IRS says aftermarket APUs can be taxed

The Internal Revenue Service in March confirmed that auxiliary power unit packages installed on tractors within six months of the tractors being placed into service typically would be subject to the 12 percent federal excise tax on heavy vehicles.

The decision, outlined in a private letter ruling (PLR) to an undisclosed fleet owner, is not especially surprising as tax rules already include other parts and accessories costing at least $1,000 and installed within six months of a new heavy truck, tractor or trailer being placed into service.

Technically, a PLR applies only to the taxpayer who requested the ruling and is limited to the facts presented. The Internal Revenue Code specifically states that such taxpayer-specific documents are not to be cited as precedent. But it stands to reason that in a similar factual situation, the IRS would reach the same conclusion regarding other taxpayers.

In this case, the fleet last year began installing APUs on its tractors, but in almost all cases it installed the APUs more than six months after the tractors were placed in service. The fleet owner did not have to pay the excise tax in those situations, but it sought a ruling on the applicability of the tax to tractors acquired more recently.

The APU package involved in this ruling includes a 2-cylinder diesel engine and an air-conditioning compressor mounted on the side of the tractor’s frame rails; a fuel-fired bunk heater, evaporator and controller installed in the cab, the sleeper compartment or tractor toolbox; and a condenser usually mounted on the back of a tractor cab.

A copy of the PLR is available by clicking here.