The NTDA Supports Repeal of the Federal Excise Tax

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LEGISLATIVE UPDATE

May 1, 2019 – Rep. Vela (D-TX), Rep. Gonzalez (D-TX), and Rep. Emmer (R-MN) have agreed to sign on to H.R. 2381, which seeks to repeal FET. There are now seven Representatives signed onto the legislation.

April 30, 2019 – Congressmen Doug LaMalfa (R-CA) with original co-sponsors Collin Peterson (D-MN), Tom O’Halleran (D-AZ), Greg Pence (R-IN) and Henry Cuellar (D-TX) yesterday introduced legislation in the U.S. House of Representatives to repeal the federal excise tax (FET) on heavy trucks, truck bodies and trailers.

HR 2381 would eliminate the largest excise tax levied by Congress. Originally created to help pay for World War I in 1917, it now serves as an unstable revenue source for the Highway Trust Fund.

Repealing FET would reduce the acquisition cost of new trucks currently subject to the tax by 12% and allow purchasers to more readily integrate cleaner and safer vehicles into their fleet. Additionally, repeal would clear the way to better alternative funding mechanisms for highway repair and maintenance.

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FET Compliance Information

What is Federal Excise Tax (FET)?

The retail excise tax is imposed on all qualified “first retail sales” of applicable trucks, trailers, and tractors (also includes necessary parts and accessories and all parts, unless exempted, installed within the first six months of the first retail sale). The current excise tax rate is 12% of the applicable taxable sales price at the first retail sale of the trailer (unless exempted under code sections Internal Revenue Code 4053 or 4221).

The FET routinely increases the cost of heavy trucks by $22,000 or more, is the highest excise tax imposed on any item, and has quadrupled since it was first imposed to pay for World War I in 1917.
While the FET is deposited into the Highway Trust Fund (HTF), it is an exceptionally unreliable source of revenue, with receipts varying 45% between 2013 and 2017 and contributing to federal budget instability. That is why H.R. 2946 includes language stressing the need for Congress to consider a more reliable and consistent revenue mechanism to fund the HTF in place of the FET.

Recent federal regulatory requirements add as much as $40,000 to the cost of a new heavy duty truck, preventing businesses and independent truck drivers from purchasing the newer, safer, and more efficient vehicles they need. While excessive regulations will take years to roll back, Congress can act today to repeal the FET and end a punitive, arbitrary tax that stalls economic growth and keeps safer, more efficient trucks off the road.

Application of the 12 Percent FET

Under Section 4051 of the Internal Revenue Code, the addition of taxable parts and accessories within six months of the original sale of a unit sold in connection with a truck or tractor that was subject to FET, are subject to the 12 percent FET regardless of when they are actually installed or if they are billed separately from the unit. These parts must be attached to a taxable body, chassis, or tractor and must contribute to the highway transportation function. The highway transportation function includes any part and/or accessory that contributes to one or more of the following functions:

  • The loading or unloading function of the unit
  • The maintenance or safety of the unit
  • The preservation of cargo
  • The comfort or convenience of the driver or passengers.

NTDA President quoted in Trailer/Body Builders article regarding FET repeal.