Primary tax exclusions for chassis sales to end users

By Rose-Michele Nardi
Transport Counsel PC

This article was published in the September 2015 edition of NTEA News

Question: Is Section 4051 tax due on all chassis sales to end user customers? Are there some common exclusions?

Answer: In general, all sales of a taxable chassis (e.g., one with a gross vehicle weight rating exceeding 33,000 pounds) are subject to Section 4051 tax, unless the chassis falls into one of four excluded sales categories.

1. Tax-free sale for resale

If a chassis is sold for resale, the initial sale will not be taxable if it complies with Treasury Regulation 48.4052-1. This requirement includes an exemption certificate provided by the purchaser to the seller at or before the point of sale. The certificate must be in the form provided by the Internal Revenue Service (IRS) under Treasury Regulation 145.4052-1(a)(6), except it must now be signed under penalty of perjury, and a registration number is no longer required.

Following are two important things to know about sales for resale.

  • A purchaser is not required to provide the seller with a sale for resale certificate even if the purchaser will, in fact, be reselling the chassis. If no resale certificate is provided, the seller is responsible to pay Section 4051 tax, even though the sale is not to an end-user customer.
  • If the purchaser gives a sale for resale certificate, the transaction may be conducted on a tax-free basis. However, any subsequent sale by the purchaser to an end-user customer (or to any other reseller without a resale certificate) will be subject to Section 4051 tax (unless another exclusion applies).

2. Section 4221 tax-free sale

Under Internal Revenue Code (IRC) Section 4221, several types of sales can be conducted on a tax-free basis, including:

  • Sales to a state or local government (Treasury Regulation 48.4221-5)
  • Sales to a nonprofit educational organization (Treasury Regulation 48.4221-6)
  • Sales to a qualified blood collector organization (no specific regulations)
  • Sales for export (Treasury Regulation 48.4221-3)
  • Sales for further manufacturing (Treasury Regulation 48.4221-2)
  • Sales for vessel or aircraft supplies (Treasury Regulation 48.4221-4)

These sales will not be subject to Section 4051 tax if the statutory requirements for each type set forth in IRC 4221 are met, as well as general and specific regulatory mandates. (General requirements are set forth at 48.4221-1, and the specifics are noted in the list above.) 

In addition to other requirements, in order for a sale to be tax-free under Section 4221, the seller must file Form 637 with the IRS, registering for “Q” activities (seller of heavy vehicles), and the purchaser must also be registered with the IRS under Form 637 in some cases. 

3. Prior taxable sale

If the chassis was involved in a prior taxable sale, any subsequent sale will generally not be taxable.

Three items to note regarding prior taxable sales:

  • Unlike a sale for resale, if a chassis has been sold tax-free under Section 4221 (and complies with all requirements for such a sale), any subsequent sale will generally not be subject to tax.
  • After the initial taxable sale, if the chassis is modified, it may be taxable if the alterations constitute further manufacturing. Generally, if a chassis was involved in a prior taxable sale, it will not be considered further manufactured unless the modification cost is more than 75 percent of the retail price of a new chassis comparable to the now-modified one. See IRC 4052(f).
  • A special rule exists for trailer and semitrailer chassis. Even if such a chassis was involved in a prior taxable sale, the subsequent chassis sale still will be taxable if resold in less than six months. (In such a case, the seller may have the right to claim a credit for tax paid in the prior taxable sale if certain requirements are satisfied.)  See Treasury Regulation 145.4052-1(a)(4).

4. Certain exempt articles

Under IRC 4053, sales of certain chassis types may be exempt from Section 4051 tax (e.g., mobile machinery vehicle, ambulance/hearse, rail trailer/semitrailer and house trailer). In addition, a chassis may be exempt from Section 4051 tax under IRC 7701(a)(48) (off-highway vehicle and trailer/semitrailer designed as stationary shelter). 

This information provides a general overview of the four primary exclusions from a taxable sale. Determining if a chassis qualifies for any of these is often very fact-specific. Taxpayers should consult with their advisers prior to relying on any of the exclusions.

Rose-Michele Nardi is a shareholder of the Washington, DC law firm Transport Counsel PC ( For 18 years, she has advised clients on the proper application of the retailer Federal Excise Tax on trucks, trailers and tractors. Rose-Michele represents clients in Internal Revenue Service proceedings involving FET, and regularly presents webinars and seminars for truck dealers and upfitters.