Trucking Companies State Taxation
Federal taxation differs from state taxation in that U.S. people are subject to federal taxes on their worldwide income. State taxes only become applicable when there is a connection, also known as Nexus, to that state and income is derived within that state where a connection exist. Nexus is generally created when the business has property and/or payroll located in that state.
Creating Nexus- Trucking Company
We will outline how state taxes affect a trucking company using a single sales factor formula.
A trucking company means a motor common carrier, a motor contract carrier, or an express carrier which primarily transports tangible personal property of others by motor vehicle for compensation. Where a trucking company has income from sources within and without a state, the amount of business from sources within a state shall be determined by its business activities within that state.
A state will determine a trucking company’ (that transports freight) nexus within their state by the following method:
Intrastate: All receipts from any shipment which both originates and terminates within a state and,
Interstate: That portion of receipts from movements or shipments passing through, into, or out of a state a determined by the ratio which the mobile property miles traveled by such movements or shipments in this state bear to the total mobile property miles traveled by movements or shipments form points or origin to destination
The Carrier is required to maintain the necessary records to identify mobile property and to enumerate by state the mobile property miles traveled by such mobile property as those terms are used in this regulation.
De Minimis Nexus Standard:
If the trucking company during the course of the income tax year neither:
1. Owns nor rents any real or personal property in this state, except mobile property; nor
2. Makes any pick-ups deliveries within a State; nor
3. Travels more than twenty-five thousand mobile property miles within a State; provided that the total mobile miles traveled within a state during the income tax year do not exceed three (3) percent of the total mobile property miles traveled in all states by the trucking company during that period; nor
4. Makes more than twelve (12) trips into a state
State Taxes Applicable
If the trucking company creates nexus with a state, then filing the appropriate tax report is required.
If you would like to discuss this or any other U.S. tax or accounting matter, please feel free to call Gabriel at 773.269.6513 or email Gabriel.email@example.com.
We look forward to hearing from you.
Gabriel Wise, CPA MST
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