Not Much Clarity With New IRS FET Advice

Dealers, shops and fleets building glider kits are left with uncertainty over Federal Excise Tax

March 2013, - WebXclusive

by Denise Rondini, Aftermarket Contributing Editor - Also by this author

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Althardt says determining the retail price can be complicated. “In many cases it is difficult to know, because it could be a type of truck the dealer does not sell or a configuration he has not sold before.”

He believes the CCA gives dealers and others doing glider kits some latitude in the area of price, because one of the answers to the question about comparable price was average retail price.

“To me this means the transaction price on a retail sale," he says. "It does not mean using the price you get for selling 500 trucks to a fleet on which the fleet is receiving massive concessions from the manufacturer.

“I take it to mean the price I am selling to an individual on a stock unit; taking the average of transactional prices.”

Who's Responsible

One area where the IRS did provide clarity was with regard to who has the liability for collecting, remitting and reporting FET: the title holder.

“For example," Althardt says, "if the fleet has a donor unit (previously taxed) and has the dealer install a glider kits, then the fleet is responsible for determining if FET needs to be paid, because the dealer never took title to the donor unit."

According to Miller, the recent CCA does not provide a great deal of guidance, especially in helping to determine what the definition of a donor unit is.

Miller encourages those involved in the glider kit business to speak with their attorneys and tax advisors on FET as it relates to glider kits to ensure they are doing things properly.

“We want bright lines to the extent they are possible,” he says. “We don’t want dealers having to make judgment decisions for themselves about whether or not they should be charging the tax. It does not make sense for them to do it, and we think it is a place where the IRS really could help dealers as well as their own auditors.

“We are glad the IRS took the time to [issue a CCA], but we don’t think we are quite there yet in terms of giving clarity.”

You Haven't Heard the End of This

Althardt does not believe this most recent CCA is the last thing dealers will hear from the IRS on FET and glider kits.

“The IRS is very aware of the issue now. I think we will see a court case that ultimately will give us clarity on specific issues.”

There is one caveat, according to Althardt.

“The only question is, will the EPA actually beat everyone to the punch. This is kind of a wild card.”

Currently a fleet can purchase a glider kit and put its older engine into it and still run the unit.

“However, the EPA could step in and say in order to run a tractor across the country you have to have a post-2010 engine. The EPA could step in and put an end to the reason why a lot of individuals and fleets are moving toward glider kits.”

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  1. 1. John black [ March 20, 2013 @ 06:43AM ]

    The fet has been paid to start with on the unit,it should not be paid twice!

  2. 2. Kevin J. Reidy [ March 20, 2013 @ 10:34AM ]

    Seems to be a fairly typical response from the IRS; they are vague about commenting on rulings on purpose. That way they can interpret their own rules in any way derogatory to the filer in order to collect higher revenue.

    If you ask them to clarify a ruling of theirs that states "Black Is White, but only when we say so." , the IRS will tell you that the answer is "Sometimes, but not always."

  3. 3. Randall Stoll CPA [ October 05, 2015 @ 12:04PM ]

    I have situation where the truck wasn't subject to FET time of sale. Two years down the road we are adding an axle and now the truck is subject to FET. Does the taxpayer have to pay FET on the original purchase price of the truck plus the cost of the axle addition? Thanks in advance for an answer


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