What is the FET (Federal Excise Tax)?

If you drive trucks or sell trucks, you should be familiar with all the taxes and fees associated with trucks. It can be difficult for organizations to determine what is or isn’t taxed under federal excise tax (FET). There are several factors to consider. The federal government imposes a specific excise tax on the sales of trucks and tractors. The seller is liable for the tax. The tax is generally imposed on certain heavy vehicles for highway use:

Class 8 Trucks, truck chassis and bodies suitable for use with a vehicle that has a gross vehicle weight (GVW) of 33,000 pounds or more.
Truck trailer and semitrailer chassis and bodies suitable for use with a trailer or semi trailer with a GVW of greater than 26,000 pounds.
Tractors that have a GVW of greater than 19,500 pounds and a gross combined weight of greater than 33,000 pounds.

Internal Revenue Code Section 4051 imposes a 12 percent federal excise tax on the sale of trucks and trailers used for highway transportation in combination with a trailer or semitrailer. Exemptions and exclusions do exist for certain vehicles that may be used under specific circumstances such as those used and designed for exclusively off highway activities. The truck owner is responsible for filing and paying Form 2290 for Heavy Highway Vehicle Use. This is an annual tax on the continuing use of heavy load-bearing vehicles.These taxes fund the Highway Trust Fund and are used to repair the federal highway system of the U.S.

In the past, dealerships have had to manually account for the FET rate on their transactions and update the figures on invoices and other transactional documentation. These days, many dealership management systems can automatically calculate the FET for dealers.

IRS Publication 510 offers a comprehensive explanation of federal excise taxes. Chapter 6 of Publication 510 offers information about the retail tax on heavy trucks, trailers, and tractors. Publication 510 is available on the IRS website. For more information regarding the tax exempt status, please read the instructions for Form 720, Quarterly Federal Excise Tax Return.