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Attorneys for the U.S. Department of Justice have filed a counterclaim against Fitzgerald Truck Parts and Sales, adjusting the sum the glider truck maker owes the IRS to $83 million from $64 million for not collecting a 12% excise sales taxes on retail glider sales dating to 2012.
“Statutory additions have accrued, and will continue to accrue, as a matter of law, on the unpaid portion of the assessments,” government attorneys said in a response to allegations contained in a lawsuit filed by Fitzgerald earlier this year.
The updated amount assessed is effective through Feb. 18 and includes taxes and penalties assessed by the IRS for Fitzgerald’s failure to collect the tax from glider tractor-trailer purchasers and forward it to the IRS, the government said.
Government attorneys made their counterclaim in a court document filed July 29 in response to claims by Fitzgerald that it was exempt from collecting the tax. The company alleged it was being targeted by the IRS, which it said has not assessed excise taxes against all dealers who sold gliders during the relevant tax periods.
Government attorneys denied that allegation in their response to Fitzgerald’s legal complaint.
In May, government attorneys asked a federal judge to dismiss portions of the Fitzgerald lawsuit. However, in a July 15 memorandum order, Chief U.S. District Judge Waverly Crenshaw Jr., of the Middle District of Tennessee, rejected the request.
In its lawsuit filed in February, Fitzgerald charged that the IRS in 2015 changed its two-decadeslong position that it was not required to pay a 12% federal excise tax on sales of refurbished gliders because the company qualified for a “safe harbor” exemption provision, since the refurbished trucks sell for less than 75% of the cost of new trucks.
The U.S. tax code imposes a 12% excise tax on the first retail sale of tractors used for highway transportation in combination with a trailer or semitrailer. In cases in which the excise tax applies, the seller collects the tax from the buyer as a separately stated charge and remits it to the federal government.
“FTPS is aware of one or more third parties who, like FTPS, sold gliders but, unlike FTPS, have not been assessed excise taxes on their sales,” the lawsuit said. “In some cases, the gliders these third parties sell are repaired and assembled by the same company, an FTPS affiliate, that repairs and assembles the gliders FTPS sells.”
“FTPS and its predecessor, Fitzgerald Kit Truck and Sales LLC, were examined on four separate occasions between 1991 and 2011, covering tax years 1991, 1996-1997 and 2006-2011,” court documents said. “During each of those years, FTPS did not collect excise tax on the sale of gliders.”
However, in 2014, court records say, the IRS began an examination for each of the tax quarters from 2012 to 2014. On May 26, 2015, the IRS sent a letter informing Fitzgerald that it owed the excise taxes, penalties and interest.
Fitzgerald was at the center of a controversy in 2018 when a Tennessee Tech University study the glider maker funded was found to involve research misconduct. A TTU investigation found that the study erroneously concluded that emissions from glider trucks are as clean or cleaner than those from newer trucks.
The TTU study results were included in an Environmental Protection Agency 2017 proposed rule to repeal an Obama-era rule limiting the production of glider trucks by each manufacturer to 300 a year. However, a 2017 EPA study concluded glider trucks can emit 43 times more nitrogen oxides and 55 times more particulate matter than trucks in compliance with newer federal emissions standards.