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Federal Excise Tax on Trucks, Truck Bodies and Trailers

The Federal imposes excise taxes on a variety commodities and services. Retail sellers of commercial and vocational vehicles, some truck and truck bodies, trailer and semitrailer bodies and chassis and truck tractors are subject to one of these federal excise taxes. This Excise tax is due on the first retail sale of a trailer that is over 26,000 GVW.

An excise tax of 12% of the sales price is imposed on the first retail sale of the following articles, including related parts and accessories sold on or in connection with, or with the sale of, the articles.

  • Truck chassis and bodies.
  • Truck trailer and semitrailer chassis and bodies.
  • Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer.

A truck is a highway vehicle primarily designed to transport its load on the same chassis as the engine, even if it is equipped to tow a vehicle, such as a trailer or semitrailer. A tractor is a highway vehicle designed to tow a vehicle, such as a trailer or semitrailer. A tractor may carry incidental items of cargo when towing or limited amounts of cargo when not towing. A sale of a truck, truck trailer, or semitrailer is considered a sale of a chassis and a body. The seller is liable for the tax.

The other federal excise tax laid on heavy truck with a gross weight of 55,000 is heavy vehicle use tax reported on Form 2290.

Chassis or body

A chassis or body is taxable only if you sell it for use as a component part of a highway vehicle that is a truck, truck trailer or semitrailer, or a tractor of the kind chiefly used for highway transportation in combination with a trailer or semitrailer.

Highway vehicle

A highway vehicle is any self-propelled vehicle designed to carry a load over public highways, whether or not it is also designed to perform other functions. Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses, and highway-type trucks and truck tractors. A vehicle is a highway vehicle even though the vehicle's design allows it to perform a highway transportation function for only one of the following.

  • A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer).
  • A special kind of cargo, goods, supplies, or materials.
  • Some off-highway task unrelated to highway transportation, except as discussed next.

Vehicles not considered highway vehicles

Generally, the following kinds of vehicles are not considered highway vehicles for purposes of the retail tax.

Specially designed mobile machinery for nontransportation functions.

A self-propelled vehicle is not a highway vehicle if all the following apply.

  • The chassis has permanently mounted to it machinery or equipment used to perform certain operations (construction, manufacturing, drilling, mining, timbering, processing, farming, or similar operations) if the operation of the machinery or equipment is unrelated to transportation on or off the public highways.
  • The chassis has been specially designed to serve only as a mobile carriage and mount (and power source, if applicable) for the machinery or equipment, whether or not the machinery or equipment is in operation.
  • The chassis could not, because of its special design and without substantial structural modification, be used as part of a vehicle designed to carry any other load.

Vehicles specially designed for off-highway transportation

A vehicle is not treated as a highway vehicle if the vehicle is specially designed for the primary function of transporting a particular type of load other than over the public highway and because of this special design, the vehicle's capability to transport a load over a public highway is substantially limited or impaired.

To make this determination, you can take into account the vehicle's size, whether the vehicle is subject to licensing, safety, or other requirements, and whether the vehicle can transport a load at a sustained speed of at least 25 miles per hour. It does not matter that the vehicle can carry heavier loads off highway than it is allowed to carry over the highway.

Nontransportation trailers and semitrailers

A trailer or semitrailer is not treated as a highway vehicle if it is specially designed to function only as an enclosed stationary shelter for carrying on a nontransportation function at an off-highway site. For example, a trailer that is capable only of functioning as an office for an off-highway construction operation is not a highway vehicle.

The First Retail Sale

The first retail sale is defined by the IRS as the following: any sale that doesn't fit one of the following exceptions:

  • A prior taxable sale of a body has occurred (six-month rule on used trailers);
  • The sale qualifies for tax-free treatment under IRC S 4221;
  • The sale is for resale and the sale for resale satisfies the requirements for tax-free treatment. Use can trigger Federal Excise Tax — use in a short-term rental fleet while for sale. Short-term or long-term leasing can trigger Federal Excise Tax. The lessor is responsible for Federal Excise Tax , and will want to include Federal Excise Tax in figuring lease payments. With the sale of a used trailer within six months of the new sale, Federal Excise Tax is due on the second sale, but you can file for reimbursement of Federal Excise Tax.”

IRS Issues Guidance on Truck Sale Excise Tax

The Internal Revenue Code imposes a tax on the first sale of certain truck chassis and bodies. The excise tax does not apply to truck bodies and chassis suitable for use with vehicles that have a gross vehicle weight of 33,000 pounds or less or truck trailer and semi-trailer bodies and chassis suitable for use with vehicles that have a gross vehicle weight of 26,000 pounds or less.

In some cases, retailers do not know the gross vehicle weight of the vehicle on which the body will be mounted, making it difficult to determine whether the body meets the “suitable for use” standard.

The guidance issued establishes four classifications of truck body types that meet the “suitable for use” standard. Truck body types that meet these classifications are therefore excluded from the retail excise tax:

  • Platform truck bodies 21 feet or less in length;
  • Dry freight and refrigerated truck van bodies 24 feet or less in length;
  • Dump truck bodies with load capacities of eight cubic yards or less; and
  • Refuse packer truck bodies with load capacities of 20 cubic yards or less.

These classifications are effective for sales on or after April 4, 2005. For more information on these classifications, see Revenue Procedure 2005-19, which is on page 832 of I.R.B. 2005-14 at www.irs.gov/pub/irs-irbs/irb05-14.pdf

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