CCA 1121019: imported truck sales distinguished under the heavy vehicle excise tax rules

Plain-English summary

Chief Counsel addressed whether a regulation example involving an exported truck conflicted with Rev. Rul. 85-95. The advice explained that the regulation example involved a taxable first retail sale that was made tax-free under IRC § 4221(a)(2) because the truck was exported. In Rev. Rul. 85-95, the pre-export sale was to a dealer for resale, so it was not a taxable first retail sale under IRC § 4052(a)(1). The advice concluded that the later imported-truck sale was the first opportunity to tax in the revenue-ruling scenario, and that the two authorities were factually distinguishable.

Ruling snapshot

• Question: Does Rev. Rul. 85-95 conflict with the export-sale example in Treas. Reg. § 48.4221-3(a)(2)?
• Outcome: Advice given.
• Key authorities: IRC §§ 4051, 4052, and 4221; Treas. Reg. § 48.4221-3(a)(2); Rev. Rul. 85-95.

Full text (IRS public release)

ID: CCA-391201-11 Number: 201121019
Release Date: 5/27/2011
Office: ----------
UILC: 4051.00-00

From: ------------------
Sent: Wednesday, March 9, 2011 11:32 AM
To: -----------------------------------------------------
Cc: --------------------------------------
Subject: Imported Trucks

Perhaps the attached explanation will persuade you that there is not a conflict between
example 2 in section 48.4221-3(a)(2) and Rev. Rul. 85-95 and that Scenario 3 is
consistent with example 2 and distinguishable from Rev. Rul. 85-95. If you have any
questions or comments, please contact me by email.

-----, I'll get back to you later on scenarios 4 & 5.

ATTACHMENT:

Imported Trucks

Factual distinction between the sale in the second example in § 48.4221-3(a)(2)
(example) and the sale in Rev. Rul. 85-95 (rev. rul.) and its consequences.

In the example, U.S. manufacturer sold a truck to a company in France. This otherwise
taxable sale was tax free because § 4221(a)(2) provides that the § 4051 tax does not
apply to a sale of a taxable article (in this case a truck) for export. Section 4221 would
not apply in the absence of an underlying taxable sale which the section can render tax
free.

In the rev. rul., a U. S. manufacturer sold a truck for export to a dealer. A sale to a
dealer is not a taxable sale because it does not meet the definition of a first retail sale in
§ 4052. Section 4052(a)(1) defines the term “first retail sale” as the first sale, for a
purpose other than for resale or leasing in a long-term lease, after production,
manufacture, or importation. A sale to a dealer is a sale for resale, not a retail sale.
Therefore, there was not a taxable sale prior to the truck being exported.

Although there is a truck sale in the United States prior to the truck’s export in the
example and in the rev. rul., the two sales are different from one another. The sale in
the example was a taxable sale that § 4221(a)(2) exempted from tax. The sale in the

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rev. rul. was not a taxable sale because a sale to a dealer is a sale for resale, not a
taxable first retail sale as defined in § 4052(a)(1). Therefore, the sale of the used truck
after its importation into the United States was the first, and only, opportunity to tax the
sale of the truck. The rev. rul. does not contradict or conflict with the example; rather,
the rev. rul. is factually distinguishable from the example.

Accordingly, scenario 3 does not conflict with the rev. rul. Unlike the rev. rul. where
there was not a taxable sale in the United States prior to export, in scenario 3 and the
example there was a taxable sale (although exempt under § 4221) prior to the truck
being exported. The distinction between a taxable sale (albeit tax free) prior to export
and a nontaxable sale prior to export is important because the characterization of the
sale prior to export determines whether a truck that was previously sold in the United
States is taxable when subsequently imported into the United States.