Most truckers meet the 12 percent federal excise tax as a line on a dealer's invoice and never think about it again. The ones who get IRS letters about it are usually doing something a little different: adding expensive equipment right after purchase, leasing new equipment before it is ever sold, building or rebuilding trucks in their own shop, or buying from a seller who did not collect the tax.
This tax is reported on Form 720, the quarterly federal excise tax return. Here is how it works, using the statute and IRS Publication 510 (December 2025).
What is taxed
IRC 4051(a) imposes a tax of 12 percent of the sale price on the first retail sale of:
- Automobile truck chassis and bodies.
- Truck trailer and semitrailer chassis and bodies.
- Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer.
The tax includes parts and accessories sold on or in connection with the article. Under section 4051(a)(5), selling a truck, truck trailer or semitrailer is treated as selling a chassis and a body. Publication 510 says the seller is liable for the tax.
The weight thresholds
Lighter equipment is excluded:
| Article | Excluded if |
|---|---|
| Truck chassis and bodies | Suitable for use with a vehicle with a gross vehicle weight of 33,000 pounds or less |
| Trailer and semitrailer chassis and bodies | Suitable for use with a trailer or semitrailer with a gross vehicle weight of 26,000 pounds or less |
| Highway tractors | Gross vehicle weight of 19,500 pounds or less and gross combined weight of 33,000 pounds or less |
Publication 510 explains that gross vehicle weight is generally the manufacturer's gross vehicle weight rating, and it lists four body types that meet the "suitable for use" standard and are excluded: platform truck bodies 21 feet or less in length, dry freight and refrigerated truck van bodies 24 feet or less, dump truck bodies with load capacities of 8 cubic yards or less, and refuse packer bodies of 20 cubic yards or less, citing Rev. Proc. 2005-19.
The six-month parts rule
This is where owners get caught. IRC 4051(b) imposes the 12 percent tax on parts and accessories, and their installation, if the owner, lessee or operator of a vehicle containing a taxable article installs or has them installed within 6 months after the vehicle was first placed in service.
Two exceptions apply. The tax does not apply to replacement parts. And it does not apply if the aggregate price of the parts and accessories, including installation, is $1,000 or less. Publication 510 adds the trap: if the total for the 6-month period is more than $1,000, the tax applies to the cost of all the parts and accessories and installation during that period, not just the amount over $1,000.
Under section 4051(b)(3), the business that installs the parts is secondarily liable for the tax. So the shop that bolts a new sleeper upgrade or a liftgate onto your new tractor in month three has a reason to ask questions.
Publication 510 says a vehicle is placed in service on the date the owner takes actual possession, established by a signed delivery ticket or similar document. Keep that document. It starts the 6-month clock.
Leases and use before sale
Publication 510 explains that a long-term lease (one year or more, counting renewal options) before a first retail sale is treated as a taxable sale, with the tax imposed on the lessor at the time of the lease. A short-term lease before a first retail sale is a taxable use, also taxed to the lessor.
And if anyone uses a taxable article before its first retail sale, that person is liable for the tax as if it had sold the article at retail. The tax attaches when the use begins. A dealer that puts a new tractor into its own fleet before selling it has made a taxable use.
How the tax base is figured
For a sale by a manufacturer, producer, importer or related person, Publication 510 says the tax is generally figured on the sales price plus a presumed markup. The presumed markup is 4 percent for trucks and truck-tractors, and zero for truck trailers and semitrailers and remanufactured trucks and tractors.
The tax base excludes the excise tax itself, separately stated state or local sales tax, the value of a used component furnished by the first user, and certain delivery charges. It also excludes amounts charged for machinery or equipment that does not contribute to the highway transportation function of the vehicle, if supported by adequate records. Publication 510 gives the example of the vacuum pump and hose on an industrial vacuum loader.
If taxable tires are sold with the vehicle, IRC 4051(d) allows a credit for the tire excise tax. Publication 510 says it is claimed on Form 720, Schedule C, for the same quarter the heavy vehicle tax is reported.
Resales, rebuilds and exemptions
- Resale certificates. A seller is not liable on a sale if it accepts, in good faith, a statement signed under penalties of perjury that the purchaser intends to resell or lease the article long-term. Publication 510 includes Model Certificate T for this.
- Tax-paid trailers resold within 6 months. The tax applies again on the resale of a trailer or semitrailer within 6 months after a taxable sale, with a credit for the tax paid on the prior sale, under conditions in Treas. Reg. 145.4052-1(a)(4).
- Repairs and modifications. The tax does not apply to the sale or use of an article that has been repaired or modified unless the cost of the repairs and modifications is more than 75 percent of the retail price of a comparable new article. Rebuilds that cross that line can be taxable.
- Exempt articles. Publication 510 lists exemptions including rail trailers and rail vans, house trailers, camper coaches, farm feed, seed and fertilizer equipment bodies, ambulances and hearses, and certain trash containers.
None of these rules are intuitive, and the dollars add up quickly on equipment that costs six figures. If you buy, build, lease or sell heavy equipment as part of your business, read Publication 510's chapter on this tax once a year and keep the delivery tickets, invoices and certificates that prove which rule applied.
When the tax ends
Under section 4051(c), the tax does not apply on and after October 1, 2028, unless Congress extends it again. It has been extended many times.
Where the IRS problems come from
Excise tax issues in trucking tend to come from the same places:
- Post-purchase upfits over $1,000 within 6 months that nobody reported.
- Owner-built or rebuilt trucks where the 75 percent test was ignored.
- Equipment leased long-term before any retail sale, with no tax paid by the lessor.
- Resale certificates accepted from buyers who were not really resellers.
- Unfiled Form 720s by businesses that did not realize they had become liable.
The fix starts with a list: every taxable article, its delivery date, every part or accessory installed in the following 6 months with costs, and any lease or use before sale. If you owe the tax and have not filed, a voluntary filing with penalty relief arguments is usually better than an examiner finding it.
The heavy vehicle use tax on Form 2290 is a separate annual tax on the same equipment; see our Form 2290 guide. If you also claim fuel tax credits, read our guide to fuel tax credit claims. For broader help, the firm's small business IRS problems guide explains its approach.
The invoice said "FET." The IRS will want to know who paid it. Make sure the answer is not "nobody."