Internal Revenue Service
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 Rev. Rul. 78-33

1978-1 C.B. 342

IRS Headnote

Cranes installed on trucks and truck chassis. The applicability of the tax imposed by section 4061 of the Code is explained with respect to cranes installed on trucks and truck chassis in such manner that the primary function of the crane is to load and unload the vehicle on which it is mounted; Rev. Rul. 73-343 obsoleted.

Full Text

Rev. Rul. 78-33

The Internal Revenue Service has considered the effect of the Tax Reform Act of 1976 [Pub. L. 94-455, 1976-3 C.B. 1], on the situations described in Rev. Rul. 73-343, 1973-2 C.B. 346, concerning application of the manufacturers excise tax imposed by section 4061 of the Internal Revenue Code of 1954 where cranes are installed on trucks and truck chassis.

Situation (1). A dealer purchased a taxable truck chassis from the manufacturer and purchased a crane from another manufacturer. The dealer installed the crane on the chassis and sold the chassis so equipped at retail. The crane is installed in such a manner that its primary function is to load and unload the vehicle on which it is mounted.

Situation (2). The facts are the same as in Situation (1) except that the dealer purchased a truck that has a gross vehicle weight of 10,000 pounds or less and, under the provisions of section 4061(a)(2) of the Code, is excluded from the tax imposed by section 4061(a)(1). In this situation, the crane is installed on the truck.

Situation (3). A trucking operator purchased a taxable truck chassis from a dealer and had a crane installed thereon by another dealer. The crane is installed in such a manner that its primary function is to load and unload the vehicle on which it is mounted. The operator used the chassis so equipped in its business. Situation (4). The facts are the same as in Situation (3), except that the trucking operator purchased a truck that has a gross vehicle weight of 10,000 pounds or less and, as in Situation (2), is excluded from tax. In this situation, the crane is installed on the truck.

Section 4061(a)(1) of the Code imposes a tax on the sale by the manufacturer, producer, or importer of certain enumerated motor vehicle articles, including automobile truck chassis.

Section 4061(a)(2) of the Code excludes from the tax imposed by section 4061(a)(1) sales by the manufacturer, producer, or importer of automobile truck chassis suitable for use with a vehicle having a gross vehicle weight of 10,000 pounds or less.

Section 4061(b)(1) of the Code imposes a tax on parts or accessories (other than tires and inner tubes) for any of the articles enumerated in section 4061(a)(1) when sold by the manufacturer, producer, or importer.

Section 4063(d) of the Code, as added by section 2109 of the Tax Reform Act of 1976, Pub. L. 94-455, provides that the tax imposed by section 4061 shall not apply to the resale on or after October 4, 1976, of any article described in section 4061(a)(1) if before such resale such article was merely combined with certain enumerated articles. Among the articles enumerated is loading and unloading equipment, including any crane.

Section 4218(a) of the Code provides that if any person manufactures, produces, or imports a taxable article and uses it then such person shall be liable for the manufacturers excise tax in the same manner as if such article was sold by the person.

Section 4221(a)(1) of the Code provides that no manufacturers excise tax shall be imposed on the sale by the manufacturer of an article for use by the purchaser for further manufacture, or for resale by the purchaser to a second purchaser for use by such second purchaser in further manufacture.

Section 4221(d)(6)(B) of the Code provides that an article shall be treated as sold for use in further manufacture if, in the case of a part or accessory taxable under section 4061(b), such article is sold for use by the purchaser as material in the manufacture or production of, or as a component part of, another article to be manufactured or produced by the purchaser.

Section 6416(b)(2)(K) of the Code, as added by the Tax Reform Act of 1976, provides for credit or refund of the manufacturers excise tax paid, on any automotive part or accessory taxable under section 4061(b), where the part or accessory is sold on or in connection with the first retail sale of a light-duty truck, as described in section 4061(a)(2), unless credit or refund is available under any other provision of the law.

Rev. Rul. 73-343 holds that the installation of a crane on a highway-type truck chassis by a dealer, or trucking operator who purchased a truck chassis from a dealer and had a crane installed thereon by another dealer, in such a manner that the crane's primary function is the loading and unloading of the vehicle on which it is mounted is another step in the manufacture of the chassis. That Revenue Ruling holds further that the dealer and trucking operator are manufacturers liable for the tax imposed by section 4061(a) of the Code on their sale or use of the completed chassis, unless such chassis are suitable for use with a vehicle having a gross vehicle weight of 10,000 pounds or less.

Under section 4063(d) of the Code, effective October 4, 1976, the mere installation of a loading and unloading crane either on a truck chassis or body by the dealer who resells such chassis or body on or after that date is not further manufacture of the chassis or body, and such cranes taxable under section 4061(b)(1) as parts or accessories may no longer be sold tax free to the dealer under the provisions of section 4221(a)(1) of the Code. In addition, where the first retail sale of a light-duty truck equipped with a taxable loading and unloading crane is made after October 4, 1976, credit or refund of the tax paid on the crane may be allowed under section 6416(b)(2)(K) to the crane manufacturer, and such cranes may not be sold tax free for such purpose. See Rev. Rul. 77-101, 1977-1 C.B. 315, which explains the applicability of the tax imposed by section 4061 with respect to a truck dealer's sales on and after October 4, 1976, of taxable and light-duty trucks upon which the dealer mounted hydraulic tailgates.

With respect to Situation (1), under the provisions of section 4063(d) of the Code, the resale of the taxable truck chassis by the dealer who before the resale combines the chassis with a crane in such a manner that the crane's primary function is to load and unload the vehicle on which it is mounted is not subject to the tax imposed by section 4061(a)(1). Further, if the crane is an automotive part or accessory under section 4061(b), it may not be sold tax free by the manufacturer to the dealer under section 4221(a)(1).

In Situation (2), if the crane, sold by the dealer on or in connection with the first retail sale of the light-duty truck, is a taxable automotive part or accessory, it may not be sold tax free by the manufacturer to the dealer under section 4221(a)(1) of the Code. However, in such case, credit or refund of the tax paid on the crane may be allowed under section 6416(b)(2)(K) to the crane manufacturer who paid the tax, provided the conditions for allowance in section 6416(a) are met.

In Situation (3), since the mere installation on a truck chassis, other than by the chassis manufacturer, of a crane in such a manner that its primary function is to load and unload the vehicle on which it is mounted is not further manufacture of the chassis, the trucking operator is not a manufacturer for purposes of section 4061(a)(1) of the Code. Thus, section 4218(a) does not apply and the use by the trucking operator of the chassis on which the crane is installed is not subject to the tax imposed by section 4061(a)(1). In addition, if the crane is a taxable automotive part or accessory, it may not be sold tax free by the manufacturer to the dealer under section 4221(a)(1).

With respect to Situation (4), if the crane involved is a taxable automotive part or accessory, it may not be sold tax free by the manufacturer to the dealer under section 4221(a)(1) of the Code. When the crane is purchased by the trucking operator for installation on a new light-duty truck, it is then sold in connection with the first retail sale of a light-duty truck for purposes of section 6416(b)(2)(K). Accordingly, a credit or refund will be allowable under that section, provided the retail purchaser of the part or accessory provides to the seller in connection with such purchase documentary evidence of a substantially contemporaneous purchase of a light-duty truck and a written certification that the part or accessory is purchased for use on such truck.

Rev. Rul. 73-343 was rendered obsolete by section 2109 of The Tax Reform Act of 1976, effective October 4, 1976.