Late last year, the IRS determined that certain heavy-duty pickup trucks should actually be classified as tractors, making it necessary for some dealers to collect an additional tax.

Although individuals may use these trucks as personal transportation and to tow recreational trailers, many buy these trucks for safety reasons such as their superior braking systems. However, the IRS now seeks to impose an excise tax obligation on buyers of these vehicles. In Revenue Ruling 2004-80, the IRS argues that these vehicles are tractors even though the U.S. 11th Circuit Court of Appeals ruled in January 2004 that they are pickup trucks.

The characterization of a vehicle as a truck or as a tractor is significant because the first retail sale of all highway tractors, regardless of size or use, is subject to the retail excise tax imposed by Section 4051 of the Highway Revenue Act of 1982. Trucks under a certain weight are not subject to this tax.

Some excerpts from the ruling:

The vehicle tows trailers and semi-trailers; the trailers exceed 35 feet in length and have a gross vehicle weight rating of 20,000 pounds…

The cab has an electric trailer brake control that connects to the brakes of a towed trailer and to a hookup for trailer lights. The vehicle has two storage boxes behind that cab that can accommodate incidental items such as small tools and vehicle repair equipment.

…Section 4051(a)(1) imposes an excise tax on the first retail sale of an automobile truck chassis and bodies, truck trailer and semi-trailer chassis and bodies, and tractors of the kind chiefly used for highway transportation in combination with a trailer or semi-trailer. The tax is not limited to commercial vehicles. Thus, a vehicle may be subject to tax even if sold for use or used as a recreational or private tow vehicle rather than for commercial purposes.

This guidance results from the Industry Issue Resolution (IIR) program. Under IIR, taxpayers, associations, and other groups representing businesses submit frequently disputed or burdensome tax issues for review. The goal, where possible, is to resolve these differences by providing more effective guidance.

In a late-breaking development, the IRS issued Revenue Procedure 2005-19, which indicates the agency will not challenge a seller’s determination that any of the following classifications of truck body types meet the “suitable for use” standard, and sales thereof are excluded from the retail excise tax:

1. Platform truck bodies 21 feet or less in length,
2. Dry freight and refrigerated truck van bodies 24 feet or less in length,
3. Dump truck bodies with load capacities of 8 cubic yards or less, or
4. Refuse packer truck bodies with load capacities of 20 cubic yards or less.

Other trucks -- including trucks that don’t meet the criteria for automatic exclusion listed above -- may still satisfy the “suitable for use” standard if the seller can establish that the truck body has practical and commercial fitness for use with a vehicle having a gross vehicle weight up to 33,000 lbs.