PLR 1022012: Tire tax credit may be claimed separately from heavy-trailer tax liability

Plain-English summary

The IRS ruled that a manufacturer selling taxable truck trailers and semitrailers must compute and report the 12 percent retail tax under IRC § 4051 on the article’s sale price. If the manufacturer satisfies the statutory requirements, it may separately claim a credit for the tire tax previously imposed under IRC § 4071. The manufacturer may not net that tire credit against its § 4051 liability when reporting the liability on Form 720. The credit reduces the total balance owed to the IRS rather than the § 4051 liability for the particular transaction.

Ruling snapshot

• Question: May the manufacturer separately claim a tire tax credit instead of netting it against its heavy-trailer tax liability?
• Outcome: Approved
• Key authorities: IRC §§ 4051, 4051(d), 4052, and 4071; Treas. Reg. § 145.4052-1(d)(1)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201022012 Third Party Communication: None
Release Date: 6/4/2010 Date of Communication: Not Applicable
Person To Contact:
Index Number: 4051.00-00 ------------------------------
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Telephone Number:

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------------- Refer Reply To:
-------------------------------------------------- CC:PSI:7
--------------------------------- PLR-142428-09
------------------------------------ Date:
February 25, 2010

X = --------------------------------------------------

Dear ---------------:

   This letter responds to a letter dated September 18, 2009, requesting rulings

under § 4051 of the Internal Revenue Code.

     The facts submitted state that X manufactures and sells various types of trailers

and semitrailers that are subject to the § 4051 tax. Some of these sales are first retail
sales to end-users. Included in the sale of these trailers and semitrailers are taxable
tires under § 4071. X requests a ruling that once the § 4051 tax is applied to the
amount for which the trailers and semitrailers are sold, X reports its § 4051 liability on
Form 720, IRS No. 33, and X’s liability is not reduced or otherwise modified to account
for a claim by X of the tire tax credit under § 4051(d). X also requests a ruling that X
may separately claim a tire tax credit on Form 720, Schedule C, Line 15a, for a
particular transaction.

     Section 4051(a)(1) generally imposes on the first retail sale of, among other

articles, certain truck trailer and semitrailer chassis and truck trailer and semitrailer
bodies (including in each case parts or accessories sold on or in connection therewith or
with the sale thereof) a tax of 12 percent of the amount for which the article is so sold.
PLR-142428-09 2

   Section 4051(d) provides that if tires are sold on or in connection with the sale of

any article and tax is imposed on the sale of the tires, a credit against the tax imposed
by § 4051 is allowed in an amount equal to the tax imposed by § 4071 on the tires.

   Section 4052(b)(1) generally provides that in determining price (A) there shall be

included any charge incident to placing the article in condition ready for use, (B) there
shall be excluded (i) the amount of the tax imposed by § 4051, (ii) if stated as a
separate charge, the amount of any retail sales tax imposed by any State or political
subdivision thereof or the District of Columbia, whether the liability for such tax is
imposed on the vendor or vendee, and (iii) the value of any component of such article if
(I) such component is furnished by the first user of such article, and (II) such component
has been used before such furnishing, and (C) the price shall be determined without
regard to any trade-in.

    Section 145.4052-1(d)(1) of the Temporary Excise Tax Regulations Under the

Highway Revenue Act of 1982 (Pub. L. 97-424) provides that the price for which an
article is sold includes the total consideration paid for the article whether that
consideration is paid in money, services, or other forms. Similar rules to section
4216(a) and the regulations thereunder, relating to charges to be included in the price
and excluded from the price, shall apply.

  Section 4071 imposes a tax on taxable tires sold by the manufacturer, producer,

or importer thereof.

    Accordingly, we rule as follows. The tax imposed by § 4051(a) is computed on

the price for which the article is sold, as that term is used in the Code and regulations.
To the extent X is liable for the tax under § 4051, X will report that liability based on the
price for which the article is sold on Form 720, IRS No. 33. If X meets the requirements
of § 4051(d), X may separately claim a credit on Form 720, Schedule C, in the amount
of the tax previously imposed by § 4071. X may not “net” the § 4051(d) credit against
its § 4051 liability and report a single amount on Form 720, IRS No. 33. A § 4051(d)
credit for a particular transaction does not reduce the § 4051 liability for that transaction;
rather, this credit is used to reduce the total balance owed by X to the IRS.

   Except as specifically set forth above, no opinion is expressed or implied as to

the federal tax consequences of the transaction described above under any other
provision of the Code.
PLR-142428-09 3

  This ruling is directed only to the taxpayer on whose behalf it was requested.

Section 6110(k)(3) provides that it may not be used or cited as precedent.

    In accordance with the power of attorney on file with this office, a copy of this

letter are being sent to X’s authorized representative.

                                              Sincerely,




                                              Frank Boland
                                              Chief, Branch 7
                                              Office of Associate Chief Counsel
                                              (Passthroughs and Special Industries)

Enclosures (2):
Copy of this letter
Copy for section 6110 purposes

cc: