Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 64-97

1964-1 C.B. 405

IRS Headnote

A company sells highway motor vehicles under conditional sales contracts and also leases such vehicles under contracts which include an option to purchase. In both instances, the State motor vehicle laws require that the company's name appear on the `Certificate of Ownership' as the legal owner and that the name of the purchaser or lessee appear as the registered owner . Occasionally, the company repossesses a vehicle with respect to which the purchaser has not paid the highway motor vehicle use tax due for any taxable year during which he used the vehicle. Likewise, the company is occasionally informed that a particular lessee has not paid the tax due for any taxable year during the period of the lease. At no time does the company, itself, put any of these vehicles to a taxable use. Held , since the purchaser or the lessee is the person in whose name a vehicle is required to be `registered,' the company does not incur any liability for the unpaid highway use tax under the circumstances described.

Full Text

Rev. Rul. 64-97

Advice has been requested whether a company which is engaged in selling and leasing highway motor vehicles incurs liability for the highway motor vehicle use tax under the circumstances set forth below.

A company sells a highway motor vehicle (having a taxable gross weight of more than 26,000 pounds) to a purchaser under a conditional sales contract. The company does not put the vehicle to a taxable use prior to sale. The motor vehicle laws of the State in which this sale occurs require that, on the `Certificate of Ownership' for each vehicle sold under such a contract, there shall appear the name of the seller as the legal owner and the name of the purchaser as the registered owner .

Recently, the company repossessed the vehicle which had been sold under a conditional sales contract entered into prior to the time of repossession. The company intends to hold the vehicle for resale and will not put the vehicle to any taxable use. However, the original purchaser has informed the company that he has not filed returns or paid any highway motor vehicle use tax with respect to the vehicle, even though he put the vehicle to a taxable use in each of the taxable years during which the vehicle was in his possession.

In addition to selling highway motor vehicles, the company also leases the same type of vehicle under a contract which includes an option to purchase. Under the State law, certain lease arrangements which include an option to purchase are treated as `conditional sales contracts.' As in the case of conditional sales, the State laws require that the name of each party to these transactions be entered on the Certificate of Ownership. Thus, in a case where the company leases a taxable vehicle in this State, its name is entered on the Certificate as the legal owner , whereas the name of the lessee is entered as the registered owner . The company does not put the vehicle to a taxable use prior to lease. In a particular case, a lessee will inform the company that it has not filed returns or paid the tax.

The question arises whether in either of the cases described above the company incurs liability for the tax for any taxable year in respect of which the tax has not been paid by the vendee or the lessee, including in the first instance the taxable year in which repossession was made.

Section 4481(a) of the Internal Revenue Code of 1954 imposes a tax upon the use on the public highways of the United States of any highway motor vehicle which has a taxable gross weight of more than 26,000 pounds. Section 4481(b) requires that the tax shall be paid by the person in whose name the highway motor vehicle is, or is required to be, registered under the law of the State in which such vehicle is, or is required to be, registered.

Section 41.4481-2(a) of the Highway Motor Vehicle Use Tax Regulations provides, in part, that the person in whose name any highway motor vehicle is registered at the time of the first taxable use of such vehicle in any taxable year is liable for the tax on the use of the vehicle for such taxable year.

Section 41.4481-3(b) of the regulations provides that any highway motor vehicle which, during any period in the taxable year, is registered both in the name of the owner of such vehicle and in the name of any other person, is considered to be registered, during such period, solely in the name of the owner of such vehicle.

Under the facts and circumstances involved in the situations described above, the Certificates of Ownership indicate that the purchaser and the lessee, respectively, are the persons who, under the motor vehicle laws of the State, are the `registered' owners of the vehicles put to a taxable use. Conversely, the company, in its respective capacities as seller and lessor is designated on the Certificate of Ownership as the legal owner of the vehicle for a purpose, under such State laws, other than to identify it as the `registered' owner of the vehicle in use. Thus, since section 41.4481-3(b) of the regulations applies to cases in which two parties are both required by a State to be `registered' under its motor vehicle laws, the situations here described do not constitute the dual registration contemplated by that section of the regulations.

Accordingly, under the circumstances described above, it is held that the company is not `the person in whose name the highway motor vehicle is, or is required to be, registered' within the meaning and intent of section 4481(b) of the Code. Thus, it does not incur liability for the highway motor vehicle use tax with respect to any of the taxable years for which a particular purchaser or a particular lessee, as the case may be, failed to pay the tax.