Confusion surrounds both the gas guzzler penalty and the luxury tax which have been in effect since the first of the year. First, the luxury tax does not apply to a limousine purchased for commercial use. If you are buying a limousine for personal use, expect to pay a luxury tax of 10 percent on the amount of the purchase price above $30,000.
Since the first of the year, however, both commercial and private limousines are subject to a gas guzzler penalty. Here is my understanding of a few key points (thanks to Jerry Loftus of LIMO and Jeffrey Berger of Shawn, Berger & Mann in Washington, D.C.)…
Who is liable for this penalty?
The owner of the vehicle at the time it is converted into a limousine is generally considered the “manufacturer” and is liable for the penalty.
How much is the penalty?
The tax table (See January/February 1991 L&C, page 48) is based on mileage and affects every new vehicle getting less than 22 miles per gallon.
How is mileage determined?
Cadillac and Lincoln are preparing estimates which might eventually be accepted by the EPA as the government standards for limousine mileage. Lincoln has tentatively announced a figure of 19.1 MPG (19.7 in CA) for Town Car stretches up to 75 inches and 7100 pounds. This brings a penalty of $2100 ($1700 in CA). A higher mileage estimate for longer limousines, which will result in greater penalties, is being developed.
Cadillac has not yet announced its mileage estimates so it is up to the coachbuilder or limousine owner to determine the mileage and the tax, or risk the maximum penalty of $7,700. The price sticker on a Brougham shows that Cadillac pays a gas guzzler penalty on each vehicle. This can be deducted from the amount shown in the tax table.
Does the penalty also apply to the conversion of used base units?
Yes. Since the law does not distinguish between new and used vehicles, every limousine conversion is subject to the penalty according to its mileage. If a coachbuilder converts a privately owned vehicle, for example, the owner would become responsible for reporting and paying the penalty. In this respect, the gas guzzler penalty is self-enforcing. By auditing coachbuilders, however, the IRS could identify the owners of vehicles for collection of the penalty.
Can anything be done to repeal this penalty?
In 1986, the NLA, in cooperative with Srmbruster/Stageway, American Custom Coach, Gaines, Eureka, DaBryan Coach, Empire Coach, Tri-State, and Allen Coachworks, mounted a lobbying campaign costing $38,000. The result was a total exemption for limousines from the gas guzzler tax. Attorney Jeffrey Berger, who led that effort, feels some relief may be possible this year as well.
“A major concern,” says Berger, “is that gas guzzler rates doubled this year and will likely increase again. You can’t just sit there and swallow this because it might get even worse.”
In our opinion, the limousine industry should ask Congress to exempt commercial limousines from the gas guzzler penalty as they did from the luxury tax. No other form of commercial transportation is subject to a gas guzzler penalty.
An additional $2100 per limousine is not only a burden on the limousine industry; it is likely to become an unfair advantage for limousine owners who, through ignorance or cunning, fail to comply. We urge you contact the NLA or LIMO and support the creation of a gas guzzler exemption for commercial limousines.