FITZGERALD TRUCK PARTS AND SALES, LLC v. UNITED STATES OF AMERICA, - Articles

All Content

FITZGERALD TRUCK PARTS AND SALES, LLC v. UNITED STATES OF AMERICA,

Posted by: Azya Thornton on Mar 31, 2025

Court: 6th Circuit Court (Published Opinions)

Attorneys 1: ARGUED: Douglas C. Rennie, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellant.

Attorneys 2: ARGUED: Kendall C. Jones, EVERSHEDS SUTHERLAND (US) LLP, Washington, D.C., for Appellee.

Attorneys 3: ON BRIEF: Douglas C. Rennie, Michael J. Haungs, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellant.

Attorneys 4: ON BRIEF: Kendall C. Jones, Zachariah W. Lindsey, EVERSHEDS SUTHERLAND (US) LLP, Washington, D.C., for Appellee.

Judge(s): BATCHELDER, STRANCH, and READLER, Circuit Judges

Court Appealed: United States District Court for the Middle District of Tennessee at Cookeville

READLER, Circuit Judge. For years, Fitzgerald Truck Parts & Sales, LLC built and sold highway tractors by installing old engines and transmissions from third-party salvage yards into otherwise new tractors. Ordinarily, the sale of a newly manufactured tractor triggers a 12% excise tax. See 26 U.S.C. §§ 4051(a)(1), 4052(a)(1). Fitzgerald believes its sales are exempt from those taxes due to its reincorporation of engines and transmissions. For support, it points to 26 U.S.C. § 4052(f)(1), which authorizes a safe harbor applicable when “repairs or modifications” to an existing tractor “do[] not exceed 75 percent of the retail price of a comparable new [tractor].” The IRS disagreed and assessed unpaid excise taxes, penalties, and interest to the tune of $268 million. Fitzgerald sued. And it won before a jury, a verdict the government now appeals. We agree with Fitzgerald that § 4052(f)(1) poses a bright-line, 75% test without any further qualitative inquiry, meaning its vehicles constructed with used engines and transmissions could qualify for the safe harbor. But there is more to consider, namely, that § 4052(f)(2) forecloses this exemption for tractors that never triggered the excise tax when they were new. And so far, Fitzgerald has not met its burden of proving that this latter provision does not apply to its tractors. In fact, evidence suggests that at least some of those vehicles were first sold in tax-exempt transactions, see 26 U.S.C. § 4221(a)(2), (4), with the original purchasers being either entities abroad or state or local governments. Accordingly, to escape § 4052(f)(2) and invoke the safe harbor, Fitzgerald must show that each refurbished tractor, when new, incurred the excise tax under § 4051. We reverse and remand on that basis.

Attachments: