Who is Responsible for Paying Truck Excise Tax? Dealers vs Buyers

• Truck excise tax responsibility usually falls on the seller (dealer or manufacturer) to collect and report.
• The buyer (owner-operator or fleet) pays the tax as part of the vehicle's purchase price.
• Importers are responsible for the excise tax when they are the first to sell or use the vehicle in the U.S.
• IRS Form 720 is the primary form used to report and pay the federal retail excise tax.
• Failure to pay or report the truck excise tax can lead to significant IRS penalties for the responsible party.

Understanding the Federal Retail Excise Tax (FET)

The Federal Retail Excise Tax (FET) is a 12% tax imposed on the first retail sale of heavy trucks, trailers, and tractors. Because this tax is a significant addition to the cost of a new vehicle, it is crucial to understand who is responsible for paying truck excise tax to the IRS.

Unlike annual use taxes, the FET is a one-time tax triggered by the sale of a new vehicle that meets specific gross vehicle weight (GVW) thresholds. Understanding these roles ensures that your business remains compliant and avoids unexpected tax liabilities.

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The Dealer's Responsibility: Collection and Reporting

In most commercial transactions, the dealer or retailer is the party legally responsible for the truck excise tax. When a dealer sells a new heavy truck to an end-user, they are required to:

• Calculate the 12% tax based on the sales price.
• Collect the tax from the buyer at the time of sale.
• Report the tax to the IRS using Form 720.

If the dealer fails to collect or remit the tax, the IRS holds the dealer liable for the unpaid amount, plus interest and penalties. This makes accurate IRS Form 720 filing a critical part of a dealer's operations.

The Buyer's Responsibility: Covering the Cost

While the dealer handles the paperwork and payment to the IRS, the buyer is the one who actually bears the financial burden. The 12% excise tax is typically added to the purchase invoice. For buyers, the responsibility involves:

• Verifying that the tax has been calculated correctly on the invoice.
• Ensuring they receive documentation showing the tax was paid (useful for future resale or audits).
• Paying the total amount, including the tax, to the dealer.

For owner-operators and fleet managers, this tax is a major consideration when budgeting for new equipment. To stay ahead of your tax obligations, you can e-file your excise tax returns efficiently through authorized platforms.

Special Cases: Importers and Manufacturers

The question of who is responsible for paying truck excise tax can change in specific scenarios:

Importers

If a business imports a heavy truck into the U.S. for their own use or for sale, they are considered the "retailer" in the eyes of the IRS and are responsible for the 12% tax.

Manufacturers

If a manufacturer sells directly to an end-user (bypassing a third-party dealer), the manufacturer assumes the responsibility of collecting and remitting the tax.

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What Happens if the Tax Isn't Paid?

The IRS is strict regarding FET compliance. If the responsible party fails to file Form 720 or pay the tax:

• Penalties: Large financial penalties for late filing or non-payment.
• Audits: Increased likelihood of an IRS audit for both the seller and the buyer.
• Lien: The IRS can place a tax lien on the business assets of the responsible party.

Conclusion

In the trucking industry, knowing who is responsible for paying truck excise tax keeps transactions transparent and legal. Generally, the dealer collects and reports the tax, while the buyer provides the funds. By staying informed and using reliable filing methods, both parties can ensure the 12% FET is handled correctly, allowing the focus to remain on the road ahead.

FAQs

Is the buyer or seller legally liable to the IRS for the truck excise tax? 

Legally, the seller (dealer) is responsible for reporting and paying the tax to the IRS, though the buyer pays the cost as part of the purchase.

Do I have to pay excise tax on a used truck? 

No, the FET only applies to the "first retail sale" of a heavy vehicle. Subsequent sales of the same used vehicle are generally exempt.

What form is used to pay the truck excise tax? 

The tax is reported and paid using IRS Form 720, the Quarterly Federal Excise Tax Return.

Can the 12% tax be waived for certain buyers? 

Some exemptions exist for state and local governments, and for vehicles used for specific purposes like farming (under certain conditions) or emergency services.

What is the penalty for not paying the FET? 

Penalties can include a percentage of the unpaid tax per month, plus interest, which can quickly add up to thousands of dollars.