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.