The 12% excise tax on new semi truck sales is currently among the highest excise taxes in the nation, impacting an industry that is struggling with compliance costs associated with regulatory mandates.
Calling itself the Modernize the Truck Fleet (MTF) coalition, trucking industry alliances band together to urge congressional leaders to repeal the outdated federal excise tax (FET), which adds significant costs to class-8 semi trucks and trailers. This 12% tax equals between $12,000 and $22,000 additional costs to a heavy truck, tractor, or trailer, making new semi trucks costly and forcing trucking companies to consider older trucks that are less fuel efficient.
The FET applies the tax on gross vehicle weight (GVW) vehicles above 33,000 pounds, trailers above 26,000 pounds, and tractors above 19,500 pounds, on their first sale. First introduced in 1917 to help fund World War I, the tax has grown from three percent to its current 12 percent.
Urging Legislation
The letter to top leaders in the U.S. Senate and House of Representatives was signed by a coalition of influential groups from different industries, including from trucking, the American Trucking Associations, National Private Truck Council, NAFA Fleet Management Association, Motor and Equipment Manufacturers Association, Truck Trailer Manufacturers Association, and several others.
Lawmakers introduced similar legislation to repeal the tax in 2012 and 2017, but both efforts failed.
A Need for Better Trucks
The average age for trucks on the road is nearly 10 years old. The coalition stresses that a tax repeal would allow trucking companies to deploy new, safer, and more fuel-efficient heavy-duty trucks and trailers by making them more affordable. A typical truck in the heaviest Class 8 weight segment gets about 6.5 mpg, but new trucks are about 10 percent more efficient.
In addition, modern trucks are often equipped with airbags and driver-assistance technologies, which can include automatic emergency braking, adaptive cruise control with braking, lane-departure warning, and lane-keeping assist blind-warning.
The coalition strongly believes that repealing the FET and stabilizing the Highway Trust Fund revenues will serve the needs of the nation’s economy and speed the integration of the latest safety and emissions technologies into the truck fleet.
Tax Overview
The excise tax on the sale of new trucks is used to fund the Highway Trust Fund that was established in 1956 to provide a more dependable source of funding from the federal government for the construction of the interstate highway system. The fund totaled $41 billion for fiscal 2018 with 87 percent of the revenue coming from the excise tax on gas and diesel fuel, according to the Tax Policy Center.
It’s a belief in the trucking industry that the excise on modern trucks adds uncertainty and volatility to the Highway Trust Fund due to the cyclical nature of heavy-duty truck and trailer sales, and Congress should carefully review the detrimental impacts it could have on the transportation policy.
It’s not clear if any Congressional leaders support the FET repeal. None of them are co-sponsoring the existing legislation. If anything does move forward, it won’t be until at least September as House members left Washington for the August recess.
If the tax is repealed, it’s a historic opportunity to remove the tax through an infrastructure bill in 2019, and ensure modern trucks and trailers are deployed in fleets.
What you can do?
Companies should look carefully at a truck suppliers’ FET calculation when buying a new truck, according to KPMG, because there are many components — like jobsite equipment and refrigeration units — that are not subject to the tax and can result in significant savings.
Making informed buying decisions is key. How much revenue will your equipment generate? What is your monthly fuel costs or insurance payments? And how much profit can I make? CFF offers a free tool to calculate your potential monthly profit called Budget Builder.
For assistance with the online Budget Builder, you can speak directly with one of our financing pros. CFF’s phone number is (469) 208-4701.
About Commercial Fleet Financing, Inc.:
At Commercial Fleet Financing (CFF), our pros have given smart advice to fleet owners, dealers and owner-operators in the transportation, moving, towing or construction industries for more than two decades. With CFF, finding the right financing solutions is a phone call away and most borrowers secure commercial vehicle financing with ease. To talk directly with one of our finance pros and get started with a credit approval in as little as two hours, CFF’s phone number is (469)-281-2962.
