It is hard to imagine a business world without taxes. Trucking businesses are typically subject to various taxes at the federal, state, and local levels. Here are some common types of taxes that trucking businesses may need to prepare for:
International Fuel Tax Agreement (IFTA)
The International Fuel Tax Agreement (IFTA) is a way for the government to gather a fuel consumption tax from carriers who operate in the US or Canada to fairly compensate each state and province for the use of their roads and infrastructure. All US and Canadian trucking companies are required to register with IFTA and file their fuel and mileage reports every quarter. IFTA was established to simplify the reporting of fuel use taxes by interstate carriers. Drivers join IFTA in their home state and as they drive to other states and purchase fuel, the tax on that fuel is credited to the driver’s account. At the end of each quarter, taxes on fuel are due and drivers are responsible for knowing the amount of fuel tax they are liable for. Read more about IFTA here.
State Registration Fees
Trucking companies are typically required to register their vehicles with the state and pay other various registration fees. The fees may vary based on factors such as vehicle weight and type. Some registration fees include the International Registration Plan or Unified Carrier Registration. The International Registration Plan (IRP) is a reciprocity agreement between different member jurisdictions in the US and Canada, jurisdictions such as states and provinces, that allows for payments of apportionable fees based on the miles you travel in each jurisdiction. These fees are in addition to the taxes paid on fuel each quarter (see IFTA). Essentially, IFTA focuses on fuel and IRP focuses on miles run in each state.
Heavy Vehicle Use Tax (HVUT)
This is a federal tax imposed on heavy vehicles operating on public highways. It applies to vehicles with a gross weight of 55,000 pounds or more. The minimum HVUT for a vehicle with a gross taxable weight equal to 55,000 pounds is $100 per year and the maximum HVUT is $550 per year at the time of writing this. The table below gives a breakdown of the HVUT classifications so you can understand your tax obligation.
Gross Taxable Weight
Heavy Vehicle Use Tax Rates
Below 55,000 lbs
$100 plus $22 per 1,000 pounds over 55,000 lbs
Over 75,000 lbs
Federal, state, local, and Indian tribal governments, along with many non-profits (e.g., American Red Cross), farms and other low mile operations (<5,000 miles) can normally receive exemptions from the HVUT.
Like any other business, trucking companies are subject to federal and state income taxes. The business's net income is taxed at the applicable corporate or individual tax rate. Take a look at our other blog to learn more about deductible expenses to lower your taxable income.
Owner-operators are required to pay their self-employment taxes (for Social Security and Medicare) in addition to their regular income tax. The self-employment tax rate is currently 15.3%. Income and self-employment taxes as an owner-operator or business are required to be paid quarterly. Most owner-operators will set aside 25-30% of their income to cover quarterly income and self-employment taxes.
Sales and Use Tax
Trucking companies may be subject to sales and use taxes on the purchase of equipment and supplies. The specific rules and rates vary by state. Luckily, some states also allow qualified truck drivers to be exempt from sales tax for business-related expenses such as the purchase of tractors/trailers, maintenance items, or repair parts. Be sure to search your state’s website (and any frequent states you travel through) for their sales tax exemption form and fill it out when making qualified purchases. Here is an example of Michigan’s Sales and Use Tax Certificate of Exemption Form:
Tax laws can be complex and vary based on individual circumstances, so it's always best to consult with a qualified tax professional or accountant. Find a tax professional who is well-versed in the trucking industry. Before choosing an accountant, do your research and ask questions! Come to your tax appointment prepared and organized. Utilizing tracking spreadsheets and other record-keeping methods is crucial to ensuring you are reporting your revenue and expenses accurately.
Feeling overwhelmed by the task of tracking all of your business expenses? Well, the good news is we’ve already created a spreadsheet that will allow you to track your data and do the summarizing for you!
The Definitive "All-in-One" Trucking Business Spreadsheet is...well, an all-in-one spreadsheet for your small trucking business! The workbook includes a detailed business dashboard that features key metrics (KPIs) to monitor your business's health such as your average cost per mile, expense and revenue totals, and more. With formulas already built-in, tracking expenses, revenue, trip details, and miles is easy. The spreadsheet also makes IFTA (International Fuel Tax Agreement) quarterly tax reporting easy by calculating your total miles and tax-paid gallons. You will also receive a BONUS Tax Deduction summary report based on your specific operation. This is a turn-key spreadsheet ready for you to use instantly!
Interested in being notified when more blogs, free resources, products, or courses are available? Subscribe down below and you'll be the first to know!
Soshaul Logistics LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It is meant to serve as a guide and information only and Soshaul Logistics, LLC does not assume responsibility for any omissions, errors, or ambiguity contained herein. Contents may not be relied upon as a substitute for the FMCSA's published regulations. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.