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IRS proposes regulations on heavy vehicle excise tax

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Tax Hot Topics: Heavy vehicle excise taxThe IRS proposed regulations on the excise taxes for tires and heavy vehicles to reflect various legislative changes and court decisions.

Many of the existing regulations date from before 1982 and in many areas don’t reflect current law. The new proposed regulations replace the regulatory definition of “highway vehicle” with a version consistent with the statutory definition created in 2004. The new definition reflects the changes made to the exceptions for off-highway and nontransportation vehicles, and includes new examples.

In the new proposed regulations, tractor and truck are defined largely following the temporary regulations with minor changes to reorganize the rules. The determination will still depend on whether the vehicle is “primarily designed” as a tractor or truck. The definition of truck trailer includes a manufactured home on a frame that has axles and wheels. This means that “toters” would be included as taxable tractors, contrary to the decision in Horton Homes, Inc. v. United States, 357 F.3d 1209 (11th Cir. 2004). The proposed regulations also state that if a chassis or body is a component part of a highway vehicle, the taxability of each is determined independent of the other.

The proposed regulations on taxable tires remove references to tread rubber and inner tubes to reflect legislation that now imposes the tax only for each ten pounds of the maximum rated load capacity that exceeds 3,500 pounds. The proposed regulations also define “rated load capacity” and “super single tire,” and address multiple load ratings and the consequences of tampering with a tire’s maximum load rating.

The proposed regulations don’t change the standard for determining if equipment or machinery installed in the chassis or body is exempt from tax. Taxability will continue to hinge on whether the equipment “contributes to the highway transportation function,” which encompasses contributing to maintenance or safety, preserving the cargo (except refrigeration units), or providing comfort or convenience to the driver.

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