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Focus on Transportation and Dealerships: Proposed IRS Guidance Changes Transportation Equipment Taxes

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The IRS issued proposed guidance focusing on retailer’s excise tax imposed on highway-type equipment, which if passed, would change the way certain transportation equipment is taxed. The proposed regulations help align the current regulations to properly reflect the current law. Additionally the regulations provide support for any buyer of an incomplete chassis cab that also confirms to the seller that he will not change the incomplete chassis cab into a taxable tractor.
July 7, 2016

The IRS issued proposed guidance focusing on retailer’s excise tax imposed on highway-type equipment, which if passed, would change the way certain transportation equipment is taxed. The proposed regulations help align the current regulations to properly reflect the current law.

Additionally the regulations provide support for any buyer of an incomplete chassis cab that also confirms to the seller that he will not change the incomplete chassis cab into a taxable tractor. In this case the seller can treat the sale of this incomplete chassis cab as a sale of a truck and therefore, there would not be an additional excise tax imposed on the sale of an incomplete chassis cab.

These proposed regulations also provide additional clarification on the various types of vehicles. A tractor is defined by the IRS as “a highway vehicle primarily designed to tow a vehicle, such as a truck trailer or semitrailer.” The IRS defines a truck as a highway vehicle “primarily designed to transport its load on the same chassis as the engine, even if it is also equipped to tow a vehicle, such as a trailer or semitrailer.” Trucks designed to pull trailer homes, commonly referred to as toters, are now considered taxable tractors by the IRS.

Additionally, the proposed regulations also clarified the various types of trailers. The IRS proposed regulations define trailers in the following manner:

  • Trailer: non-self-propelled vehicle hauled, towed or drawn by a separate truck or tractor, and consists of a chassis and a body
  • Truck trailer: trailer that carries all of its weight and the weight of its load on its own chassis
  • Semitrailer: a trailer, the front end of which is designed to be attached to, and rest upon, the vehicle that tows it, which results in a portion of the load weight resting on the towing vehicle.
In this proposed guidance the IRS also clarifies that if a vehicle is used primarily to tow a vehicle, but it does not have a towing package or air brakes, then it is defined as a tractor.

Contact your RubinBrown advisor today for a detailed consultation regarding these changes and how they may effect you.

Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.

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For more information, please contact:

  • Aaron Pollard, CPA, CGMA — St. Louis
  • Manager & Vice Chair
  • Transportation & Dealerships Services Group
  • 314.290.3457
  • aaron.pollard@rubinbrown.com