The trucking industry is heavily regulated by government organizations such as the Federal Motor Carrier Safety Administration (FMCSA). There are numerous requirements companies must meet, and keep current, if they are to continue operating legally. It can be confusing sifting through all the different types of licenses and the various information available about each type. Here, we’ll look at licenses that will help you start a trucking company and gain the operating authorities that permit you to run a legal business.
Table of Contents
What is a Commercial Driver’s License (CDL)? Which CDL do I need?
A Commercial Driver’s License (CDL) is a license that is required to operate a Class 8 commercial vehicle. A CDL is required to operate various commercial motor vehicles (CMV) such as heavy trucks. There are 3 classes of Commercial Driver’s Licenses which authorize holders to operate commercial vehicles:
Class A CDL – authorizes the holder to drive any combination of vehicles weighing at least 26,000 pounds. This license requires that the Gross Vehicle Weight Rating (GVWR) of the towed vehicle must be at least 10,000 pounds. Examples of vehicles that drivers can operate with this license include flatbeds and truck-trailers.
Class B CDL – authorizes the holder to drive a single vehicle without a trailer weighing more than 26,000 pounds, or a towing vehicle with a trailer that is less than 10,000 pounds. Equipment operated with this license will likely be single vehicles with a majority of the weight at the front. Examples include box trucks, large passenger buses, and types of tractor-trailers.
Class C CDL – this license covers vehicles with GMVR that is less than 26,000 and the trailer also weighing less than 10,000. Class C CDLs also authorize operators to transport 16 or more passengers. Class C covers equipment such as school buses or combination vehicles that are not covered by Classes A or B.
With just a CDL you are limited to operating vehicles indicated in the class you have. CDL Endorsements grant further authorities to operate specific types of vehicles or to move certain types of cargo. Examples include:
Double and Triples – for transporting two or three trailers at one time
Tanker – for transporting bulk liquids
Hazmat – for transporting materials that are classified as hazardous by the U.S. Department of Transportation.
See an entire list of endorsements here.
You must be 18 years old to be eligible for a CDL and 21 years old if you plan on driving the vehicle from state to state. You can earn your CDL by attending a registered truck driving school (Example HERE) and passing the Entry Level Driver's Training (ELDT), passing a written test and obtaining a Certified Learner's Permit (CLP), and passing the CDL skills tests. Keep in mind that each state will have different requirements for obtaining a CDL and it is illegal to have licenses from multiple states. Visit your home state’s licensing office site to obtain a free CDL Manual and to learn more about the specific requirements you will need to meet to gain your CDL.
What is an Employer Identification Number (EIN)? Do I need an EIN?
An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is used to identify business entities. Even as an owner-operator, you will likely need an EIN even if you don't have employees. An EIN is what the IRS uses to identify your business. Getting your EIN can be done through a variety of ways including online via the IRS. Obtaining an EIN is a free service; however, you must check with your state to determine if you meet their requirements or need a state number charter.
What is a Department of Transportation Number (DOT)? Do I need a DOT Number?
A U.S. Department of Transportation (USDOT, DOT) number is a unique number which identifies a company and is used for collecting and monitoring their safety information. DOT numbers are required when a vehicle is involved in interstate commerce among other requirements such as:
Gross vehicle weight or gross combination weight of more than 10,000 pounds
Designed to transport 8 or more passengers for compensation; 15 or more for no compensation
You are required by the FMCSA to obtain a USDOT number and follow Federal Regulations. Obtaining a USDOT number is free and can be done online.
For more information on DOT numbers and how to register please visit the FMCSA’s official website.
What is a Motor Carrier (MC) Number? How do I get an MC Number?
Motor Carrier numbers (MC, MX, FF) are different from DOT numbers in that they dictate the type of operation a company can run and the type of cargo it may carry. A MC number grants a trucking company the authority to cross state lines with cargo on board.
Learn more about MC numbers and how to receive one on Soshaul Logistics’ website.
What is the Unified Registration System (URS)?
Carriers and freight brokers are required to register with the FMCSA via the Unified Registration System (URS), more information can be found on their website. However, applicants should start out here for some initial instruction and disclaimer. For a more detailed explanation on freight brokers and freight agents, click here.
What is the Unified Carrier Registration?
The Unified Carrier Registration (UCR) Act of 2005 replaced earlier legislation and the former system for registering and collecting fees from motor carriers and freight brokers for interstate travel. The fees collected support state motor carrier safety activities. It is a base-state system, where a registrant pays fees through its base state on behalf of all participating states.
Learn more here.
What is a SCAC? Do I need a SCAC?
Standard Carrier Alpha Code (SCAC) is a privately controlled code used for identifying carriers and trucking companies. The goal of SCAC was to computerize information and records when the system was founded in the 1960s by the National Motor Freight Traffic Association (NMFTA). This allows documents such as freight bills or bills of lading to be uploaded for easy access.
SCAC are primarily used by government agencies and allow for shipments to be easily tracked at all stages of the cycle. If you are planning to haul any of the following types of loads, you will need a SCAC:
Military
Government
Intermodal
Port Cargo
Railyard Cargo
Chemicals
The NMFTA website can be accessed for more information on how to pay the fee to register for a SCAC.
What is Blanket of Coverage (BOC-3)?
The BOC-3, or blanket of coverage, designates an agent for your company that can file legal documents on your behalf. If you are an owner-operator, you cannot file your own BOC-3 and will need a process agent to file for you.
A process agent, according to the FMCSA’s site, is a representative whom court papers may be served in any proceedings against a motor carrier or freight broker. Make sure you choose someone you trust to handle important notifications from the government, including any court filings against your company. Different professional trucking associations can assist you with your BOC-3.
What is a Freight Broker? Can a Carrier also have a Freight Broker license?
A freight broker is a person who maintains a license that authorizes them to serve as an intermediary between shippers and carriers.
YES, carriers can also receive a Freight Broker license. Some carriers obtain a broker's license to help serve their current customer's capacity needs that they can not meet with their own assets. Some carriers are simply seeking to grow their business and expand to more customers or freight types by obtaining a broker's license.
There are additional steps other than gaining your operating authority as a broker (MC number), which are required for freight brokers. Brokers must also have surety bonds and it's wise to maintain insurance to protect the company from liability. Surety bonds (BMC-84) or trust funds agreements (BMC-85) are securities that guarantee job completion and provide coverage for payment if the job is not complete in return for collateral. The FMCSA lists the following steps as requirements to getting a broker authority.
File an OP-1 form, an application for Motor Property carrier and Broker Authority, with the FMCSA
Provide $75,000 surety bond (BMC-84) or trust fund agreement (BMC-85)
Submit a BOC-3 or designation of process agent (we will discuss this later)
Pay $300 fee during application process
There is an approximate 4-6 week processing time for the application to gain broker authority.
What is the International Registration Plan (IRP)?
The International Registration Plan (IRP) is a reciprocity agreement between different member jurisdictions in the US and Canada 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).
Like IFTA, IRP is required for vehicles that travel across state lines and exceed 26,000 pounds gross vehicle weight or have 3 or more axles. An apportioned vehicle registration means there are fees that are paid in each state and/or province where the apportioned vehicle operates. Fees are proportional to the number of miles a vehicle logs in each area or jurisdiction. Your base jurisdiction is the state in which your vehicle is registered. You can apply for IRP registration at a Department of Motor Vehicle (Secretary of State office) or online in your base jurisdiction. IRP fees vary depending on jurisdiction, vehicle weight, percent of miles traveled in an IRP jurisdiction, and so on.
You will need to register for IFTA to account for any taxes on fuel. Once you are registered with IFTA and IRP, you will receive the Apportioned License Plate for the vehicle plus an Apportioned Cab Card. The card identifies the jurisdictions you are registered to operate in. IFTA provides a separate set of decals and license. You must keep track of all miles traveled in each jurisdiction. Recording and reporting takes time, but it’s important to be thorough and efficient.
What is the International Fuel Tax Agreement (IFTA)?
The International Fuel Tax Agreement (IFTA) among U.S States and Canadian Provinces was established to simplify the reporting of the 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.
The IFTA is great for streamlining paperwork and burdens of reporting on fuel tax liability for various types of fuel. IFTA assists drivers by calculating the amount of tax due or the tax credit for each state a driver goes through. Visit your state’s government site to learn more about local guidelines on how to get your IFTA license and decal.
We have fuel and mileage reporting templates for you to use to track your miles, track fuel expenses, and to help you get started in the business.
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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 - Copyright 2023 - does not assume responsibility for any omissions, errors, or ambiguity contained herein. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.