The IRS “may be taking a more aggressive stance with glider kits” in terms of applying Federal Excise Tax, according to Tim Reynolds, a dealership tax principal with CliftonLarsonAllen.  

On January 17, the IRS Office of Chief Counsel released a much-anticipated memorandum on the tax treatment of chassis renovations, in which an outfitter (dealer) combines components (sometimes referred to as glider kits), to produce a highway tractor or truck chassis. The hope was that the memo would provide some clarity to the many questions that those in the dealership industry had on the previous memo released on January 7, 2013. 

The memo outlines four scenarios and discusses whether the units are taxable, who is liable for the Federal Excise Tax (FET), and how the price is computed.

“The new memo seems to be an ‘about face’ of prior IRS guidance and suggests the IRS may be taking a more aggressive stance with glider kits,” Reynolds said.  

The CCA report cites a court case (Boise National Leasing v. United States) where a trucking company combined new cabs, frames, and other minor components, with major components of old trucks, such as engines and axles, to produce a complete and operational truck. The court ruled this activity is considered to be manufacturing for excise tax purposes.