Internal Revenue Service
Revenue Ruling
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smRev. Rul. 72-9
1972-1 C.B. 328
IRS Headnote
Applicability of the taxes imposed by section 4041(a) of the Code to diesel fuel sold for use or used as a fuel in certain types of diesel-powered motor vehicles.
Full Text
Rev. Rul. 72-9
Advice has been requested concerning the applicability of the retailers excise tax imposed by section 4041(a) of the Internal Revenue Code of 1954 to diesel fuel sold for use or used as a fuel in the types of diesel-powered motor vehicles described below.
Type 1--These vehicles are constructed on standard weight chassis and are equipped with replaceable log bunks, 12 to 14 feet in width. These widths exceed the maximum width permitted on the highways in the State where the vehicles are operated, so that when equipped with the 12 to 14 foot log bunks the vehicles can neither be registered for use on highways in the State, nor issued special permits for such use. As a consequence, when equipped with overwidth bunks the vehicles are operated only on private property as loggers. Many of these vehicles are operated while equipped with overwidth bunks for a certain period of time, and then the bunks are removed and the vehicles are converted to highway-type cargo carriers. In certain cases, this is accomplished by replacing the overwidth bunks with smaller bunks so that the vehicles may be permitted to use the highways. In some instances, after being operated as over-the-highway cargo carriers for a certain period, they are converted to overwidth loggers and used only on private property. The question presented with respect to this type of vehicle is the applicability of the tax imposed by section 4041(a) of the Code to diesel fuel sold for use in the vehicles when they are converted from one type of use to another under the circumstances described.
Type 2--These vehicles are constructed on heavy-duty chassis and are operated mostly in mine pits and other off-highway locations. Generally these vehicles are within State width and weight limitations for highway registration purposes. Unloaded vehicles of this type are so close to State weight limitations, however, that they can only carry relatively small loads over the highway. Furthermore, they are incapable of operating at normal highway speeds. Accordingly, it is not economically practical to operate them on the highway as cargo carriers. In certain emergency situations, however, they are allowed by the State to operate overloaded on the highway by special permit.
Type 3--These vehicles are constructed on heavy-duty truck chassis and are used in various industrial and commercial operations, such as logging, quarrying, mining, concrete mixer service, dumping service, and oil field service. They are used to haul property, often over the highway, from a loading point on or off the highway to an unloading point that may also be on or off the highway. Some of these vehicles have an overall width in excess of 102 inches. The heavy-duty features include such items as high rated axle capacities, special suspension systems, and high gross vehicle weights ranging from 64,000 pounds to 81,000 pounds. These features enable the vehicles to perform under the most difficult off-highway operating conditions. However, the vehicles are also designed to perform efficiently in transporting extra-heavy loads over public roads at normal highway speeds. Most States require that special permits be obtained in order to use these vehicles on public roads.
Section 4041(a) of the Code imposes a tax upon diesel fuel (1) sold by any person to an owner, lessee, or other operator of a diesel-powered highway vehicle, for use as fuel in such vehicle, or (2) used by any person as a fuel in a diesel-powered highway vehicle unless there was a taxable sale of such liquid under paragraph (1).
Section 48.4041-7(b) of the Manufacturers and Retailers Excise Tax Regulations provides that the term "highway vehicle" has reference to the type of vehicle and not to the use which is made of the vehicle. The term means any motor vehicle, whether powered by diesel fuel or special motor fuel, which is of the type used for transportation on the highways. It includes automobile trucks, buses, highway tractors, trolley buses, and other similar type vehicles. The term "highway vehicle" does not include any vehicle, which, although propelled by means of its own motor, is of a type not used for highway transportation, that is, of a type designed and manufactured for a purpose other than highway transportation.
A vehicle's status for purposes of section 4041 of the Code is determined at the time of the sale or use of the diesel fuel. Thus, if at the time the diesel fuel is sold or used, the vehicle is of the type designed for highway transportation the diesel fuel will be subject to tax. A diesel powered highway vehicle that is temporarily modified to such an extent that State law prohibits its use on the highway is not "of the type used for transportation on the highways" within the meaning of section 48.4041-7(b) of the regulations while it is so modified. The fact that a vehicle may incidentally be used on the highway will not, of itself, classify the vehicle as a highway vehicle, for purposes of the diesel fuel tax.
When the vehicles described as Type 1 are equipped with overwidth log bunks they are not permitted to be used on the highways. Vehicles with these overwidth bunks are of a type not used for highway transportation and are not diesel-powered highway vehicles within the meaning of section 4041(a) of the Code. Accordingly, it is held that diesel fuel sold for use, or used, in these vehicles when they are so adapted is not subject to the tax imposed by section 4041(a) of the Code. However, when these vehicles are converted and operated as highway-type cargo carriers, they are vehicles of the type used for highway transportation and therefore are diesel-powered highway vehicles within the meaning of section 4041(a) of the Code, so that the tax imposed by that section applies to diesel fuel sold for use or used as a fuel in these vehicles during the time they are adapted for use as highway-type cargo carriers.
With respect to the vehicles described as Type 2, the low payload and low speed characteristics of these vehicles indicate they are not of the type used for highway transportation, even though some highway use may occur under special conditions. Therefore, such vehicles are not diesel-powered highway vehicles, for purposes of the tax imposed by section 4041 of the Code. Accordingly, it is held that no tax is applicable under section 4041(a) of the Code to diesel fuel sold for use or used as fuel in such vehicles. See Revenue Ruling 59-33, C.B. 1959-1 299, in which a similar conclusion is reached with respect to vehicles designed for use in the logging industry.
The vehicles described as Type 3 are of the type used for highway transportation even though the chassis possess certain characteristics or features which make them suitable for use over rough terrain and even though they may exceed State weight or width limitations so that they may be operated on the highways only under a special permit. Accordingly, it is held that the tax imposed by section 4041 of the Code applies to diesel fuel sold for use or used in such vehicles.
It should be noted that, under section 4041(a) of the Code, once a vehicle is determined to be a highway-type vehicle for purposes of the diesel fuel tax, the rate of tax to be applied may be affected by the registration status of the vehicle, or in the case of vehicles owned by the United States the actual use of the vehicle. Generally, the current rate of tax provided by section 4041(a) of the Code with respect to fuel sold for use or used in a diesel-powered highway vehicle is four cents a gallon. However, a lower rate of two cents a gallon applies to fuel sold for use or used in a diesel-powered highway vehicle which (at the time of such sale or use) is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country, or which, in the case of a diesel-powered highway vehicle owned by the United States, is not used on the highway.