Driving Economics: How Highway Tax for Trucks Matters

| July 31, 2023

| Highway Use Tax for Truckers and Others

If you own or operate a truck, it’s important to become familiar with trucking taxes, especially highway taxes for trucks. Staying compliant with IRS and state tax laws is imperative to running and growing your business so it can be successful and thrive.

Avoiding tax payments is the biggest tax mistake a business can make while miscalculating trucking taxes can also cause expensive and time-consuming problems. But understanding trucking taxes, like highway taxes, can be difficult to navigate.

To help you out, we’ve put together a comprehensive guide to cover everything you need to know about highway taxes for trucks — from the various types and how they work to the impact they make on the trucking industry.

A Comprehensive Guide to Trucking Taxes

Independent truck drivers and owner-operators pay several federal and state taxes. Some of the most common taxes in the trucking industry are:

Estimated tax
Self-employment tax
State income tax
Federal income tax

Highway taxes for trucks also include the following:

IFTA fuel tax
Heavy vehicle usage tax
Excise tax

A Closer Look at Estimated Tax & Self Employment Tax

If you’re self-employed and expect to owe at least $1,000 in taxes, you must make estimated tax payments. These quarterly payments include self-employment tax and federal and state income tax.

Knowing how much to put aside for estimated tax payments can be tricky. But generally, you’ll want to allocate about 25% to 35% of your monthly earnings.

For a more exact number, use Form 1040-ES to figure out your estimated tax.

Your income tax will likely fall into the 10% to 12% income tax bracket, and your self-employment tax should be roughly 15.3% of your net earnings (this includes a 12.4% social security tax and a 2.9% Medicare tax).

Each quarter, you can pay your federal tax estimates online or via the IRS mobile app (if you have an electronic federal tax payment system account, you can make your payments there). Many states also let you pay your estimated taxes online.

An Overview of State Income Truck Taxes

Forty-three states and the District of Columbia have state income taxes. The seven states that do not impose individual income taxes are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.

The definition and rules of taxable income vary by state. For example, New Hampshire and Tennessee residents only pay tax income from dividends and interest.

To stay on top of your state taxes, check your state’s government website for more information on where you live and work.

State-Specific Truck Driver Taxes

Truck driver taxes also vary from state to state. For example, in Washington, independent contractors and owner-operators could be subject to public utility tax, business and occupation tax, retail sales tax, and use tax. Again, check your state’s government website for more details.

A Look at Federal Income Tax — Form 1099 for Truck Drivers

Whether you work as an independent contractor or you hire one out for your trucking business, you’ll still have to report how much money was paid. That’s where 1099 forms for truck drivers come into play.

1099 forms for employers

If you paid an independent contractor more than $600 in a tax year, you’ll need to report the compensation you gave them on Form 1099-NEC.

To file a 1099 form, you’ll include the following:

Your business name
Your business address
Your EIN
Your independent contractor’s name
Your independent contractor’s EIN or social security number
Your independent contractor’s address

If you need your independent contractor’s information, you can request it through a W-9.

There are also additional federal and state details you’ll need to know, depending on where you live. This could include state income, payer state number, and withheld state tax.

1099 forms for truck drivers

As an independent trucking contractor, you’ll need client 1099s to report the income you earned during the tax year.

If you haven’t been making estimated quarterly payments, then you’ll likely end up owing the IRS for state and federal taxes, social security, and Medicare.

Understanding the International Fuel Tax Agreement

The International Fuel Tax Agreement (IFTA) collects fuel taxes by interstate commercial carriers and redistributes them. It was adopted in 1996 to make transferring fuel taxes between states and provinces easier.

IFTA also helps repair and maintain roads and highways in each state and province so they are safe and reliable, ultimately decreasing the risk of vehicle damage for motor haulers.

Who qualifies for IFTA?

You must have an IFTA license and decals if you:

Have a “qualified motor vehicle”
Travel between two or more of the member jurisdictions (48 of the United States and 10 Canadian provinces)

A vehicle that’s qualified for the IFTA tax has:

Two axles and a gross vehicle weight exceeding 26,000 pounds
Two axles and a registered weight exceeding 26,000 pounds
Three or more axles, regardless of weight
A combination weight exceeding 26,000 pounds

IFTA base jurisdictions

Once you obtain an IFTA license, you can travel through all IFTA jurisdictions. You’ll also be required to submit one fuel tax return per quarter to your base jurisdiction.

A base jurisdiction is where your truck and information are registered. It’s also where your operational control and records are maintained. It should be the state where your qualified motor vehicle is traveling within the fleet, accruing mileage.

*Alaska, Hawaii, District of Columbia, Yukon Territory, Northwest Territory, and Nunavut are not included in IFTA.

How to apply for an IFTA license

If your trucking business requires an IFTA license, you must submit an application in the state where your company is located. It’s important to find the IFTA requirements and vehicle registration process for your state.

To apply for an IFTA license, you’ll need the following information:

USDOT number
Registered business name
Mailing address
Federal business number

Once your application is processed, you’ll receive two issued IFTA decals for your vehicle for the current year. Both of these will need to be displayed on each side of your truck cab.

Note: IFTA licenses and decals expire each year on December 31st. You have until March 1st of the following year to renew them.

Obtaining an IFTA license and decals is important for running your trucking business. If you don’t have an IFTA license and decals on your vehicle, you could face penalties. Not displaying your IFTA decals can also result in fines of up to several thousand dollars.

Filing a quarterly IFTA return

IFTA must be reported by the last day of the month, after the end of each quarter. For example, here are the typical dates for each reporting quarter.

Quarter	Period	Deadline
First Quarter	January to March	April 30
Second Quarter	April to June	July 31
Third Quarter	July to September	Oct. 31
Fourth Quarter	October to December	Jan. 31

Note: If the due date falls on a weekend or public holiday, the due date will be pushed to the next business day. For example, the first quarter payment for 2023 was pushed to May 1 since April 30 fell on a Sunday.

To complete an IFTA quarterly tax return, you’ll need the following information:

Total miles, taxable and nontaxable, traveled by the licensee’s qualified motor vehicles in all jurisdictions, IFTA and non-IFTA, including trip permit miles
Total gallons of fuel consumed, taxable and nontaxable, by the licensee’s qualified motor vehicles in all jurisdictions, IFTA and non-IFTA
Total miles and taxable miles traveled in each member jurisdiction
Taxable gallons consumed in each member jurisdiction
Tax-paid gallons purchased in each member jurisdiction
Current tax rate for each member jurisdiction

Heavy Highway Vehicle Use Tax: What You Need to Know

The Heavy Vehicle Use Tax is an IRS tax based on the weight of your vehicle. If you have a vehicle with a gross weight of 55,000 pounds or more and you drive it on public roadways, you must pay the HVUT. This is done by filing Form 2290 annually.

Calculating Heavy Vehicle Use Tax

To calculate your HVUT, you must first determine your taxable gross weight, which is the combination of the following:

The actual unloaded weight of your motor vehicle fully equipped for service
The actual unloaded weight of trailers or semi-trailers fully equipped for service that are typically used with the vehicle
The weight of the maximum load typically carried on the vehicle and on the trailers or semi-trailers

Taxable gross weight categories

The HVUT varies based on your taxable gross weight category. For example, the HVUT payment for a vehicle with a gross weight between 55,000 to 75,000 pounds is $100. If your truck is over 55,000 pounds, you’ll need to add $22 for every 1,000 pounds that your vehicle weighs (with a cap at 75,000 pounds).

However, if your vehicle has a gross weight of over 75,000 pounds, the maximum HVUT payment you’ll make is $550.

A breakdown of tax rates

Vehicles below 55,000 pounds	No tax
Vehicles 55,000 pounds	$100
Vehicles over 75,000 pounds	$550
Vehicles between 55,000 and 75,000 pounds	$100 plus $22 for every1,000 pounds over 55,000

The Importance of Highway Tax for Trucks

In the past few decades, the volume of truck weight has grown significantly, and the trucking industry is only going to continue to grow in the coming years. According to the Department of Transportation, the freight tonnage carried by trucks is expected to increase by 50% between 2002 and 2035.

Since heavy trucks add more wear and tear to the roadways, the heavy highway vehicle use tax evens the playing field. By collecting HVUT payments, the IRS is able to funnel money back into the country’s transportation funding. By helping to repair roads and maintaining the nation’s highways, the HVUT can help with the following:

Reducing car crashes
Lowering fuel and insurance costs
Easing traffic congestion
Increasing air quality by decreasing energy consumption
Strengthening the country’s economic productivity

Tax Compliance for Heavy Vehicle Use Tax

To avoid IRS penalties, file Form 2290 and pay your taxes on time. You can do this by either e-filing or mailing Form 2290.

When to file Form 2290

The deadline to file Form 2290 and pay your HVUT is the last day of the month following the “first used month” of the vehicle (for example, if you get a new truck in December and put it on the road, you must file your 2290 tax form by January 31st).

However, if you continue to operate your truck on public highways, you’ll file following the fiscal year. Since the tax year begins on July 1 and ends on June 30, the deadline to file Form 2290 for most truckers is August 31st.

How to e-file Form 2290

E-filing is the easiest way to pay your HVUT. It’s also the only method the IRS will allow if you’re filing 2290 forms for more than 24 vehicles.

When you e-file, your return will be processed quickly, you’ll get your stamped Schedule 1 in a matter of minutes, and you’ll get your refund faster — usually within three weeks of the IRS receiving your tax return.

To e-file Form 2290 and pay your HVUT, you’ll need to do the following:

Gather your information – This includes your Employee Identification Number (EIN), Vehicle Identification Number (VIN), and taxable gross weight of each vehicle.
Choose a 2290 e-file provider and file – You cannot e-file Form 2290 on irs.gov. You must use a participating third-party provider like ExpressTruckTax.
Choose a payment option – You can pay your taxes by credit card or debit card, via an electronic funds withdrawal, or through the Electronic Federal Tax Payment System (EFTPS).

How to paper file Form 2290

If you paper file your Form 2290, you’ll need to print the return, fill it out, and mail it to the IRS, along with your check. This usually takes the IRS four to six weeks to accept your return.

If you’re sending Form 2290 with a full payment that is not drawn from an international financial institution, mail it to the Internal Revenue Service, P.O. Box 932500, Louisville, KY 40293-2500.

Amendments and Corrections to Form 2290

Form 2290 amendments should be filed when the information for the filed vehicle changes in these three ways:

There’s an increase in taxable gross weight
The mileage use has exceeded its limit
The VIN is incorrect

Penalties for non-compliance

If you miss filing Form 2290 and making your HVUT payment on time, you could be penalized 4.5% of the total HVUT taxes due — this penalty can accrue for up to five months.

If you fail to pay the full amount of HVUT taxes due, you could also face a penalty of 0.5% of the unpaid tax per month, with a maximum penalty of 25%.

Understanding Federal Excise Taxes for Truck Drivers

If you’re new to the trucking industry, the first tax you’ll likely face is the federal excise tax.

Excise taxes are imposed on the sale of certain goods or services, including the purchase of fuel, heavy trucks and highway tractors, tobacco, and more. Federal excise taxes apply to trucks, tractors, truck trailers, and semi-trailers. They must be paid to the federal government after purchase.

Federal excise taxes for truck drivers fund the Highway Trust Fund. These payments are then used for road repairs and to expand the U.S. highway system.

Federal Excise Tax Form 720

Anyone involved in the sales of goods or services, such as fuel, heavy trucks, and other goods in Part I and Part II of Form 720, must pay excise taxes using Form 720, Quarterly Federal Excise Tax.

This form must be submitted for every quarter until you file a final return. The deadline to file Form 720 is the last day of the following month of the quarter’s end month (see the IFTA quarterly table above).

How to Calculate Federal Excise Tax On Trucks

The IRS imposes a 12% federal excise tax on the first retail sale of truck chassis and bodies, truck trailers and semi-trailer chassis and bodies, and tractors used for highway hauling along with a trailer or semi-trailer.

The tax only applies to truck chassis and bodies suitable for use with a gross vehicle weight of 33,000 pounds or more. It does not apply to a truck trailer and semi-trailer chassis and bodies suitable for use with a trailer or semi-trailer with a gross vehicle weight of 26,000 pounds or less. Tractors with a gross vehicle weight of 19,500 or less and a gross combined weight of 33,000 pounds or less are also exempt from paying the 12% federal excise tax.

How to claim tax credits on Federal Excise Tax using Form 8849

Form 8849, Claim for Refund of Excise Taxes, is a tax form used to claim credits when a vehicle is stolen, destroyed, or sold. You can also claim credits if you overpaid taxes. There are six schedules available to be attached to Form 8849:

Schedule 1 – Nontaxable Use of Fuels
Schedule 2 – Sales by Registered Ultimate Vendors
Schedule 3 – Certain Fuel Mixtures and the Alternative Fuel Credit
Schedule 5 – Section 4081(e) Claims
Schedule 6 – Other Claims
Schedule 8 – Registered Credit Card Issuers

Note: You must only attach the schedules on which you are claiming a refund. Keep in mind that you cannot file Schedules 2, 3, 5, and 8 with any other schedules on Form 8849. You must file each of these schedules with a separate Form 8849.

ExpressTruckTax supports Schedule 6

If you want to claim refunds of excise taxes, use Form 8849 Schedule 6. Alternatively, you can use those funds to pay your taxes for the current year. When you e-file Excise Tax Form 2290, our system auto-generates Form 8849 Schedule 6 if your tax credits exceed your HVUT.

Highway Tax for Trucks – Final Thoughts

Staying on top of highway use taxes not only keeps you compliant with IRS and state tax laws, but it also benefits the trucking industry as a whole.

By contributing to the nation’s transportation funding, you’re ensuring that roads are repaired and maintained. This, in turn, helps improve how efficiently goods are moved and ultimately strengthens the nation’s economic productivity.

For more information about highway tax for trucks, visit ExpressTruckTax and check out the resources below:

Tags: heavy highway tax, highway tax 2290

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