The National Truck Equipment Association (NTEA) is backing HR 4321, legislation introduced by Representative Jim Gerlach (R-PA) to repeal the retail sales excise tax on heavy trucks and replace the revenue with a small increase in the diesel fuel tax rate.
The bill was cosponsored by Rep. Earl Blumenauer (D-OR). The bill has been referred to the House Ways and Means Committee, of which Rep. Gerlach is a member.
The NTEA says this legislation would provide sales, infrastructure, and efficiency benefits.
The 12% federal excise tax (FET) is currently levied on the retail sale of some heavy truck and truck bodies, trailers and semitrailer bodies and chassis and truck tractors. The revenues collected from this excise tax are dedicated to the highway trust fund. The highway trust fund is dedicated to the construction and maintenance of federal highways and bridges. The primary revenue source for this fund is the fuel taxes.
“A 12% retail sales tax serves as a disincentive to sales,” the NTEA says. “As the economy and industry begin to recover, eliminating this disincentive will serve to strengthen the industry.
“Since the FET is levied on truck sales and the collected revenue is dedicated to highway funding, it is basically a user fee. As a user fee, the FET is flawed. It does not equitably tax the users of the highways. The fuel tax more closely approximates user equity. The heavier the vehicle and the more distance it travels the more fuel it typically uses. The more fuel the truck uses, the more it pays into the highway trust fund.
“The highway trust fund is shrinking. The FET serves as a very unstable source of revenue. FET revenues are completely driven by sales. When truck sales drop, the FET revenue being deposited to help pay for highway construction and maintenance drops in a corresponding manner. Fuel tax revenues are much more resistant to economic ups and downs. The fuel tax provides a significantly more stable source of revenue for federal budgeters.
“The FET has always been a very complex tax for truck sellers to apply. Truck equipment distributors and dealers have consistently been faced with situations where the taxability of a truck, truck body or equipment was unclear. Eliminating this tax and shifting it to the existing diesel tax will improve the sales process for many companies.”
In order to help work truck industry companies gain a better understanding of FET and how it is applied, the NTEA released the Federal Excise Tax Guide for the Work Truck Industry in 2011. This is the first and only publication that takes a comprehensive look at the 12% tax that applies to work trucks, tractors and trailers. Sections include information on the "Suitable for Use" standard; the Six-Month Rule; the 75% Rule; tax-free sales; and more.
The FET Guide is available at http://ntea.com/vango/core/orders/category.aspx?catid=12