Paver trucks and trailers are taxable highway vehicles

Plain-English summary

A manufacturer sold truck- and trailer-mounted pavers that carried resurfacing materials from local storage sites to jobsites, mixed or continually agitated the materials, and spread them on pavement. The taxpayer argued that the vehicles were off-highway mobile machinery. Chief Counsel advised that Congress's 2004 statutory definition effectively replaced the former mobile-machinery exception. The vehicles' design enabled their ordinary public-highway transport function, and the record did not show size, permitting, licensing, safety, or speed limits that substantially impaired that function. Their chassis and bodies were therefore subject to the 12-percent section 4051 tax on first retail sale.

Ruling snapshot

• Question: Were the taxpayer's paver trucks and trailers off-highway vehicles exempt from the section 4051 retail tax?
• Outcome: No; the vehicles were highway vehicles subject to tax on first retail sale
• Key authorities: IRC §§ 4051 and 7701(a)(48)

Full text (IRS public release)

Office of Chief Counsel
Internal Revenue Service
Memorandum

Number: 201532032
Release Date: 8/7/2015

CGabrysh
CC:PSI:07:POSTN-101383-15

UILC: 4051.00-00

date: March 30, 2015

to: Robert P. Wolff
Appeals Officer

from: Stephanie Bland
Branch Chief, CC:PSI:7
Office of the Associate Chief Counsel
Passthroughs & Special Industries

subject: Section 4051: Truck Chassis and Bodies

This responds to your request for Taxpayer Specific Legal Advice regarding § 4051 of
the Internal Revenue Code (Code). Neither the chassis nor the bodies that are the
subject of this request qualify for the weight exemptions in § 4051(a)(2) and (3). This
request excludes the non-transportation machinery and/or equipment installed on the
trucks and trailers as determined by a revenue agent.

This advice may not be used or cited as precedent.

Legend

Taxpayer =

Model X =

Model Y =

Model Z =

Issue

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Whether certain paver trucks and trailers are off-highway vehicles for purposes of the
tax imposed by § 4051.

Facts

Taxpayer manufactures and sells truck and trailers including Models X, Y, and Z
(collectively, vehicles) used in the highway construction and maintenance industry.
These vehicles are referred to as “pavers” and are used to resurface parking lots,
residential streets, and highways. The vehicles drive a few miles from a local site
where unmixed resurfacing materials are stored to a jobsite where the resurfacing
materials are usually mixed and applied to repair pavement. Taxpayer may relocate
a local site depending on jobsite changes and traffic flows.

The Model X truck or trailer mounted paver has five compartments for the five
components of the resurfacing materials. A separate diesel engine runs the hydraulic
system that releases the correct amounts of resurfacing materials from the five
compartments, mixes these materials, dispenses the mixed materials into a delivery
system that deposits the mixture into a spreader box at the back of the truck from
which the mixture is poured on to the area to be resurfaced. A trained operator
manually calculates the appropriate amounts of resurfacing materials and adjusts the
paver to release and mix these amounts. This truck moves at 1.5 miles per hour
when it is dispensing the resurfacing materials.

The Model Y truck or trailer mounted paver has an automated system that calculates
the amounts of the five resurfacing components that need to be released from their
compartments and mixed before being released into the delivery system for deposit
into the spreader box.

The Model Z truck carries a premixed slurry seal that is continually mixed. This slurry
seal is spread and laid down with the same equipment used for these purposes on a
Model X truck.

Law

Section 4051(a)(1)(A) imposes a 12 percent tax on the first retail sale of a truck
chassis and a truck body.

Section 145.4051-1(a)(2) of the Temporary Excise Tax Regulations Under the
Highway Revenue Act of 1982 (Pub. L. 97-424) limits the application of this tax to a
chassis or a body that is sold for use as a component part of a highway vehicle (as
defined in § 48.4061(a)-1(d) of the Regulations on Manufacturers and Retailers
Excise Taxes)).

Section 48.4061-1(d)(1) defines the term “highway vehicle” as any self-propelled
vehicle, or any trailer or semitrailer, designed to perform a function of transporting a

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load over public highways, whether or not also designed to perform other functions.

Section 48.4061(a)-1(d)(2)(i) provides an exception (the mobile machinery exception)
to the term “highway vehicle” for certain specially designed mobile machinery vehicles
that (A) consist of a chassis to which there has been permanently mounted (by
welding, bolting, riveting, or other means) machinery or equipment to perform a
construction, manufacturing, processing, farming, mining drilling, timbering or
operation similar to any one of the foregoing enumerated operations if the operation
of the machinery or equipment is unrelated to transportation on or off the public
highways, (B) the chassis has been specially designed to serve only as a mobile
carriage and mount (and a power source, where applicable) for the particular
machinery or equipment involved, whether or not such machinery or equipment is in
operation, and (C) by reason if such special design, such chassis could not, without
substantial modification, be used as a component of a vehicle designed to perform a
function of transporting any load other than that particular machinery or equipment or
similar machinery or equipment requiring such a specially designed chassis.

Several court cases have addressed the application of the § 48.4061(a)-1(d)(2)(i)
exception to asphalt trailers and semitrailers. Flow Boy, Inc. v. United States, 83-1
U.S.T.C. ¶16,395, aff’d, 54 A.F.T.R.2d 6545, 84-1 U.S.T.C. ¶16,418 (10th Cir. 1984),
and Gateway Equip. Corp. v. United States, 247 F. Supp. 2d 299 (W.D.N.Y. 2003).
Relying on § 48.4061(a)-1(d)(2)(i), the courts in Flow Boy and Gateway held that the
asphalt trailers and semitrailers in question were not highway vehicles.

Section 7701(a)(48)(A), which became effective on October 22, 2004, defines an off-
highway vehicle as a vehicle that is specially designed for the primary function of
transporting a particular type of load other than over the public highway and because
of this special design such vehicle’s capability to transport a load over the public
highway is substantially limited or impaired. A vehicle’s design is determined solely
on the basis of its physical characteristics. In determining whether substantial
limitation or impairment exists, account may be taken of factors such as the size of
the vehicle, whether such vehicle is subject to the licensing, safety, and other
requirements applicable to highway vehicles, whether such vehicle is subject to the
licensing, safety, and other requirements applicable to highway vehicles, and whether
such vehicle can transport a load at a sustained speed of at least 25 miles per hour.
It is immaterial that a vehicle can transport a greater load off the public highway than
such vehicle is permitted to transport over the public highway.

Section 4061(a)-1(d)(1) defines the term “public highway” as any road (whether a
Federal highway, State highway, city street or otherwise) in the United States which is
not a private roadway.

The Joint Committee explained the elimination of the mobile machinery exception in §
48.4061(a)-1(d)(2)(i) as follows:

POSTN-101383-15 4

The Congress understood that a mobile machinery exception was created by
Treasury regulation because the Treasury Department believed that mobile
machinery used the public highways only incidentally to get from one jobsite to
another. However, it had come to the attention of the Congress that certain vehicles
are taking advantage of the mobile machinery exemption even though they spend a
significant amount of time on public highways and, therefore, cause wear and tear to
such highways.

General Explanation of Tax Legislation Enacted in the 108th Congress, (May 2005).

Analysis and Conclusion

As of October 22, 2004, Congress, in effect, repealed the mobile machinery exception
in § 48.4061(a)-1(d)(2)(i) by enacting the statutory definition of an off-highway vehicle
in § 7701(a)(48). Further, the Flow Boy and Gateway decisions discussed above
predate the enactment of § 7701(a)(48); therefore, after October 22, 2004, Flowboy
and Gateway are no longer precedent for determining whether a vehicle meets the
definition of an off-highway vehicle. Thus, Taxpayer’s trucks and trailers must meet
the definition of an off-highway vehicle in § 7701(a)(48) to be exempt from the § 4051
tax.

The design of Taxpayer’s Models X, Y, and Z (vehicles) enables them to transport
resurfacing materials on a public highway from a local site where resurfacing
materials are stored to a jobsite where the resurfacing materials are sometimes
mixed, depending on the model, and applied to public highways with the exception of
parking lots. Although designed to carry a particular load of resurfacing materials and
related equipment, this design does not substantially limit or impair the vehicles’
capability to transport its load over the public highway from a local storage site to a
jobsite because this is what their design enables them to do. There is nothing in the
materials submitted for consideration that indicate that the vehicles are oversized and
require special permits to travel on a public highway or that the vehicles are exempt
from the licensing, safety, and other requirements applicable to highway vehicles.
There is also no indication that the vehicles cannot transport its load at a sustained
speed of at least 25 miles per hour. Therefore, we conclude that the vehicles do not
meet the definition of off-highway vehicles in § 7701(a)(48). We further conclude that
the vehicles are subject to the § 4051 tax on their first retail sale.

If you have any questions concerning this memorandum, please contact Celia Gabrysh
at (202) 317-5255.