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Federal Excise Tax (FET) on trucks is a federal sales tax applied to the first retail sale of particular heavy trucks, tractors, and trailers.
If you’re a U.S. truck dealer, fleet owner, or a business that regularly purchases commercial vehicles, this tax directly affects your bottom line and compliance obligations.
Under current IRS regulations, the FET is generally 12% of the total sale price of qualifying vehicles, including any parts or accessories sold as part of the transaction (IRS Form 720 Instructions).
Filing and paying it correctly is essential because mistakes can lead to penalties, delayed sales, or audit issues that disrupt operations.
Understanding when the tax applies, which transactions qualify for exemptions, and how to file accurately can save you time, money, and unnecessary stress. This blog will break down the essentials and give you a clear path to staying compliant.
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The Federal Excise Tax on trucks is part of a group of federal taxes applied to specific goods and activities. It is not a general sales tax. Instead, it targets certain high-value, high-impact transactions that have a direct link to the federal highway system.
According to the IRS, the tax applies to the first retail sale of a “highway vehicle” that meets the weight and design criteria outlined in Internal Revenue Code Section 4051. This usually means trucks, tractors, and trailers built for commercial hauling rather than personal transport.
For trucks, the IRS describes a qualifying vehicle as one “primarily designed to carry a load over public highways,” other than passengers. Tractors are classified as vehicles “primarily designed to tow a trailer or semi-trailer over public highways” (IRS Form 720 Instructions). These definitions matter because they decide whether a transaction falls under FET rules.
Understanding these distinctions helps sellers and buyers avoid costly misclassification. If a vehicle meets the IRS definition and exceeds the weight thresholds, the sale will likely trigger the 12% FET, even if the parties are unaware of the requirement.
Also Read: Understanding US GAAP Revenue Recognition Standards
The Federal Excise Tax on trucks is part of a group of federal taxes applied to specific goods and activities. It is not a general sales tax. Instead, it targets certain high-value, high-impact transactions that have a direct link to the federal highway system.
According to the IRS, the tax applies to the first retail sale of a “highway vehicle” that meets the weight and design criteria outlined in Internal Revenue Code Section 4051. This usually includes:
These definitions matter because they determine whether a transaction falls under FET rules. Understanding them helps both sellers and buyers:
Precise classification from the start can make FET compliance much smoother for all parties involved. It also serves as the foundation for understanding the specific circumstances under which the tax must be calculated and paid.
The FET is triggered when a qualifying truck, tractor, or trailer is sold at retail for the first time. This point of sale, known as the “first retail sale,” is when the buyer takes ownership for use rather than resale. The seller is responsible for collecting the tax from the buyer and remitting it to the IRS.
Filing and payment are done using IRS Form 720, the Quarterly Federal Excise Tax Return. This form must be submitted along with the payment for the tax due in the applicable quarter. Accurate reporting is essential to avoid penalties or processing delays.
Quarterly filing deadlines for Form 720 are as follows: