132 F.4th 937
6th Cir.2025Background
- Fitzgerald Truck Parts & Sales, LLC built and sold "glider tractors" by installing used engines and transmissions into new tractor bodies (glider kits) between 2012 and 2017.
- The sale of newly manufactured highway tractors is typically subject to a 12% federal excise tax under 26 U.S.C. § 4051(a)(1), unless an exception applies.
- Fitzgerald claimed an exemption under the safe harbor provision in 26 U.S.C. § 4052(f)(1), arguing that its modifications were below 75% of the price of a comparable new tractor.
- The IRS assessed $268 million in taxes, penalties, and interest after rejecting Fitzgerald's interpretation.
- Fitzgerald sued for a refund and won at the district court level; the government appealed.
Issues
| Issue | Plaintiff’s Argument | Defendant’s Argument | Held |
|---|---|---|---|
| Whether Fitzgerald’s operations qualify for § 4052(f)(1) safe harbor exemption | Repairs/modifications below 75% threshold allow exemption | No exemption: activities amount to new manufacturing, not qualifying repairs | Safe harbor applies if cost test met—no extra qualitative test |
| Whether the source of salvaged parts (from tax-exempt or foreign sales) bars the exemption under § 4052(f)(2) | Only the type/class of tractor matters, not historical taxability | Exemption is barred if tractors, when new, weren’t taxable (e.g., exported or to government) | Fitzgerald must prove each refurbished tractor was taxable when new; otherwise, no exemption |
| Whether use of parts from multiple salvage sources changes the exemption analysis | Aggregation of used parts qualifies as repair/modification | Mixing salvaged parts = manufacturing a new article, no exemption | Statute does not limit by number of sources; threshold test controls |
| Whether objection to jury instruction or procedural forfeitures occurred | Government forfeited argument by not objecting at trial | No forfeiture; argument preserved by motion after trial | No forfeiture; appellate review proper |
Key Cases Cited
- Schneider Nat'l Leasing, Inc. v. United States, 11 F.4th 548 (7th Cir. 2021) (establishes that § 4052(f)(1) sets out a bright-line cost test with no qualitative inquiry for refurbished tractors)
- CenTra, Inc. v. United States, 953 F.2d 1051 (6th Cir. 1992) (non-taxed initial sales, such as exports or sales to government, affect application of excise tax exemption)