[Author: Mark Othmer, Nebraska Field Director, 2016 | Keywords: Sales Tax, Header Trailers]
I’ve had lengthy discussions with a number of dealers over the last several months about header trailers and whether you should collect sales tax at the time of sale or fill out a Form 6 and send the customer to the local county courthouse to get a title, registration and license (while having the local county authorities decide the sales tax issue). It is safe for me to say that not every county assessor and treasurer will come to the same conclusion on this issue, making it a regulatory nightmare. I-NEDA continues to work toward a resolution for this issue. However, it won’t be quick or easy.
In the meantime, you as a business owner must decide how you want to proceed with header trailers and what risks you are willing to take. I recommend taking no risk, which means collecting sales tax from the customer at the time of purchase and remitting the collected tax in the normal procedure. This is the only way your dealership remains 100% risk free as far as the Nebraska Department of Revenue is concerned. However, you still run the risk of how your customer views your dealership’s procedures.
There may be times when a customer will threaten to “take his business elsewhere” due to your policy of collecting the sales tax on header trailer sales. When encountering this situation, I encourage you to explain to the customer that it is not your decision. The Nebraska Department of Revenue has made the determination for you and this is the only action you can take without placing your dealership at risk. At the same time, I would furnish your customer with Form 7 – Claim for Refund of Sales and Use Tax (found at revenue.nebraska.gov) and offer to help them fill it out. Encourage them to send it to the Nebraska Department of Revenue so the taxability issue can be handled directly between the customer and the Department. If you choose this path, it should pacify the customer and keep your dealership risk-free.
Some dealers have chosen the path of becoming a licensed trailer dealer. In this case, when a dealer sells a header trailer he fills out a Form 6 (found at revenue.nebraska.gov), gives it to the purchaser and advises them to go to their county courthouse to title, register and license the trailer. The sales tax on the trailer is determined at the courthouse, where the customer pays the sales tax along with the other fees required to obtain a title, registration and license.
There are issues with choosing this path. First, there are some minor fees and regulations a dealer must follow to become a licensed trailer dealer. Dealers who have gone this route have said that while it seems like a lot of work at first, once they started the process it wasn’t as bad as first thought. The next thing dealers may encounter is that the trailer they are selling does not come with a Manufacturer Statement of Origin (MSO), which is the first thing the county courthouse requests when attempting to title a trailer. Trailers like this should be titled as “homemade” trailers but once again, each county may be different. In addition, some counties will say a trailer cannot be licensed if it doesn’t have a 17-digit vehicle identification number (VIN). Generally a MSO and VIN go hand-in-hand, meaning if the manufacturer supplies a MSO it usually has a VIN. Notice I used the words “generally” and “usually.” By no means does this mean always. Once again, this only adds to the confusion.
Last but not least, I recently heard from a dealer who was told that trailers under the 10,000 lb. weight classification (GVWR) do not require licensing, rolling the discussion all the way back to the original question of taxability. My understanding is that the taxability question is why the ag sales tax exemption would not apply. The confusion has now gone full circle.
What to do, what to do?
If the Nebraska Department of Revenue would provide the industry with a set of concrete rules and regulations and make sure these rules and regulations are followed in all counties, I am confident that I-NEDA members would gladly follow them. Dealers just want to know the rules and that they apply to everyone who sells the product. If we could get to this point I think everyone would be happy. Well most everyone, since you can’t please 100% of the people 100% of the time.