In the Truck Trailer Manufacturers Association (TTMA) Technical Advice Memorandum 200215004, the Internal Revenue Service has held that the Taxpayer's Form 720 did not correctly reflect the tax on sales of certain vehicles imposed by Section 4051. The IRS also held that, although no particular documentation is prescribed to support a claim under Section 6416(b)(4), the taxpayer must establish that it sold taxed tires in connection with the sale of a vehicle to a state or local government for its exclusive use.
A retailer of heavy vehicles, the taxpayer purchased taxable vehicles tax free for resale and reported the Section 4051 tax on the sale of those vehicles. The IRS said the taxpayer reduced the amount of the Section 4051 tax it computed on the sale of the vehicle by the amount of Section 4071 tax on the tires sold in connection with the vehicle and reported on Form 720, Part 1, IRS #33 a “net” amount of tax. The IRS concluded that this is incorrect and stated that the tax imposed by Section 4051 is computed on the sale price of the vehicle as determined under Section 4052(b).
The Section 4051(d) credit is claimed on Form 720, Schedule C, Part II, line 11h; it is not “netted” against the Section 4051 tax with a single amount reported on Form 720, Part 1, IRS #33. The Section 4051(d) credit does not reduce the Section 4051 liability; rather, credits are used to reduce the balance due.
As to documentation needed to support the taxpayer's Section 6416(b)(4) claim and whether any information must be included on the invoice, the IRS said no regulations under Section 6416(b)(4) prescribe the particular documentation needed. However, says the IRS, the taxpayer must establish that it sold taxed tires in connection with the sale of the vehicle for exclusive use of the state or local government. Documentation may be a signed statement from the state or local government that the specified vehicle is purchased for the exclusive use of the state or local government.
The IRS also noted that, because the vehicles are not subject to the Section 4051 tax, no information needs to be included on the invoice.