A Houston-based trucking wholesaler and retailer is responsible for $1.93 million in excise taxes for tires it bought from Chinese manufacturers in order to resell them in the U.S., the U.S. Court of Appeals for the 5th Circuit ruled.
The 5th Circuit’s opinion Monday reversed a district court ruling in September that Texas Truck Parts & Tire Inc. wasn’t responsible for the excise taxes on the tires it purchased because customs forms showed that the Chinese companies imported the tires, according to court records.
“When a party orders taxable articles to be shipped to the United States for resale and is otherwise uninvolved in the importation process, is that party the importer? We hold that they are when they derive almost all of the benefits of the importation,” the 5th Circuit wrote in its decision. “While we agree with the district court that Texas Truck did not ‘bring’ the tires to the United States as the term is used in the applicable Treasury regulation, we find that it erred by failing to consider whether Texas Truck was the beneficial owner under the regulation. We further hold that Texas Truck was, in fact, the beneficial owner, and therefore liable for the excise tax.”
Texas Truck Parts & Tires Inc. sells tractor-trailers as well as parts and tires for the trucking industry.
From 2012 to 2017, Texas Truck Parts & Tires purchased tires from Omni United PTE Ltd.; Shandong Homerun Tires Co. Ltd.; Maxon International Co. Ltd; Weifang Haichuan Imp & Exp; and Qingdao Lai Jie Rubber Trade, according to court records.
Texas Truck Parts & Tires Inc. believed the Chinese companies were the importers responsible for the excise taxes, which are duties imposed on certain goods, services and activities that can be paid by importers, manufacturers, retailers and consumers, according to the IRS.
Texas Truck Parts & Tires did not respond to a request for comment.
The company did not file quarterly excise tax returns or pay most of the excise taxes on the tires it purchased from 2012 to 2017 from the Chinese manufacturers.
Following an IRS audit, the company was assessed approximately $1.93 million in taxes.
Texas Truck Parts & Tire paid $252,100 toward its $1.93 million excise tax balance to the IRS. In 2021, the company sued the federal government for a refund to challenge its liability. The company said each Chinese tire manufacturer it purchased the tires from had a Houston-based sales agent.
Tax consulting firm RSM US said the court’s decision could introduce “stricter guidelines for U.S. businesses importing tires or other taxable goods from foreign suppliers, reinforcing the importance of identifying the true ‘importer’ for excise tax purposes.”