FET on Government Agency Sales
Originally published in the May 2015 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 members who make FET-eligible truck chassis, truck body and
equipment sales are receiving conflicting information on which government
agencies are exempt and how to properly document sales to tax-exempt government
entities. Questions include:
- Who is eligible for tax-exempt
- Which government agencies are
- What paperwork is
- First, as the seller of the
taxable chassis, body or equipment, you are responsible for correctly
documenting and executing the tax-free sale, or the Internal Revenue Service
(IRS) will require the tax payment from you.
- Next, determine which companies
are eligible for tax-free government sales.
- Examples include city, state
and county municipalities; state-run non-profit schools and universities;
volunteer fire departments; recognized Indian tribes (with additional
requirements); and more.
- Examples of entities that are
not exempt include the U.S. federal government, military branches
(however, your state branch of the National Guard can qualify), and others. It
is important to note, even if the entity is exempt according to a federal tax
form like a 501(3) (C), FET exemption does not automatically apply to trucks,
truck bodies and equipment.
- Also, the taxable item must be
sold to the tax-exempt entity or government agency for its exclusive use. This
can be a sticking point on municipal leases. For this reason, make sure that the
agreement is structured to give the municipality sole use of the taxable
articles. It is important for the seller to register with the IRS for tax-exempt
sales (IRS Form 637).
In addition, both the seller and the buyer must use the proper exemption
certificates to document the tax-exempt sale. However, cities, states or county
municipalities are exempt from these registration requirements.
Are you faced with technical or engineering
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.