Clarifying the Tax Burden on Off-Highway Vehicles

Originally published in the February 2014 edition of Tech Trends (e-newsletter and as an article within NTEA News), this article is also available to you below as an employee of an NTEA member company.

Many areas of the U.S. are currently experiencing an increase in construction, drilling and mining activity. A majority of these activities require heavy-duty commercial vehicles that are mainly used off-highway. As a result, many customers who purchase new truck chassis and truck bodies for off-road usage falsely believe they qualify for an off-highway Federal Excise Tax (FET) exemption. This type of customer confusion can be quite problematic for an upfitter. If the upfitter does not collect tax on a taxable body or chassis, the upfitter could end up with a potentially large Internal Revenue Service (IRS) FET bill.

What You Need to Know

• Vehicle use does not determine whether or not a truck body or truck chassis is taxable under FET. The truck chassis design will determine taxability.
• Truck chassis specifically designed for off-highway use have severe limitations for on-highway usage. Normally, the chassis OEM has already secured an IRS ruling confirming the off-highway design.
• Remember that truck bodies and truck chassis are separate taxable items. For example, a truck body that meets IRS design requirements for an off-highway FET exemption could be mounted on a standard on-road truck chassis. In this case, if the truck chassis meets the taxable requirements (33,001 lbs. GVWR or greater), it is taxable, but the off-highway truck body is not

Are you faced with technical or engineering challenges?
Contact the Technical and Engineering Hotline at 800-441-6832 for individual attention on varied topics such as Federal Excise Tax, truck certification and labeling, vehicle compliance and truck spec’ing. The Hotline is available Monday-Friday, 8am-5pm (EST). Members can contact the Association as frequently as needed.