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Guidance Needed on Application of Excise Tax to Live Bottom Semitrailer Bodies

JUN. 23, 1998

ILM 1998-473

DATED JUN. 23, 1998
DOCUMENT ATTRIBUTES
  • Institutional Authors
    Internal Revenue Service
  • Cross-Reference
    002601
  • Code Sections
  • Subject Area/Tax Topics
  • Index Terms
    heavy vehicles sales tax
    heavy vehicles sales tax, exemptions
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2000-7317 (3 original pages)
  • Tax Analysts Electronic Citation
    2000 TNT 165-86
Citations: ILM 1998-473

 

Date: June 23, 1998

 

 

CC:DOM:P&SI:8

 

SPR-105768-98 PSKirwan

 

 

INTERNAL REVENUE SERVICE MEMORANDUM

 

 

TO:

 

District Technical Coordinator, Western Region

 

Attn: Tony M. Machado

 

 

FROM:

 

Chief, Branch 8

 

Office of the Assistant Chief Counsel

 

(Passthroughs and Special Industries) CC:DOM:P&SI:8

 

 

SUBJECT:

 

Technical Coordination Report 18,097

 

 

[1] This addresses your Technical Coordination Report (TCR) concerning the tax consequences of the sale of semitrailer bodies equipped with "live bottom floors. You have expressed concern that similarly-situated taxpayers are being treated differently and that this differing treatment causes a competitive disadvantage for those retailers who pay the tax.

 

BACKGROUND

 

 

[2] Section 4051(a)(1) of the Internal Revenue Code imposes a tax on, the first retail sale of truck and truck trailer and semitrailer bodies and chassis.

[3] Under section 4053(2), the tax imposed by section 4051 is not imposed on any body primarily designed:

(A) to process or prepare seed, feed, or fertilizer for use on farms,

(B) to haul feed, seed, or fertilizer to and on farms,

(C) to spread feed, seed, or fertilizer on farms,

(D) to load or unload feed, seed, or fertilizer on farms, or

(E) for any combination of the foregoing.

[4] The exemption contained in section 4053 is designed to exempt from the tax certain vehicle bodies (not chassis), otherwise taxable, that are primarily designed for one of the uses listed in section 4053.

[5] Rev. Rul. 69-579, 1969-2 C.B. 200, holds that certain automotive truck bodies equipped with elaborate heavy-duty unloading equipment and used primarily for hauling feed, seed, and fertilizer to and on farms are exempt from the manufacturers tax under section 4063(a)(2)(B) [now section 4053(2)(B)]. That revenue ruling states the bodies at issue were not designed for the general hauling of feed, seed, or fertilizer over the highway. The elaborate and expensive unloading equipment built into the bodies, and the modifications required to accommodate the unloading systems, made it impractical to purchase the bodies for use other than in hauling feed, seed, or fertilizer to, and unloading it on, farms.

[6] Rev. Rul. 75-462, 1975-2 C.B. 419, holds that a dump truck designed for, and used primarily in, hauling grain and sugar beets from the field to points on or off the farm and that may also be used to haul fertilizer over the highway to the farm is not exempt from tax under the provisions of section 4063(a)(2)(B). That ruling states that highway bodies used for general hauling of feed, seed, or fertilizer over the highway are subject to the manufacturers excise tax unless they have specific features that indicate they are primarily designed to haul those items to and on farms. The ruling further states that although the bodies carry feed and fertilizer they do not have specific features that indicate they are primarily designed to haul feed and fertilizer to and on farms.

 

DISCUSSION

 

 

[7] Under the rationale of Rev. Rul. 75-462, whether a body is capable of, or indeed used for, hauling feed, seed, or fertilizer to and on farms is irrelevant in determining whether the exemption under section 4053(2) applies. What is relevant is whether the body was primarily DESIGNED for that function. See also, Dillon Ranch Supply v. United States, 652 F.2d 873 (9th Cir. 1981), rev'g, 78-2 USTC paragraph 16,294 (D. Mont. 1978).

[8] Your TCR specifically concerns the application of the principles discussed above to the sale of certain semitrailer bodies equipped with live bottom moving floors designed and used to load and unload the trailers. The government continues to litigate these cases. In Bocats, Inc. v. United States, 85-2 USTC paragraph 16,438 (D. Kan. 1985), a jury concluded that trailers equipped with "live bottom mechanisms" were primarily designed to haul, load, or unload feed, seed, or fertilizer to and on farms, and were thus not subject to the tax. In a more recent case, Peerless Corporation v. United States, Civ. No. J-C-97-195 (E.D. Ark. March 17, 1998) (order denying plaintiff's motion to exclude consideration of all evidence concerning use in determining the primary design of the trailers at issue), the jury agreed with the government and concluded that the live bottom semitrailer bodies were not designed primarily to haul feed, seed, or fertilizer to or on farms.

[9] The Service has been consistent in application of section 4053. You have cited a ruling letter (LR 8907008) in which the Service concluded that a semitrailer body equipped with a "walking floor" was found to be exempt from the section 4051 tax by reason of the exemption in section 4053(2). That ruling relies on a factual representation by the taxpayer that the semitrailer bodies at issue there were primarily designed to haul bulk agricultural products from harvested fields to farms and feedlots. This fact, like all facts represented by taxpayers requesting letter rulings, is subject to verification on audit. Conclusions reached in ruling letters are only valid if the facts upon which they are based are true. By representing that the primary design was for an exempt purpose, the taxpayer has received a favorable ruling. If, in fact, the semitrailer bodies at issue in that ruling were not primarily designed to haul bulk agricultural products from harvested fields to farms and feedlots, then the ruling letter offers no protection to the requestor.

[10] It is important to acknowledge that fairly minor differences between similar, but not identical, semitrailer bodies, each equipped with live bottom mechanisms, could lead to a different tax result. Thus, we cannot conclude that all semitrailer bodies equipped with live bottom mechanisms are subject to tax. Each must be examined to determine whether it was designed to haul, load, or unload feed, seed, or fertilizer to and on farms.

[11] In conclusion, we agree that guidance, preferably in the form of a regulation, would assist agents in administering sections 4051 and 4053. However, because of the factual nature of the inquiry into primary design, a regulation cannot cover all possible permutations of the live bottom semitrailer bodies. Thus we would welcome requests for technical advice, where appropriate, in order to provide guidance in particular cases. Such requests would allow consideration of all the facts underlying the primary design determination, and allow this office to analyze these facts to arrive at a conclusion regarding the ultimate issue of primary design.

[12] If you have any further questions on this matter, please call Patrick Kirwan, at (202) 622-3130.

DOCUMENT ATTRIBUTES
  • Institutional Authors
    Internal Revenue Service
  • Cross-Reference
    002601
  • Code Sections
  • Subject Area/Tax Topics
  • Index Terms
    heavy vehicles sales tax
    heavy vehicles sales tax, exemptions
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2000-7317 (3 original pages)
  • Tax Analysts Electronic Citation
    2000 TNT 165-86
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