Aerial devices at retail: Taxable or not?

From an NTEA member We sell certain aerial devices at retail. Is an aerial device considered a taxable part or accessory (and therefore subject to a 12% Federal Excise Tax when sold with a taxable chassis)? The Internal Revenue Service (IRS) has frequently addressed this issue. Most rulings Weiner, Brodsky, Sidman & Kider PC reviewed involving aerial devices concerned the application of the so-called “mobile-mount” exception to determine if the entire vehicle was not taxable. We are aware of only one revenue ruling (decided in 1964) and one recent letter ruling that squarely address the issue of whether an aerial device is a taxable part or accessory. In those two rulings, the IRS determined the subject aerial devices were not taxable parts or accessories. To the extent your aerial devices are substantially similar to the equipment described in those rulings, your aerial devices would probably not be treated as taxable parts or accessories. (We are also aware of four letter rulings issued prior or close in time to the 1964 revenue ruling that also determined that certain aerial devices were not taxable parts or accessories. See Letter Rulings 5601314030A, 561127880A, 5810093400A and 6401302410A. However, these rulings are very old, are not revenue rulings and are largely conclusory. Accordingly, we will not discuss these rulings in detail.) In Revenue Ruling 64-189, 1964-1 C.B. 378 (January 1964), a certain aerial platform was designed to enable a person to reach high places to paint, trim trees, perform street light services, perform maintenance services, etc. In addition to a platform, the components of the subject aerial device included an engine, pump, hydraulic cylinders and a boom that was hydraulically operated. This revenue ruling did not provide a detailed description of the subject equipment. Although the ruling indicates that the subject equipment reaches “high places,” the actual reach of the equipment is unknown. The IRS concluded that the subject aerial platform was not a taxable part or accessory. The IRS reached this conclusion because the aerial platform was, “in effect the load being transported and the primary function of the article is to serve a purpose unrelated to the vehicle as such.” See also Treasury Regulation Section 48.4061(b)-2. More recently, in Letter Ruling 200023015 (Feb. 29, 2000), the IRS again addressed whether certain aerial devices were taxable parts or accessories. The subject equipment in this letter ruling was certain telescoping aerial cranes, aerial lifts and aerial lift/crane combinations and accessories. All of the subject equipment had extended horizontal reaches in excess of 25' (excluding readily removable extensions). The IRS concluded that the equipment in Letter Ruling 200023015 was not taxable parts or accessories. However, in reaching this conclusion, the IRS did not rely on Revenue Ruling 64-189. Instead, the IRS based its conclusion on the principle of the so-called 25-foot Presumption. The 25-foot Presumption, most typically applied to cranes, is an administrative test established by the IRS to determine whether a piece of equipment is taxable based on its extended horizontal reach. If the extended horizontal reach of the equipment is greater than 25' (excluding readily removable extensions), the equipment is presumed to be nontaxable job-site equipment (i.e., the load of the vehicle). If the reach of the equipment is 25' or less (and it can be mounted on trucks for use in loading and unloading such trucks), the equipment is presumed to be a taxable part or accessory. (In either case, evidence can be introduced to rebut these presumptions.) Typically, all taxpayers are entitled to rely on a revenue ruling so long as (a) the equipment is substantially similar to the equipment described in the revenue ruling, and (b) the revenue ruling has not been revoked. (Revenue Ruling 64-189 does not appear to have been revoked.) However, in this case, a taxpayer should be cautious in relying on Revenue Ruling 64-189 for the following reasons: Revenue Ruling 64-189 was decided almost 38 years ago; Revenue Ruling 64-189 was decided under the now-repealed manufacturers’ excise tax (but see Treasury Regulation Section 145.4051-1(c) and Technical Advice Memorandum 199940001 (Dec. 28, 1999), indicating that Revenue Ruling 64-189 would apply equally under the current Retailers’ excise tax); There have not been a lot of rulings addressing the issue of whether aerial devices are taxable parts or accessories; Recent Letter Ruling 200023015 does not cite to Revenue Ruling 64-189; and Revenue Ruling 64-189 does not describe the subject equipment in detail (meaning it may be difficult to determine if your aerial devices are sufficiently similar to those described in the revenue ruling.) Accordingly, you should consult with your tax adviser prior to relying on Revenue Ruling 64-189. Such consultation is especially important if you sell aerial devices with extended horizontal reaches of 25' or less. IMPORTANT NOTE: This document reflects the FET as of 1/9/2002. Transactions prior to this time may be subject to different rules because of changes in the FET Regulations, Statutory Amendments and IRS Rulings issued subsequent to the time of such earlier transactions. Similarly, transactions entered into after 1/9/2002 may be subject to different rules. It is, therefore, essential that users of the outline consult with their tax advisers before relying upon it. Also, users should recognize that IRS Letter Rulings referred to in these materials are binding only on the taxpayers to whom they were issued and only serve as an indication of the IRS's position on any issue.

Aerial devices at retail: Taxable or not?

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