Which platform bodies meet the suitable for use standard?

From an NTEA member We understand platform truck bodies 21 feet long or less are not taxable under Internal Revenue Code (IRC) 4051. What about a 22- or 24-foot platform body? A truck body is excluded from Section 4051 tax if it’s suitable for use with a vehicle that has a gross vehicle weight (GVW) rating of 33,000 pounds or less. Internal Revenue Service (IRS) determined platform bodies 21 feet long or less automatically satisfy this suitable for use standard and will be treated as nontaxable. For longer platform bodies, there is no automatic exclusion from Section 4051 tax. These bodies potentially could satisfy the suitable for use standard, but the burden is on the taxpayer to compile documentation sufficient to convince IRS. Unlike chassis, truck bodies typically do not have a GVW rating. In recognizing it could be difficult to apply the suitable for use standard to bodies, IRS created safe harbors for four types. If a body satisfies one of these safe harbors, IRS will accept the taxpayer’s determination that it satisfies the suitable for use standard and is excluded from Section 4051 tax. See Revenue Procedure 2005-19. The four safe harbors created by IRS are 1) Platform truck bodies 21 feet or less in length; 2) Dry freight and refrigerated truck van bodies 24 feet or less in length; 3) Dump truck bodies with load capacities of 8 cubic yards or less; and 4) Refuse packer truck bodies with load capacities of 20 cubic yards or less. A 22- or 24-foot platform body does not fall within any of the safe harbors described. However, it does not mean those bodies are automatically taxable. Instead, they still may be nontaxable, if you can demonstrate to IRS they are suitable for use with vehicles rated below the taxable weight threshold (for trucks, 33,000 pounds GVW or less). Unfortunately, IRS has not provided much guidance on how to satisfy the suitable for use standard. As such, for any model body that does not fall within one of the four safe harbors, there is a risk that IRS will reject the taxpayer’s position that the body satisfies the suitable for use standard. It’s important to understand, under the suitable for use test, a particular model body — such as the 22- or 24-foot platform body — should always be treated the same for Section 4051 tax purposes, regardless of chassis type upon which it’s installed in a particular sale. In other words, the same model body should not be treated as taxable in a sale when installed on a chassis with a GVW rating greater than 33,000 pounds, and nontaxable in a sale when installed on a chassis with a GVW rating of 33,000 pounds or less. Generally speaking, in order to satisfy the suitable for use standard, you would need to demonstrate a 22- or 24-foot platform body has “practical and commercial fitness” for such use. This phrase appears to focus on whether, from a functional and price perspective, it makes sense to install that type of body on a vehicle rated below the taxable weight threshold. Therefore, generally, your best evidence that a particular body model satisfies the suitable for use standard will be your own sales data, to the extent such data shows the body being installed on vehicles rated with GVWs below the taxable weight thresholds. Letter ruling example In Letter Ruling 8820032 (Feb. 17, 1988), IRS determined a certain model body was suitable for use with a vehicle below the taxable weight threshold (and therefore was excluded from Section 4051 tax) when 38 of the 244 bodies — approximately 15 percent — were installed on chassis rated 33,000 pounds or less. This letter ruling suggests if you have a sufficiently large sample, you may be able to satisfy the suitable for use standard, even when the majority of bodies were installed on taxable chassis. However, this ruling is old and generally not binding on IRS. It also does not adopt any particular percentage as being sufficient to satisfy the suitable for use standard. In addition, it’s important to note, IRS previously rejected a taxpayer’s claim that certain platform bodies over 21 feet satisfied the suitable for use standard. In Technical Advice Memorandum 9226005 (Feb. 27,1992) — four years after the letter ruling discussed in this article — IRS determined “[a]lthough, the taxpayer has shown some usage of those platform bodies over 21 feet in connection with 33,000 pounds or less G.V.W. vehicles, the information submitted does not establish a practical and commercial fitness for such use as required” under the applicable regulations. The ruling did not discuss sample size or percentage of bodies installed on vehicles below the taxable weight threshold, so it does not provide guidance on evidence needed to satisfy the suitable for use standard. However, this ruling demonstrates the risk of IRS rejecting a taxpayer’s position that longer platform bodies satisfy the suitable for use standard. So, although it’s possible to argue a body that does not fall within the safe harbor — such as a 22- or 24-foot platform body — still satisfies the suitable for use standard, you would need to be prepared to defend your position in an IRS audit. This means you must have sufficient documentation to convince IRS that the model body at issue has “practical and commercial fitness” for use with vehicles below the taxable weight threshold. In light of the fact-specific nature of suitable for use determinations, the lack of IRS guidance in this area and the 1992 IRS ruling, you are encouraged to consult with your tax advisor prior to determining a platform body longer than 21 feet would be nontaxable under the suitable for use standard.

Which platform bodies meet the suitable for use standard?

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