Transport Counsel PC
This article was published in
the January 2013 edition of NTEA News
Question: We sell and install certain auxiliary
power units (APUs). Is it true that these units may still be subject to tax
under Internal Revenue Code (IRC) Section 4051? I thought APUs were specifically
exempted from tax a few years ago.
Answer: Yes, some APUs still may be taxable under the
Section 4051 tax. Although you are correct that an exemption for idling
reduction devices was created in 2008 (see IRC section 4053(9)), an APU must
satisfy certain requirements in order for this exemption to apply.
Unfortunately, though, not all APUs will satisfy these requirements.
First, the Environmental Protection Agency (EPA) must determine that
the specific model of the APU being sold reduces idling when the vehicle
is stationary/temporarily parked. The EPA has identified five general
categories of idling reduction technologies:
- Fuel-operated heaters
- Battery air
- Auxiliary power units/generator
- Thermal storage systems
- Shore connection
For each of these categories, the EPA has further identified the
specific models of idling reduction units it has determined satisfy the EPA
requirement in the exemption.
To view the list of EPA-approved units, for purposes of this exemption,
and click on “Eligible Products for the Federal Excise Tax Exemption”
link under the “Federal Excise Tax Exemption” heading. If the model APU
you sell and install is not on this list, then it does not satisfy the Section
4053(9) exemption. You should also review the information under the heading
“***List of Technologies No Longer Eligible for Federal Excise Tax
Exemption ***” to determine whether the status of a previously
approved model unit has changed.
Second, in order to be exempt, the APU must be installed on a tractor.
(See the statutory language cited in the subsequent third criteria.)If the APU
is installed on a truck, trailer or any other type of vehicle, it will not
satisfy the Section 4053(9) exemption. This means that even if the APU you sell
satisfies the first criteria (i.e., it is identified on the EPA-approved list),
it will not be exempt if it is not installed on a tractor.
Third, the exemption requires that an APU (or any other device(s)) must
be “designed to provide to a vehicle those services (such as heat, air
conditioning or electricity) that would otherwise require the operation
of the main drive engine while the vehicle is temporarily
parked or remains stationary using one or more devices affixed to a
tractor.” You should note that this requirement is based on the unit’s design
and not the use by any particular customer.
If the APU you sell and install does not satisfy all three of these
requirements, the Section 4053(9) exemption will not apply. The
Internal Revenue Service has not yet issued any rulings interpreting or applying
this exemption. Accordingly, taxpayers should consult with their tax counsel
prior to treating their idling reduction devices as nontaxable under this