Incomplete chassis cabs: Trucks or tractors for purposes of FET?

From an NTEA member We are a licensed truck dealer and want to sell a new incomplete chassis cab with a gross vehicle weight rating (GVWR) of 33,000 pounds or less. Our customer advised that the chassis will be completed as a truck. Can I sell the chassis as a nontaxable truck for purposes of Internal Revenue Service (IRS) Internal Revenue Code Section 4051 Federal Excise Tax (FET)? It depends. In order to treat an incomplete chassis cab as a nontaxable truck, you should do two things. First, review the equipment list identified in Treasury Regulations 145.4051-1(e)(1)(ii) and confirm the chassis does not include any of those types of items. Second, obtain a written certification from the purchaser that the vehicle will not be equipped for tractor use. Because the taxable gross vehicle weight threshold for trucks and tractors is different, the IRS’s treatment of an incomplete chassis cab as a truck or a tractor may determine whether its sale will trigger FET. There is a list of five equipment categories at Treasury Regulation 145.4051-1(e)(1)(ii). These categories are_ A device for supplying pressure from the chassis cab to the brake system (air or hydraulic) of the towed vehicle; A mechanism for protecting the chassis cab brake system from the effects of a loss of pressure in the brake system of the towed vehicle; A control linking the brake system of the chassis to the brake system of the towed vehicle; A control in the cab for operating the towed vehicle’s brakes independently of the chassis cab’s brakes; or Any other equipment designed to make it suitable for use as a tractor. If an incomplete chassis cab is not equipped with any equipment identified in these five categories and you obtain a written certification from the purchaser that the “vehicle will not be equipped for use as a tractor,” then the IRS likely will treat the incomplete chassis cab as a truck (rather than a tractor). See Treasury Regulation 145.4051-1(e)(1). It’s important to emphasize that even if an incomplete chassis cab doesn’t have the types of equipment identified in Treasury Regulation 145.4051-1(e)(1)(ii), the chassis still can be treated as a taxable tractor for FET purposes, if the seller does not obtain a written certification from the purchaser that the vehicle will not be equipped for use as a tractor. See Freightliner of Grand Rapids, Inc. v. United States, 351 F. Supp.2d 718 (W.D. Mich. 2004) (finding “an incomplete chassis cab that does not have any of the listed equipment is to be treated as a tractor unless the purchaser certifies in writing that it will not equip the vehicle for use as a tractor”). See also Letter Ruling 200732015 (October 30, 2006). Note that the regulations don’t require the customer’s certification to be in a specific form or contain specific information (other than the purchaser certifying in writing that the “vehicle will not be equipped for use as a tractor”). However, in 2016, the IRS proposed (but did not adopt) changes to FET regulations regarding incomplete chassis cabs. Among those proposed changes was a specific certification form to use when treating incomplete chassis cabs as trucks rather than tractors. This form had very detailed requirements. Although the current regulations don’t require taxpayers to use that specific certification form, it may provide some guidance when creating your own form certificate. See Notice of Proposed Rulemaking Excise Tax; Tractors, Trailers, Trucks, and Tires; Definition of Highway Vehicle, 2016-1 CB 614 (April 18, 2016), Proposed Treas. Reg. 48.4051-1(e)(8)(ii), Model Certificate, at 13. If the chassis contains any of the equipment identified in Section 145.4051-1(e)(1)(ii), the regulations provide that the chassis “shall be” treated as a tractor. Therefore, under the plain language of the regulations, an incomplete chassis cab that contains any such identified equipment will be treated as a tractor even if you obtain a written certification from your customer stating the vehicle will not be equipped for use as a tractor. (Although we are aware of a 1990 letter ruling that suggests an exception to this rule, so long as a specified procedure is followed, that ruling is old, not generally binding on the IRS, and contrary to the plain language of the regulations. Accordingly, it is strongly advised that taxpayers do not rely on the 1990 letter ruling.) Bottom line: If an incomplete chassis cab has any of the equipment identified in Section 145.4051-1(e)(1)(ii), or if you haven’t obtained a written certification from your customer, then you generally should treat the chassis cab as a tractor.

Incomplete chassis cabs: Trucks or tractors for purposes of FET?

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