Are used truck chassis sales taxable?

From an NTEA member We own a used, taxable truck chassis and would like to sell it. Are we correct that our sale will not be subject to Internal Revenue Service (IRS) Internal Revenue Code (IRC) Section 4051 Federal Excise Tax (FET)? Generally, FET is not triggered on the sale of a used, taxable truck chassis — in other words, a truck chassis with a gross vehicle weight rating (GVWR) exceeding 33,000 pounds — so long as it has not been modified. However, if the truck chassis has been modified, then your sale may trigger FET, even though the truck chassis is used. (If the modified truck chassis was used prior to selling it, then the first use of the chassis after the modification may have triggered FET.) However, you should be aware this article specifically concerns truck chassis; the sale of used semitrailers and trailers within six months or after they were sold in a taxable sale likely may trigger tax even if the trailers and semitrailers were not modified. See Treasury Regulation 145.4052-1(a)(2)(iii). Your question does not indicate whether modifications were made to the chassis, and if so, the types and timeline of the modifications. Such details will affect whether the modifications trigger FET, and if they do, who is liable for the FET. This article provides a general discussion of how modifications to a used truck chassis may affect FET. If there were modifications to the chassis, there are a couple of general rules. You will need to determine if either the so-called further manufacturing rule or the so-called Six-Month Rule applies. If modifications to the truck chassis result in “further manufacturing,” the chassis generally is treated as new for FET purposes, which means that the first sale or use after such modifications likely will trigger FET (assuming the modified chassis has a GVWR greater than 33,000 pounds and does not otherwise qualify for an exception from FET). Note, if further manufacturing triggers FET, the FET is based on the taxable sale price of the modified chassis and not just on the cost of the modification (but in specific situations, certain deductions for used components may be available to decrease the taxable price). You also should be aware that the further manufacturing rules apply differently, depending on whether the chassis, prior to the modifications, had been taxable for purposes of FET. If the truck chassis, when new, was not subject to FET and after the modifications, if new, would be subject to FET, then you will need to determine, based on prior IRS rulings, whether the IRS likely would treat those specific types of modifications as falling into the category of further manufacturing. If the truck chassis, when new, was subject to FET, then you likely will be able to take advantage of the so-called 75% safe harbor. The safe harbor generally provides that modifications will not constitute further manufacturing if the cost of the modifications is not greater than 75% of the retail price of a new article (such as a truck chassis) comparable to the modified article. See IRC 4052(f). If this safe harbor applies (e.g., the truck chassis, when new, had a GVWR greater than 33,000 pounds), then many modifications that otherwise would constitute further manufacturing (such as the addition of a tag axle) likely will not trigger FET because the cost of such modifications would not exceed the 75% threshold of the safe harbor. In addition to the further manufacturing rule, you need to determine whether the Six-Month Rule applies. Under this rule, as it applies to your question, if you install a part or accessory on a taxable truck chassis within six months of the owner taking actual possession of the chassis, then FET may (subject to certain exceptions) be triggered for the cost of the part/accessory (including the price of its installation). See IRS 4051(b); Treasury Regulation 145.4051-1(c). This rule applies even if the further manufacturing rules do not.

Are used truck chassis sales taxable?

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