Top 10 of 2013: Feds talk excise tax

Jason Cannon

December 30, 2013

The top Successful Dealer article of 2013 was published in February following the release of a CCA document from the Internal Revenue Service detailing its requirements regarding Federal Excise Tax, specifically as it relates to the heavy-duty dealer industry.

RELATED: No. 2 of Top 10 of 2013: Let’s talk liters

Federal Excise Tax (FET) in the commercial truck market is a 12-percent tax issued on the first retail sale of a taxable body, chassis or tractor. It is factored into the total cost of a truck when sold and paid by the purchaser. In the commercial truck dealer market, it is the responsibility of the dealer to issue and collect the tax, as well as provide the tax to the IRS.

Even though gliders are produced through the remanufacturing and rebuilding of used components, they can fall under the requirements of FET. According to Greg Althardt, partner with CliftonLarsonAllen’s Truck and Trailer Dealership group, there are two tests to verify if a previously taxed modified unit, known as a donor unit, will be subject to FET.

Nature of the modification: If the modification changes the transportation function of the unit, restores a wrecked unit into a usable unit or extends a unit’s useful life, that modification is subject to Federal Excise Tax.

75-percent rule: If the cost of a modified unit exceeds 75 percent of a comparable average retail sale price for a new unit, then the entire unit is subject to Federal Excise Tax.

Althardt says a question the IRS chose to answer regarding a previously taxed donor unit was a particular revenue ruling that is no longer viewed a current law.

“A clear bright-line test was not given. The current statutory law reverts back to Rev Ruling 91-27, which states as long as the modifications to a previously taxed article do not change the transportation function of a unit or restores a wrecked unit the 75 percent rule may be applied. If the modifications do not exceed 75 percent of the comparable new retail unit no additional FET is due,” he says.

The original article can be found in its entirety here.

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