Excise Taxes - Manufacturing Tax Tips
Manufacturing companies may be liable for manufacturer excise taxes as well as the federal highway vehicle use tax. These companies may also be eligible to claim an income tax credit or a refund for gasoline, diesel fuel, or kerosene that is used in nontaxable uses.
Manufacturers are responsible for manufacturers taxes on the following items (for more information on each item listed, see Publication 510, Excise Taxes for 2009 (Including Fuel Tax Credits and Refunds)
- Sport fishing equipment - tax based on the sale price of the item
- Bows - tax based on the sale price of the item
- Arrow components - tax based on the sale price of the item
- Coal - tax based on either sale price of the item or weight of the item
- Tires - tax based on the weight of the item
- Gas guzzler automobiles - tax is based on the fuel economy rating of the automobile
- Vaccine - tax is based per dose
For purposes of reporting and paying manufacturers taxes, a manufacturer includes both producers and importers.
A manufacturer is any person who produces a taxable article from new or raw material, or from scrap, salvage, or junk material by processing or changing the form of an article or by combining or assembling two or more articles. If you furnish the materials and keep title to those materials, and to the finished article, you are considered a manufacturer even though another person actually manufacturers the taxable article.
An importer is the person who brings an article into the United States, or withdraws an article from a customs bonded warehouse for sale or use in the United States.
A sale is defined as the transfer of title to, or the substantial incidents of ownership in, an article distributed to a buyer for consideration which may involve the receipt of money, services, or other things. A sale can include both use and lease of an article.
A manufacturer who uses a taxable article is liable for the tax in the same manner as it were sold.
The lease of an article (including any renewal or extension of the lease) by the manufacturer is generally considered a taxable sale. However, for the gas guzzler tax, only the first lease (excluding any renewal or extensions) of the automobile by the manufacturer is considered a sale.
Credits or Refunds
A credit or refund of the manufacturers taxes may be allowable if the tax paid article is, by any person:
- Used or sold for use as supplies for vessels (except for coal and vaccines)
- Sold to a state or local government for its exclusive use (except for coal, gas guzzlers, and vaccines)
- Sold to a nonprofit educational organization for its exclusive use (except for coal, gas guzzlers, and vaccines)
In addition a credit or refund of manufacturers taxes may be allowable for the following special cases:
- Taxable articles in which the price is readjusted by reason of return or repossession of the article
- Tax paid articles for further manufacture of another article subject to the manufacturers taxes (except for coal)
Heavy Highway Use Vehicle Tax
A truck or truck tractor is subject to the highway vehicle use tax if it:
- Is a highway motor vehicle (generally, a vehicle moved by its own motor and designed to transport a load over the public highways, even if it is designed to do other things)
- Is registered or required to be registered for highway use
- Is used on a public highway, and
- Has a taxable gross weight of at least 55,000 pounds (taxable gross weight means the weight of the vehicle plus the weight of the trailers and semi-trailers customarily used in connection with vehicles of the same type, plus the weight of the maximum load customarily carried on vehicles, trailer, and semi-trailers of the same type)
The tax applies to the first use of a taxable vehicle on a public highway during the taxable period, which is each July 1st through June 30th . The person in whose name a taxable vehicle is registered or required to be registered must pay the tax on Form 2290, Heavy Highway Vehicle Use Tax Return (PDF). The tax is due by the last day of the month following the month in which the vehicle is first used during the taxable period. Thus, if you use a taxable vehicle in July, you must file Form 2290 by August 31st. See Form 2290, Heavy Highway Vehicle Use Tax Return (PDF) and Publication 510, Excise Taxes for 2009 (Including Fuel Tax Credits and Refunds)
Fuel Tax Credits and Refunds
A federal excise tax is imposed on gasoline ($.184 per gallon), clear diesel fuel ($.244 per gallon), and clear kerosene ($.244 per gallon). The amount of these taxes may be credited or refunded if these fuels are used in many types of off-road uses. Common off-road uses include use as heating oil, use in stationary engines, use in non-highway vehicles, and use in separate engines mounted on highway vehicles.
Generally, refunds of $750 or more may be claimed quarterly on Form 8849, Claim for Refund of Excise Taxes (PDF). Claims not made on Form 8849 may be claimed as income tax credit on Form 4136, Credit for Federal Tax Paid on Fuel (PDF). See the forms and their instructions for specific claim requirements.
Note that a credit or refund is not allowable for the following:
- Any use in the propulsion engine of a registered highway vehicle, even if the vehicle is used off the highway
- Any fuel that is lost or destroyed through fire, spillage, or evaporation
- Any use of dyed diesel fuel or dyed kerosene. In fact, you may be subject to a substantial penalty if you use dyed fuel as a fuel in a registered diesel-powered highway vehicle
It is important to keep records to support your claim. Keep these records at your principal place of business. These records should establish the number of gallons used during the period covered by the claim, the dates of purchase, the names and addresses of suppliers and amounts bought from each in the period covered by the claim, the purposes for which you used the fuel, and the number of gallons used for each purpose.
See Publication 510, Excise Taxes if you use propane or other special fuels in registered highway vehicles. If you do, you may be liable for tax on this use.
NOTE: IRS Issues Guidance on Truck Sale Excise Tax. IR-2005-29 - IRS guidance establishes four classifications of truck body types that are excluded from retail excise tax.