Legislation to repeal the 12% federal excise tax on truck and trailer purchases and replace it with an increase in the diesel fuel tax has been introduced in the U.S. House of Representatives.


Congressmen Jim Gerlach (R-PA) and Earl Blumenauer (D-OR) introduced the bipartisan bill, H.R. 4321, on the House floor on March 29, and has been referred to the House Ways and Means Committee, of which Rep. Gerlach is a member. The bill is strongly supported by the Truck Renting and Leasing Association, the National Truck Equipment Association and others.

"TRALA members purchase between 35-40% of all new trucks and equipment in North America. Eliminating the FET would help mitigate the cost of investing in new equipment and accelerate the utilization of new environmental and safety technologies in commercial truck transportation," the group said in a statement issued on Friday.

NTEA calls the 12% retail sales tax a disincentive to sales.

"As the economy and industry begin to recover, eliminating this disincentive will serve to strengthen the industry," NTEA said in a press release.

Supporters of the bill propose replacing revenue shortfalls to the Highway Trust Fund with a 6.4 cent-per-gallon fuel tax levy, which they say would be revenue neutral over the course of 10 years while providing a more stable 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," NTEA says. "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."

"This change in law would also give more certainty to Highway Trust Fund revenues by linking the funding to diesel fuel consumption rather than the excise tax as truck and equipment sales tend to fluctuate greatly due to economic conditions," notes TRALA.

Complexity
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 here.