Frequently Asked Questions
Who is eligible for the Heavy Vehicle Repair and Modification Safe Harbor?
Owners of existing heavy vehicles can perform significant upgrades or repairs without triggering the retail excise tax, provided costs stay below the 75% threshold.
How does the Heavy Vehicle Repair and Modification Safe Harbor work?
Repairs or modifications to a heavy truck are not treated as 'manufacture' (triggering the 12% tax) if the cost does not exceed 75% of the price of a comparable new article.
What law authorizes the Heavy Vehicle Repair and Modification Safe Harbor?
The Heavy Vehicle Repair and Modification Safe Harbor is authorized under IRC §4052(f) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §4052
Source: Internal Revenue Code, Title 26, United States Code
§ 4052. Definitions and special rules(a) First retail saleFor purposes of this subchapter—(1) In generalThe term “first retail sale” means the first sale, for a purpose other than for resale or leasing in a long-term lease, after production, manufacture, or importation.
(2) Leases considered as salesRules similar to the rules of section 4217 shall apply.
(3) Use treated as sale(A) In generalIf any person uses an article taxable under section 4051 before the first retail sale of such article, then such person shall be liable for tax under section 4051 in the same manner as if such article were sold at retail by him.
(B) Exemption for use in further manufactureSubparagraph (A) shall not apply to use of an article as material in the manufacture or production of, or as a component part of, another article to be manufactured or produced by him.
(C) Computation of taxIn the case of any person made liable for tax by subparagraph (A), the tax shall be computed on the price at which similar articles are sold at retail in the ordinary course of trade, as determined by the Secretary.
(b) Determination of price(1) In generalIn determining price for purposes of this subchapter—(A) there shall be included any charge incident to placing the article in condition ready for use,
(B) there shall be excluded—(i) the amount of the tax imposed by this subchapter,
(ii) if stated as a separate charge, the amount of any retail sales tax imposed by any State or political subdivision thereof or the District of Columbia, whether the liability for such tax is imposed on the vendor or vendee, and
(iii) the value of any component of such article if—(I) such component is furnished by the first user of such article, and
(II) such component has been used before such furnishing, and
(C) the price shall be determined without regard to any trade-in.
(2) Sales not at arm’s lengthIn the case of any article sold (otherwise than through an arm’s-length transaction) at less than the fair market price, the tax under this subchapter shall be computed on the price for which similar articles are sold at retail in the ordinary course of trade, as determined by the Secretary.
(3) Long-term lease(A) In generalIn the case of any long-term lease of an article which is treated as the first retail sale of such article, the tax under this subchapter shall be computed on a price equal to—(i) the sum of—(I) the price (determined under this subchapter but without regard to paragraph (4)) at which such article was sold to the lessor, and
(II) the cost of any parts and accessories installed by the lessor on such article before the first use by the lessee or leased in connection with such long-term lease, plus
(ii) an amount equal to the presumed markup percentage of the sum described in clause (i).
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