REVENUE RULE 95-40

1995-20 I.R.B. 5

VACUUM LOADERS AND SEWER CLEANERS

Published: May 15, 1995

Section 4051.--Imposition of Tax on Heavy Trucks and Trailers Sold at Retail, 26 CFR 145.4051-1: Imposition of tax on heavy trucks and trailers sold at retail.

Vacuum loaders and sewer cleaners. The sales of the truck chassis, body, and related components of industrial vacuum loader vehicles and catch basin and sewer cleaner vehicles are subject to the retailers excise tax under section 4051 of the Code.

(Also Sections 4061, 7805, 48.4061(a)-1, 301.7805-1)

ISSUE

Are sales of the truck chassis, body, and related components of industrial vacuum loader vehicles and catch basin and sewer cleaning vehicles subject to the retailers excise tax under s 4051(a) of the Internal Revenue Code?

FACTS

Situation I. An industrial vacuum loader vehicle (vacuum loader) is a self- loading truck comprised of a highway-type chassis, industrial vacuum equipment, and a collector body. The chassis for the vacuum loader usually is modified to facilitate the installation of the collector body and the other equipment. The modifications often include a change in the cab-to-axle length, reinforcement by fishplating, replacement of the standard drive shaft, and relocation or addition of cross-members. The modifications do not prevent the vehicle from being driven at regular highway speeds, nor do they result in the vehicle being overweight, overheight, or overwidth for regular highway use. The vacuum equipment is used to retrieve either wet or dry debris at a clean-up site and load the debris into the collector body, which commonly has a capacity of 12 to 20 or more cubic yards. The debris is then either driven to a dump site in the vacuum loader or transferred to another transport vehicle for removal.

The principal components of industrial vacuum equipment include a power source (generally, the chassis engine), a vacuum pump (generally driven by a transfer case power takeoff), a filtration system, and a hose used to retrieve the debris and load the body. The vacuum loader is often equipped with various other components such as a material separator, a silencer or muffler, a hydraulic control system, a control cabinet, and a ladder.

The manufacturers of truck chassis assign a gross vehicle weight rating to each chassis based on its ability to carry a load, using such factors as frame strength and the number and strength of the axles. The chassis for a typical vacuum loader is rated at 54,000 or 56,000 pounds, which can be increased by the addition of another axle. The chassis, collector body, and equipment commonly weigh up to 40,000 pounds without a load and thus can transport an additional 14,000 to 16,000 pounds. A typical vacuum loader is considerably more expensive and transports a smaller load than a single function transporter such as a dump truck. The chassis are not suitable for use with vehicles having a gross vehicle weight of 33,000 pounds or less.

Situation 2. A catch basin and sewer cleaning vehicle (sewer cleaner) is a vehicle comprised of a highway-type truck chassis, certain specialized equipment, a water tank whose capacity is commonly 1,000 or more gallons, and a debris hopper with dump controls, whose capacity is commonly eight or more cubic yards. The chassis for the sewer cleaner usually is modified to facilitate the installation of the specialized equipment, the water tank, and the debris hopper. The specialized equipment generally includes a jet rodding hose, a hose reel, a hose guide, a high pressure water pump, and a vacuum pipe. The modifications do not prevent the vehicle from being driven at regular highway speeds, nor do they result in the vehicle being overweight, overheight, or overwidth for regular highway use.

The specialized equipment is used to clean catch basin and sewer lines by flushing high pressure water through drain lines to remove debris and then flushing the debris into the debris hopper using a vacuum system. The sewer cleaner is then driven to a dump site where the debris is removed from the debris hopper. The water tank is designed to be of sufficient capacity to carry enough water for the cleaning function at the job site.

The vehicle weight, chassis rating, and load potential of sewer cleaners is similar to that of vacuum loaders. A typical sewer cleaner is considerably more expensive and transports a smaller load than a single function transporter. The chassis are not suitable for use with vehicles with a gross vehicle weight of 33,000 pounds or less.

LAW

Section 4051(a) imposes on the first retail sale of certain enumerated articles a tax equal to 12 percent of the article's sales price. Included among those articles are truck chassis and bodies and tractors of the kind chiefly used for highway transportation in combination with a trailer or semi-trailer. The tax does not apply to truck chassis and bodies suitable for use with vehicles having a gross vehicle weight of 33,000 pounds or less.

Section 145.4051-1(a)(2) of the temporary Excise Tax Regulations under the Highway Revenue Act of 1982 provides that a chassis or body is taxable under s 4051(a)(1) only if the chassis or body is sold as a component part of a highway vehicle, as defined in s 48.4061(a)-1(d) of the Manufacturers and Retailers Excise Tax Regulations.

Section 48.4061(a)-1(a)(3)(i) includes, as a part of a taxable truck chassis or body, equipment that is installed on a taxable chassis or body and that contributes to the highway transportation function of the chassis or body. The regulation includes loading and unloading equipment as an example of machinery and equipment that contribute to the highway transportation function of a chassis or body.

Section 48.4061(a)-1(a)(3)(ii) provides that amounts charged for equipment installed on a taxable chassis or body are not part of the taxable sales price if (A) the equipment does not contribute to the highway transportation function of the chassis or body and (B) the reasonableness of the charge is supportable by adequate records.

Section 48.4061(a)-1(d)(1) defines a highway vehicle as any self-propelled vehicle, or any trailer or semi-trailer, designed to perform a function of transporting a load over public highways, whether or not also designed to perform other functions, but does not include a vehicle described in s 48.4061(a)-1(d)(2). A vehicle does not include the vehicle's load. The term public highway includes any domestic road that is not a private roadway.

Section 48.4061(a)-1(d)(2) provides two exceptions to the definition of a highway vehicle contained in s 48.4061(a)-1(d)(1). First, s 48.4061(a)- 1(d)(2)(i) provides that a self-propelled vehicle or trailer or semi-trailer is not a highway vehicle if (A) it consists of a chassis to which there has been permanently mounted (by welding, bolting, riveting, or other means) machinery or equipment to perform a construction, manufacturing, processing, farming, mining, drilling, timbering, or operation similar to any of the foregoing enumerated operations if the operation of the machinery or equipment is unrelated to transportation on or off the public highways, (B) the chassis has been specially designed to serve only as a mobile carriage and mount (and a power source, where applicable) for the particular machinery or equipment involved, whether or not the machinery or equipment is in operation, and (C) by reason of the special design, the chassis could not, without substantial structural modification, be used as a component of a vehicle designed to perform a function of transporting any load other than that particular machinery or equipment or similar machinery or equipment requiring the specially designed chassis.

Second, s 48.4061(a)-1(d)(2)(ii) provides that a self-propelled vehicle or trailer or semi-trailer is not a highway vehicle if (A) it is specially designed for the primary function of transporting a particular type of load other than over the public highway in connection with a construction, manufacturing, processing, farming, mining, drilling, timbering, or operation similar to any of the foregoing enumerated operations, and (B) by reason of the special design, the use of the vehicle to transport the load over the public highways is substantially limited or substantially impaired. For purposes of applying the rule relating to limited or impaired highway use, account may be taken of whether the vehicle may be driven at regular highway speeds, requires a special permit for highway use, is overweight, overheight, or overwidth for regular highway use, and any other relevant considerations. Solely for the purposes of determinations under s 48.4061(a)-1(d)(2)(ii), where there is affixed to the vehicle equipment used for loading, unloading, storing, vending, handling, processing, preserving, or otherwise caring for a load transported by the vehicle over the public highways, the functions are related to the transportation of a load over the public highways even though the functions may be performed off the public highways.

ANALYSIS: Vacuum Loaders

Vacuum loaders are designed to transport a load and are self-propelled vehicles whose chassis are designed to travel over the highway. Thus, vacuum loaders are described in s 48.4061(a)-1(d)(1) and are subject to the tax imposed by s 4051(a) unless they meet one of the exceptions contained in s 48.4061(a)-1(d)(2).

The s 48.4061(a)-1(d)(2)(i) exception excludes from taxation vehicles that are specially designed for and limited to providing a mobile carriage for job site machinery and equipment that does not perform a transportation function. Vacuum loaders do not meet this exception because the large collector bodies that are mounted on the chassis are designed to transport cargo. The collector body's substantial cargo carrying capacity demonstrates that vacuum loaders are designed as multi-functional vehicles that can not only retrieve waste from clean-up sites but also carry a substantial cargo from the clean-up site on and off the public highways to the cargo's disposal site. Accordingly, the chassis does not serve only as a carriage and mount for machinery and equipment unrelated to transportation on or off the public highways (that is, the chassis is not limited to job site non-transportation use). Although a vacuum loader is not the least expensive method to transport a load over the highway, the use of a vacuum loader to clean and transport is often the most efficient way to clean up a site and remove the debris.

A vacuum loader does not meet the exception provided by s 48.4061(a)- 1(d)(2)(i) even if, due to the vacuum loader's weight rating, its collector body may not be filled to volumetric capacity if very heavy debris has been vacuumed. The mobile machinery exception carves out only vehicles designed solely as mobile mounts for job site machinery. It does not except all heavy vehicles other than single function transporters such as dump trucks. For example, in Central Engineering Co. v. United States, 306 F.Supp. 667 (E.D.Wis.1969), the court held that a truck-mounted loading unit that performed the same functions and was structurally similar to a combination of the vacuum loader and sewer cleaner was designed to transport a load over the highway, and was not an off-highway vehicle.

Vacuum loaders also do not meet the exception for certain vehicles designed for off-highway transportation provided in s 48.4061(a)-1(d)(2)(ii). Specifically, the vacuum loaders described above are produced from highway-type chassis and are not designed for the primary function of carrying a particular load other than over the public highway. Furthermore, the design characteristics described in the facts above do not indicate that the vehicle's ability to carry a load over the public highways is substantially limited or substantially impaired.

Therefore, the exceptions contained in s 48.4061(a)-1(d)(2)(i) and (ii) do not apply to vacuum loaders. However, as described in the discussion of related components below, those vehicle components that do not contribute to the vehicle's highway transportation function are excluded from the tax base.

ANALYSIS--Sewer Cleaners

Sewer cleaners are designed to transport a load and are self-propelled vehicles whose chassis are designed to travel over the highway. Thus, sewer cleaners are described in s 48.4061(a)-1(d)(1) and are subject to the tax imposed by s 4051(a) unless they meet one of the exceptions contained in s 48.4061(a)-1(d)(2). For reasons analogous to those provided in the analysis of vacuum loaders, the exceptions contained in s 48.4061(a)-1(d)(2)(i) and (ii) do not apply to sewer cleaners.

ANALYSIS--Related Components

Rev. Rul. 78-311, 1978-2 C.B. 260, holds that certain components used in the cleaning operations of certain mobile washing vehicles do not contribute toward the transportation function of the vehicles. Consequently, the amounts charged for those items are not part of the taxable sales price of the vehicles, provided the reasonableness of the charge for the equipment is supported by adequate records.

Rev. Rul. 79-192, 1979-1 C.B. 340, holds that vacuum equipment, water hoses, and certain other components of street sweeper vehicles are items that primarily perform the non-transportation function of street cleaning and are excludable from the tax base.

Under s 48.4061(a)-1(a)(3) and these revenue rulings, certain components of vacuum loaders and sewer cleaners do not contribute to the highway transportation function and are thus excludable from the tax base. For vacuum loaders these components include the vacuum pump and hose (which perform primarily a debris retrieval function although they perform a loading and unloading function as well), filter system, material separator, silencer or muffler, control cabinet, and ladder. For sewer cleaners these components include the high pressure water pump, hose components (which perform primarily a flushing and backflushing function), and the vacuum pipe. To the extent that a taxpayer can make a proper showing that other components should be excluded from the tax pursuant to s 48.4061(a)-1(a)(3), they may also be excluded from the tax base.

HOLDING

The sale of the truck chassis and body of vacuum loaders and sewer cleaners, and the components of the vehicles that contribute to their highway transportation function, are subject to the retailers excise tax under s 4051(a). The sale of components of the vehicles that do not contribute to their highway transportation function are not subject to the retailers excise tax under s 4051(a).

PROSPECTIVE APPLICATION

Under the authority of s 7805(b), this revenue ruling does not apply to sales or uses occurring prior to June 14, 1995, nor does this revenue ruling apply to the sale of any vehicle sold pursuant to a written contract that was binding on the seller prior to May 15, 1995, and at all times thereafter.

DRAFTING INFORMATION

The principal author of this revenue ruling is Bernard H. Weberman of the Office of the Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling contact Mr. Weberman on (202) 622-3163 (not a toll-free call).

Rev. Rul. 95-40, 1995-20 I.R.B. 5