Federal Excise Tax On Trucks, Trailer And Semitrailer
You should be familiar with all the taxes and fees associated with trucks, whether you drive trucks, sell trucks, or run a trucking business. It is necessary to budget for these tax obligations ahead of time if you're just starting out.
Heavy Highway Vehicle Use Tax is a form of revenue collected by truck drivers who operate big rigs on the highway. An individual who becomes a new truck driver must pay federal excise taxes first.
Federal Excise Tax Defined
Unlike sales tax, excise taxes are only levied on specific goods or products, such as gasoline, alcohol or tobacco. The price of the product usually includes these FET taxes at the time of purchase.
For the sale of trucks and tractors, the federal government charges an excise tax. According to the government, a truck is defined as a highway vehicle that typically carries its load and its engine on the same chassis, regardless of whether it tows a vehicle, such as a truck trailer or semitrailer. Smaller trucks are included in that definition, but only trucks exceeding a certain size must pay the tax.
A tractor can also be defined as a vehicle used on highways that are used to tow a vehicle such as a trailer, semitrailer, or equipment. While towing, some tractors may carry small amounts of cargo incidentally. When not towing, some tractors may carry limited amounts of cargo. It is considered to be a chassis and a body that goes with the sale of a truck, truck trailer, or semitrailer.
It is the seller's responsibility to pay the FET tax on trailers. Under certain circumstances, the seller can accept from the buyer a statement in good faith expressing that the buyer intends to lease or resell the property to a third party on an ongoing basis under penalty of perjury. In the event that the article is sold again to a new buyer for its intended use, the purchaser is liable for payment of the tax.
Where Do Excise Taxes Go?
The Highway Trust Fund is financed with these taxes, and its expenditures are typically used to repair and expand the highways of the United States. Due to the extra wear and tear trucks and heavy vehicles create on roads, excise taxes contribute to maintaining and repairing roads and infrastructure.
Truck Excise Taxes: When Do They Apply?
According to the IRS, the Federal Excise Taxes imposed on the first retail sale, defined as the first sale after manufacture, production, or importation for a purpose other than resale or long-term leasing. There exists certain federal excise tax exemptions on trailers, such as the body of a dump truck, that are eight cubic yards or less.
If you have been charged with or responsible for collecting Federal Excise Tax and if you haven't filed a Form 720 with the IRS for each quarter, you must do so. There is a deadline set for the end of the calendar month that follows the close of the quarter, i.e., January to March are due by the end of April.
Calculating Federal Excise Tax On Trucks
FET taxes on trucks are 12% of the total sale price, and they are added when you purchase a new pickup.
Trucks, trailers, and tractors used for highway transportation in combination with a trailer or semitrailer are subject to a 12 percent federal excise tax under Internal Revenue Code Section 4051, which could result in an additional charge of over $30,000 for a new truck. This code further addresses the FET tax on the sales of certain large trucks.
For trucks with a gross vehicle weight of 33,000 pounds or less, the FET does not apply to the truck chassis and bodies. FETs do not also apply to trailer and semitrailer chassis with a gross vehicle weight of 26,000 pounds or less, or to semitrailers and trailers that use the same chassis. This FET tax applies to trucks as well as related parts and accessories, including tires.
FET of 12% is not applicable to tractors whose gross vehicle weight is 19,500 pounds or less or whose combined gross weight is 33,000 pounds or less.
Are Used Trucks Subject To An Excise Tax?
When a truck is bought, sold, or used for the first time, the FET is paid. The excise tax is not usually necessary for trucks that have previously been purchased and used.
Used trucks may, however, be subject to FET in certain situations. It should be noted that in the event that a truck was exported to another country, it would not be subject to FET. Upon importation back into the US, and upon subsequent sale, the FTE criteria would apply, as if the transaction were a first sale or use.
Hire A Professional
For more information about your responsibilities as a truck driver or seller, consult an accountant. In addition to guiding you through the paperwork, an accountant can also make the process easier for you. Our tax experts will also help you take advantage of deductions as a truck driver.