IRS Cracks Down on Fuel Tax Exemptions

A recent “special alert” to the ACPA membership informed members about increased scrutiny by the Internal Revenue Service (IRS) on concrete pumping companies who have filed for refunds of federal fuel excise tax. In each instance, it appeared the concrete pumping company incorrectly applied for, and received, a refund of the federal fuel tax they paid based on a portion of fuel consumed while in PTO. While many states allow for a portion or percentage of state fuel tax to be refunded for off-road or PTO use, currently there is no such type of federal exemption allowable.

The email also subsequently brought to the ACPA’s attention that some member companies were either unnecessarily paying certain federal excise taxes (FET), or not taking full advantage of others.

The IRS recognizes concrete pumps as exempt from FET taxes because they meet the exemption requirements as defined in Title 26 > Subtitle D > Chapter 31 > Subchapter C > § 4053 (8) Mobile Machinery of the U.S. Tax Code. The exemption is granted to any vehicle which consists of a chassis —

(A) 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 similar operation if the operation of the machinery or equipment is unrelated to transportation on or off the public highways,

(B) which 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 such machinery or equipment is in operation, and

(C) which, by reason of such special design, 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 such a specially designed chassis.

The IRS’ Mobile Machinery Exemption (MME) determination applies to three excise taxes for concrete pumps:

1) Heavy Vehicle Use Tax. This is a yearly highway use excise tax typically ranging from $350 to $550 per truck, depending on its weight. Many DOT offices are not familiar with the MME and will try and coerce you into showing proof of filing a Federal 2290 Form and paying HVUT before they will issue your unit a license. Concrete pumps are EXEMPT from HVU taxes and you should not file a 2290 tax form.

2) Retail Excise Tax. This is a 12 percent excise tax charged on the chassis portion of a truck unit upon the first retail sale. Concrete pump chassis are EXEMPT from this tax.

3) Fuel Excise Tax. This is where it gets tricky… the exemption only applies if your concrete pump traveled less than 7,500 miles in a calendar year. The amount of the refund for each unit traveling less than 7,500 miles per year is 100 percent of the total tax paid on the unit in a calendar year. If the unit traveled 7,500 miles or more in a calendar year, the exemption doesn’t apply. Currently, there is no federal exemption that allows for a refund—full or otherwise— on the amount of fuel tax your pump consumed while in PTO operation.

Here are some examples of when you can, and cannot, apply for the fuel tax rebate/refund.

• You own a concrete pump for the entire year and the unit traveled in excess of 7,500 miles—no refund allowed.

• The same pump traveled in excess of 7,500 miles in a calendar year but over 50 percent of its fuel was consumed while in PTO operation—no refund allowed.

• Your concrete pump was pretty much stationary on a job site throughout the year and traveled less than 7,500 miles in the calendar year—you are entitled to 100 percent of the total fuel tax paid on this unit for the year.

• You purchased or sold a pump in a calendar year and for the total time you owned the pump during this year, it traveled less than 7,500 miles—you are entitled to 100 percent of the total fuel tax paid on this unit for the year.

• You own several concrete pumps. Your “Brand X” concrete pump traveled in excess of 7,500 miles for the year and your “Brand Y” concrete pump traveled less than 7,500 miles—“Brand Y” qualifies for the 100 percent refund of the unit’s total fuel tax paid, but “Brand X” does not qualify because it traveled over 7,500 miles in the year.

• Your “Brand X” concrete pump traveled less than 7,500 miles in 2016 and traveled in excess of 7,500 miles in 2017—you are entitled to 100 percent of the total fuel tax paid on this unit for 2016, but not in 2017 because it exceeded the 7,500-mile threshold.

It is also important to note that if your pump qualifies for the exemption and you apply for the rebate/refund, you should be prepared to provide auditable documentation of your unit’s mileage, such as data obtained from a hubometer. This is especially important now that we’ve learned the IRS has stepped up its scrutiny of the deduction.

The ACPA is making significant progress towards legislation which would create a Vehicle Miles Traveled (VMT) program for concrete pumps. If successful, it would remove the 7,500-mile threshold and instead put in place a user-based mileage fee of .05 cents per mile for units whose gross vehicle weight does not exceed 60,000 pounds, and .07 cents per mile for units with a gross vehicle weight of greater than 60,000 pounds. Stay tuned for additional updates on this issue in the weeks ahead.

In the meantime, you should consult with your tax accountant to ensure your company is in compliance with IRS Federal Excise Tax Law, as well as taking advantage of the exemptions for which you are entitled.

For additional information, please contact Christi Collins, executive director at the ACPA National Office.