The 'On...and Off the Road Again' Case

http://www.ustaxcourt.gov/InOpHistoric/MylesLorentzInc.TC.WPD.pdf

1/25/12

The code allows for a credit of highway taxes on fuel purchased for off road business use. Taxpayer used highway-legal vehicles that had been modified to become more heavy duty to haul belly-dump trailers for off-road work in the course of their business. The vehicles would travel from job to job around the country on highways, however, taxpayers did keep meticulous records regarding which mileage was on and which was off highway. In cases of mixed use they claimed no credit for any fuel taxes, just to be safe.

Take aways:

• The taxpayers asked the court to consider the truck and trailer together as one vehicle, however, each could still perform their function if attached to another so they were deemed separate. Only the truck part could be evaluated since the trailers on their own can’t consume fuel.

• The code does not consider as off-highway fuel used in a “highway vehicle” that’s registered, or that should be registered, for highway use with an exception for vehicles that has been redesigned for the primary function of transporting a particular load off-highway or which redesigned features substantially limit or impair the transport of such over the public highways.

• When considering the design, only the physical characteristics of the vehicle may be considered – how the vehicle was actually used is immaterial. The fact that a vehicle may be incredibly inefficient on the highway vs. off does not rise to the level of substantial impairment. That would require a vehicle to be too heavy, too high, or too wide for regular use. Also considered are whether such vehicle is subject to the licensing, safety, and other requirements applicable to highway vehicles, and whether such vehicle can transport a load at a sustained speed of at least 25 miles per hour

• The court found that while the vehicles had indeed been customized to be more heavy-duty they were not customized for use to haul one particular material and that while they were modified to be used off-highway, they were not modified to such an extent that they were not still able to be used on-highway.