It's a Team's Life

FET is DUE

By Linda Caffee
Posted Jul 30th 2016 5:40AM

When a CMV owner increases the carrying capacity of the truck, a Federal Excise Tax is due. It may take one month, six months, or three or many years, it is a certainty that the IRS will eventually collect the taxes owed.

Federal excise tax is 12% of the purchase price of a new truck that is over 33,000 lbs. GVWR. A perceived tax loophole is to buy a less than 33,000 lbs. GVWR to avoid the FET and then, after six or more months have passed, add a lift axle and have the GVWR changed to 33,000 pounds. So, now what happens if, after an axle is added and the ability to carry over 33,000 pounds is registered? Easy answer: 12% is due on the value of the truck and the axle.

Common practice in the expedite industry is to purchase a single axle truck and then add either a pusher or tag axle then register the truck to carry over 33,000 lbs. This has been the practice in the past, but it will not be the practice in the future.

If, after the initial sale or if a used truck is purchased and an axle is added, IRS form 720 needs to be filled out and FET payment must be made to the IRS. The form can be found online and downloaded to be filled out and then sent to the IRS with payment. There are different interpretations on the initial purchase price. A good truck accountant will be worth their weight in gold to figure out how much is owed.

When buying a new truck from a truck dealer there are several items that are exempt from FET with one big one being the freight box and warranties. So a truck dealer that knows FET inside and out can save the purchaser a lot of money. Knowing also what items to wait six months on to purchase is also vital to paying the tax. One example is if the initial purchase includes automatic tire chains FET is due. If when buying a truck you wait six months to install the chains no FET is due. So when ordering the truck think before ordering all of those extras including tire pressure monitoring systems, would it be better to wait the six months or pay FET?

Pretty simple really:

Add axle and increase gross weight rating above 33,000 lbs. - FET is DUE - no matter the age of the truck or if you are first or fifth truck purchaser IRS form 720 needs to be filled out and tax paid.

Link to IRS Form 720

2 Comments

  • Greg - July 30, 2016
    Good information for those considering modifying a truck.
  • teamcaffee - August 1, 2016
    There are a lot of old wives tales about this issue.

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