FET on a further manufactured truck chassis

Originally published in the September 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.

NTEA receives numerous federal excise tax (FET) questions regarding modifications to customers’ truck chassis and implications to companies as modifiers. Members are unsure when to charge tax and who must pay the Internal Revenue Service (IRS). This confusion is understandable as many alterations affect a truck’s GVWR for FET purposes — whether or not it changes on the certification label.

For example, some modifications, such as adding a lift axle to a truck chassis or changing an existing axle to accommodate heavy equipment, can fall into two FET categories — parts and accessories, and further manufacture. Since different areas may apply, both must be reviewed before determining anything due.

Key considerations

  • As defined by the IRS, adding a part or accessory, including labor required for installation if added to a truck chassis in the first six months, causes an FET-taxable event.
  • Modifying truck chassis GVWR by adding a lift axle or changing an axle is an act of further manufacture, according to IRS rulings. As such, the Six-Month Rule does not apply. If a truck started with a nontaxable 33,000-pound GVWR and modifications caused it to exceed this rating (the IRS sums axle ratings without considering tire or spring rating limitations), the truck chassis could become taxable and further manufactured for FET purposes. The Six-Month Rule does not apply to further manufacture.
  • When work is done, the truck chassis owner is primarily responsible for paying FET. This could be the customer, truck dealer or modifier, based on who holds the title.
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, 8 a.m.-5 p.m. (EST). Members can contact the Association as frequently as needed.