DO: Fill in the following chart. Use check marks or exes (X's) to indicate which authority to contact with questions regarding the concerns in the left-hand margin. The first line of the chart has been completed for you as an example of how you are to complete the rest of the form.
INSTRUCTIONAL PURPOSE: To enrich your study of Trucking by introducing you to road taxes. You will learn the difference between Federal and state road taxes, then focus on Federal road taxes (or Federal Highway Use Tax). You will learn how to determine whether or not you are responsible for paying Federal Use Tax, when taxes are due, and how to complete IRS Form 2290 to submit appropriate payment.
CONTENT: Truck drivers are subject to a number of different taxes. The two you hear about most are the "Federal Highway Use Tax" and those levied by individual states on the use of fuel. When you hear a person discussing these taxes it can get very confusing because people often refer to both of them as "road taxes." Actually, the two kinds of taxes are quite different. The only real similarity between the two is this: monies earned by both taxes are used to build and maintain highways. In this exercise, you will be learning about the Federal Use Tax, not the state tax on fuel usage. However, to help you keep the two taxes straight, we have provided a chart which points out differences and similarities between the two kinds of taxes.
What is Federal Highway Use Tax?
One of the sources of funds for the national highway construction program is the Federal Highway Use Tax on Heavy Vehicles. The tax period begins on July 1st and ends on June 30th, and the tax is paid only one time during that period on each taxable vehicle, by each person responsible for it.
Who Pays the Tax?
This tax is due from registered owners of vehicles which meet the current Federal definition of "highway motor vehicles" and which have a taxable gross weight of 55,000 pounds or more. If a vehicle is registered by two people, the owner of the vehicle is the one who pays the tax. When an owner/operator leases a vehicle to a trucking company, the owner- operator (the lessee) normally pays the tax.
When Do You Pay?
As we said above, Federal Use Tax is only paid once throughout the year on each taxable vehicle. So, say you purchase a truck part way through the tax period and the previous owner already paid the use tax for that tax period. You do not have to pay the use tax again, not even for the portion of the tax period for which you are operating the vehicle. (Of course, the previous owner may ask you to reimburse him or her for part of the use tax, but that is between you and the previous owner.) If, however, the previous owner had not paid the use tax on the vehicle, you may be liable for paying the tax for the full year.
What Kinds of Vehicles Are Subject to the Tax?
The Internal Revenue Service has specific guidelines which tell what kinds of vehicles are responsible for paying the use tax and which do not have to pay it. "Highway motor vehicles" (which are used at least one time on a public highway during the tax period) have to pay it if they have a taxable gross weight of 55,000 pounds or more and are required to be registered for highway use. Roughly speaking, all large trucks that carry cargo are responsible for paying the tax.
To find out for sure if your vehicle is a "highway motor vehicle" as defined by the IRS, you need to refer to IRS Publication No. 349. However, most trucks, truck-tractors and buses designed for use on the highway must pay the tax. The exceptions are quite logical. Farm vehicles and construction vehicles always used off-highway do not usually have to pay the tax, and vehicles used only by the Federal government or any state, local or Indian tribal government are exempt as well. (You should refer to Publication No. 349 for other specific information, such as special rulings for agricultural vehicles, suspensions of the tax, reduced rates for some vehicles, credits, refunds, and record-keeping requirements.)