Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 70-54

1970-1 C.B. 218

IRS Headnote

"Trailer/containers" equipped with refrigeration units, which are designed primarily for highway transportation but which are adaptable for railroad service, are subject to tax under section 4061(a)(1) of the Code; Revenue Ruling 60-185 distinguished.

Full Text

Rev. Rul. 70-54

Advice has been requested regarding the applicability of the manufacturers excise tax imposed by section 4061(a)(1) of the Internal Revenue Code of 1954 to sales by the manufacturer of the article described below.

A company manufactures an insulated "trailer/container" equipped with a diesel powered mechanical refrigeration unit. The unit is 40 feet long, 8 feet wide, and 131/2 feet high when used with a 48-inch high fifth wheel. The unit is designed and constructed for use in highway operations and railroad trailer-on-flat-car service.

The bogie for the unit is of the tandem axle, wide slide, adjustable, demountable type with framework designed to slide between the longitudinal members on the bottom of the trailer/container. The slide range of the bogie is 66 inches in 6-inch increments. The bogie is equipped with air brakes, a parking brake on the rear axle, flaps, and a license plate holder.

The unit is equipped with a retractable landing gear, a fifth-wheel king pin, a fold-up bumper, 12-volt wiring, clearance lights, running lights, reflectors, and lifting pads located on the bottom edges. The refrigeration unit and its fuel supply tank are mounted on the front of the unit.

The purpose of the removable bogie and lifting pads is to facilitate the transfer of the trailer/container from its bogie to a railroad flat car. When the landing gear and king pin are retracted and the bumper is folded, the underside of the unit has a flat surface that fits flush on a railroad flat car.

Other features designed to adapt the unit to flat car transportation include a reinforced front end and rear doors to enable them to withstand the shocks of railroad switching operations. The trailer/container is designed to be capable of withstanding a longitudinal shock load of at least 5 times the force of gravity when fully loaded to 50,000 pounds and mounted on a flat car. Master holes, 3 inches by 7 inches, to secure the unit to a railroad flat car are provided on 38-inch centers located in the king pin subplate and in the lower door frame.

Section 4061(a)(1) of the Code imposes a tax upon sales by the manufacturer of truck trailer and semitrailer chassis and bodies.

Section 48.4061(a)-1(e) of the Manufacturers and Retailers Excise Tax Regulations provides that a trailer or semitrailer chassis or body primarily designed for highway use in combination with a taxable truck, bus, or tractor is subject to the tax imposed by section 4061(a)(1). The tax attaches even though the trailer or semitrailer may have equipment to perform functions other than in connection with the transportation of property or persons. However, no tax under section 4061(a) attaches to that part of the selling price of the complete unit which is reasonably attributable to such equipment provided that such part of the selling price is billed separately on the invoice to the customer or can be otherwise established by adequate records.

As used in the regulations the term "primarily designed" has reference to the type of body or chassis and not to the use made of it. The trailer/container described above is primarily designed to transport cargo on the highway, even though it possesses features indicative of ready adaption to railway transportation.

The special construction features such as retractable king pin and landing gear, reinforced front end and rear doors, lifting pads, fold-up bumper, flat undersurface, and provisions for anchoring the unit to railroad cars do not obviate the fact that the primary concern in designing the unit was to create a highway-type semitrailer, which incorporated features to make it readily adaptable to railroad service.

Therefore, it is held that sales by the manufacturer of the above-described semitrailer are taxable under section 4061(a)(1) of the Code.

This Revenue Ruling is distinguishable from Revenue Ruling 60-185, C.B. 1960-1, 412, which holds that cargo containers designed for shipment of property by water, rail, and highway are not considered to constitute taxable truck trailer or semitrailer bodies within the meaning of section 4061(a)(1) of the Code since they are not primarily designed for highway use.

The cargo containers described in Revenue Ruling 60-185 differ from the article described herein, in that the cargo containers are designed for multiple purposes; that is, transportation by water, rail, and highway. The trailer/containers described in this ruling are designed for highway transportation with modifications to facilitate adaptability to railroad service. The size of the units, the running gear, brakes, lights, bumpers, and fifth-wheel king pins are all indicative of design conforming to highway standards. The unit is built for use with tractors of the kind chiefly used in highway transportation and is a highway-type semitrailer as defined in section 48.4061(a)-1(e) of the regulations.