At the same time as it is suing the government in a Tennessee federal court, Fitzgerald Truck Parts and Sales (FTPS) learned recently that it is now on the hook for another $19 million in back taxes. Federal attorneys have issued a counterclaim against the glider truck kit manufacturer saying that Fitzgerald actually owes the IRS $83 million, up from $64 million, for failing to collect a 12% excise sales tax dating back eight years.
Federal attorneys said, “Statutory additions have accrued, and will continue to accrue, as a matter of law, on the unpaid portion of the assessment.” The new amount includes taxes and penalties that the IRS says were not collected from sales of glider tractor-trailer purchases since 2012.
The counterclaim was in response to Fitzgerald’s assertion that it was exempt from collecting the tax, saying the IRS was singling out Fitzgerald and that the tax had not been assessed on all dealers who sold gliders during the same time period. The government denied this allegation and had asked a judge to dismiss parts of Fitzgerald’s lawsuit.
But, in a memo, a federal district court judge in Tennessee rejected the government’s request. At issue is Fitzgerald’s claim that the IRS changed its previous position—held for twenty years—that the truck maker did not need to pay the 12% federal excise tax because the company had a
“safe harbor” exception due to the fact that a refurbished truck sells for less than 75% of the cost of a new truck.
“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.”
The examination of Fitzgerald by the IRS began in 2014 for tax quarters from 2012-2014 and resulted in a letter telling them they owed the excise taxes, penalties, and interest. Fitzgerald has admitted that it did not collect those taxes but argues they were under the assumption they had an exemption.