The Internal Revenue Service is reminding truck buyers that they can’t escape the 12 percent federal excise tax on the first retail sale of certain trucks, tractors and trailers just by buying them in another country. Truck owners who don’t pay the tax promptly after importing taxable vehicles are liable for interest and, potentially, penalties once the IRS catches up with them.
In the United States, the 12 percent federal excise tax typically is paid at the dealer level, but dealers in other countries aren’t liable for the tax, of course. There is still a tax liability if the vehicle is imported, however. When a truck owner brings a heavy vehicle into the United States that would be taxed if bought here, the tax kicks in once the owner uses the vehicle. The truck buyer would report the tax on Form 720, which would be due at the end of the quarter in which the sale or first use took place.
The issue appears to arise most with small and medium-sized trucking companies buying vehicles in Canada, says Joe Mazzuca, an IRS excise tax policy analyst. Mazzuca suspects that some Canadian truck dealers are promoting the lack of an excise tax as a way to entice U.S. fleet owners to buy across the border.
U.S. Customs and Border Protection shares import data with the IRS regarding articles subject to the 12 percent excise tax. So if truck owners don’t pay the tax on their own initiative, it’s likely that the IRS ultimately will catch up with them. By then, interest might make the tax far larger, and the owner might be subject to additional penalties.
For more information on the applicability of the excise tax to imported vehicles, click here.