Military vehicles do not qualify for the off-highway or mobile-machinery exemptions, so their first retail sale is subject to the § 4051 heavy-truck excise tax

Plain-English summary

The first retail sale of a heavy truck, trailer, or tractor chassis or body carries a 12 percent federal excise tax under Code § 4051. A company that builds specialized vehicles for the U.S. military asked the IRS to rule that two of its vehicles are exempt, arguing they are either "off-highway vehicles" under § 7701(a)(48)(A) or "mobile machinery" under § 4053(8). To be an off-highway vehicle, a vehicle must be specially designed to primarily haul a particular load off-road, and that design must substantially impair its ability to carry a load on public highways. To be mobile machinery, the chassis must be built only to carry permanently mounted equipment (like a crane or drill) and could not carry anything else without major structural changes. The IRS ruled that both vehicles fail every test. They can travel over 25 mph, meet Department of Transportation road standards, are not oversize or overweight, and (crucially) each has a pintle hook that lets it tow ordinary trailers and loads. Because the vehicles are built to work on public roads and can haul loads other than their special equipment, they are ordinary highway vehicles. The IRS concluded there is no general excise-tax exemption for military vehicles, so the first retail sale of each vehicle is taxed under § 4051.

Ruling snapshot

• Question: Are the first retail sales of two military vehicles exempt from the § 4051 excise tax under the off-highway vehicle exception (§ 7701(a)(48)(A)) or the mobile machinery exemption (§ 4053(8))?
• Outcome: Denied (both vehicles are subject to the § 4051 tax)
• Key authorities: IRC §§ 4051, 4053(8), 7701(a)(48)(A); Treas. Reg. § 48.4061(a)-1(d); Rev. Rul. 79-239; Rev. Rul. 79-296; Notice 2017-5; Rockwater, Inc. v. United States, 121 F.4th 1287 (11th Cir. 2024); Myles Lorentz, Inc. v. Commissioner, 138 T.C. 40 (2012); Florida Power & Light Co. v. United States, 375 F.3d 1119 (Fed. Cir. 2004)

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 202623002                                              Third Party Communication: None
Release Date: 6/5/2026                                         Date of Communication: Not Applicable
Index Number: 4051.00-00, 4053.00-00,
              7701.00-00                                       Person To Contact:
                                                               -------------------, ID No. -----------------
---------------------------                                    Telephone Number:
-----------------------------                                  --------------------
------------------------------------------------------------   Refer Reply To:
----------------------------                                   CC:ECE:B3
                                                               PLR-113981-25
                                                               Date:
                                                               March 02, 2026




                                                  LEGEND


Taxpayer                           = -----------------------------

Vehicle X Manufacturer             = -------------------------------

Vehicle X                          = -------------------------------------------------------------------------
                                     ---------------------------------

Unit 1                             = --------------------------------------------

Unit 2                             = ----------------------

Vehicle 1                          = ----------------------------

Vehicle 2                          = -------------------------------

Trailer 1                          = --------------

Trailer 2                          = -------------

Component 1                        = -----------------------------

Component 2                        = ----------------

Component 3                        = ---------------

Component 4                        = ---------------------------------

Load 1                             = ------------------------------------------

Load 2           = -------------------------------------------------------------------------
                   -------------------------------------------------------------------------
                   -------------------

Load 3           = -------------------------------------------------------------------------
                   -------------------------------------------------------------------------
                   ------------

Trailer 1 Load   = ---------------------------

Trailer 2 Load   = -------------------------------------------------------------------------
                   ---------------------------------------------------------------------

State            = -----------

A                = ---------

B                = --------

C                = ---------

D                = ---------

E                = --------

F                = ---

G                = ---------

H                = --------

J                = ------

K                = ------

L                = ---------

M                = ---------

N                = ------

O                = ------

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

This letter responds to a ruling request dated July 16, 2025, submitted on your behalf by
your authorized representative, requesting rulings that the first retail sales of Vehicle 1
and Vehicle 2 are not subject to the tax imposed by § 4051(a) of the Internal Revenue
Code (Code) because the vehicles meet the off-highway vehicle exception under
§ 7701(a)(48)(A), or alternatively, because the vehicles meet the mobile machinery
exemption under § 4053(8).

Taxpayer represents that, at the time this ruling request was submitted, the facts were
as follows.

                                         FACTS

Taxpayer entered into an agreement with the U.S. military to supply Unit 1 and Unit 2.
Unit 1 is composed of Vehicle 1 and Trailer 1, and Unit 2 is composed of Vehicle 2 and
Trailer 2. Vehicle 1 and Vehicle 2 are constructed using Vehicle X, which Taxpayer
purchases from Vehicle X Manufacturer.

Vehicle X

Vehicle X measures approximately A feet long, and approximately B feet wide. Vehicle
X has a gross vehicle weight rating (GVWR) of C pounds. The chassis of Vehicle X is
capable of hauling 20-foot intermodal shipping containers and is equipped with a pintle
hook that allows for a towing capacity of D pounds and a vertical load capacity of E
pounds.

Vehicle X has features for off-road military operations, including the transport of heavy
equipment. Vehicle X includes:
   • Large, thick-treaded off-road tires, designed for enhanced traction and durability
      on rough terrain;
   • Air-ride suspension, providing substantial ground clearance for off-road
      maneuverability;
   • Specialized transmissions and gearboxes, configured for rugged, off-highway
      conditions; and
   • Advanced axle systems, enabling (i) locking of all four axles to prevent tire spin
      on soft or loose surfaces, and (ii) activation of an 8x8 all-wheel drive mode for
      superior off-road performance.

Vehicle X also has features that support on-road use. Vehicle X is equipped with
components that comply with U.S. Department of Transportation (DOT) requirements,
such as headlights, reflective striping, windshield wipers, turn signals, and highway
emergency marker kits. Additional road-capable features of Vehicle X include antilock
braking systems, traction control, and the ability to maintain a maximum sustained
speed of F miles per hour.

Vehicle 1

Taxpayer adds Component 4, a hydraulic interface, and a parking brake signal wire to
the Vehicle X chassis. All hardware specific to Vehicle 1 is attached to the chassis
using existing hole locations or standard locking mechanisms. Taxpayer mounts
Component 1 and Component 2 onto Component 4.

Vehicle 1 transports Load 1 utilizing Component 1, and Load 2 utilizing Component 2.
Vehicle 1 also tows Trailer 1, which carries Trailer 1 Load.

Assembling Component 2 and other components takes several weeks. Attaching
Component 1 and Component 2 requires a minimum of one week. The components
and hardware are designed to be installed for the full useful life of the vehicle.
Removing Component 1 and Component 2 from Vehicle X, if preserving reassembly
capability, takes several days. Reassembly would require new materials such as bolts,
greases, and adhesives. Installation and removal involve the use of a large overhead
crane, an electrical and mechanical tool kit, and detailed knowledge of the assembly
process, which is considered proprietary. Taxpayer represents that disassembling and
reassembling Vehicle 1 is complex and resource-intensive.

When fully outfitted, Vehicle 1 has a GVWR of approximately G pounds, excluding Load
1 and Trailer 1. Trailer 1 adds an additional H pound GVWR. Vehicle 1 can travel at an
average speed of J miles per hour and reach a top speed of K miles per hour.
Taxpayer has not represented that Vehicle 1 is oversize or overweight.

Taxpayer represents that Vehicle 1 is "significant military equipment" within the meaning
of 22 C.F.R. § 120.36(b) and the United States Munitions List, 22 C.F.R. § 121.1
(USML).1 Taxpayer also represents that under Defense Transportation Regulation
§ 4500.9-R-Part III, app. F, § D.2, the transport of Load 1 on public highways is
prohibited absent prior authorization by a DOT special permit or military air waiver.

1 22 C.F.R. § 120.36(a) provides that significant military equipment means articles for which special
export controls are warranted because of their capacity for substantial military utility or capability.

The U.S. military's specifications require that Vehicle 1 provide the ability to operate on
primary, secondary, unimproved, and off-road locations. Taxpayer obtained special
permission from the State Department of Transportation to operate Vehicle 1 on local
public roads for limited purposes, including transportation to and from a supplier and for
maintenance activities, without registering Vehicle 1 with State's department of motor
vehicles. In granting this permission, the State Department of Transportation
determined that Vehicle 1 constituted "special mobile equipment" under State law. As a
result, Vehicle 1 did not require titling or registration in State.

Vehicle 2

Taxpayer adds a parking brake signal wire to the Vehicle X chassis. All hardware
specific to Vehicle 2 is attached to the chassis using existing hole locations or standard
locking mechanisms. Taxpayer also attaches Component 3 to the Vehicle X chassis.

Vehicle 2 transports Load 3 utilizing Component 3. Vehicle 2 also tows Trailer 2, which
carries Trailer 2 Load.

Assembling Component 3 and other components takes several weeks. Attaching
Component 3 requires two to three days. The components and hardware are designed
to be installed for the full useful life of the vehicle. Disassembly takes less than one
day. Installation and removal involve the use of a large overhead crane, an electrical
and mechanical tool kit, and detailed knowledge of the assembly process, which is
considered proprietary. Taxpayer represents that disassembling and reassembling
Vehicle 2 is complex and resource-intensive.

When fully outfitted, Vehicle 2 has a GVWR of approximately L pounds, excluding
Trailer 2's GVWR of approximately M pounds. Vehicle 2 can travel at an average
speed of N miles per hour and reach a top speed of O miles per hour. Taxpayer has
not represented that Vehicle 2 is oversize or overweight.

Taxpayer represents that certain components integrated into Unit 2 are classified as
"significant military equipment" within the meaning of 22 C.F.R. § 120.36(b) and the
USML. Taxpayer represents that, when in operation, Unit 2 poses a sufficient health
risk to humans to make its operation inadvisable in densely populated areas.

The U.S. military's specifications require that Vehicle 2 provide the ability to operate on
primary, secondary, unimproved, and off-road locations. Taxpayer obtained special
permission from the State Department of Transportation to operate Vehicle 2 on local
public roads for limited purposes, including transportation to and from a supplier and for
maintenance activities, without registering Vehicle 2 with State's department of motor
vehicles. In granting this permission, the State Department of Transportation
determined that Vehicle 2 constituted "special mobile equipment" under State law. As a
result, Vehicle 2 did not require titling or registration in State.

                                  LAW AND ANALYSIS

Section 4051(a)(1) imposes a 12 percent ad valorem excise tax on the first retail sale of
automobile truck chassis and bodies, truck trailer and semitrailer chassis and bodies,
and tractors of the kind chiefly used for highway transportation in combination with a
trailer or semitrailer.

Section 4051(a)(3) provides that the § 4051 tax does not apply to truck trailer and
semitrailer chassis and bodies, suitable for use with a trailer or semitrailer, with a gross
vehicle weight of 26,000 pounds or less.

Section 145.4051-1(a)(2) of the Temporary Excise Tax Regulations under the Highway
Revenue Act of 1982 provides that a chassis or body is taxable under § 4051(a)(1) only
if the chassis or body is sold for use as a component part of a highway vehicle (as
defined in § 48.4061(a)-1(d)), which is an automobile truck, truck trailer or semitrailer, or
a tractor of the kind chiefly used for highway transportation in combination with a trailer
or semitrailer.

Section 48.4061(a)-1(d)(1) of the Manufacturers and Retailers Excise Tax Regulations
defines a "highway vehicle" as any self-propelled vehicle, or any trailer or semitrailer,
designed to perform a function of transporting a load over public highways, whether or
not also designed to perform other functions. For purposes of this definition, a vehicle
consists of a chassis, or a chassis and a body if the vehicle has a body, but does not
include the vehicle's load.

Section 48.4061(a)-1(d)(1) provides that the term "transport" includes the term "tow."

Section 48.4061(a)-1(d)(1) defines "public highway" to include any road (whether a
Federal highway, State highway, city street, or otherwise) in the United States which is
not a private roadway.

Section 48.4061(a)-1(d)(2) provides exceptions to the definition of "highway vehicle" for
certain mobile machinery and certain vehicles specially designed for off-highway
transportation.

Section 7701(a)(48)(A) was added to the Code by the American Jobs Creation Act of
2004, Pub. L. 108-357. It provides an off-highway vehicle exception to the definition of
"highway vehicle." This provision supersedes the prior regulatory off-highway vehicle
exception in § 48.4061(a)-1(d)(2)(ii).

Section 7701(a)(48)(A)(i) provides that a vehicle will not be treated as a highway vehicle
if such vehicle 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.

Section 7701(a)(48)(A)(ii) provides that, for purposes of § 7701(a)(48)(A)(i), a vehicle's
design is determined solely on the basis of its physical characteristics.

Section 7701(a)(48)(A)(iii) provides that, for purposes of § 7701(a)(48)(A)(i), 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, 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 4053(8) provides an exemption from the tax imposed by § 4051 for mobile
machinery. Specifically, no tax is imposed on any vehicle that consists of a chassis—
   (A) 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 similar operation if the
       operation of the machinery or equipment is unrelated to transportation on or off
       the public highways,
   (B) which 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) which, by reason of such special design, could not, without substantial structural
       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.

Section 4053(8) was added to the Code by the American Jobs Creation Act of 2004.
This provision essentially codified the regulatory mobile machinery exception to the
definition of highway vehicle in § 48.4061(a)-1(d)(2)(i).

There is no general exemption from the § 4051 tax for military vehicles.

Rev. Rul. 79-239, 1979-2 C.B. 367, holds that a four-wheel undercarriage (which is
considered a trailer chassis) designed to transport a collapsible military antenna unit
satisfies the mobile machinery exemption.2 The antenna unit is permanently bolted to
the undercarriage and, once the antenna is erected, performs operations at off-highway
sites. The undercarriage is specially designed to serve only as a mobile carriage for the
antenna while it is being transported on and off the highway. The fact that the
undercarriage does not serve as a mount for the antenna while in operation does not
disqualify it as mobile machinery. Because of its special design, the undercarriage
lacks an identifiable chassis frame, so it could not, without substantial structural
modification, be used to carry any load other than the antenna unit.

Rev. Rul. 79-296, 1979-2 C.B. 370, holds that tax applies to the sale of truck-tractors
and low-bed semitrailers that are designed to be used in combination to transport
military equipment on and off the highway.3 The vehicles are oversize and require
special permits and/or escort vehicles on most state highways. These vehicles are
designed to transport battle tanks, personnel carriers, construction equipment,
semimobile mobile power plants, and other heavy loads over the highway from
railheads, ports, or depots to user maintenance areas. The vehicles are also for use off
the highway and over rough terrain, sand, and soft soils, to evacuate disabled battle
tanks and similar vehicles from, and deliver high density cargo into, remote combat and
field support areas. The truck-tractors are eight-by-eight with 22.5-tons capacity, 120-
inch width, and a maximum speed of 38.5 miles per hour with a heavy load. The low-
bed trailers have four axles with 60-tons capacity and are 137 inches wide. The
revenue ruling holds that the vehicles are not specially designed for the primary function
of transporting the military equipment other than over the public highway because they
are designed to carry the equipment both on and off the highway, with neither function
being primary. The revenue ruling also holds that while the vehicles have
characteristics that impair their use on the highway, in that they are oversize and require
special permits and/or escort vehicles on most state highways, those characteristics are
necessary to enable the vehicles to carry their intended load and accomplish their
highway transportation function.

2 Rev. Rul. 79-239 applies the regulatory mobile machinery exception in § 48.4061(a)-1(d)(2)(i), which is
essentially identical to the codified exemption in § 4053(8). The revenue ruling concerns the now
repealed § 4061 tax.

Notice 2017-5, 2017-6 I.R.B. 779, provides interim definitions of the terms "chassis" and
"body" for purposes of § 4051(a)(1). Specifically, section 3.01 of the notice provides
that a "chassis" is a vehicle's frame and supporting structure and all those components
attached to it (except those components that are exempt from tax). Components that
are part of a chassis include, but are not limited to, the engine, axles, transmission,
drive train, suspension, exhaust aftertreatment system, and cab. Section 3.02 of the
notice defines a "body" as the cargo or load carrying structure of a truck, trailer, or
semitrailer. Examples of a body include, but are not limited to, a flatbed body, a tanker
body, and a box body.

Rockwater, Inc. v. United States, 121 F.4th 1287 (11th Cir. 2024), held that trailers that
dried and transported peanuts from farm fields to off-site buying points were not off-
highway vehicles within the meaning of § 7701(a)(48)(A). The trailers were not
specially designed to transport peanuts off-highway, even though the trailers had
special peanut-drying design features, because they were outfitted with standard
highway equipment allowing them to operate at 55 miles per hour, were DOT compliant,
and could travel on public highways without special permits or markings. The special
peanut-drying design had nothing to do with off-highway transportation. Further, the
design of the trailers did not substantially limit or impair the trailers' on-highway
capability given that they were not designated as oversize or overweight, were DOT
compliant, could travel on public roads at 55 miles per hour, and were marketed as safe
to handle loads of peanuts from the fields to the buying points, which almost always
required travel on public roads. The court found Rockwater's arguments about the
trailers' economic feasibility and the short duration of the harvest season unpersuasive,
3 Although Rev. Rul. 79-296 applies the regulatory off-highway vehicle exception in § 48.4061(a)-
1(d)(2)(ii), the reasoning is analogous for purposes of this ruling.
as the substantial limitation or impairment analysis concerns physical characteristics,
not efficiency of vehicle operation.

Myles Lorentz, Inc. v. Commissioner, 138 T.C. 40 (2012), held that heavy-duty tractors
used to tow "belly dump trailers" were not off-highway vehicles within the meaning of
§ 7701(a)(48)(A).4 The court noted that the word "primary" does not mean "exclusive,"
but rather something similar to "of first importance" or "principally." Myles Lorentz, 138
T.C. at 46 (citing Worldwide Equip., Inc. v. United States, 605 F.3d 319, 324 (6th Cir.
2010) and Malat v. Riddell, 383 U.S. 569, 571-72 (1966)) (referring to regulatory
exception). The tractors were not specially designed to primarily transport a particular
type of load, as they could tow a variety of trailers that could haul different types of
loads. The tractors also were not designed primarily for off-highway transportation
because they could haul loads, large or small, on a highway. The tractors could travel
at regular highway speeds, did not require a special permit, were not overwidth or
overweight for regular highway use, and did not exceed height restrictions. Thus, they
were not substantially impaired in transporting "a load" over the public highway. The
court noted that the term "transport" includes towing, and separately, that the
substantial-impairment evaluation under § 7701(a)(48)(A)(i) is not limited to the load the
vehicle customarily tows.

Florida Power & Light Co. v. United States, 375 F.3d 1119 (Fed. Cir. 2004), held that
utility vehicles with a pintle hook affixed to the chassis did not meet the mobile
machinery exemption.5 The vehicles were used to elevate personnel for utility work, lift
materials, pull and push cable, dig holes, and set poles. The pintle hook was used to
attach a trailer to the vehicles to haul materials for use with machinery or equipment on
the vehicles. Because the chassis was not designed to transport only the attached
machinery or equipment, but also to transport trailers and trailer loads, it had not been
specially designed to serve only as a mobile carriage and mount for the machinery or
equipment involved. The court emphasized that "[a]ny special modification of the
chassis to enable transportation of items other than the designated machinery or
equipment negates the exception." Florida Power & Light, 375 F.3d at 1123.

Vehicle 1

        Off-highway vehicle exception

To qualify for the § 7701(a)(48)(A) off-highway vehicle exception, a vehicle must meet
two tests: (1) the special design test, which requires that the vehicle be "specially
4 The court applied the regulatory off-highway vehicle exception in § 48.4061(a)-1(d)(2)(ii) for one tax year
that predated the effective date of § 7701(a)(48)(A). Ultimately, the highway-vehicle issue determined
whether the taxpayer qualified for a credit with respect to fuel excise taxes due to off-highway business
use.
5 Florida Power analyzed the regulatory mobile machinery exception in § 48.4061(a)-1(d)(2)(i) for
purposes of the heavy highway vehicle use tax imposed by § 4481. The regulatory mobile machinery
exception is essentially identical to the codified exemption in § 4053(8).
designed for the primary function of transporting a particular type of load" off-highway;
and (2) the substantial impairment test, which requires that the vehicle's capability to
transport "a load" over the public highway be substantially limited or impaired because
of its special design. See § 7701(a)(48)(A)(i).

Vehicle 1 is not specially designed for the primary function of transporting a particular
type of load. Vehicle 1 is designed to transport Load 1 and Load 2. However, Vehicle 1
is also designed to tow Trailer 1 and transport Trailer 1 Load. Thus, Vehicle 1 is not
specially designed for the primary function of transporting Load 1 and Load 2 (or those
particular types of loads). In addition, the Vehicle 1 chassis is equipped with a pintle
hook that allows for a towing capacity of D pounds, which far exceeds Trailer 1's
GVWR.6 Like the heavy-duty tractors in Myles Lorentz, Vehicle 1 can tow a trailer and
trailer load other than Trailer 1 and Trailer 1 Load. Therefore, Vehicle 1 is not specially
designed for the primary function of transporting Trailer 1 Load, together with Load 1
and Load 2, or loads typified by these three loads. See § 7701(a)(48)(A)(i); Myles
Lorentz, 138 T.C. at 46 ("primary" means "of first importance" or "principally"). For
purposes of the special design test, a vehicle's design is determined solely on the basis
of its physical characteristics. See § 7701(a)(48)(A)(ii). Therefore, it is immaterial that
Vehicle 1 is not used and/or not intended to be used to transport other loads.

Taxpayer also has not shown that Vehicle 1 is specially designed for the primary
function of off-highway transportation. The U.S. military requires that Vehicle 1 provide
the ability to operate on primary, secondary, unimproved, and off-road locations. While
the primary, secondary, and unimproved roads envisioned may be outside the United
States, when applying the special design test, a vehicle's design is determined solely on
the basis of its physical characteristics. See § 7701(a)(48)(A)(ii). Vehicle 1 has
physical features that allow it to transport its loads off-highway, and other features that
provide the capability to transport its loads on public highways. Vehicle 1 can travel
over 25 miles per hour; has DOT-compliant components such as headlights, reflective
striping, windshield wipers, and turn signals; and has public-highway features like
antilock braking systems and traction control. See Rockwater, 121 F.4th 1287. Like the
military vehicles in Rev. Rul. 79-296, and the heavy-duty tractors in Myles Lorentz,
Vehicle 1 is not specially designed for the primary function of transporting a load off-
highway. See also Myles Lorentz, 138 T.C. at 46 (discussing meaning of "primary").
Similar to the Rockwater plaintiff's marketing of its peanut-drying trailers as safe for
transport over public roads, Taxpayer, by contracting to construct Vehicle 1 to the U.S.
military's specifications, must ensure that Vehicle 1 has the ability to operate on primary
and secondary roads. Therefore, Vehicle 1 does not meet the special design test in
§ 7701(a)(48)(A)(i).

Vehicle 1 also does not meet the substantial impairment test in § 7701(a)(48)(A)(i)
because Vehicle 1's capability to transport a load over the public highway is not
substantially limited or impaired. Taxpayer does not assert that Vehicle 1 is oversize or
6 Trailer 1's GVWR falls below the threshold for taxation.   See § 4051(a)(3).
overweight, and the vehicle has DOT-compliant features for on-road use. Vehicle 1 can
maintain an average speed of over 25 miles per hour while transporting a load. See
§ 7701(a)(48)(A)(iii). Vehicle 1 is subject to restrictive limitations when transporting
Load 1 on the public highway, but such restrictions are load-based and are not due to
the vehicle's design for purposes of carrying Load 1. See § 7701(a)(48)(A)(i)
(impairment must be "because of" a vehicle's special design). Vehicle 1 can be driven
on public roads. Further, Taxpayer has not shown that Vehicle 1's capability to
transport a load on the public highway is substantially impaired.

Like the vehicles in Rockwater and in Myles Lorentz, Vehicle 1 can be driven on the
public highway and is not oversize or overweight. Rev. Rul. 79-296 held military
vehicles to be highway vehicles even though they required special permits or escort
vehicles to drive on the public highway due to their size.7 Unlike the vehicles at issue in
Rev. Rul. 79-296, Vehicle 1 does not require special permits or escort vehicles to drive
on the public highway due to its design. Even if the load-based permitting restriction
were considered a design-based impairment, Vehicle 1 need only be capable of
transporting "a load" over the public highway without substantial impairment, not
necessarily its intended loads. See § 7701(a)(48)(A)(i). Moreover, as in Rev. Rul. 79-
296, any special permits or escorts that must be obtained for Vehicle 1 to transport its
intended loads on the public highway enable it to accomplish its public highway
transportation function.

The State Department of Transportation determined that Vehicle 1 is exempt from State
registration and titling requirements as "special mobile equipment" under State law.
However, Vehicle 1 is generally still subject to other State law requirements relating to
motor vehicles. The exemption from State registration and titling requirements is
outweighed by other factors for purposes of the substantial impairment test in
§ 7701(a)(48)(A)(i).

Vehicle 1 fails both the special design test and the substantial impairment test.
Therefore, Vehicle 1 does not qualify for the off-highway vehicle exception under
§ 7701(a)(48)(A).

        Mobile Machinery Exemption

To qualify for the mobile machinery exemption to the § 4051 tax, a vehicle's chassis
must meet three requirements per § 4053(8)(A) through (C), respectively: (A) the
permanent mount test, which requires the permanent mounting of machinery or
equipment to perform a certain jobsite "or similar" operation that is unrelated to
transportation; (B) the special design test, which requires that the chassis be "specially
designed to serve only as a mobile carriage and mount (and a power source, where
applicable) for the particular machinery or equipment involved"; and (C) the substantial
structural modification test, which requires that the chassis "could not, without
substantial structural modification, be used as a component of a vehicle" designed to
transport any load other than the particular machinery or equipment (or similar
machinery or equipment) for which it was specially designed.

Vehicle 1 does not meet the permanent mount test under § 4053(8)(A). Component 1
has a hydraulic mechanism and could be considered machinery or equipment. The
operation of Component 1, at least in part, is unrelated to transportation. Rev. Rul. 79-
239 concludes that the operation of military equipment at an off-highway site constitutes
a "similar" operation to the enumerated jobsite operations in the permanent mount test.
However, Component 1 is also designed to transport Load 1 on primary and secondary
roads, as well as off-highway. Component 1 thus performs both transportation and non-
transportation functions. Further, Component 2 does not constitute machinery or
equipment. Therefore, Vehicle 1 fails the permanent mount test.

Even if the Service were to find Vehicle 1 meets the permanent mount test, Vehicle 1
does not meet the other requirements for the mobile machinery exemption.

Vehicle 1 does not meet the special design test under § 4053(8)(B). The chassis of
Vehicle 1 transports Load 1 and Load 2, utilizing Component 1 and Component 2,
respectively. Component 2 is not machinery or equipment. Therefore, the chassis of
Vehicle 1 does not serve only as a mobile carriage and mount for permanently mounted
machinery or equipment. Further, the chassis of Vehicle 1 has a pintle hook, and
Vehicle 1 tows Trailer 1 and transports Trailer 1 Load (and is capable of towing a
different trailer). Florida Power & Light held that vehicles with a pintle hook attached to
the chassis did not meet the special design test because the chassis was not designed
to transport only the attached machinery or equipment but also to tow trailers and
transport trailer loads. 375 F.3d at 1123. Rev. Rul. 79-239 is distinguishable because
the undercarriage at issue served only as a mobile carriage for the military antenna unit
bolted onto it. Because Vehicle 1's chassis can transport Load 1, Load 2, and Trailer 1
Load, and can tow a different trailer, the chassis of Vehicle 1 has not been specially
designed to serve only as a mobile carriage and mount for Component 1.

Vehicle 1 does not meet the substantial structural modification test under § 4053(8)(C).
The Vehicle 1 chassis can transport Load 1, Load 2, and Trailer 1 Load. Further, the
pintle hook allows the Vehicle 1 chassis to tow other loads. Accordingly, the Vehicle 1
chassis does not require substantial structural modification to be used as a component
of a vehicle designed to perform a function of transporting a load other than
permanently mounted machinery or equipment.

It is immaterial that the State Department of Transportation determined Vehicle 1 was
"special mobile equipment" under State law. That determination involved a
fundamentally different evaluation than that in § 4053(8), and in any event, Vehicle 1's
exemption from State registration and titling requirements is not a factor under
§ 4053(8).

Vehicle 1 fails all three tests. Therefore, Vehicle 1 does not qualify for the mobile
machinery exemption under § 4053(8).

Vehicle 2

        Off-highway vehicle exception

To qualify for the § 7701(a)(48)(A) off-highway vehicle exception, Vehicle 2 must meet
both the special design test and the substantial impairment test, discussed above.

Vehicle 2 is not specially designed for the primary function of transporting a particular
type of load. Vehicle 2 is designed to transport Load 3. However, Vehicle 2 is also
designed to tow Trailer 2 and transport Trailer 2 Load. Thus, Vehicle 2 is not specially
designed for the primary function of transporting Load 3 (or that particular type of load).
In addition, the Vehicle 2 chassis is equipped with a pintle hook that allows for a towing
capacity of D pounds, which exceeds Trailer 2's GVWR.8 Like the heavy-duty tractors
in Myles Lorentz, Vehicle 2 can tow a trailer and trailer load other than Trailer 2 and
Trailer 2 Load. Therefore, Vehicle 2 is not specially designed for the primary function of
transporting Trailer 2 Load together with Load 3, or loads typified by these two loads.
See § 7701(a)(48)(A)(i); Myles Lorentz, 138 T.C. at 46 ("primary" means "of first
importance" or "principally"). For purposes of the special design test, a vehicle's design
is determined solely on the basis of its physical characteristics. See
§ 7701(a)(48)(A)(ii). Therefore, it is immaterial that Vehicle 2 is not used and/or not
intended to be used to transport other loads.

Taxpayer also has not shown that Vehicle 2 is specially designed for the primary
function of off-highway transportation. The U.S. military requires that Vehicle 2 provide
the ability to operate on primary, secondary, unimproved, and off-road locations. While
the primary, secondary, and unimproved roads envisioned may be outside of the United
States, when applying the special design test, a vehicle's design is determined solely on
the basis of its physical characteristics. See § 7701(a)(48)(A)(ii). Vehicle 2 has
physical features that allow it to transport its loads off-highway, and other features that
provide the capability to transport its loads on public highways. Vehicle 2 can travel
over 25 miles per hour; has DOT-compliant components such as headlights, reflective
striping, windshield wipers, and turn signals; and has public-highway features like
antilock braking systems and traction control. See Rockwater, 121 F.4th 1287. Like the
military vehicles in Rev. Rul. 79-296, and the heavy-duty tractors in Myles Lorentz,
Vehicle 2 is not specially designed for the primary function of transporting a load off-
highway. See also Myles Lorentz, 138 T.C. at 46 (discussing meaning of "primary").
Similar to the Rockwater plaintiff's marketing of its peanut-drying trailers as safe for
8 Trailer 2's GVWR falls below the threshold for taxation.   See § 4051(a)(3).
transport over public roads, Taxpayer, by contracting to construct Vehicle 2 to the U.S.
military's specifications, must ensure that Vehicle 2 has the ability to operate on primary
and secondary roads. Therefore, Vehicle 2 does not meet the special design test in
§ 7701(a)(48)(A)(i).

Vehicle 2 also does not meet the substantial impairment test in § 7701(a)(48)(A)(i)
because Vehicle 2's capability to transport a load over the public highway is not
substantially limited or impaired. Taxpayer does not assert that Vehicle 2 is oversize or
overweight, and the vehicle has DOT-compliant features for on-road use. Vehicle 2 can
maintain an average speed of over 25 miles per hour while transporting a load. See
§ 7701(a)(48)(A)(iii). Vehicle 2 is subject to limitations with respect to its operations in
densely populated areas, but such restrictions are operations-based and are not due to
the vehicle's design for purposes of carrying Load 3. See § 7701(a)(48)(A)(i)
(impairment must be "because of" a vehicle's special design). Vehicle 2 can be driven
on public roads. Further, Taxpayer has not shown that Vehicle 2's capability to
transport a load on the public highway is substantially impaired.

Like the vehicles in Rockwater and in Myles Lorentz, Vehicle 2 can be driven on the
public highway and is not oversize or overweight. Rev. Rul. 79-296 held military
vehicles to be highway vehicles even though they required special permits or escort
vehicles to drive on the public highway due to their size.9 Unlike the vehicles at issue in
Rev. Rul. 79-296, Vehicle 2 does not require special permits or escort vehicles to drive
on the public highway due to its design. Even if the operations-based restriction were
considered a design-based impairment, Vehicle 2 need only be capable of transporting
"a load" over the public highway without substantial impairment, not necessarily its
intended loads. See § 7701(a)(48)(A)(i).

The State Department of Transportation determined that Vehicle 2 is exempt from State
registration and titling requirements as "special mobile equipment" under State law.
However, Vehicle 2 is generally still subject to other State law requirements relating to
motor vehicles. The exemption from State registration and titling requirements is
outweighed by other factors for purposes of the substantial impairment test in
§ 7701(a)(48)(A)(i).

Vehicle 2 fails both the special design test and the substantial impairment test.
Therefore, Vehicle 2 does not qualify for the off-highway vehicle exception under
§ 7701(a)(48)(A).

        Mobile Machinery Exemption

To qualify for the mobile machinery exemption to the § 4051 tax, Vehicle 2 must meet
all three requirements in § 4053(8), the permanent mount test, the special design test,
and the substantial structural modification test, discussed above.

9 See footnote 7.

Vehicle 2 does not meet the permanent mount test under § 4053(8)(A). Component 3
does not constitute machinery or equipment. Accordingly, Vehicle 2 fails the permanent
mount test.

Even if the Service were to find that Vehicle 2 meets the permanent mount test, Vehicle
2 does not meet the other requirements for the mobile machinery exemption.

Vehicle 2 does not meet the special design test under § 4053(8)(B). The chassis of
Vehicle 2 transports Load 3. Therefore, the chassis of Vehicle 2 does not serve only as
a mobile carriage and mount for permanently mounted machinery or equipment.
Further, the chassis of Vehicle 2 has a pintle hook, and Vehicle 2 tows Trailer 2 and
transports Trailer 2 Load (and is capable of towing a different trailer). Florida Power &
Light held that vehicles with a pintle hook attached to the chassis did not meet the
special design test because the chassis was not designed to transport only the attached
machinery or equipment but also to tow trailers and transport trailer loads. 375 F.3d at
1123. Rev. Rul. 79-239 is distinguishable because the undercarriage at issue served
only as a mobile carriage for the military antenna unit bolted onto it. Vehicle 2's chassis
can transport Load 3 and Trailer 2 Load and can tow a different trailer. Accordingly,
even if Component 3 were machinery or equipment, the chassis of Vehicle 2 would not
be specially designed to serve only as a mobile carriage and mount for such
hypothetical machinery or equipment.

Vehicle 2 does not meet the substantial structural modification test under § 4053(8)(C).
The Vehicle 2 chassis can transport Load 3 and Trailer 2 Load. Further, the pintle hook
allows the Vehicle 2 chassis to tow other loads. Accordingly, the Vehicle 2 chassis
does not require substantial modification to be used as a component of a vehicle
designed to perform a function of transporting a load other than permanently mounted
machinery or equipment.

It is immaterial that the State Department of Transportation determined Vehicle 2 was
"special mobile equipment" under State law. That determination involved a
fundamentally different evaluation than that in § 4053(8), and in any event, Vehicle 2's
exemption from State registration and titling requirements is not a factor under
§ 4053(8).

Vehicle 2 fails all three tests. Therefore, Vehicle 2 does not qualify for the mobile
machinery exemption under § 4053(8).

                                      CONCLUSION

Vehicle 1 does not meet the requirements of the § 7701(a)(48)(A) off-highway vehicle
exception or the requirements of the § 4053(8) mobile machinery exemption. Thus, the
first retail sale of Vehicle 1 is subject to tax under § 4051.

Vehicle 2 does not meet the requirements of the § 7701(a)(48)(A) off-highway vehicle
exception or the requirements of the § 4053(8) mobile machinery exemption. Thus, the
first retail sale of Vehicle 2 is subject to tax under § 4051.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter. Specifically, this ruling does not opine on what constitutes the tax base for
Vehicle 1 or Vehicle 2.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.

The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the request for rulings, it is subject to verification on examination.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.


                                           Sincerely,




                                           Jennifer Y. Golden
                                           Senior Technician Reviewer, Branch 3
                                           (Energy, Credits, and Excise Tax)

Enclosure
Copy for § 6110 Purposes

cc:
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