification numbers, and place and date of sale. In their comments, the Associations described how each requirement presents potential challenges to taxpayers.
One of the most problematic is body identification numbers. The Associations advised that no federal rule or industry standard exists for assigning body identification numbers, and many manufacturers do not have the systems in place. The Associations requested IRS perform a cost-benefit analysis, considering the cost a body manufacturer would incur to implement a new numbering system against the questionable need for it (as demonstrated by the absence, for the last three decades, of any such requirement).
Incomplete chassis cabs In their comments, the Associations noted IRS accepts that completed vehicles may have towing capability, but still be treated as trucks for FET purposes, if their primary function is to carry cargo on the chassis. However, current and proposed regulations, in essence, provide that if the incomplete chassis cab is equipped with towing capability, it will automatically be deemed a tractor. The Associations 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.
Suitable for use standard The Associations pointed out there are no regulations, and few rulings, providing guidance for determining whether or not a body is exempt from FET because it is “suitable for use” with vehicles rated below the taxable threshold. They asked IRS to include in its regulations the principle that a model body will be presumed nontaxable if, 15 percent or more of the time, it is installed on vehicles below the taxable threshold rating.
GVWR and GCWR records The proposed regulations expand the record-keeping requirement so that a seller must retain gross vehicle weight rating (GVWR) records for all articles and vehicles it sells, and gross combined weight rating (GCWR) data for all tractors sold. In their comments, the Associations state there is no need for sellers to retain such information if they are not asserting the articles or vehicles are rated below the taxable threshold. They requested no changes be made to GVWR record retention requirements.
The Associations emphasized manufacturers were not legally required to provide GCWR details to a reseller, and there was no industry standard document in which that information is provided by manufacturers. As such, the comments call for no record retention requirement regarding GCWRs.
Other items The comments asked for clarification on calculating the so-called 75 percent rule and its application to glider vehicles; on application of the mobile machinery exception to chassis “reinforced” for towing purposes; and on the proposed example applying the off-highway exception, so it is more consistent with FET principles. Additionally, the Associations requested reconsideration of proposed language indicating trailers similar to those in the Flow Boy or Gateway cases could not satisfy the off-highway exception; and guidance on calculating constructive prices.
There is no timetable by which the IRS must respond to comments. NTEA will inform members when final rules adopting FET regulations are published. Information will also be included in NTEA’s Washington Update e-newsletter.