SECTION 2. BACKGROUND

Section 4051(a)(1) imposes a 12-percent tax on the first retail sale of automobile truck chassis and bodies, truck trailer and semitrailer chassis and bodies, and tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. Section 145.4051– 1(e)(1)(i) of the Temporary Excise Tax Regulations Under The Highway Revenue Act of 1982 defines “tractor” as a highway vehicle primarily designed to tow a vehicle, such as a trailer or a semitrailer, but does not carry cargo on the same chassis as the engine.

Generally, the § 4051 tax applies to the first retail sale of an article. Section 4052(a)(1) defines “first retail sale” as the first sale, for a purpose other than for resale or leasing in a long-term lease, after production, manufacture, or importation. The safe harbor provision in § 4052(f)(1) excludes from the definition of “manufactured” or “produced” an article that is repaired or modified (including any modification that changes the transportation function of the article or restores a wrecked article to a functional condition) if the cost of such repairs and modifications does not exceed 75 percent of the retail price of a comparable new article.

Neither the Code nor the regulations define the terms “chassis” or “body” for purposes of determining articles that are subject to tax under § 4051(a)(1). Likewise, there is no definition of “chassis” or “body” for determining whether an article satisfies the safe harbor provision in § 4052(f)(1).

The Treasury Department and the IRS recognize that taxpayers would benefit from having definitions of “chassis” and “body” in order to identify chassis and bodies that are subject to tax under § 4051(a)(1) and in order to apply the safe harbor provision in § 4052(f)(1). Accordingly, the Treasury Department and the IRS have adopted interim definitions of “chassis” and “body” for these purposes. The interim definitions are set forth in Section 3 of this notice. In crafting these definitions, the Treasury Department and the IRS consulted numerous sources, including the Society of Automotive Engineers (SAE) Glossary of Automotive Terms and Title 49 of the Code of Federal Regulations (Transportation).