96-029
Response
February 7, 1996
Request
Dear
XXXXX,
Recently,
XXXXX which is in the business of selling and servicing new and used over the
road semi-trailer for the trucking industry, asked the IRS to write us a letter
on when Federal Excise Tax becomes due on a new trailer that is sold.
Is
it due when the trailer is invoiced or when the funds are received and the
title is passed to the purchaser?
Currently,
XXXXX pays the FET deposits on the 9th and 24th of each month based on invoice
date. However, in conversations with
the IRS and other members of the trucking industry it appears that the correct
answer is that the deposit is due only when the title is passed under state law. That date might be two or three weeks after
the trailer is invoiced which would help our cash flow.
Attached
is a copy of our letter to the IRS and their response. In the IRS letter it states that "the
regulation provides that the retailers excise tax generally attaches when the
title to the article sold passes from the retailer to the purchaser." The last paragraph on page one of the IRS
letter seems to state that "when the title passes" will ultimately
depend on the law in the jurisdiction where the sales are made and what that
law says about determining when title passes.
As
a result I am requesting a letter of
determination from the Utah State Tax Commission informing XXXXX, under the
laws of the state of Utah when does the title pass from XXXXX to our customer
when we sell a new trailer.
When
does title pass?
1. When XXXXX invoices its customers?
2. When XXXXX gets paid for the trailer by the
customer?
3. When title applications are presented to the
DMV for licencing?
4. When the manufacturers Statement of Origin
(MSO) is signed off by XXXXX?
Given
the magnitude of Federal Excise Tax paid by the XXXXX on a yearly basis, it is
important to finally determine when the tax must be paid. I am thanking you in advance for your help
in resolving this matter.
Sincerely,
XXXXX
XXXXX
RE:
Advisory Opinion Identifying when title passes for purposes of a federal excise
tax.
Dear
XXXXX,
We
have received your request for an opinion as to when title passes for purposes
of determining when a federal excise tax is due. We offer the following guidance:
In
Utah, unless there is specific statutory language to the contrary, passage of
title is governed by the Uniform Commercial Code. Under the Uniform Commercial Code, title passes from the seller
to the buyer in any manner or upon any conditions to which the parties
agree. If the parties to the
transaction do not explicitly agree upon the passage of title, title passes to
the buyer at the time and place that the seller completes his obligations with
regard to physical delivery of the goods.
If the contract requires the seller to deliver the goods at a specified
destination, title passes upon delivery to that destination. Otherwise, title
passes when the buyer takes possession at the seller's place of business or
when the seller delivers the goods for shipment.
On
the basis of the information provided in your request and in the letter
provided to you by the IRS, it appears that the federal excise tax attaches
when your customer takes delivery of the semitrailer, even if that delivery
occurs some time after the actual contract for sale is entered. Of course, we defer to the Internal Revenue
Service should they issue you a differing opinion on this matter.
Please
let us know if you have further questions.
For
the Commission,
Alice
Shearer
Commissioner
XXXXX
XXXXX
Dear
XXXXX:
We
are responding to your letter of XXXXX, requesting general information on when
tax attaches on the retail sale of trailers under the Internal Revenue Code.
The
following sections of the Code and the applicable regulations will answer your
questions.
Section
4051 (a) (1) of the Code imposes a tax of 12 percent of the amount for which
chassis and bodies of trucks, trailers and semitrailers, and tractors are sold
at their first retail sale. Section
4051 (a) (3) provides an exclusion from the tax for trailers weighing 26,000
pounds or less.
Section
4052 (a) (1) of the Code provides that the term "first retail sale"
means that the first sale, for purposes other than resale or leasing in a
long-term lease, after production, manufacture, or importation.
Section
48.0-2 (a) (5) of the manufacturers and Retailers Excise Tax Regulations
provides that the term "sale" means an agreement whereby the seller
transfers the property ( that is, the title or the substantial incidents of
ownership) in the goods to the buyer for consideration called the price, which
may consist of money, services, or other things.
Section
48.0-2 (b) (1) of the regulation provides that the retailers excise tax
generally attaches when the title to the article sold passes from the retailer
to the purchaser.
Section
48.0-2 (b) (2) of the regulation provides that when the title passes is
dependant upon the intention of the parties as gathered from the contract of
sale and the attendant circumstances.
In the absence of expressed intention, the legal rules of presumption
followed in the jurisdiction where the sale is made govern in determining when
title passes.
We
are enclosing a copy of Publication 510 which provides information to the
public on excise tax filing and deposit requirements.
Sincerely,
XXXXX