Subchapter A - Luxury Passenger Automobiles

26 USC 4001 - Imposition of tax

(a) Imposition of tax

(1) In general
There is hereby imposed on the 1st retail sale of any passenger vehicle a tax equal to 10 percent of the price for which so sold to the extent such price exceeds the applicable amount.

(2) Applicable amount

(A) In general
Except as provided in subparagraphs (B) and (C), the applicable amount is $30,000.

(B) Qualified clean-fuel vehicle property
In the case of a passenger vehicle which is propelled by a fuel which is not a clean-burning fuel and to which is installed qualified clean-fuel vehicle property (as defined in section 179A (c)(1)(A)) for purposes of permitting such vehicle to be propelled by a clean-burning fuel, the applicable amount is equal to the sum of

(i) the dollar amount in effect under subparagraph (A), plus

(ii) the increase in the price for which the passenger vehicle was sold (within the meaning of section 4002) due to the installation of such property.

(i) In general In the case of a purpose built passenger vehicle, the applicable amount is equal to 150 percent of the dollar amount in effect under subparagraph (A).

(ii) Purpose built passenger vehicle For purposes of clause (i), the term purpose built passenger vehicle means a passenger vehicle produced by an original equipment manufacturer and designed so that the vehicle may be propelled primarily by electricity.

(b) Passenger vehicle

(1) In general
For purposes of this subchapter, the term passenger vehicle means any 4-wheeled vehicle

(A) which is manufactured primarily for use on public streets, roads, and highways, and

(B) which is rated at 6,000 pounds unloaded gross vehicle weight or less.

(2) Special rules

(A) Trucks and vans
In the case of a truck or van, paragraph (1)(B) shall be applied by substituting gross vehicle weight for unloaded gross vehicle weight.

(B) Limousines
In the case of a limousine, paragraph (1) shall be applied without regard to subparagraph (B) thereof.

(c) Exceptions for taxicabs, etc.
The tax imposed by this section shall not apply to the sale of any passenger vehicle for use by the purchaser exclusively in the active conduct of a trade or business of transporting persons or property for compensation or hire.

(d) Exemption for law enforcement uses, etc.
No tax shall be imposed by this section on the sale of any passenger vehicle

(1) to the Federal Government, or a State or local government, for use exclusively in police, firefighting, search and rescue, or other law enforcement or public safety activities, or in public works activities, or

(2) to any person for use exclusively in providing emergency medical services.

(e) Inflation adjustment

(1) In general
The $30,000 amount in subsection (a) shall be increased by an amount equal to

(A) $30,000, multiplied by

(B) the cost-of-living adjustment under section 1 (f)(3) for the calendar year in which the vehicle is sold, determined by substituting calendar year 1990 for calendar year 1992 in subparagraph (B) thereof.

(2) Rounding
If any amount as adjusted under paragraph (1) is not a multiple of $2,000, such amount shall be rounded to the next lowest multiple of $2,000.

(f) Phasedown
For sales occurring in calendar years after 1995 and before 2003, subsection (a)(1) and section 4003 (a) shall be applied by substituting for 10 percent, each place it appears, the percentage determined in accordance with the following table: If the calendar year is: The percentage is: 19969 percent 19978 percent 19987 percent 19996 percent 20005 percent 20014 percent 20023 percent.

(g) Termination
The taxes imposed by this section and section 4003 shall not apply to any sale, use, or installation after December 31, 2002.

26 USC 4002 - 1st retail sale; uses, etc. treated as sales; determination of price

(a) 1st retail sale
For purposes of this subchapter, the term 1st retail sale means the 1st sale, for a purpose other than resale, after manufacture, production, or importation.

(b) Use treated as sale

(1) In general
If any person uses a passenger vehicle (including any use after importation) before the 1st retail sale of such vehicle, then such person shall be liable for tax under this subchapter in the same manner as if such vehicle were sold at retail by him.

(2) Exemption for further manufacture
Paragraph (1) shall not apply to use of a vehicle as material in the manufacture or production of, or as a component part of, another vehicle taxable under this subchapter to be manufactured or produced by him.

(3) Exemption for demonstration use
Paragraph (1) shall not apply to any use of a passenger vehicle as a demonstrator.

(4) Exception for use after importation of certain vehicles
Paragraph (1) shall not apply to the use of a vehicle after importation if the user or importer establishes to the satisfaction of the Secretary that the 1st use of the vehicle occurred before January 1, 1991, outside the United States.

(5) Computation of tax
In the case of any person made liable for tax by paragraph (1), the tax shall be computed on the price at which similar vehicles are sold at retail in the ordinary course of trade, as determined by the Secretary.

(1) In general
Except as otherwise provided in this subsection, the lease of a vehicle (including any renewal or any extension of a lease or any subsequent lease of such vehicle) by any person shall be considered a sale of such vehicle at retail.

(2) Special rules for long-term leases

(A) Tax not imposed on sale for leasing in a qualified lease
The sale of a passenger vehicle to a person engaged in a passenger vehicle leasing or rental trade or business for leasing by such person in a long-term lease shall not be treated as the 1st retail sale of such vehicle.

(B) Long-term lease
For purposes of subparagraph (A), the term long-term lease means any long-term lease (as defined in section 4052).

(i) Determination of price The tax under this subchapter shall be computed on the lowest price for which the vehicle is sold by retailers in the ordinary course of trade.

(ii) Payment of tax Rules similar to the rules of section 4217 (e)(2) shall apply.

(iii) No tax where exempt use by lessee No tax shall be imposed on any lease payment under a long-term lease if the lessees use of the vehicle under such lease is an exempt use (as defined in section 4003(b)) of such vehicle.

(d) Determination of price

(1) In general
In determining price for purposes of this subchapter

(A) there shall be included any charge incident to placing the passenger vehicle in condition ready for use,

(B) there shall be excluded

(i) the amount of the tax imposed by this subchapter,

(ii) if stated as a separate charge, the amount of any retail sales tax imposed by any State or political subdivision thereof or the District of Columbia, whether the liability for such tax is imposed on the vendor or vendee, and

(iii) the value of any component of such passenger vehicle if

(I) such component is furnished by the 1st user of such passenger vehicle, and

(II) such component has been used before such furnishing, and

(2) Other rules
Rules similar to the rules of paragraphs (2) and (4) of section 4052 (b) shall apply for purposes of this subchapter.

26 USC 4003 - Special rules

(a) Separate purchase of vehicle and parts and accessories therefor
Under regulations prescribed by the Secretary

(1) In general
Except as provided in paragraph (2), if

(A) the owner, lessee, or operator of any passenger vehicle installs (or causes to be installed) any part or accessory (other than property described in section 4001 (a)(2)(B)) on such vehicle, and

(B) such installation is not later than the date 6 months after the date the vehicle was 1st placed in service,

then there is hereby imposed on such installation a tax equal to 10 percent of the price of such part or accessory and its installation.

(2) Limitation
The tax imposed by paragraph (1) on the installation of any part or accessory shall not exceed 10 percent of the excess (if any) of

(A) the sum of

(i) the price of such part or accessory and its installation,

(ii) the aggregate price of the parts and accessories (and their installation) installed before such part or accessory, plus

(iii) the price for which the passenger vehicle was sold, over

(B) the appropriate applicable amount as determined under section 4001 (a)(2).

(3) Exceptions
Paragraph (1) shall not apply if

(A) the part or accessory installed is a replacement part or accessory,

(B) the part or accessory is installed to enable or assist an individual with a disability to operate the vehicle, or to enter or exit the vehicle, by compensating for the effect of such disability, or

(C) the aggregate price of the parts and accessories (and their installation) described in paragraph (1) with respect to the vehicle does not exceed $1,000 (or such other amount or amounts as the Secretary may by regulation prescribe).

The price of any part or accessory (and its installation) to which paragraph (1) does not apply by reason of this paragraph shall not be taken into account under paragraph (2)(A).

(4) Installers secondarily liable for tax
The owners of the trade or business installing the parts or accessories shall be secondarily liable for the tax imposed by this subsection.

(b) Imposition of tax on sales, etc., within 2 years of vehicles purchased tax-free

(1) In general
If

(A) no tax was imposed under this subchapter on the 1st retail sale of any passenger vehicle by reason of its exempt use, and

(B) within 2 years after the date of such 1st retail sale, such vehicle is resold by the purchaser or such purchaser makes a substantial nonexempt use of such vehicle,

then such sale or use of such vehicle by such purchaser shall be treated as the 1st retail sale of such vehicle for a price equal to its fair market value at the time of such sale or use.

(2) Exempt use
For purposes of this subsection, the term exempt use means any use of a vehicle if the 1st retail sale of such vehicle is not taxable under this subchapter by reason of such use.

(c) Parts and accessories sold with taxable passenger vehicle
Parts and accessories sold on, in connection with, or with the sale of any passenger vehicle shall be treated as part of the vehicle.

(d) Partial payments, etc.
In the case of a contract, sale, or arrangement described in paragraph (2), (3), or (4) of section 4216 (c), rules similar to the rules of section 4217 (e)(2) shall apply for purposes of this subchapter.