12% Excise Tax on New Trucks/Trailers
Once you’ve decided you’re entering the trucking business you’ll need equipment, and the most typical question that arises is to purchase new or old tractor and/or trailers. At Wise Dispatching, we absolutely do not sell equipment, but we are here to educate our client base on the state sales tax and federal excise tax implications of purchasing a new tractor and/or trailer.
State Sales Tax
State governments were kind enough to allow Carriers to purchase “Rolling Stock” equipment sales tax free assuming the Carrier is a For Hire interstate Carrier. Rolling stock equipment includes the transportation vehicles of any kind of interstate transportation company for hire (railroad, bus line, air line, trucking company etc.), but not vehicles that are being used by a person to transport its officers, employees customers or others not for hire (even if they cross state lines) or to transport property that person owns or is selling and delivering to customers (even if the transportation crosses state lines). State governments require that the Carrier has more than 50% of its business operating interstate or it can become liable for the sales tax on the rolling stock equipment previously purchased.
When the Carrier decides to make the acquisition of their rolling stock equipment, the Carrier should give the Seller a certification that the Carrier is an interstate carrier for hire, and that the purchaser is purchasing the property for use as rolling stock moving in interstate commerce. The Carrier must include its Interstate Commerce Commission Certificate of Authority number or must certify that it is a type of interstate carrier for hire (such as an interstate carrier of agricultural commodities for hire) that is not required by law to have an Interstate Commerce Commission Certificate of Authority).
Federal Excise Tax
State governments were kind enough to forgo the sales tax on the purchase of rolling stock equipment; however, the Federal government was not. The Federal government doesn’t derive its revenue by instituting a federal sales tax, but by income taxes and other taxes, such as an excise tax. The Carrier, if purchasing NEW tractors and/or trailers, will be subject to a 12% tax on the purchase price. The tax is imposed on the first retail sale, including related parts and accessories sold on or in connection with or with the sale of:
- Truck chassis and bodies
- Truck Trailer and semitrailer chassis and bodies
- Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer
The sale is treated as the first retail sale, and the seller will be liable for the tax imposed on the sale unless, there has been a prior taxable sale, lease, or use of the item being sold, the sale qualifies as a tax-free sale, or the seller in good faith accepts from the purchases a a statement signed under penalties of perjury and executed in good faith that the purchaser intends to resell the article or lease it on a long-term basis.
A truck is a highway vehicle primarily designed to transport its load on the same chassis as the engine, even if it equipped to tow a vehicle, such as a trailer or semitrailer.
A trailer is a highway vehicle designed to tow a vehicle, such as trailer or semitrailer. A tractor may carry incidental items of cargo when towing or limited amounts of cargo when not towing.
Exempt Sales
The tax does not apply to truck chassis and bodies suitable for use with a vehicle that has a gross vehicle weight of 33,000 pounds or less. It also does not apply to truck trailer, semitrailer chassis, and bodies suitable for use with a trailer or semitrailer that has a gross vehicle weight of 26,000 pounds or less. Tractors that have a gross vehicle weight of 19,500 pounds or less and gross combined weight of 33,000 pounds or less are excluded from the 12% retail tax. The tax also does not apply if the equipment is be used outside the United States. In addition, if the truck bodies are 21 feet or less in length or dry freight and refrigerated truck van bodies 24 feet or less in length the tax does not apply.
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