HIGHWAY USE TAX DOES NOT APPLY TO BRITISH COLUMBIA-REGISTERED TRUCKS WITH PRORATED LICENSES UNDER UNIFORM REGISTRATION AND RECIPROCITY AGREEMENT

Rev. Rul. 86-62

Section 41.4481-1(a)(2) of the Highway Use Tax Regulations, as amended by T.D. 8027, 1985-26 I.R.B. 6, concerns any highway motor vehicle that is issued a base plate by a Canadian province under the International Registration Plan (IRP) or similar agreement and has a proportional registration under such agreement to satisfy the registration laws of any of the United States. The section provides that for taxable periods beginning after June 30, 1985, these vehicles are exempt from the tax imposed by section 4481(a) of the Internal Revenue Code.

Rev. Rul. 81-86, 1981-1 C.B. 504, holds, effective July 1, 1981, that the highway use tax imposed by section 4481(a) of the Code applies to certain trucks. The trucks involved are those that are registered (base plated) in the Canadian province of British Columbia and that have "prorate licenses" under the Uniform Vehicle Registration Proration and Reciprocity Agreement (U.V.R.P.R.A.). A prorate license is a special license that, under the U.V.R.P.R.A., allows certain commercial fleet interstate vehicles to satisfy the registration laws of certain U.S. states.

The U.V.R.P.R.A. is a reciprocal agreement similar to the IRP, and its prorate licensing constitutes a proportional registration in satisfaction of state laws. Thus, under section 41.4481-1(a)(2) of the regulations, effective July 1, 1985, a Canadian trust that is registered in British Columbia and has a prorate license under the U.V.R.P.R.A. is not subject to the highway use tax imposed by section 4481(a) of the Code.

Rev. Rul. 81-86 is therefore revoked, effective for taxable periods beginning after June 30, 1985.

In Little Audrey's Transportation Co. v. United States, 369 F.Supp 329 (D. Neb. 1974), aff'd mem., 508 F.2d 846 (8th Cir. 1974), the court held that, under a reciprocal proration agreement similar to the U.V.R.P.R.A., prorate licensing did not constitute registration. Rev. Rul. 81-86 stated that the Internal Revenue Service would no longer follow the holding. Although Rev. Rul. 81-86 is now revoked, the Service will continue to not follow that holding.