Petition for Writ of Certiorari — Rockwater, Inc., dba Peerless Manufacturing Company, Petitioner v. United States

No. ________

In The Supreme Court of the United States

__________

ROCKWATER, INC., d.b.a

PEERLESS MANUFACTURING CO.

Petitioner,

v.

UNITED STATES OF AMERICA,

Respondent.

__________

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Eleventh

Circuit

__________

PETITION FOR WRIT OF CERTIORARI

__________

DAVID D. AUGHTRY

Counsel of Record

CHAMBERLAIN, HRDLICKA, WHITE, WILLIAMS & AUGHTRY

191 PEACHTREE STREET, N.E.

FORTY-SIXTH FLOOR

ATLANTA, GEORGIA 30303

(404) 659-1410

david.aughtry@chamberlainlaw.com

Counsel for Petitioner

-iQUESTIONS PRESENTED

This statutory interpretation case raises the

primary question as to the plain (best) meaning of 26

U.S.C. § 7701(a)(48)(A)(i) and, in the context of the

federal excise tax scheme under 26 U.S.C. § 4051(a),

raises these four interrelated issues regarding the test

for applying that statutory exception:

1) What role does the ability of a vehicle to

transport a load over the highway play in the

statutory inquiry under 26 U.S.C. § 7701(a)(48)(A)(i)?

2) Does the two-prong test under 26 U.S.C. §

7701(a)(48)(A)(i) require comparison of the vehicle in

question to a traditional highway vehicle to identify

the special design features and impairments or

limitations?

3) Whether the phrase “specially designed for the

primary function of transporting a particular type of

load other than over the public highway…” as used in

26 U.S.C. § 7701(a)(48)(A)(i) requires consideration of

the design elements of the entire vehicle or just

particular components of the vehicle?

4) Does the phrase “substantially limited or

impaired” as used in 26 U.S.C. § 7701(a)(48)(A)(i)

require consideration of all forms of impairment or

limitation?

-iiRULE 14(b) STATEMENT

The parties to the proceeding are Petitioner/

Appellant,

Rockwater,

Inc.

d.b.a.

Peerless

Manufacturing Co., and Respondent/ Appellee, the

United States of America, by and through its Agent,

the Commissioner of the Internal Revenue Service.

RULE 29.6 CORPORATE DISCLOSURE

STATEMENT

Rockwater, Inc. is wholly owned by two

individuals.

There are no parent, partner, or

subsidiary corporations with an ownership interest in

Rockwater, Inc. No publicly held companies own an

interest in Rockwater, Inc. and Rockwater, Inc. holds

no ownership interest in a publicly held company.

PROCEEDINGS BELOW

A list of all proceedings in trial and appellate

courts directly related to this case is as follows:

Rockwater, Inc. d.b.a. Peerless Manufacturing

Company v. United States of America, District

Court for the Middle District of Georgia, Docket

No. 4:21-cv-00125-CDL (April 10, 2023)

Rockwater, Inc. d.b.a. Peerless Manufacturing

Company v. United States of America, By and

Through Its Agent, The Commissioner of Internal

Revenue, United States Court of Appeals for the

Eleventh Circuit, No. 23-11893 (November 15,

2024)

-iiiTABLE OF CONTENTS

QUESTIONS PRESENTED.......................................... i

RULE 14(b) STATEMENT ........................................... ii

RULE 29.6 CORPORATE DISCLOSURE

STATEMENT........................................................... ii

PROCEEDINGS BELOW............................................. ii

TABLE OF CONTENTS .............................................. iii

TABLE OF AUTHORITIES ......................................... v

PETITION FOR A WRIT OF CERTIORARI .............. 1

JUDGMENT FOR WHICH REVIEW IS SOUGHT ... 1

JURISDICTION ............................................................ 1

STATUTES OR OTHER PROVISIONS

INVOLVED .............................................................. 2

INTRODUCTION ......................................................... 3

STATEMENT OF THE CASE ..................................... 6

REASONS FOR GRANTING THE PETITION ........ 11

A. Congress Sought to Protect Vehicles of Limited

Highway Utility – Not Tax Them Like 24/7, 365

Highway Hauler ................................................... 13

B. The Statute Requires Comparison of the

Vehicle to Traditional 24/7, 365 Over-the-Road

Haulers. ................................................................. 16

C. The Primary Design Prong Requires Analysis

of the Entire Vehicle – Not Just the Parts That

Touch the Road. .................................................... 19

D. The Plain Language of the Substantial

Impairment Prong Encapsulates More Than

What Is Legal or Possible. ................................... 22

CONCLUSION ............................................................ 25

-iv-

APPENDIX

Appendix A Opinion in the United States Court

of Appeals for the Eleventh Circuit

(November 15, 2024) ................... App. 1

Appendix B Order in the United States District

Court for the Middle District of

Georgia (April 10, 2023) ........... App. 30

Appendix C 26 U.S.C. § 4051(a) ................... App. 45

26 U.S.C. § 7701(a)(48)(A) ........ App. 47

26 C.F.R. § 48.4061(a)-1(d) ...... App. 49

-vTABLE OF AUTHORITIES

CASES

Big Three Indus. Gas & Equipment Co. v.

United States, 329 F. Supp. 1273, 1278 (S.D.

Tex. 1971), aff’d per curiam, 459 F.2d 1042

(5th Cir. 1972) ........................................................ 12

Florida Power & Light Co. v. United States, 56

Fed. Cl. 328, 333 (2003) ......................................... 12

Gateway Equipment Corp. v. United States,

247 F. Supp. 2d 299, 307

(W.D. N.Y. 2003) ........................................ 16, 22, 24

GLB Enterprises, Inc. v. United States, 232

F.3d 965, 967-69 (8th Cir. 2000)...................... 12, 24

Halliburton Co. v. United States, 611 F. Supp.

1118, 1124-30 (N.D. Tex. 1985) ............................. 24

Hostar Marine Transport Systems, Inc. v.

United States, 592 F.3d 202, 212-213 (1st

Cir. 2010) .......................................................... 11, 12

Loper Bright Enterprises v. Raimondo, 604

U.S. 369, 400 (2024) ................................................. 5

Malat v. Riddell, 383 U.S. 569, 571-72 (1966) .......... 15

Myles Lorentz, Inc. v. Commissioner, 138 T.C.

40, 48-49 and n.17 (2012) ...................................... 23

West Virginia v. Environmental Protection

Agency, 597 U.S. 697 (2022) .................................. 11

Worldwide Equipment v. United States, 546 F.

Supp. 2d 459, 468 (E.D. Ky. 2008), vac’d in

part on other grounds, 605 F.3d 319

(6th Cir. 2010) .......................................................... 3

-vi-

Worldwide Equipment, inc. v. United States,

605 F.3d 218, 324-26 (6th Cir. 2010) ............... 11, 14

STATE CASES

26 U.S.C. § 4051(a) ......................... i, 2, 3, 9, 10, 13, 21

26 U.S.C. § 6511(a)..................................................... 10

26 U.S.C. § 6532(a)(1) ................................................ 10

26 U.S.C. § 7422(a)..................................................... 10

26 U.S.C. § 7701(a)(48) ................................................ 4

26 U.S.C. § 7701(a)(48)(A) ........................... 2, 4, 10, 22

26 U.S.C. § 7701(a)(48)(A)(i) .. i, 3, 5, 11, 13, 14, 15, 16

26 U.S.C. § 7701(a)(48)(iii) ........................................ 23

28 U.S.C. § 1254 .......................................................... 1

28 U.S.C. § 1340 ......................................................... 10

28 U.S.C. § 1346(a)(1) ................................................ 10

28 U.S.C. § 1402(a)(2) ................................................ 10

REGULATIONS

26 C.F.R. § 145.4051-1(a)(2) .................................. 3, 13

26 C.F.R. § 48.4061(a)-1(d) ...................................... 2, 3

OTHER AUTHORITIES

67 Fed. Reg. 38913 at 4 ............................................... 4

American Jobs Creation Act of 2004 –

Conference Report, 150 Cong. Rec. S1119108, at S11213 (2004) (Statement from U.S.

Senator Jim Bunning) ....................................... 4, 13

Black’s Law Dictionary (12th ed. 2024) .............. 19, 22

-viiI.R.S. G.C.M. 37833, at 5, 1979 WL 52699

(Jan. 26, 1979) .................................................. 14, 22

Merriam Webster Dictionary (6th ed. 2004) 15, 17, 22

Random House Unabridged Dictionary 1897

(2d ed.1993) ............................................................ 22

-1PETITION FOR A WRIT OF CERTIORARI

Rockwater, Inc., respectfully petitions for a writ of

certiorari to review the opinion and judgment of the

United States Court of Appeals for the Eleventh

Circuit issued November 15, 2024.

JUDGMENT FOR WHICH REVIEW IS SOUGHT

The opinion of the Eleventh Circuit is published at

121 F.4th 1287 (11th Cir. 2024) and is reproduced in

the Petition Appendix A ("Pet. App.") at pp. App. 1App. 29. The April 10, 2023, Order of the District

Court for the Middle District of Georgia is

unpublished. It was entered at Docket No. 4:21-CV125-CDL on April 10, 2023, and is reproduced at Pet.

App. B, pp. App. 30-App. 43.

JURISDICTION

The Opinion of the Eleventh Circuit was entered

on November 15, 2024. This Court has jurisdiction

pursuant to 28 U.S.C. § 1254.

-2STATUTES OR OTHER PROVISIONS

INVOLVED

26 U.S.C. § 4051(a)

26 U.S.C. § 7701(a)(48)(A)

26 C.F.R. § 48.4061(a)-1(d)

Full text of the above-referenced statutes and

regulation set out in Appendix C (App.44-52)

-3INTRODUCTION

This case represents the latest attempt by the IRS

to

usurp

congressional

authority

through

administrative repeal of 26 U.S.C. § 7701(a)(48)(A)(i).

That provision provides a codified exception to certain

federal excise taxes, including 26 U.S.C. § 4051(a),

which imposes a 12-percent excise tax on the first

retail sale of heavy highway vehicles. See also 26

C.F.R. § 145.4051-1(a)(2) (limiting application of the

tax to highway vehicles). The IRS defines highway

vehicles as “any self-propelled vehicle, or any trailer

or semitrailer, designed to perform a function of

transporting a load over public highways, whether or

not also designed to perform other functions…” 26

C.F.R. § 48.4061(a)-1(d).

Congress imposed the excise tax:

… to ensure that those entities which enjoy the

use of the public roads pay for their upkeep. To

put it differently, the tax forces those entities

that cause the most damage to the public roads,

and often benefit economically the most from

them, to pay for the consequences of their use.

Worldwide Equipment v. United States, 546 F.

Supp. 2d 459, 468 (E.D. Ky. 2008), vac’d in part

on other grounds, 605 F.3d 319 (6th Cir. 2010).

The

tortured

history

of

26

U.S.C. §

7701(a)(48)(A)(i) traces back more than 80 years to 26

C.F.R. § 48.4061(a)-1(d). Like the now codified

exception, the regulatory exception protected vehicles

primarily designed for an off-highway function that

possessed limited highway transportation utility.

-4In 2002, the IRS attempted to repeal some of the

exceptions to the excise tax. See 67 Fed. Reg. 38913 at

4. In response, Congress codified the off-highway

vehicle exception at 26 U.S.C. § 7701(a)(48)(A) as part

of the American Jobs Creation Act of 2004, stating:

A vehicle shall not be treated as a highway

vehicle if such vehicle is specially designed for

the primary function of transporting a

particular type of load other than over the public

highway and because of this special design such

vehicle's capability to transport a load over the

public highway is substantially limited or

impaired.

In so doing, Congress made clear its intention:

My intention in proposing [26 U.S.C. §

7701(a)(48)] was to confirm that Congress feels

it is proper that vehicles which do not make use

of, or make only very limited use of, the public

highways should not be considered a “highway

vehicle” for purposes of various excise tax

sections. American Jobs Creation Act of 2004 –

Conference Report, 150 Cong. Rec. S11191-08,

at S11213 (2004) (Statement from U.S. Senator

Jim Bunning)

Undeterred by the plain meaning of the codified

exception and the clear congressional intent behind its

enactment, the IRS urges an administrative repeal of

the codified “off-highway” exception through a narrow

interpretation of the statute focused solely on the

ability of a vehicle to operate on the highway. It is the

second time the IRS seeks to usurp the power of

Congress to protect vehicles of limited highway utility.

-5The IRS attempts to repeal the now codified

exception by promulgating a standard that focuses

solely on the ability of a vehicle to touch the public

highways. In short, it adopts the general highway

vehicle definitional rule as the standard for defeating

the exception through an narrow interpretation of 26

U.S.C. § 7701(a)(48)(A)(i).

That interpretation

contradicts the plain meaning of the statute, ignores

the clear congressional intent of the codified exception,

and creates a circuitous statutory scheme that writes

the exception out of the code. While the District Court

rejected that circular standard, the IRS found a

willing partner in the Eleventh Circuit Court of

Appeals to effectuate its administrative repeal.

In Loper Bright Enterprises v. Raimondo, 604 U.S.

369, 400 (2024) this Court expressed its continued

commitment to the best reading of a statute. Here, the

best reading of 26 U.S.C. § 7701(a)(48)(A)(i) lies in the

plain language of that statute as confirmed by the

clear congressional intent behind its codification and

the broader statutory scheme that gives the exception

context. The rule gives the exception meaning and an

exception without meaning is no exception at all.

The IRS attempt to tax peanut drying wagons as if

they were traditional highway haulers running 24/7,

365 despite the undisputed fact they spend less than

1 percent of their life on the road and sit dormant for

42 to 44 weeks out of the year, defies the statute and

all logic. That attempt has real world consequences to

this business and the entire peanut industry, As in

Loper Bright, Rockwater asks this Court to give

26 U.S.C. § 7701(a)(48)(A)(i) its best meaning as

opposed to the IRS attempt to render it meaningless.

-6STATEMENT OF THE CASE

Moisture threatens peanut crops more than any

other source; it allows development of mold and

aflatoxins that spoil harvests, threaten consumers, and

spell financial ruin for farmers.

For farmers,

producers, and consumers, drying peanuts effectively

and efficiently remains essential to industry viability.

In 1954, Rockwater’s predecessor, Peerless

Manufacturing Co., invented the first mechanical

peanut drying system consisting of a stationary drying

fan and a mobile peanut drying wagon specifically

designed to transport peanuts to those drying fans to

perform that essential peanut drying function. Over

the decades, the peanut drying system has remained

effectively the same, with the only difference arising

from advancements in peanut cultivation: larger

combines harvested more rows of peanuts at the same

time, increasing the demand to dry more peanuts at the

same time. In response to that need, Peerless increased

the size of its peanut drying wagons to meet the

increased volume demand from 14’ boxes attached to

wagons to 45’ and 48’ drying boxes affixed to a chassis

capable of being pulled by a semi-truck.

In 2017, Rockwater began selling 45’ and 48’ peanut

drying wagons comprised of an all-steel drying box

affixed to an I-beam chassis. Rockwater employed an

all-steel design to prevent moisture leeching risks

associated with the aluminum/wood design of

traditional semi-trailer-vans. The drying box consists

of an 18-inch plenum with a 40 percent perforated floor

at the top of the plenum. The plenum height and floor

perforation were designed in consultation with the

National Peanut Research Laboratory.

-7Rockwater uses 18-gauge sheet metal for the

flooring supported by five additional steel trusses

installed across the plenum. The drying box has an

opening at one end of the plenum designed to hook up

to a drying fan duct. The drying fan opening, plenum,

and perforated floor allow warm air to pass under and

up through the peanut load to facilitate effective drying

of peanut loads.

The 18-inch plenum raises the center of gravity of

the drying wagon when loaded, increasing the rollover

risk. The perforated sheet-metal floor requires loads

that disperse weight evenly, preventing it from hauling

denser loads such as those on pallets or large

packaging. The flooring cannot support the weight of

those denser materials and prevents the use of forklifts

or other vehicles to load/unload the vehicle.

Instead of traditional barn-style doors, the rear of

the drying box has a top, horizontally hinged rear gate

that starts approximately 24 inches below the top of the

trailer. There are no hydraulics or other mechanisms

to raise the rear gate. The drying box also has an opentop that allows for top-loading peanuts in the field. The

rear gate and open top expose loads to the elements and

prevent loading and unloading by forklift. Loads must

be top-loaded and unloaded by raising the entire

peanut drying wagon at an angle (like the rear of a

dump truck) to allow gravity to unload the vehicle.

The drying box sits on a chassis which consists of a

single I-beam that runs the length of the chassis. Two

oversized sand feet are affixed to the I-Beam at one end.

The sand feet provide greater stability than traditional

feet in loose soil conditions found in farms and other offhighway sites.

-8Two-axles comprised of 4 wheels each are affixed to

the other end of the chassis. The chassis is equipped

with standard tires, lights, and brakes, as well as

required DOT reflective striping.

The peanut harvest season runs for 8 to 10 weeks

from September through November. Peanuts are

harvested by a combine that pulls up the plant and flips

it over to expose the peanuts to the sunlight. Peanuts

must be adequately dried before storage to prevent

development of mold and aflatoxins that render crops

worthless.

The peanut drying wagons are hauled to a spot on

the farm. The peanuts are picked up and top loaded

into a peanut drying wagon in the field. Once full, the

peanut drying wagon is hauled to a drying fan and

hooked up to dry the peanuts for about 24 hours. Some

farms have their own drying sheds, but most drying

sheds are located at centralized peanut buying points

run by farmer-owned co-ops. Typically, off-site buying

points are within 20-miles of the farms.

Once dried, the peanut drying wagon is transferred

to an inspection point and graded by federal state

inspectors. Each buying point has its own inspection

point on site. The peanuts are inspected for moisture

content, debris, and overall quality. If they pass

inspection, the peanut load is assigned a grade. If they

fail inspection, the peanut load is sent for cleaning, redrying, and re-inspection. Once the peanuts have been

graded, the peanut drying wagon is placed on a large

hydraulic lift that raises the entire peanut drying

wagon at an angle to unload the peanuts into a

warehouse. Most buying points have warehouses on

site or nearby.

-9After unloading, the peanut drying wagon is hauled

back to the farm for another load. During the 8-to-10week harvest season, the peanut drying wagons make

up to one trip per day, with most making trips every

other day. Peanut drying wagons are only used to

transport peanuts from the farm to the drying shed and

around the buying point for drying, inspection,

cleaning, and unloading. The peanut drying wagons

serve no other purpose. The peanut drying wagons sit

dormant for the remaining 42 to 44 weeks of the year.

Peanut drying wagons only touch public highways

if the route between the farm and the buying point

requires usage of such roads. They spend 97 percent of

the 8-10 harvest season on farms, farm roads, and at

buying points. The peanut industry utilizes traditional

semi-trailer vans and hopper bottom trailers to

transport peanuts over the highway. The industry

utilizes these over the road haulers to transport

peanuts over the highway from the warehouses to the

producers (shellers) because peanut drying wagons are

not suitable as over the road haulers due to their

limitations. Because of those limitations, peanut

drying wagons spend 99 percent of their life in a nonhighway transportation function (either off-highway

transportation or sitting dormant).

The Internal Revenue Service (IRS) asserted excise

taxes against Rockwater under 26 U.S.C. § 4051(a) on

the determination that the peanut drying wagons were

highway vehicles. That 12 percent excise tax is

imposed on each sale of a highway vehicle. The IRS

asserted the excise tax against Rockwater for the first

three quarters of 2017.

-10Rockwater paid the excise taxes with respect to the

second quarter of 2017 under protest and filed a claim

for refund under 26 U.S.C. § 6511(a) as required by 26

U.S.C. § 7422(a). Rockwater then waited the required

six months under 26 U.S.C. § 6532(a)(1) before suing

the IRS in the District Court for the Middle District of

Georgia. Jurisdiction was conferred upon the District

Court under 28 U.S.C. §§ 1340 and 1346(a)(1). The

Middle District of Georgia was the proper venue under

28 U.S.C. § 1402(a)(2) because Rockwater is a

corporation with a principal place of business in

Shellman, Georgia.

Prior to trial, Rockwater and the Department of

Justice filed competing Motions for Summary

Judgment with respect to the application of 26 U.S.C. §

4051(a) to the peanut drying wagons manufactured and

sold by Rockwater. The District Court, Judge Land,

issued an order granting summary judgment in favor

of Rockwater on the finding that the peanut drying

wagons met the exception under 26 U.S.C. §

7701(a)(48)(A) for “off-highway” vehicles. The IRS

appealed that order to the Eleventh Circuit Court of

Appeals. Following briefing and oral argument, the

Eleventh Circuit Court of Appeals issued an order

reversing the District Court and granting summary

judgment in favor of the IRS.

Rockwater files this Petition for a Writ of Certiorari

to respectfully request this Court bring much needed

clarity and uniformity to this statutory excise tax

scheme and to prevent the administrative repeal of the

exception codified by Congress in 26 U.S.C. §

7701(a)(48)(A) that would result from the Circuit Court

opinion below.

-11REASONS FOR GRANTING THE PETITION

This case involves fundamental questions as to the

limits of agency power to impose unfounded statutory

interpretations that render codified exceptions

meaningless. At the heart of that attempt is a

question about the best meaning of a federal statute –

26 U.S.C. § 7701(a)(48)(A)(i).

Beyond the attempted agency repeal of the codified

exception that raises separation of powers questions

akin to West Virginia v. Environmental Protection

Agency, 597 U.S. 697 (2022), the history of the

exception is marred by inconsistent applications and

conflicting opinions across and among the federal

circuit courts of appeals (and district courts). As Judge

Land found below, the history of the exception is

wrought with confusion caused by the regulatory

process undertaken by the IRS and attempts by the

courts to ascertain the meaning of the applicable

language. Pet. App. B at App. 36. See also, e.g.,

Worldwide Equipment, Inc. v. United States, 605 F.3d

319, 324-26 (6th Cir. 2010) (defining the test as an “ex

ante analysis that examines a vehicle’s primary

design” that permits more than incidental highway

use); Hostar Marine Transport Systems, Inc. v. United

States, 592 F.3d 202, 212-213 (1st Cir. 2010) (road use

focused test that rendered off-highway functionality

irrelevant). One need look no further than the two

opinions issued in this case - and the vastly different

conclusions – to ascertain the confusion wrought by

the lack of a thorough interpretation of the provisions

contained within the exception. A thorough analysis

and clear standard benefits the Courts, congress, and

taxpayers in a number of agricultural, mining, oil and

gas, and other industries facing similar questions.

-12The confusion wrought extends to whether the

entire vehicle design should be factored into the

primary design/function prong. (compare GLB

Enterprises, Inc. v. United States, 232 F.3d 965, 96769 (8th Cir. 2000) (analyzing the entire vehicle), with

Hostar, 592 F.3d at 212-13 (focused on wheels, tires,

etc.)) and whether the substantial impairment prong

considers actual usage of the vehicle by those that

know its limits best (compare GLB Enterprises, 232

F.3d at 967 (considering usage), with Florida Power &

Light Co. v. United States, 56 Fed. Cl. 328, 333 (2003)

(extreme weather use was irrelevant). It also persists

in whether economic and physical limits should be

construed along with legal limits. See Big Three

Indus. Gas & Equipment Co. v. United States, 329 F.

Supp. 1273, 1278 (S.D. Tex. 1971), aff’d per curiam,

459 F.2d 1042 (5th Cir. 1972). The exception begs for

clarity by giving the statute its best meaning.

But this statutory interpretation case does not live

in the abstract. The seven+ year attempt by the IRS

to repeal the codified exception has taken a direct toll

on Rockwater who saw an 80 percent drop in sales as

a result of the 12 percent surcharge. For an employer

in an area with little economic opportunity, the

company may never recover from the long-running

impact of the surcharge. For the larger industry,

increased costs pressure thin margins. Those concerns

extend to other industries affected by the IRS'

improper interpretation. More insulting, underlying

all of this is the belief that the IRS knows better what

a vehicle can do than the people who utilize it every

day. Usurp Congress; usurp logic; usurp an industry;

usurp the rule of law.

-13A. Congress Sought to Protect Vehicles of

Limited Highway Utility – Not Tax Them Like

24/7, 365 Highway Hauler.

Congress made clear its intention to protect

vehicles that make limited use of the public highways.

See American Jobs Creation Act of 2004 – Conference

Report, 150 Cong. Rec. S11191-08, at S11213 (2004)

(Statement from U.S. Senator Jim Bunning, author of

the off-highway exception). The plain meaning of the

statutory language, buttressed by the broader

statutory excise tax scheme, reflects that intention. 26

U.S.C. § 4051(a) and 26 C.F.R. § 145.4051-1(a)(2) set

the rule –a 12 percent excise tax will be imposed on

the first retail sale of a highway vehicle, defined as

…any self-propelled vehicle, or any trailer or

semitrailer, designed to perform a function of

transporting a load over public highways,

whether or not also designed to perform

other functions… (Emphasis added).

Congress codified the “off-highway” exception to

that broad definition through 26 U.S.C. §

7701(a)(48)(A)(i):

A vehicle shall not be treated as a highway

vehicle if such vehicle is specially designed for

the primary function of transporting a

particular type of load other than over the

public highway and because of this special

design such vehicle's capability to transport

a load over the public highway is substantially

limited or impaired. (Emphasis added).

-14In Worldwide Equipment, Inc. v. United States, 605

F.3d 319, 324 (6th Cir. 2010), the Sixth Circuit noted:

The structure of the statute supports that the

off-highway exception comes into play only with

respect to vehicles that are designed, at least to

some extent, for both on-and off-highway use.

In other words, “[i]f a vehicle is not designed for

highway use, it would fall outside the regulatory

definition of a highway vehicle and would not be

subject to the 12% excise tax.” Id. at n. 2. The Sixth

Circuit based that conclusion, in part, because

“[v]arious IRS general counsel memoranda support

that conclusion. See I.R.S. G.C.M. 37833, at 5, 1979

WL 52699 (Jan. 26, 1979) (noting that ‘only vehicles

with no or negligible utility for transporting loads on

public highways fail to meet the design test in the

general definition of highway vehicle,’ and ‘[t]he

exceptions are provided to exclude vehicles that

should not be taxed, but which meet the design test.’)”

Id. No rule; no exception.

Here, the IRS advocates an administrative repeal

of this exception for dual purpose vehicles through an

interpretation of 26 U.S.C. § 7701(a)(48)(A)(i). By

narrowly defining the term “transport” and the phrase

“other than over the public highway”, the IRS excludes

99 percent of the peanut drying wagon design, its clear

primary function, and the substantial limitations that

cause the peanut industry – those who best know the

limits of the vehicle – to park the vehicle for 42-to-44

weeks out of the year. Instead, the IRS insists the

focus should remain with the ability of the vehicle to

operate on the public highways.

-15That advocacy effectively eliminates the exception,

ignores the statutory scheme, contradicts the plain

language of the statute, and usurps the clear intention

of Congress. As the Sixth Circuit noted, the statutory

scheme only invokes the exception in the context of

dual-use vehicles. That is, the exception only comes

into consideration if a vehicle can perform a highway

transportation function in the first instance. Highway

transportation function constitutes a condition

precedent to the 26 U.S.C. 7701(a)(48)(A)(i) inquiry.

The plain language of the statute confirms that

duality. The term “primary function” means the

exemption contemplates application to multi-function

vehicles and turns on the “primary” function served by

the vehicle. This Court defined “primary” as of the

utmost importance. Malat v. Riddell, 383 U.S. 569,

571-72 (1966). That requires an identification and

ordering of those functions.

The term “function” means “the action for which a

person or thing is specially fitted or use or for which a

thing exists.” Function, Merriam Webster Dictionary

(6th ed. 2004). The term “primary function” must then

mean the most important reason/use for the existence

of the vehicle. Coupled with the “specially designed”

inquiry, the test must focus on those items that make

the vehicle special: what separates it from the

traditional semi-trailer van (or other highway vehicle)

that serves a known primary (if not exclusive)

highway transportation function. The IRS insistence

on ignoring the primary function – the reason the

peanut drying wagons exist – contradicts that plain

meaning of the statute to create a circuitous statutory

scheme the would tax 100 percent of highway vehicles.

-16B. The Statute Requires Comparison of the

Vehicle to Traditional 24/7, 365 Over-theRoad Haulers.

The required duality of the vehicles that fit in the

statutory scheme requires comparison of the vehicle

with traditional highway vehicles designed to haul

loads over the public highways all day every day. No

doubt exists as to those vehicles being the target of the

excise tax regime due to their outsized benefit from the

federally funded highway infrastructure.

The

exception, on the other hand, looks to protect those

vehicles that, while sharing common characteristics

with those traditional highway vehicles, make limited

use of the federal highways because of their design.

The primary design

comparison from the start:

prong1

invokes

that

…vehicle is specially designed for the

primary function of transporting a particular

type of load other than over the public

highway… 26 U.S.C. § 7701(a)(48)(A)(i).

The term “specially designed” necessarily invokes

a comparison to a standardized version of the vehicle

to distinguish between what is special and what is not.

See Gateway Equipment Corp. v. United States, 247 F.

Supp. 2d 299, 307 (W.D. N.Y. 2003) (noting the term

necessitates the comparison).

1 The Courts have traditionally broken the statutory language

into a two-prong test: (i) the primary design prong that focuses

on the physical design elements of the vehicle; and (ii) the

substantial impairment/limitation prong that focuses on the

capabilities (or lack thereof) of the vehicle.

-17We give common terms their common meaning.

Merriam Webster defines “specially” as “in a special

manner” and “special” as “uncommon, noteworthy.”

Special and Specially, Merriam Webster Dictionary

(6th ed. 2004). Thus, special requires something else

be ordinary; the exception needs a rule.

The second prong of the exception similarly

invokes a comparison. By looking to “substantial

impairments or limitations” the plain language of the

statute invokes a comparison between the vehicle in

question and the traditional highway vehicle to set the

backdrop. To consider an impairment or limitation

“substantial,” we must take into consideration what

the unimpaired and unlimited highway vehicle can do.

Traditional semi-trailer vans – the ones we all

picture when we think of semi-trailers – have a clear

primary design function. They facilitate the transport

of goods across the public highways. They do it rain

or shine, day and night, weekends, holidays, etc. They

run 24/7, 365. They provide the baseline from which

we compare the Rockwater peanut drying wagons.

The IRS urges a focus on those elements that

remain similar between the two sets of vehicles – tires,

wheels, lights, and DOT required striping – while

simultaneously ignoring the things that make the

peanut drying wagon unique. But none of those

elements are “specially designed.” Rather, they set

the baseline for the highway vehicle definition that

first ensnares the peanut drying wagon into the

statutory scheme. By focusing on those elements and

casting aside the clear primary function and special

design elements, the IRS eliminates the exception.

-18The special design elements of the Rockwater

peanut drying wagons include the all-steel design, the

18-inch plenum, the additional trusses, the 40 percent

perforated floor, the drying fan opening, the tophinged rear door, the I-beam chassis, the open-top,

and the oversized sand-feet. All those special design

elements facilitate its primary function of

transporting peanuts from field to buying point.

Traditional semi-trailer vans contain none of those

elements. Traditional semi-trailers are made from

lighter aluminum and wood framing, do not contain a

plenum, and have a solid floor without additional

trusses. They are enclosed on all sides and have a roof.

They utilize barn-style rear doors to facilitate loading

and unloading. The traditional, smaller feet and axles

are attached directly to the body as opposed to an Ibeam.

The IRS ignores those special design elements and

focuses squarely on the standard tires, wheels, rear

lights, and DOT striping. Those elements merely

allow the peanut drying wagons to legally operate on

the highway. The Department of Transportation (both

federal and state) sets out requirements for vehicles

that must be met before they are allowed to operate on

highways. If the Rockwater peanut drying wagons

employed non-approved tires, wheels, lights and/or

did not attach the required reflective striping, they

would not be allowed on the highways at all – they

would not be designed for highway use and, therefore,

not meet the general definition of a highway vehicle.

That is, they would not need to meet the exception

because the peanut drying wagons would not meet the

rule. The IRS logic eliminates the exception.

-19C. The Primary Design Prong Requires Analysis

of the Entire Vehicle – Not Just the Parts

That Touch the Road.

The primary design prong focuses the inquiry

on the primary function of “transporting a particular

type of load other than over the public highway.” The

focus on a particular type of load harks back to the

specially designed requirement as compared to

general over-the-road vehicles.

The term

“transporting” means “to carry or convey (a thing)

from one place to another.” Transporting, Black’s Law

Dictionary (12th ed. 2024). “Carry” means to “sustain

the weight or burden of; to hold or bear.” Id. “Convey”

means to transfer or deliver (something, such as a

right or property) to another…” Id.

Finally, “other than over the public highway”

can only be read to mean just that: the vehicle was not

primarily designed to function as an over the highway

hauler. To put a finer point on it: by describing the

qualifying transportation function in the negative

(other than), the exception encapsulates vehicles

specially designed for a transportation function other

than those primarily designed to serve as highwayhaulers (like traditional highway vehicles that make

the most use of the highways). There is no doubt that

the peanut drying wagons were specially designed for

the primary function of carrying peanuts and

conveying them from field to buying point (and then

around the buying point for drying, inspection, and

unloading) – i.e., other than as an over-the-roadhighway-hauler. Every physical design component of

a peanut drying wagon that makes the peanut drying

wagon unique points to that undeniable conclusion.

-20Inexplicably, the IRS justifies ignoring the

“specially designed” and “primary function” terms on

the disingenuous decree that the peanut drying

functionality is merely stationary. Casting that

primary function aside as stationary – nontransportation – ignores the definition of the term

transport. Moreover, it impermissibly restricts the

statutory “other than over the public highway” to a

private road/public highway inquiry.

The statute does not ask whether the vehicle is

primarily designed to transport loads over the

highways or over private roads. Rather, read as a

whole, the primary design prong protects those

vehicles specially designed for a primary function of

transporting cargo other than as a highway cargo

hauler. The primary design prong asks whether the

vehicle was designed to primarily serve as a highway

cargo hauler or specially designed to serve some other

transportation need. That is, a highway vehicle

remains what we know a highway vehicle to be – a

vehicle that functions primarily to move goods and

people over the public highways. Those highway

vehicles primarily benefit from federally funded

infrastructure – the very vehicles targeted by the

excise tax scheme – as opposed to those vehicles that

make limited use of the public highways – those

vehicles protected by Congress. It does not mean, as

the IRS presses, that every vehicle that can touch the

road remains a highway vehicle. To hold otherwise

would render the statutory exception meaningless

because every vehicle must first be capable of

operating on the highway (legally and physically)

before the exception can be invoked. The condition

precedent cannot set the standard for the exception.

-21Here, the IRS presses a test that ignores the

carry and emphasizes the convey by focusing on the

parts of the vehicle that cause it to move – i.e. the

wheels, tires, breaks, etc. – and casting the remaining

elements as stationary. The carry function remains

essential to the ability to transport a load. It is akin

to claiming that a running back’s feet are solely

responsible for transporting the football into the

endzone – the hands and body have no transportation

function according to the IRS. That interpretation

rewrites the statute and eliminates the exception by

ensnaring every vehicle capable of touching the

highways in the first instance.

Indeed, drawing a distinction between the body

of the vehicle and the chassis to ignore the body

contradicts the plain language of the underlying

federal excise tax. 26 U.S.C. § 4051(a) applies the

federal excise tax to both semi-trailer “chassis” and

“bodies”. That is, the excise tax statute draws a

distinction between the two so that it might tax either

one, if, for example the first retail sale involves a new

body attached to a used chassis that was already

subject to a first retail sale excise tax.

The physical design elements of the Rockwater

peanut drying wagon – the things that make the

drying wagon unique – clearly reflect a primary

function of transporting peanuts from field to buying

point to facilitate the drying, inspection, grading, and

unloading of those peanuts. That is, they were

specially designed to carry and convey peanuts for a

purpose other than purely transporting peanuts over

the public highways.

-22D. The Plain Language of the Substantial

Impairment Prong Encapsulates More Than

What Is Legal or Possible.

The plain language of the substantial

limitation/impairment prong focuses on the

capabilities of the vehicle to perform highway

transportation functions. Black’s Law Dictionary

defines “limit” as a restriction or restraint. Limit,

Black’s Law Dictionary (12th ed. 2024). Merriam

Webster defines “impaired” to mean “diminished in

function or ability.” Impaired, Merriam Webster

Dictionary (6th ed. 2004). Random House Unabridged

Dictionary 1897 (2d ed.1993) defines “substantial” as

“of ample or considerable amount quantity, size.”

Gateway, 247 F. Supp. 2d at 311. Again, the term

substantially limited or impaired requires a

comparison to the traditional highway vehicle that

does not suffer from such limitations or impairments.

The draft 1979 regulations which birthed 26 U.S.C.

§ 7701(a)(48)(A) stated “the underlying principle is

that such vehicles are so designed that they will spend

most of their functional time off the highway

performing

tasks

unrelated

to

highway

transportation, although they are capable of operating

on and will make occasional use of, the public

highways.” Gateway, 247 F. Supp. 2d at 311. (citing

I.R.S. G.C.M. 37833 at 4, dated January 26, 1979).

The focal point of the inquiry must be read in the

context of that underlying principle. The point of the

exception remains to protect those vehicles that have

little to no utility as a traditional highway hauler –

that a customer would not buy it for that purpose.

-2326 U.S.C. § 7701(a)(48)(iii) provides examples of

factors that “may be taken” into account in

determining substantial impairment or limitation of

the vehicle, including whether it requires special

licensing, can operate at highway speeds, or poses a

risk for being too tall, etc. But that list does not

constitute an exclusive list of considerations. It does

not limit or impair the practical inquiry into the

capabilities of the subject vehicle. Nor does it attempt

to promote any factor as controlling or determinative.

Here, the IRS presses the non-binding, nonexhaustive list as the only factors that should be

considered in determining the limitations or

impairments (and whether they meet the substantial

threshold). That defies the permissive language of 26

U.S.C. § 7701(a)(48)(iii). If Congress had intended for

that list to be binding or exhaustive, it knows how to

make it so.

Rather, the practical inquiry looks not just to limits

on the legal ability to operate the vehicle (licensing,

size limits, etc.), but to the physical (highway speed,

practical loading/unloading) and the economic

(efficiency). Moreover, while actual usage plays no

role in the primary design prong, the actual usage of a

vehicle can be used to inform the substantial

limitation or impairment inquiry. See Myles Lorentz,

Inc. v. Commissioner, 138 T.C. 40, 48-49 and n.17

(2012) (substantial impairment prong permits

consideration of other relevant considerations

including the use of the vehicle). The customers that

purchase and use these vehicles in their day-to-day

businesses know the limits of those vehicles better

than anyone.

-24Here, the Rockwater peanut drying wagons remain

substantially limited and/or impaired in their ability

to operate as traditional over-the-road haulers. The

open-top and top-hinged rear door limit the ability to

practically load and unload any load. Even if you

could top-load the goods needing transport, you could

only unload them at a site with a hydraulic lift large

enough to fit the entire drying wagon and dump the

contents out of the back. The open top also means that

it cannot protect from the elements.

The perforated flooring means no pallets or dense

loads. The all-steel design, additional trusses, I-beam,

and oversized sand feet essential to the peanut drying

transportation function add substantial weight to the

vehicle compared to the traditional semi-trailer. That

means the vehicle makes up a greater percentage of

gross vehicle weight limits on public highways. The

ability to carry less and increased fuel costs from

added weight render the peanut drying wagon

economically inefficient.

Here, the use confirms those limitations. See

Halliburton Co. v. United States, 611 F. Supp. 1118,

1124-30 (N.D. Tex. 1985) (substantially impaired

vehicles spent 2/3rds of their time on the jobsite, offhighway); GLB Enterprises, 232 F.3d at 967 (cotton

retrievers transporting cotton modules up to 100 miles

over public highways qualified for the off-highway

exception); Gateway, 247 F. Supp. at 314 (allocation of

a vehicle's functional time is a factor in the substantial

limitation/impairment assessment). Those who know

the peanut drying wagon best employ a second vehicle

to act as a highway hauler of peanuts – no one buys

two vehicles when one would do the job.

-25CONCLUSION

The best meaning of a statute is one which gives it

actual meaning; one that fulfills its purpose. The IRS

ought not be permitted to repeal a statute by

advancing an interpretation that gives that statute no

meaning. For these reasons, we respectfully submit

that the petition for writ of certiorari should be

granted.

Respectfully submitted,

DAVID D. AUGHTRY

Counsel of Record

CHAMBERLAIN, HRDLICKA,

WHITE, WILLIAMS & AUGHTRY

191 Peachtree Street, 46th FL

Atlanta, Georgia 30303-1747

Phone: (404) 659-1410

david.aughtry@chamberlainlaw.com

Counsel for Petitioner

February 13, 2025

APPENDIX

APPENDIX

TABLE OF CONTENTS

Appendix A Opinion in the United States Court

of Appeals for the Eleventh Circuit

(November 15, 2024) ................... App. 1

Appendix B Order in the United States District

Court for the Middle District of

Georgia (April 10, 2023) ........... App. 30

Appendix C 26 U.S.C. § 4051(a) ................... App. 44

26 U.S.C. § 7701(a)(48)(A) ........ App. 46

26 C.F.R. § 48.4061(a)-1(d) ...... App. 48

App. 1

Appendix A

121 F.4th 1287

United States Court of Appeals, Eleventh Circuit.

ROCKWATER, INC., d.b.a. Peerless

Manufacturing Company, Plaintiff-Appellee,

v.

UNITED STATES of America, BY AND

THROUGH Its Agent, the COMMISSIONER OF

INTERNAL REVENUE, Defendant-Appellant.

No. 23-11893

|

Filed: 11/15/2024

Synopsis

Background: Taxpayer, a manufacturer of trailers

that dried and transported peanuts from farm fields to

off-site buying points, brought tax refund action

alleging that it was entitled to off-highway vehicle

exception to federal retail excise tax. The United

States District Court for the Middle District of

Georgia, No. 4:21-cv-00125-CDL, Clay D. Land, J.,

2023 WL 2868931, granted taxpayer's motion for

summary judgment and denied United States' crossmotion for summary judgment. United States

appealed.

App. 2

Holdings: The Court of Appeals, Hull, Circuit Judge,

held that:

trailers were not specially designed to transport

peanuts off-highway, and

design of trailers did not substantially limit or impair

their on-highway capability.

Affirmed in part, reversed in part, and remanded with

instructions.

Luck, Circuit Judge, filed opinion concurring in part

and dissenting in part.

Procedural Posture(s): On Appeal; Motion for

Summary Judgment.

*1289 Appeal from the United States District Court

for the Middle District of Georgia, D.C. Docket No.

4:21-cv-00125-CDL

Attorneys and Law Firms

Jasen D. Hanson, David DeCoursey Aughtry,

Chamberlain Hrdlicka White Williams & Aughtry,

Atlanta, GA, for Plaintiff-Appellee.

Bethany B. Hauser, Jennifer Marie Rubin, Margaret

Elizabeth Sheer, Jikky E. Thankachan, U.S.

Department of Justice-Tax, Washington, DC, U.S.

Attorney Service - Middle District of Georgia, DOJUSAO, Macon, GA, for Defendant-Appellant.

App. 3

Before William Pryor, Chief Judge, and Luck and

Hull, Circuit Judges.

Opinion

HULL, Circuit Judge:

This appeal requires us to decide whether specially

designed peanut trailers that dry and transport

peanuts from farm fields to off-site buying points on

public roads are “off-highway transportation vehicles”

that are exempt from a 12 percent excise tax that

applies to the first retail sale of “[t]ruck trailer and

semitrailer chassis” and “[t]ruck trailer and

semitrailer bodies.” 26 U.S.C. §§ 4051(a)(1)(C), (D),

7701(a)(48)(A)(i).

An Internal Revenue Service (“IRS”) audit determined

that Plaintiff-Appellee Rockwater, Inc., doing

business as Peerless Manufacturing Company, owed

excise taxes on the sale of three peanut-drying

trailers. Rockwater paid the taxes, statutory interest,

and penalties but filed a claim for a refund from the

IRS. Rockwater then filed this lawsuit against the

United States, the Defendant-Appellant, for a full

refund and attorney's fees. The district court granted

summary judgment in favor of Rockwater as to its

refund request for the excise taxes, statutory interest,

and penalties, but denied Rockwater's request for

*1290 attorney's fees. The United States appealed.

After review, and with the benefit of oral argument,

we conclude that the district court erred in concluding

that Rockwater's peanut-drying trailers are “offhighway transportation vehicles” that are exempt

App. 4

from the tax. Id. § 7701(a)(48)(A)(i). We reverse in part

the grant of summary judgment to Rockwater and

remand with instructions to enter final judgment for

the United States for taxes and statutory interest.

Given the government did not appeal the penalties, we

affirm the district court's ruling that Rockwater is not

required to pay penalties.

I. BACKGROUND

A. The Peanut Harvesting Process

Nearly half of the United States’ peanuts are produced

in Georgia, where farmers harvest the crop each fall.

At the start of the eight-to-ten-week harvest, farmers

dig up the peanuts from the ground and leave them in

the fields for a few days to dry in the sun. Drying is a

critical stage in the process. Failing to dry the peanuts

within a few hours of harvesting can cause them to

develop mold and produce harmful aflatoxins.

Peanuts contain over 25 percent moisture at harvest

and must contain no more than 10.49 percent

moisture to be safe and salable. Thus, sun drying

alone is insufficient. To finish drying the peanuts,

most commercial farmers use mechanical peanutdrying trailers and wagons that transport the peanuts

off-site to be dried with fans.

App. 5

B. Rockwater's Peanut-Drying Trailers

The relevant facts about Rockwater's trailers are not

disputed. In 1954, Peerless designed the first

mechanical peanut-curing system, which consisted of

a drying box affixed on wheeled axles and connected

to a drying fan. In 2016, after Rockwater acquired

Peerless, David Rogers and David Peeler purchased

Rockwater and reengineered the trailers. In 2017,

Rockwater began manufacturing and selling 45- and

48-foot peanut-drying trailers under the Peerless

name.

Rockwater's trailers consist of a steel drying box

welded to a chassis. The chassis comprises an I-beam

that runs the length of the chassis. At one end of this

I-beam are two oversized sand feet, which provide

additional stability while the trailers are in the fields.

At the other end are two axles with four wheels on

each axle. The steel drying box has eight-foot-tall side

walls, an open top, a raised 40 percent perforated floor,

and an 18-inch-tall gap, or “plenum,” that runs the

length of the trailer below the perforated floor, where

the drying fan connects and blows warm air that rises

through the peanuts and out the open top. Other

features of the drying box are its horizontally-hinged

rear door, which allows peanuts to be unloaded by

hydraulically lifting the trailer at an angle for the

peanuts to empty out the back. The trailers can carry

about 20 to 23 tons of peanuts. Here is a picture of

Rockwater's peanut trailer.

App. 6

*1291

Farmers ordinarily use Rockwater's trailers in the

following manner. The farmers load the harvested

peanuts into the trailers’ open tops and drive the

trailers to a drying shed that usually is located at an

off-site buying point (collectively, “buying point”). 1

The “typical[ ]” distance from the field to the buying

point is about 20 miles. Approximately two-thirds of

those 20 miles are on public roads. The trailers make

an average of two to three trips each week from the

fields to the buying points.

It is necessary to move the trailers to the drying sheds

because the drying fans that attach to the trailers

require gas and electricity, which are unavailable in

the fields. The fans run continuously for about a day

on average, after which the peanuts are emptied from

the trailers and the trailers are returned to the fields

to begin the process again.

1 The parties do not dispute that although some farms have their

own drying sheds, most drying sheds are located at centralized

peanut-buying points.

App. 7

The trailers are not conducive to all-purpose

transportation needs. Their all-steel construction

makes the trailers heavier than most other trailer

types, and the 18-inch plenum raises the trailers’

center of gravity, which increases the rollover risk.

The perforated flooring cannot support dense loads.

Nor can the trailer be loaded from the back because

the rear door is hinged horizontally to allow for

gravitational unloading when the trailer is lifted at an

angle.

Still, several design features facilitate the trailers’

trips from the fields to the drying sheds by public road.

The trailers “operate by road speed limits.” Although

the trailers can safely travel 55 miles per hour,

Rockwater

provides

no

maximum

speed

recommendation. The trailers ordinarily are not

designated oversize or overweight, so they do not

require special markings or special permits to operate

on the public roads. The trailers use standard

semitrailer tires because Rockwater “d[id] *1292 not

want to burden [its] customers with specialized tires.”

The trailers also come with standard brakes, lights,

and reflective stripes that comply with federal and

state law for public roadway operation. And before a

sale, the trailers undergo a Department of

Transportation (“DOT”) inspection and receive vehicle

identification numbers.

In addition, Rockwater's online advertisement for the

trailers provides a bulleted list of the trailers’ features.

The first bullet point states that placing the stress of

the load on the chassis and not the body “allows the

App. 8

safest most reliable method for handling your crop

from the field to the buying point.”

C. Procedural History

The IRS audited Rockwater for failing to file a

quarterly federal excise tax return for its sale of three

trailers in the second quarter of 2017. After the IRS

determined that the 12 percent tax applied to the

trailer sales, Rockwater paid $37,031.76 in excise

taxes, penalties, and interest.

Rockwater then filed a claim for a refund with the IRS.

Rockwater then filed this lawsuit challenging the

application of the excise tax to its trailer sales and

requesting a refund and attorney's fees. In its

complaint, Rockwater alleged that its trailers were

exempt from the excise tax on the first retail sale of

highway vehicles because the trailers are “off-highway

transportation vehicles.” See 26 U.S.C. §§

4051(a)(1)(C), (D), 7701(a)(48)(A)(i). The first retail

sale means the first time a trailer is sold. See id. §

4051(a)(1). The excise tax does not apply to resales of

the same trailer thereafter. See id.

After discovery, Rockwater and the United States filed

cross-motions for summary judgment. The district

court granted summary judgment in favor of

Rockwater as to the taxes. The district court also ruled

that “[e]ven if it were determined that Rockwater

owed the tax, it still had reasonable cause not to pay

it initially” and so neither statutory interest nor

penalties were appropriate.

App. 9

The United States appealed as to the taxes and

statutory interest but not as to the penalties. As the

government argues, and Rockwater now does not

dispute, the Internal Revenue Code (the “Code”)

provides that penalties are subject to a “reasonable

cause” exception, see Code § 6651(a)(1), but statutory

interest is not, see id. §§ 6601(a), 6621. So the

statutory interest depends on whether Rockwater

owed the excise taxes or whether its peanut-drying

trailers are exempt. That is the legal issue we

examine.

II. STATUTORY AND REGULATORY

OVERVIEW

A. Standards of Review

We review the statutory interpretation and

application of the Code de novo. C.I.R. v. Driscoll, 669

F.3d 1309, 1311 (11th Cir. 2012). We also review a

grant of summary judgment de novo. Thai Meditation

Ass'n of Ala. v. City of Mobile, 83 F.4th 922, 926 (11th

Cir. 2023).

In tax refund lawsuits, the IRS Commissioner's

assessment has “the support of a presumption of

correctness.” Welch v. Helvering, 290 U.S. 111, 115, 54

S.Ct. 8, 78 L.Ed. 212 (1933). “[E]xemptions from

taxation are to be construed narrowly.” Mayo Found.

for Med. Educ. & Rsch. v. United States, 562 U.S. 44,

59-60, 131 S.Ct. 704, 178 L.Ed.2d 588 (2011) (citation

and quotation marks omitted).

App. 10

B. Federal Excise Tax on “Highway Vehicles”

The Code imposes a 12 percent tax on the first retail

sale of “[t]ruck trailer and semitrailer chassis” and

“[t]ruck trailer *1293 and semitrailer bodies.” 26

U.S.C. § 4051(a)(1)(C), (D). The Code does not define

those terms. But Congress authorized the Secretary of

the Treasury to pass rules and regulations to enforce

the Code. Id. § 7805(a).

In turn, the relevant Treasury Regulations clarify that

a chassis and body are taxable under Code § 4051(a)

“only if such chassis or body is sold for use as a

component part of a highway vehicle.” Treas. Reg. §

145.4051-1(a)(1)(ii), (a)(2) (emphasis added). The

Treasury Regulations also define “highway vehicle” as

“any trailer or semitrailer, designed to perform a

function of transporting a load over public highways,

whether or not also designed to perform other

[functions].” Id. § 48.4061(a)-1(d)(1). A “public

highway” includes “any road (whether a Federal

highway, State highway, city street, or otherwise)”

which is not a private roadway. Id.

The Treasury Regulations further provide that “in

determining whether a vehicle is a ‘highway vehicle,’

it is immaterial that the vehicle is designed to perform

a highway transportation function for only a

particular kind of load.” Id. Examples of a “highway

vehicle” are “passenger automobiles, motorcycles,

buses, and highway-type trucks, truck tractors,

trailers, and semi-trailers.” Id. A vehicle that is not a

“highway vehicle” is a “nonhighway vehicle.” Id.

App. 11

Here, Rockwater's trailers are sold as a component

part of a highway vehicle, which standing alone would

make them taxable. The focus of Rockwater's appeal

is on another provision in the Code that exempts “offhighway transportation vehicles” from the 12 percent

excise tax. We turn to that provision.

C. Exemption for Off-Highway Transportation

Vehicles

In the Code, Congress has defined types of “offhighway transportation vehicles” to which the §

4051(a) tax does not apply. 26 U.S.C. § 7701(a)(48).

Section 7701(a)(48)(A)(i) provides that “[a] vehicle

shall not be treated as a highway vehicle” under §

4051(a) if these two special design requirements are

met:

(1) the “vehicle is specially designed for the primary

function of transporting a particular type of load

other than over the public highway and”

(2) because “of this special design such vehicle's

capability to transport a load over the public

highway is substantially limited or impaired.”

Id. § 7701(a)(48)(A)(i).2 The next statutory subsection

also provides that “a vehicle's design is determined

solely on the basis of its physical characteristics.” Id.

§ 7701(a)(48)(A)(ii).

2 Section 7701(a)(48)(B) adds another exception. It provides that

nontransportation trailers and semitrailers, which function only

as enclosed stationary shelters, also are exempt. 26 U.S.C.

§ 7701(a)(48)(B). This exception is not involved in this case.

App. 12

Finally, Code § 7701(a)(48)(A) provides that we may

consider several factors in assessing whether the

vehicle's capability to transport a load over a public

highway is “substantially limited or impaired”: (1) “the

size of the vehicle”; (2) “whether such vehicle is subject

to the licensing, safety, and other requirements

applicable to highway vehicles”; and (3) “whether such

vehicle can transport a load at a sustained speed of at

least 25 miles per hour.” Id. § 7701(a)(48)(A)(i), (iii).

With this background, we turn to the parties’

arguments.

III. DISCUSSION

The parties do not dispute that because Code §

7701(a)(48)(A)(i) uses “and” to connect *1294 the two

requirements, Rockwater's trailers must satisfy both

criteria to be exempt from taxation as “off-highway

transportation vehicles.” See Schlumberger Tech.

Corp. & Subsidiaries v. United States, 55 Fed. Cl. 203,

220 (2003) (“The off-highway use exception is a twopart, conjunctive test.”). In other words, we must

reverse if Rockwater's trailers fail to satisfy either of

Code § 7701(a)(48)(A)(i)’s criteria.

A. The Trailers Are Not Specially Designed to

Transport Peanuts Off-Highway

The initial issue is whether Rockwater's trailers meet

the first requirement of being “specially designed for

the primary function of transporting” peanuts “other

App. 13

than over the public highway.” 26 U.S.C. §

7701(a)(48)(i). This special design requirement asks

whether the vehicle is specially designed for the

primary function of transporting a load off public

highways. See id. The statutory requirement does not

ask about the type of load being carried or nontransportation features of the vehicle. See id. Instead,

this first requirement focuses on the primary, special

transportation design of the vehicle, instead of the

non-transportation purposes it might also serve. See

id.

The physical characteristics that Rockwater cites do

not establish that the primary transportation purpose

of its trailers is off-highway use. Rockwater points to

features like (1) the I-beam and oversized sand feet

providing greater stability in the field, (2) the

perforated floor and plenum allowing for drying fans

to blow warm air up through the peanuts, and (3) the

open top and the hinged rear gate facilitating the

loading and unloading of the peanuts.

Although the oversized sand feet lend the trailers

stability when stationary, the sand feet serve no

purpose during transport. And in considering the

transportation function of these trailers, it is

immaterial whether the top is open or the floors are

perforated or the rear door is hinged. What matters is

that these design features serve the purpose of drying

peanuts primarily in stationary locations like buying

points. They do not establish a primary purpose of

transporting peanuts.

App. 14

As the government points out, the trailers are

outfitted with standard highway equipment that

allows the trailers to operate at 55 miles per hour.

Although the trailers are specially designed to

facilitate the drying of peanuts, their special peanutdrying design has nothing to do with off-highway

transportation.

Let's consider a similar challenge brought in the Sixth

Circuit involving the application of the same highway

vehicle tax, id. § 4051(a), to a coal-hauler dump truck.

See Worldwide Equip., Inc. v. United States, 605 F.3d

319, 321 (6th Cir. 2010). In Worldwide, a heavy truck

dealer challenged the application of the tax to its coalhauler dump trucks. Id. To haul coal in the muddy,

gravelly Appalachian coal fields, the coal-hauler dump

trucks were outfitted with (1) a special engine,

transmission, and rear axle combination; (2) an

oversized steel dump body; and (3) special off-road

tires. Id. at 327-28. Evidence reflected that the rear

axles and special tires would overheat if the truck was

operated at or above 35 to 40 miles per hour for any

length of time. Id. at 328. Holding that sufficient

evidence precluded summary judgment for the

government on the special design prong, the Sixth

Circuit explained that the evidence suggested that the

coal-hauler dump trucks were specially designed to

haul coal off-road in the coal fields. Id. at 326-27, 331.

The Sixth Circuit noted that this special design for offhighway transportation was apparent from the coalhauler dump trucks’ special frames, engines, *1295

transmissions, and off-road tires and the need for

special permits to operate the trucks on the highway

due to their size and weight. Id. at 326-28.

App. 15

Unlike in Worldwide, the special features that

Rockwater calls our attention to are specific to peanut

drying, not transporting the peanuts. See id. Indeed,

the physical characteristics relevant to assessing the

trailers’ transportation design are its standard tires,

its ability to operate by road speed limits, and its DOTcompliant brakes, lights, and reflective stripes, all of

which support Rockwater's advertisement that the

trailers are the “safest most reliable method for

handling your crop from the field to the buying point.”

(Emphasis added). In fact, Rockwater's advertisement

reveals that the trailers’ ability to transport peanuts

from fields to buying points, which almost always

requires travel over public roads, is the primary goal

of its transportation design. The presence of these

highway transportation features coupled with the

absence of specific features for off-highway

transportation establish that the trailers were not

specially designed for the primary purpose of moving

peanuts off-highway. And without specific off-highway

transportation design features, the fact that the

trailers are capable of being towed in the fields does

not, without more, establish that off-highway

transportation is a special design, much less the

primary function. See Fla. Power & Light Co. v. United

States, 56 Fed. Cl. 328, 333 (2003) (holding that

vehicles designed for extreme weather conditions for

use by a utility company were not off-highway vehicles

because their design for frequent off-road use was not

the same as being primarily designed for off-road use).

The First Circuit rejected an argument like

Rockwater's when it held that hydraulic boat trailers

App. 16

were not off-highway vehicles. See Hostar Marine

Transp. Sys., Inc. v. United States, 592 F.3d 202, 21213 (1st Cir. 2010). The First Circuit explained that

although the hydraulic boat trailers exhibited some

special design features, those features either were

irrelevant to their “on-versus off-highway function” or

supported their “on-highway function.” Id. at 213. For

example, the First Circuit considered the boat trailers’

open-center frames, hydraulic components, and stub

axles, but concluded that no evidence supported the

inference that the features were related to the roads

on which the trailers traveled instead of the boats that

they hauled. Id. The First Circuit also pointed to

several features that “emphatically point[ed] towards

their special design for on-highway transportation,”

such as DOT-compliant brakes, lighting, tires, and

wheel coverings and the ability to travel at normal

highway speeds. Id.

Likewise, the transportation features of Rockwater's

peanut-drying trailers, including its DOT compliance

and ability to travel by normal road speed limits on

public highways without special permits or markings,

evince that their primary transportation design was

for use on public roads. Without this design, no matter

the peanut-drying features on the trailers, the

peanuts would be marooned in the fields, unable to

reach the critical drying fans at the buying points.

Based on the first requirement in § 7701(a)(48)(A)(i),

the peanut-drying trailers do not meet the statutory

definition of “off-highway transportation vehicles,”

and the district court's grant of summary judgment to

Rockwater must be reversed. Nevertheless, we also

App. 17

consider the trailers’ ability to meet the second

requirement below.

B. The Trailers’ On-Highway Capability is Not

Substantially Limited or Impaired

The next issue is whether the trailers’ capability to

carry cargo over the public *1296 highways is

substantially limited or impaired. Code §

7701(a)(48)(A)(iii) provides several factors to consider

in assessing whether a vehicle's capability is

substantially limited or impaired, including the size of

the vehicle, its safety and licensing features, and its

ability to travel over 25 miles per hour. See 26 U.S.C.

§ 7701(a)(48)(A)(iii). All these factors weigh in the

government's favor.

First, the trailers are not designated as oversize or

overweight. This means that the trailers do not

require special permits to operate. Second, the trailers

go through DOT inspection before sale and have DOTcompliant brakes, lights, and reflective stripes. The

trailers also are marketed as safe to handle loads of

peanuts from the fields to the buying points, which

Rockwater acknowledges almost always requires

travel on public roads. The trailers can travel by “road

speed limits” of 55 miles per hour, too, well above the

25-mile-per-hour threshold.

Notably, all the statutory factors concern physical

characteristics of the vehicle. See id. §

7701(a)(48)(A)(ii), (iii). This is why Rockwater's

arguments about the trailers’ economic feasibility and

the short duration of the harvest season are

App. 18

unpersuasive. As the Court of Federal Claims

explained, the “words ‘substantially limited or

substantially impaired’ are [not] synonymous with

impaired efficiency of vehicle operation.” Fla. Power &

Light Co., 56 Fed. Cl. at 333-34 (rejecting the

argument that the utility vehicles’ designs, which

made them heavier, slower, and less fuel-efficient, did

not substantially limit or impair their use on public

highways). Moreover, Rockwater relies on evidence

about the type of cargo that its trailers are designed to

carry, instead of evidence that the trailers are

substantially less capable of traveling on public roads.

It argues that its trailers’ raised center of gravity

increases the rollover risk, but this is not dispositive.

Despite the increased rollover risk, which is not

unique to these trailers, the trailers remain capable of

safely operating by road speed limits and do not need

special markings or permits for highway travel.

Because Rockwater failed to establish that its trailers

were off-highway transportation vehicles, 26 U.S.C. §

7701(a)(48)(A)(i), that are exempt from taxation, id. §

4051(a)(1), the government was entitled to summary

judgment on the taxes and statutory interest.

IV. THE DISSENT

A. Excise Taxes

The dissent agrees Rockwater owes the excise taxes.

While the Court identifies two independent reasons

why, the dissent joins only the reason in Part III.A. As

App. 19

to the second reason in Part III.B, our dissenting

colleague argues there is a jury issue. But this ignores

that the parties’ cross-motions for summary judgment

agreed that no material facts were in dispute and, on

appeal, the parties did not argue that a jury question

exists on any issue. We properly decide the legal issues

that the parties identified and litigated.

B. Statutory Interest

The Code provides for mandatory statutory interest on

the taxes owed here. See 26 U.S.C. § 6601. Because

Rockwater owes taxes, it automatically owes interest.

Yet our dissenting colleague would have us rule that

Rockwater does not owe interest. This is a nonsensical

result that no one asks for. As set forth below,

Rockwater has never argued that it did not have to pay

interest on taxes owed by Rockwater.

Starting in the district court, the parties litigated over

whether Rockwater owed the excise taxes and

penalties. Even if it owed *1297 the taxes, Rockwater

argued that penalties are subject to a reasonable cause

defense. 3 However, Rockwater never argued that

reasonable cause would supply a defense to the

mandatory statutory interest.

The district court's summary judgment order held that

Rockwater did not owe the excise taxes. As a brief

alternative ruling, the district court concluded that

3 Failing to file a tax return at all incurs a penalty “unless it is

shown that such failure is due to reasonable cause and not willful

neglect.” 26 U.S.C. § 6651(a)

App. 20

even if Rockwater owed the taxes, it had reasonable

cause not to pay them initially and did not owe the

penalties.

That section of the order, entitled “Penalties,” cited

only the penalty statute and cases about reasonable

cause in the context of owing penalties. The order did

not cite the mandatory interest statute, or any interest

cases, or discuss interest at all. Yet in that Penalties

section the district court sua sponte and mistakenly

lumped interest in its reasonable cause ruling, even

though that exception applies solely to penalties.

Given the district court's sua sponte and elementary

mistake, the United States argued on appeal that the

district court's order “should not be interpreted to hold

that its ‘reasonable cause’ finding exempts Rockwater

from statutory interest” because the Code provides

that penalties are subject to a “reasonable cause”

exception, see Code § 6651(a)(1), but statutory interest

is not, see id. §§ 6601(a), 6621. Indeed, the government

succinctly cited the relevant law: “Compare I.R.C. §

6651(a) (penalty is subject to a reasonable cause

exception) with I.R.C. § 6621 (interest is not).” As the

government said at oral argument, “There's not much

more to say than that.” Given the instant context of

mandatory, statutory interest, the government's

argument did everything necessary to explain the

elementary legal error by the district court. Notably,

too, Rockwater does not claim the government

abandoned or failed to preserve the interest error on

appeal; only our dissenting colleague does.

App. 21

And importantly, Rockwater also has never claimed

that even if it owed the taxes, it did not owe interest.

At oral argument, the United States clarified that it

did not challenge the reasonable cause penalty ruling,

but it maintained that no reasonable cause defense

applies as to the mandatory statutory interest.

Rockwater did not dispute this either during oral

argument or in its response brief. The record before us

is clear that both parties have always understood that

Rockwater's liability for interest is automatic if it is

required to pay the excise taxes. That's the way the

tax law works.

What this means is that everyone but our dissenting

colleague recognizes that the mandatory, statutory

interest has and continues to rise and fall solely on the

issue of the excise taxes. And because we do not

represent one party or the other, we decline to litigate

an “issue” and affirm an alternative ruling that yields

an illogical result that no party has requested either

in the district court or on appeal.

V. CONCLUSION

We REVERSE the grant of summary judgment to

Rockwater, REMAND for entry of final judgment in

favor of the United States on Rockwater's complaint

as to the excise taxes and statutory interest, and

AFFIRM the finding that Rockwater is not required

to pay penalties.

App. 22

REVERSED IN PART AND AFFIRMED IN

PART.

Luck, Circuit Judge, concurring in part and dissenting

in part:

The district court granted summary judgment for

Rockwater, Inc. and ordered *1298 that the company

be refunded three separate pots of money: (1) excise

taxes that Rockwater paid to the government; (2)

interest that the government imposed for the delay in

paying the excise taxes; and (3) penalties the

government imposed for delaying payment on the

taxes. On appeal, the government raised only “one

issue” related to the first pot of money—the excise

taxes refund.

But the government did not argue that the district

court erred in ordering the refund for the second pot of

money—interest. The word interest did not appear in

the issue section of the government's initial brief. It

did not appear in the summary of the argument. And

it did not appear in the argument section. Not “plainly

and prominently,” as we require to preserve an issue

for appeal. See Sapuppo v. Allstate Floridian Ins. Co.,

739 F.3d 678, 681 (11th Cir. 2014) (quotation omitted).

Not at all in those sections of the initial brief. That

means the interest refund issue has been abandoned.

See United States v. Willis, 649 F.3d 1248, 1254 (11th

Cir. 2011) (“A party seeking to raise a claim or issue

on appeal must plainly and prominently so indicate....

Where a party fails to abide by this simple

requirement, he has waived his right to have the court

consider that argument.” (quotation, citation, and

brackets omitted)); Access Now, Inc. v. Sw. Airlines

App. 23

Co., 385 F.3d 1324, 1330 (11th Cir. 2004) (“Any issue

that an appellant wants [us] to address should be

specifically and clearly identified in the brief....

Otherwise, the issue—even if properly preserved at

trial—will be considered abandoned.”); Marek v.

Singletary, 62 F.3d 1295, 1298 n.2 (11th Cir. 1995)

(“Issues not clearly raised in the briefs are considered

abandoned.” (citation omitted)).

The government's only substantive reference to

interest was in a footnote in the statement-of-the-case

section of the initial brief. But the footnote was not

enough to preserve sufficiently for appeal the interest

refund issue. See Tallahassee Mem'l Reg'l Med. Ctr. v.

Bowen, 815 F.2d 1435, 1446 n.16 (11th Cir. 1987) (“In

this case, the single footnote in the Secretary's initial

brief did not sufficiently preserve the mootness

issue.”); see also Asociacion de Empleados del Area

Canalera v. Panama Canal Comm'n, 453 F.3d 1309,

1316 n.7 (11th Cir. 2006) (“[T]hat argument is waived

because it appears only in a footnote in their initial

brief and is unaccompanied by any argument.”

(citation omitted)); Greenbriar, Ltd. v. City of

Alabaster, 881 F.2d 1570, 1573 (11th Cir. 1989)

(“Although Greenbriar refers to the district court's

dismissal of its amendment in its Statement of the

Case in its initial brief, it elaborates no arguments on

the merits as to this issue in its initial or reply brief.

Accordingly, the issue is deemed waived.”). And if the

footnote wasn't enough to preserve the issue, then the

citations hidden at the end of the buried footnote in

the statement-of-the-case section of the brief certainly

were not enough either. Nobody points to any case

holding otherwise.

App. 24

Even if the lone reference in the statement-of-the-case

footnote was enough to preserve the interest refund

issue, the government did not argue that the district

court erred in ordering the interest refund. Instead,

sans citations, the two-sentence footnote said: “The

[district] court also held that to the extent Rockwater

was not liable for the tax, it was not liable for the

interest on the tax. The court should not be

interpreted to hold that its ‘reasonable cause’ finding

exempts Rockwater from statutory interest.”

But there is no other way to interpret the district

court's order. The district court found that “Rockwater

had reasonable cause for any delay in paying the tax.”

And then the district court applied that *1299 finding

to order the interest refund: “Because Rockwater does

not owe the tax, and alternatively because it otherwise

had reasonable cause for its delay in paying it, neither

penalties nor interest are appropriate.” The only way

to read what the district court wrote is that the

“reasonable cause” finding applied to Rockwater's

request for a penalty refund and an interest refund.

Because the government didn't raise the interest

refund issue, and because, even if it did, the

government is wrong in its statement-of-the-case

footnote, I would affirm that part of the district court's

order.

The majority opinion comes to a contrary conclusion

because, it says, Rockwater never argued or claimed

on appeal that it was due an interest refund. But this

turns the preservation rules on their head. Rockwater

is the appellee. It won the three specific pots of money

App. 25

in the district court, including a refund on the interest

it paid to the government because there was

reasonable cause for the delay in payment. Rockwater

had no obligation to challenge an issue it won below.

None. Besides, Rockwater did argue that the

government “did not address,” and therefore

“abandoned,” any argument that the district court

erred in finding reasonable cause. Not just me.

The only party with the obligation to raise on appeal

any errors with the district court's order was the

government as the appellant. If the government really

believed, as the majority opinion does, that the district

court erred in awarding interest based on the

reasonable cause finding, then it should have plainly

and prominently raised the issue on appeal, as every

other appellant is required to do. But not only did the

government fail plainly and prominently to raise the

interest refund issue, it failed even to mention the

word interest in the argument section of its brief. Not

one time, which means we must affirm.

That result is neither illogical nor nonsensical.

Instead, it flows naturally from an appellant's failure

to challenge a specific pot of money awarded by the

district court. Affirming is what we have done in

countless appeals where the appellant has not

sufficiently preserved an issue, and it is what we

would do in any other appeal where the appellant does

not plainly and prominently raise an issue. That is as

true for the government as it is for any other partyappellant.

****

App. 26

For the other pots of money—the refunds for the excise

taxes and the penalties—I concur in the judgment. As

the majority opinion explains, there were two

requirements that Rockwater had to meet to qualify

for the off-highway transportation vehicle exemption

to the excise tax. Rockwater had to show that: (1) its

peanut wagon “is specially designed for the primary

function of transporting a particular type of load other

than over the public highway”; and (2) because “of this

special design such vehicle's capability to transport a

load over the public highway is substantially limited

or impaired.” 26 U.S.C. § 7701(a)(48)(A)(i). In Part

III.A., the majority opinion elegantly and

comprehensively explains why there's no genuine

dispute that Rockwater did not meet the first

requirement. I happily join that part of the opinion.

We could have ended there because, as the majority

opinion explains, Rockwater's peanut wagon “must

satisfy both criteria to be exempt from taxation as ‘offhighway transportation vehicles.’ ” Because the

peanut wagon clearly didn't meet the first

requirement, the company was not exempt from the

excise tax. But the majority opinion, in Part III.B.,

then goes on to decide that there's no genuine dispute

that Rockwater *1300 did not meet the second

exemption requirement.

I wouldn't reach the second requirement because, to

me, whether there's a genuine dispute that the special

design of the peanut wagon substantially limited or

impaired the wagon's capability to transport a load

over the public highway is a harder call and an

unnecessary one. The majority opinion is right that

App. 27

the statutory factors weigh in the government's favor.

But the statutory factors are not exclusive, and other

factors weigh in favor of Rockwater.

Rockwater's peanut wagon, for example, had an allsteel design, oversized sand feet, an open top, a tophinged lift gate, and a perforated floor that is raised

eighteen inches higher than a normal trailer's floor.

The all-steel design and oversized sand feet increased

the peanut wagon's weight, which hindered its

capability to transport loads economically over the

public highways. The open top exposed the load to the

elements, the top-hinged lift gate disallowed

traditional loading and unloading, and the perforated

floor was far weaker than a normal one. Those

features made it difficult, if not impossible, to

transport anything other than peanuts. And the

raised floor raised the wagon's center of gravity, which

increased the rollover risk during transport.

With similar evidence, two of our sister circuits have

affirmed jury verdicts finding a substantial limitation

under the second requirement. See GLB Enters. v.

United States, 232 F.3d 965 (8th Cir. 2000); Flow Boy,

Inc. v. United States, No. 82-1823, 1984 WL 15513

(10th Cir. Jan. 20, 1984). In Flow Boy, for example, the

Tenth Circuit affirmed the jury's verdict finding that

the specialized cement trailers’ capability to transport

a load over public highways was substantially limited

because it was not economically efficient to operate the

loaded cement trailers on the public highway. See

1984 WL 15513, at **1–2. The Tenth Circuit explained

that the jury's finding was supported by credible

evidence showing that the cement trailers were too

App. 28

heavy to carry optimal loads over the public highway,

hindering the trailers’ economic efficiency. See id.

Similarly, in GLB Enterprises, the Eighth Circuit

affirmed a jury's verdict finding that the specialized

cotton trailers’ capability to transport a load over

public highways was substantially limited because it

was less safe to operate the loaded cotton trailers on

the public highway. See 232 F.3d at 967. There, the

cotton trailers’ special design features—that

significantly increased its weight (which impaired

braking) and changed its center of gravity (which

increased rollover risk)—made the trailers dangerous

enough that a special permit was necessary to operate

the trailers over public highways when loaded at a

certain capacity. Id. at 968. Even though the peanut

wagon here did not require a special permit to operate

over the public highways, its special design features,

which increased the wagon's weight and rollover risk,

raised similar economic and safety concerns as Flow

Boy’s cement trailers and GLB Enterprises’s cotton

trailers.

The majority opinion doesn't address some of these

contrary facts or the caselaw from our sister circuits

because, it says, “the parties’ cross-motions for

summary judgment agreed that no material facts were

in dispute and, on appeal, the parties did not argue

that a jury question exists on any issue.” But whether

the peanut wagon's special design substantially

limited or impaired its capability to transport a load

over the public highway was very much in dispute, as

it was in Flow Boy and GLB Enterprises. Indeed, the

dispute takes up an entire section of the government's

App. 29

initial brief. In any event, the majority *1301 opinion

misses the point. We should not go out of our way to

reach an alternative ground (whether it's a judge

question or jury question) where there's some doubt

whether we're right. Better to decide only one ground

where we're clearly right than to stretch to decide a

second unnecessary alternative ground where we're

not.

Because the majority opinion is so clearly right about

the first exemption requirement in Part III.A., I would

resolve the excise tax refund issue on that ground

without getting into the more complicated conflicting

evidence on the second exemption requirement.

All Citations

121 F.4th 1287, 134 A.F.T.R.2d 2024-6113, 30 Fla. L.

Weekly Fed. C 1660

App. 30

Appendix B

2023 WL 2868931

United States District Court, M.D. Georgia,

Columbus Division.

ROCKWATER, INC. d/b/a Peerless Manufacturing

Company, Plaintiff,

v.

UNITED STATES of America, Defendant.

CASE NO. 4:21-CV-125 (CDL)

|

Signed April 10, 2023

Attorneys and Law Firms

Jasen D. Hanson, I, David DeCoursey Aughtry,

Atlanta, GA, for Plaintiff.

Margaret Elizabeth Sheer, Jikky

Washington, DC, for Defendant.

Thankachan,

ORDER

CLAY D. LAND, UNITED STATES DISTRICT

COURT JUDGE

*1 This tax refund action presents the issue of whether

peanut drying semitrailers (“drying trailers”)

designed and sold by Plaintiff Rockwater, Inc.

App. 31

(“Rockwater”) are subject to the 12% federal excise tax

applicable to heavy trucks and trailers sold at retail.

Rockwater argues that its drying trailers are specially

designed for the primary function of transporting

peanuts for drying purposes in a manner other than

over the public highway and that this special design

substantially limits or impairs the drying trailers’

capability to transport the peanuts over the public

highway. Accordingly, it maintains that these drying

trailers are not subject to the excise tax. The

Government responds that the drying trailers are

designed for use on the public highway and that the

design does not substantially limit or impair such use;

thus they are subject to the tax.

Pending before the Court are the parties’ crossmotions for summary judgment. As discussed in the

remainder of this Order, the Court finds as a matter

of law that the drying trailers are specially designed

for the primary function of transporting peanuts for

drying purposes in a manner other than over the

public highway and that the special design

substantially limits or impairs the drying trailers’

capability to transport the peanuts over the public

highway. Therefore, they are not subject to the excise

tax. Consistent with this holding, the Court further

finds that Rockwater had a good faith basis for

contesting the tax and delaying payment;

consequently, it is not liable for penalties and interest.

Accordingly, Rockwater's motion for summary

judgment (ECF No. 15) is granted and the

Government's motion (ECF No. 16) is denied.

App. 32

SUMMARY JUDGMENT STANDARD

Summary judgment may be granted only “if the

movant shows that there is no genuine dispute as to

any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a). In

determining whether a genuine dispute of material

fact exists to defeat a motion for summary judgment,

the evidence is viewed in the light most favorable to

the party opposing summary judgment, drawing all

justifiable inferences in the opposing party's favor.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255

(1986). A fact is material if it is relevant or necessary

to the outcome of the suit. Id. at 248. A factual dispute

is genuine if the evidence would allow a reasonable

jury to return a verdict for the nonmoving party. Id.

FACTUAL BACKGROUND

I. The Peanut Harvesting Process and

Rockwater's Role in It

Many of the material facts in this action are

undisputed. Almost half of all peanuts produced in the

United States are harvested in Georgia between

September and early November. During this eight to

ten week harvesting season, peanuts must be properly

dried, or their quality and price may decline

substantially. The drying process begins when the

farmer digs up the peanut plants from the ground

using a combine and thereby exposes the peanuts to

sunlight for one to two days. Next, the farmer loads

them on specialized equipment—here, Rockwater's

App. 33

drying trailers—for transport offsite for further

drying. The drying trailers are primarily designed to

facilitate the drying of the peanuts, but they also

accommodate the transporting of the peanuts short

distances from the field to the site where the drying

process is completed.

*2 Typically, the loaded drying trailers travel

approximately twenty miles from the field to the

drying site. On average, two-thirds of the trip is made

on a public highway. The drying trailers are designed

to be hooked up directly to a dryer at the drying site

so that the peanuts can be dried for an additional

twenty-one to twenty-four hours. The design of the

drying trailers allows them to then be loaded onto a

specialized dock that is raised at an angle to allow the

peanuts to fall by gravity out of a top-hinged door at

the back of the drying trailers. The peanuts are then

unloaded into warehouse containers and transported

to shellers, processors, and end users in a traditional

cargo-hauling semitrailer. The empty drying trailer

travels back to the field and the process repeats until

the end of peanut harvesting season. After harvesting

season ends, the drying trailers sit idle for the next

forty-two to forty-four weeks. The drying trailers

spend approximately 3% of the harvest season and 1%

of their lives on the public road.

II. The Special Design of Rockwater's

Semitrailers

Rockwater designed its drying trailers to facilitate the

peanut drying process. They consist of a drying box

welded to a chassis. The drying trailers all have drying

App. 34

boxes that are 8 feet tall. Further, Rockwater built

each drying trailer with either a 45-foot or 48-foot

chassis repurposed from a used Department of

Transportation-ready chassis. Dykes Dep. 30:19–21,

ECF No. 15-5; Def.’s Mot. Summ. J. Ex. E, Chart, ECF

No. 16-7 (rows 4, 5, and 6). Each drying trailer has a

gross vehicle weight rating of 61,900 pounds.

Rockwater's drying trailers are different from

traditional semitrailers that are designed to haul

cargo. First, unlike traditional semitrailers—usually

made of wood and aluminum—Rockwater's drying

trailers are made of steel. The steel prevents moisture

from sticking to the peanuts, but adds substantial

weight to the drying trailers, thus impairing their use

as a cargo trailer on public highways. Second, unlike

traditional semitrailers, Rockwater's drying trailers

have an open top. The open top permits the toploading of peanuts into the drying box in the field and

allows moisture to escape while the peanuts dry.

Rockwater's drying trailers also have a special design

feature that includes a top-hinged door at the back

that can only be opened by raising the drying trailer

at an angle. To support the enlarged drying box and

provide greater stability in the field, Rockwater

designs each drying trailer with a modified chassis

from a traditional semitrailer to include oversized

sand feet, an I-beam, and steel horizontal braces.

These chassis modifications, which add substantial

weight to the trailer, would never be feasible for

semitrailers designed for regular public highway use.

Another special design feature provides for a custom

drying box with a 40% perforated floor on which the

peanut load rests and through which air flows to dry

App. 35

the peanuts. Under the perforated floor, an 18-inch

plenum, or chamber, runs the length of the bottom of

the box. That plenum raises the drying box's center of

gravity, which increases the risk of rollover at higher

speeds. At the end of the plenum is a vent to which the

dryer attaches and into which the dryer pumps hot air

to continue the drying process. Knowing that the

nature of peanut harvesting will typically require the

peanuts to be transported on a public road for short

distances from the field to a drying site, Rockwater

designs its drying trailers to comply with applicable

highway regulations.

III. The Tax Refund Action

In the second quarter of 2017, Rockwater sold three

peanut drying trailers—each extending to 8 feet in

heighth and built on a used chassis stretching either

45 feet or 48 feet in length. Rockwater did not pay the

excise tax on any of those drying trailers in 2017 or

report the sales to the IRS. After an audit, the IRS

determined that the heavy highway vehicle excise tax

applied to the drying trailers and assessed $29,880 in

excise taxes against Rockwater for the second quarter

of 2017 as well as failure to file penalties. Rockwater

paid the IRS $37,031.76 in excise taxes, penalties, and

interest. Rockwater subsequently filed a claim for

refund with the IRS followed by this present

complaint.

App. 36

DISCUSSION

I. “Special Rule” for Off-Highway

Transportation Vehicles

*3 The Internal Revenue Code (the “Code”) imposes a

12% excise tax on the first retail sale of heavy (i.e.,

exceeding 26,000 pounds) “truck trailer and

semitrailer chassis and bodies.” 26 U.S.C. § 4051(a)(1),

(3). Congress did not define “truck trailer and

semitrailer chassis” or “truck trailer and semitrailer

bodies.” Instead, it left it to the IRS to do so through

Treasury regulations. Id. § 7805(a); id. § 4051. This

regulatory process has created confusion over the

years with the repeal and revision of the applicable

regulations. The courts have sometimes added to the

confusion as they attempted to ascertain the

applicable language which they struggled to interpret

in light of regulatory guidance and often conflicting

case law. In an attempt to make sense of the mess, the

Court begins with the statute enacted by Congress

followed by a discussion of the applicable regulations.

The plain language of the statute, when read in

isolation, provides that any trailer chassis or body

weighing over 26,000 pounds that is sold for the first

time at retail shall be subject to a 12% federal excise

tax. Id. § 4051(a)(1), (3). Congress authorized the IRS

to put meat on the bones of this bare statute through

the promulgation of Treasury Regulations. Id. §

7805(a); id. § 4051. Those regulations establish a

“special rule” applicable to trailer chassis and bodies.

According to the regulations, chassis and bodies are

taxable “only if such chassis or body is sold for use as

App. 37

a component part of a highway vehicle.” Treas. Reg. §

145.4051-1(a)(2) (as amended in 2000). Thus, chassis

and bodies that are not component parts of a “highway

vehicle” are not subject to the excise tax. The next

question is what is a “highway vehicle” for purposes of

this regulatory scheme. That question can be

answered by examining Congress's clarification of

what a “highway vehicle” is not. See 26 U.S.C. §

7701(a)(48). Some courts, when interpreting §

7701(a)(48)(A)’s past iterations as a regulation, refer

to this definitional narrowing of the term as an

“exemption” or “exception.” The applicable statutory

language is as follows:

(48) Off-highway vehicles.-(A) Off-highway transportation vehicles.-(i) In general.--A vehicle shall not be treated as a

highway vehicle if such vehicle is specially designed

for the primary function of transporting a particular

type of load other than over the public highway and

because of this special design such vehicle's

capability to transport a load over the public

highway is substantially limited or impaired.

(ii) Determination of vehicle's design.--For purposes

of clause (i), a vehicle's design is determined solely

on the basis of its physical characteristics.

(iii) Determination of substantial limitation or

impairment.--For purposes of clause (i), in

determining whether substantial limitation or

impairment exists, account may be taken of factors

such as the size of the vehicle, whether such vehicle

App. 38

is subject to the licensing, safety, and other

requirements applicable to highway vehicles, and

whether such vehicle can transport a load at a

sustained speed of at least 25 miles per hour. It is

immaterial that a vehicle can transport a greater

load off the public highway than such vehicle is

permitted to transport over the public highway.

Id. § 7701(a)(48)(A)(i)–(iii).

Based on the foregoing, the Rockwater drying trailers

are not subject to the excise tax if (1) the drying

trailers were specially designed, as determined solely

on the basis of their physical characteristics, for the

primary function of transporting peanuts other than

over the public highway; and (2) because of this special

design the drying trailers capability to transport a

load of peanuts over the public highway is

substantially limited or impaired. The undisputed

evidence is clear that the drying trailers were specially

designed to transport peanuts for drying purposes in

a manner other than over the public highways. While

the drying trailers could certainly function at a

minimum capacity on the public highway, the special

design features are focused primarily on allowing the

vehicle to operate efficiently and effectively to

accomplish the drying of the peanuts. Almost none of

the special design features reflect a primary purpose

of hauling peanuts as cargo on the public highway.

The modifications to the chassis, with the

accompanying extra weight, are focused on the drying

function. The special design features allow for the

vehicle to maneuver in the fields, on the private roads,

and at the stationary drying sites in a manner that

App. 39

achieves its primary purpose—effective and efficient

drying of peanuts. The Court finds that no reasonable

juror could conclude otherwise, and therefore, this

prong of the “special rule” has been satisfied as a

matter of law.

*4 Rockwater also makes a convincing argument that

this special design substantially limits or impairs the

drying trailers’ capability to transport a load over the

public highway. The added weight reduces the

economic feasibility of using the vehicle on the

highway. And the nature of the modifications that

raise the center of gravity affects the vehicle's safety

on the public roadway. Although the drying trailers

require no special permits, the limitations

substantially limit its transporting capabilities on the

public roadway. In essence, the design allows the

vehicle to meet minimum highway standards while

focusing on the drying function of the trailer. The fact

that these drying trailers are only used eight to ten

weeks out of the year and, even during their periods of

heaviest use, sit stationary for over 90% of the time,

confirms this common-sense conclusion. The Court

acknowledges that some evidence exists to the

contrary. For example, the drying trailers can

maintain a sustained speed in excess of 25 miles per

hour, satisfy regulatory height and weight

requirements, and are not subject to special licensing

or safety requirements. See id. § 7701(a)(48)(A)(iii).

But the fact that the vehicle can operate safely and

legally on the highway is not dispositive. The statute

recognizes that other factors may be considered. See

id. (“account may be taken of factors such as”

(emphasis added)). The question is whether the

App. 40

special design substantially impairs or limits the

vehicle's capability to transport a load over the public

highway. “Substantially” means to a “considerable,”

“significant,” or noticeable degree. Substantially,

Merriam-Webster

Dictionary

Online,

https://www.merriamwebster.com/dictionary/substantially; see Substantial,

Black's Law Dictionary (11th ed. 2019). “Impair”

means to make less effective, Impair, MerriamWebster Dictionary Online, https://www.merriamwebster.com/dictionary/impair, and “limit” means to

restrict, encumber, or constrain, Limit, MerriamWebster Dictionary Online, https://www.merriamwebster.com/dictionary/limit. Clearly, the drying

trailer design restricts or encumbers or makes less

effective to a considerable or noticeable degree the

drying trailer's capability to transport a load over the

public highway. Because the undisputed facts upon

which this conclusion is based lead only to this one

reasonable conclusion, Rockwater has satisfied this

second prong of the “special rule” as a matter of law.

Having found that both prongs of the “special rule”

have been satisfied, Rockwater's motion for summary

judgment is granted.1

1 The

Court has not located any binding precedent on these

issues. The closest Eleventh Circuit precedent it found is

consistent with today's ruling but admittedly involved the

interpretation of slightly different regulatory language. See Big

Three Indus. Gas & Equip. Co. v. United States, 329 F. Supp.

1273 (S.D. Tex. 1971), aff'd, 459 F.2d 1042 (5th Cir. 1972) (per

curiam).

App. 41

II. The Mobile Machinery Exemption

Rockwater also argues that its drying trailers meet

the mobile machinery exemption to the excise tax. 26

U.S.C. § 4053(8). In light of the Court's ruling that

Rockwater is entitled to summary judgment under the

special “off highway vehicle rule,” it is not necessary

for the Court to address this alternative argument.

But for the sake of completeness and to avoid an

unnecessary remand should the Court of Appeals

disagree with the Court's previous rulings, the Court

finds it appropriate to do so. The mobile machinery

exemption is available for certain vehicles which have

as their sole function carrying machinery or

equipment and which could not transport any other

load “without substantial structural modification.” Id.

As the Court explained previously, the drying trailers’

design accommodates the transport of peanuts to

carry out the drying process. Their sole function is not

to carry machinery or equipment; nor are they unable

to transport loads other than machinery or equipment.

Accordingly, Rockwater's drying trailers would not be

exempt under the mobile machinery exemption.

III. Penalties

As noted previously, the IRS imposed penalties and

interest based upon Rockwater's delay in paying the

disputed tax. To avoid a penalty due to a delay in

filing, the Code requires taxpayers to show (1)

reasonable cause for the delay and (2) that the delay

did not result from willful neglect.2 Id. § 6651(a). As

2 The Government does not contend that Rockwater's delay in

filing the excise tax was the product of willful neglect.

App. 42

the Court has explained, Rockwater certainly had

reasonable cause for the delay. It had a good faith

basis for believing that it did not owe the tax. The

Court's findings in today's Order vindicate

Rockwater's delay in paying the tax and establish as a

matter of law that the penalties and interest are not

owed. Even if it were determined that Rockwater owed

the tax, it still had reasonable cause not to pay it

initially. The evidence is undisputed that its belief

that it did not owe the tax was supported by advice

from tax professionals. Good faith reliance on

professional tax advice may constitute reasonable

cause in some circumstances. United States v. Boyle,

469 U.S. 241, 250-51 (1985). The record establishes

that Rockwater made substantial efforts to get

competent advice from qualified tax professionals to

assess its potential tax liability for the drying trailers

on

multiple

occasions.

See

Gustashaw

v.

Commissioner, 696 F.3d 1124, 1139 (11th Cir. 2012)

(stating, in the context of a different penalty provision,

“The most important factor ... is the ‘extent of the

taxpayer's effort to assess [its] proper tax liability.”

(quoting Treas. Reg. § 1.6664-4(b)(1))). The advice that

Rockwater received, which came from its longstanding

accounting firm after detailed discussions about the

drying trailers, was both factually particularized and

legally informed. Stovall v. Commissioner, 762 F.2d

891, 895 (11th Cir. 1985) (explaining that a tax

professional's advice must be informed for a taxpayer

to reasonably rely on it). Under these circumstances,

Rockwater had reasonable cause for any delay in

paying the tax. Because Rockwater does not owe the

tax, and alternatively because it otherwise had

reasonable cause for its delay in paying it, neither

App. 43

penalties nor interest are appropriate. Accordingly,

summary judgment is granted in favor of Rockwater

on this issue.

CONCLUSION

*5 For the foregoing reasons, Rockwater's motion for

summary judgment (ECF No. 15) is granted, and the

Government's motion (ECF No. 16) is denied.

Judgment shall be entered in favor of Rockwater in

the amount of $37,031.76.3

IT IS SO ORDERED, this 10th day of April, 2023.

All Citations

Not Reported in Fed. Supp., 2023 WL 2868931, 131

A.F.T.R.2d 2023-1345

3 The only remaining issue is Plaintiff's claim for attorneys’ fees.

Because the current record is adequate for making a

determination of this issue and additional briefing is unnecessary

to assist the Court, the Court finds it appropriate to decide this

issue in this Order. Although the Court found the Government's

arguments in support of its imposition of the tax unpersuasive,

they are not substantially unjustified. 26 U.S.C. § 7430(c)(4)(B).

Decisions by the Courts of Appeals support this conclusion. Id. §

7430(c)(4)(B)(iii). Therefore, Rockwater is not entitled to recover

its attorneys’ fees.

App. 44

Appendix C

26 U.S.C.A. § 4051, I.R.C. § 4051

§ 4051. Imposition of tax on heavy trucks and

trailers sold at retail

(a) Imposition of tax.-(1) In general.--There is hereby imposed on the

first retail sale of the following articles (including

in each case parts or accessories sold on or in

connection therewith or with the sale thereof) a tax

of 12 percent of the amount for which the article is

so sold:

(A) Automobile truck chassis.

(B) Automobile truck bodies.

(C) Truck trailer and semitrailer chassis.

(D) Truck trailer and semitrailer bodies.

(E) Tractors of the kind chiefly used for highway

transportation in combination with a trailer or

semitrailer.

(2) Exclusion for trucks weighing 33,000

pounds or less.--The tax imposed by paragraph

(1) shall not apply to automobile truck chassis and

automobile truck bodies, suitable for use with a

vehicle which has a gross vehicle weight of 33,000

App. 45

pounds or less (as determined under regulations

prescribed by the Secretary).

(3) Exclusion for trailers weighing 26,000

pounds or less.--The tax imposed by paragraph

(1) shall not apply to truck trailer and semitrailer

chassis and bodies, suitable for use with a trailer or

semitrailer which has a gross vehicle weight of

26,000 pounds or less (as determined under

regulations prescribed by the Secretary).

(4) Exclusion for tractors weighing 19,500

pounds or less.--The tax imposed by paragraph

(1) shall not apply to tractors of the kind chiefly

used for highway transportation in combination

with a trailer or semitrailer if-(A) such tractor has a gross vehicle weight of

19,500 pounds or less (as determined by the

Secretary), and

(B) such tractor, in combination with a trailer or

semitrailer, has a gross combined weight of

33,000 pounds or less (as determined by the

Secretary).

(5) Sale of trucks, etc., treated as sale of

chassis and body.--For purposes of this

subsection, a sale of an automobile truck or truck

trailer or semitrailer shall be considered to be a

sale of a chassis and of a body described in

paragraph (1).

App. 46

26 U.S.C.A. § 7701(a)(48)(A). Definitions

(a) When used in this title, where not otherwise

distinctly expressed or manifestly incompatible with

the intent thereof-(48) Off-highway vehicles.-(A) Off-highway transportation vehicles.-(i) In general.--A vehicle shall not be treated

as a highway vehicle if such vehicle is specially

designed for the primary function of

transporting a particular type of load other

than over the public highway and because of

this special design such vehicle's capability to

transport a load over the public highway is

substantially limited or impaired.

(ii) Determination of vehicle's design.--For

purposes of clause (i), a vehicle's design is

determined solely on the basis of its physical

characteristics.

(iii)

Determination

of

substantial

limitation or impairment.--For purposes of

clause (i), in determining whether substantial

limitation or impairment exists, account may be

taken of factors such as the size of the vehicle,

whether such vehicle is subject to the licensing,

safety, and other requirements applicable to

highway vehicles, and whether such vehicle can

transport a load at a sustained speed of at least

25 miles per hour. It is immaterial that a

App. 47

vehicle can transport a greater load off the

public highway than such vehicle is permitted

to transport over the public highway.

App. 48

26 C.F.R. § 48.4061(a)–1(d) Imposition of tax;

exclusion for light-duty trucks, etc.

(d) Highway vehicle—(1) Definition. For

purposes of this subchapter, the term “highway

vehicle” means any self-propelled vehicle, or any

trailer or semitrailer, designed to perform a function

of transporting a load over public highways, whether

or not also designed to perform other functions, but

does not include a vehicle described in paragraph

(d)(2) of this section. For purposes of this definition, a

vehicle consists of a chassis, or a chassis and a body if

the vehicle has a body, but does not include the

vehicle's load. Therefore, in determining whether a

vehicle is a “highway vehicle”, it is immaterial that

the vehicle is designed to perform a highway

transportation function for only a particular kind of

load, such as passengers, furnishings and personal

effects (as in a house, office, or utility trailer), a

special type of cargo, goods, supplies, or materials, or,

except to the extent otherwise provided in paragraph

(d)(2)(i) of this section, machinery or equipment

specially designed to perform some off-highway task

unrelated to highway transportation. In the case of

specially designed machinery or equipment, it is also

immaterial, except as provided in paragraph (d)(2)(i)

of this section, that such machinery or equipment is

permanently mounted on the vehicle. For purposes of

paragraph (d) of this section, the term “transport”

includes the term “tow”, and the term “public

highway” includes any road (whether a Federal

highway, State highway, city street, or otherwise) in

the United States which is not a private roadway. A

App. 49

vehicle which is not a highway vehicle within the

meaning of this paragraph shall be treated as a

nonhighway vehicle for purposes of this subchapter.

Examples of vehicles that are designed to perform a

function of transporting a load over the public

highways are passenger automobiles, motorcycles,

buses, and highway-type trucks, truck tractors,

trailers, and semi-trailers.

(2)

Exceptions—(i)

Certain

specially

designed

mobile

machinery

for

nontransportation functions. A self-propelled

vehicle, or trailer or semi-trailer, is not a highway

vehicle if it (A) consists of a chassis to which

there has been permanently mounted (by

welding, bolting, riveting, or other means)

machinery or equipment to perform a

construction, manufacturing, processing, farming,

mining, drilling, timbering, or operation similar

to any one of the foregoing enumerated

operations if the operation of the machinery or

equipment or equipment is unrelated to

transportation on or off the public highways, (B)

the chassis has been specially designed to serve

only as a mobile carriage and mount (and a power

source, where applicable) for the particular

machinery or equipment involved, whether or not

such machinery or equipment is in operation, and

(C) by reason of such special design, such chassis

could not, without substantial structural

modification, be used as a component of a vehicle

designed to perform a function of transporting

any load other than that particular machinery or

App. 50

equipment or similar machinery or equipment

requiring such a specially designed chassis.

(ii) Certain vehicles specially designed for

offhighway transportation. A self-propelled

vehicle, or a trailer or semitrailer, is not a

highway vehicle if it is (A) specially designed for

the primary function of transporting a particular

type of load other than over the public highway in

connection with a construction, manufacturing,

processing, farming, mining, drilling, timbering,

or operation similar to any one of the foregoing

enumerated operations, and (B) if by reason of

such special design, the use of such vehicle to

transport such load over the public highways is

substantially limited or substantially impaired.

For purposes of applying the rule of (B) of this

subdivision, account may be taken of whether the

vehicle may travel at regular highway speeds,

requires a special permit for highway use, is

overweight, overheight or overwidth for regular

use, and any other relevant considerations. Solely

for purposes of determinations under this

paragraph (d)(2)(ii), where there is affixed to the

vehicle equipment used for loading, unloading,

storing,

vending,

handling,

processing,

preserving, or otherwise caring for a load

transported by the vehicle over the public

highways, the functions are related to the

transportation of a load over the public highways

even though such functions may be performed off

the public highways.

(iii) Certain trailers and semi-trailers

specially

designed

to

perform

non-

App. 51

transportation functions off the public

highways. A trailer or semi-trailer is not a

highway vehicle if it is specially designed to serve

no purpose other than providing an enclosed

stationary shelter for the carrying on of a

function which is directly connected with and

necessary to, and at the off-highway site of, a

construction, manufacturing, processing, mining,

drilling, farming, timbering, or operation similar

to any one of the foregoing enumerated

operations such as a trailer specially designed to

serve as an office for such an operation.

(3) Optional application. For purposes of this

subchapter, if any rules existing immediately

prior to January 13, 1977 would, if applicable,

unequivocally resolve an issue involving the

definition of a highway vehicle with respect to a

period prior to such date, at the option of the

taxpayer, such rules existing prior to such date

shall be applied to resolve the issue for all periods

prior to such date, and the rules of paragraphs

(d)(1) and (2) of this section, which define the

term “highway vehicle”, shall not apply with

respect to such issue for all periods prior to such

date.

(4) Highway vehicles not subject to section

4061 tax. Although for purposes of this

paragraph (d) passenger automobiles, automobile

trailers

and

semitrailers,

motor

homes,

motorcycles, light-duty trucks, etc., will be

considered to be highway vehicles because they

are designed to perform a function of transporting

a load over public highways, the tax imposed

App. 52

under section 4061(a) does not apply to the sale of

such vehicles because they either are not articles

subject to tax under such section or are excluded

from tax under section 4061(a)(2). See also

paragraphs (a)(4) and (f) of this section. Despite

the fact that passenger automobiles, passenger

automobile trailers and semi-trailers, motor

homes, motorcycles, light-duty trucks, etc., are

not subject to the manufacturers excise tax on

highway vehicles imposed by section 4061(a), the

fact that they are nevertheless considered

highway vehicles for purposes of this subchapter

can be of material significance in determining the

applicability of such excise taxes as the tax

imposed by section 4041 (relating to diesel and

special motor fuels), the tax imposed by section

4071(a)(1) (relating to tires of the type used on

highway vehicles), or the tax imposed by section

4481 (relating to highway use tax on highway

motor vehicles). In addition, the definition of the

term “highway vehicle” is material in

determining the credits or refunds provided by

section 6416(b)(2)(I) (relating to diesel fuel used

in certain highway vehicles), section 6421(a)

(relating to gasoline used for a nonhighway

purpose), section 6424 (relating to lubricating oil

used otherwise than in a highway motor vehicle),

and section 6427(a) (relating to diesel or special

motor fuel not used for a taxable purpose).