Sens. Cruz, Marshall Send letter to the Internal Revenue Service Expressing Concerns on Application of the Heavy Vehicle Excise Tax on Feed Trucks

WASHINGTON, D.C. - U.S. Sen. Ted Cruz (R-Texas) joined Sen. Roger Marshall (R-Kan.) on a letter to the Internal Revenue Service (IRS) outlining concerns about the new application of a heavy vehicle excise tax on feed trucks that are primarily used to feed livestock on farm property. Traditionally, this tax has only applied to heavy vehicles that transport goods over public highways. Recently, however, the IRS has begun notifying feedlots that they must pay a tax on their feed trucks even though they are not designed for transportation over highways. This letter asks the IRS definitively to answer if feed trucks are subject to the excise tax or not. Their letter also asks if the IRS believes these vehicles are subject to federal excise tax, to provide a thorough analysis and what would be the appropriate avenue for livestock producers to appeal such a determination.

In the letter, the senators wrote:

"This letter is to express our concern with the Internal Revenue Service's (IRS) change in interpretation of the Federal excise tax of heavy highway vehicles. Feedlots purchase off-highway implements of husbandry used to feed livestock on the footprint of a farm. In the past, these vehicles were exempt from federal excise tax because they are not designed to perform a function of transporting a load over public highways. However, feedlots in our states are now being told that these vehicles are highway vehicles and subject to federal excise tax. We respectfully request any detail regarding why the IRS believes these vehicles are on-highway use and thus subject to tax."

Read their full letter below.

April 29, 2021

Charles P. Rettig
Commissioner of Internal Revenue
Internal Revenue Service
Building 1111, Constitution Ave., NW
Washington, D.C., 20224

Dear Commissioner Rettig,

This letter is to express our concern with the Internal Revenue Service's (IRS) change in interpretation of the Federal excise tax of heavy highway vehicles. Feedlots purchase off-highway implements of husbandry used to feed livestock on the footprint of a farm. In the past, these vehicles were exempt from federal excise tax because they are not designed to perform a function of transporting a load over public highways. However, feedlots in our states are now being told that these vehicles are highway vehicles and subject to federal excise tax. We respectfully request any detail regarding why the IRS believes these vehicles are on-highway use and thus subject to tax.

Pursuant to 26 C.F.R. § 48.4061(a)-1(d)(2)(ii), these vehicles do not meet the definition of a highway vehicle and are expressly exempt. First, they are self-propelled vehicles designed for the primary function of mixing and delivering feed within the footprint of a farm.

Secondly, not only are these vehicles oversized and overweight, they also have additional hydraulics that prevent them from operating at high speeds. There is a long list of design changes that make these vehicles unable to be registered and driven on highways in our states. In fact, feed trucks are considered "implements of husbandry" by state law and cannot be titled or registered for highway use, similar to farm tractors.

Certain IRS regional offices are apparently applying a test that considers a potential design change of the vehicle that would allow operation on roads. The key being, if the design is changed. The test under the C.F.R. is not one that considers potential designs, but the actual design. The actual design of these vehicles would prove problematic for considering them highway vehicles. It would take thousands of dollars to undue the design changes. Under your agency's own regulations these vehicles are not highway vehicles. The design changes are not merely the attachment of equipment, but rather substantial alterations for a specific purpose unrelated to highway use.

No later than 30 days from receipt of this letter, could you please provide full and detailed responses to the following questions:

If the IRS believes these vehicles are subject to federal excise tax, please provide a thorough analysis of IRS's ruling?

Please provide the appropriate avenue for livestock producers to appeal such a determination?

Thank you and I look forward to your response.

Sincerely,

/s/

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