Excise taxes on newly manufactured tractors; 26 USC §§ 4051(a)(1) & 4052(a)(1); Whether plaintiff’s tractors (which incorporated old engines & transmissions from salvage yards) were exempt under § 4052(f)(1); Whether plaintiff could establish that “each refurbished tractor, when new, incurred the excise tax under § 4051”; §§ 4221(a)(2) & (4); In CenTra, Inc v United States

The court reversed the jury verdict for plaintiff-Fitzgerald Truck Parts, holding that it failed to establish that it was entitled to invoke the “safe harbor” exemption from paying excise tax on its tractors where it did not “show that each refurbished tractor, when new, incurred the excise tax under § 4051.” Fitzgerald puts old engines and transmissions obtained from salvage yards into new tractors and sells them. The sale of a newly manufactured tractor triggers a 12% excise tax. Fitzgerald claimed it was exempt from the tax based on the use of salvaged parts under § 4051(f)(1), which creates a “safe harbor” for tractors with used parts that qualify. But the government disagreed, assessing $268 million in unpaid excise taxes, penalties, and interest. Fitzgerald sued, and the jury returned a verdict for Fitzgerald. The court agreed “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.” However, it found “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.” The court noted that there was evidence to suggest that at least some of the “vehicles were first sold in tax-exempt transactions, . . . with the original purchasers being either entities abroad or state or local governments.” Remanded.