Schneider National Leasing, Inc. v. U.S.

Federal 7th Circuit Court
Civil Court
Excise Tax
Citation
Case Number: 
No. 20-3354
Decision Date: 
August 25, 2021
Federal District: 
E.D. Wisc.
Holding: 
Reversed and remanded

Dist. Ct. erred in holding that plaintiff was subject to excise tax on 976 tractors it overhauled from 2011 to 2013, after finding that degree of refurbishing in question constituted manufacture of new tractors, rather than repairs or modifications, and thus safe harbor from said taxation under 26 USC section 4052(f)(1), which permits companies to repair or modify tractors they already own, did not apply. While IRS found that safe harbor did not apply, since cost of repairs to instant tractors exceeded 75 percent of comparable new tractors, Ct. of Appeals observed that whether plaintiff’s refurbishments resembled manufacturing as practical matter is not dispositive to applicability of safe harbor, if plaintiff complied with 75 percent cost limitation. Moreover, Ct. found that 75 percent limitation applied to “retail price” at which article is sold in individual arms-length transactions to end consumers on open market, as opposed to 75 percent of near wholesale price paid for new tractors by instant plaintiff. As such, remand was necessary for new assessment by Dist. Ct. as to whether cost of plaintiff’s refurbishments exceeded 75 percent of retail price as defined by Ct.