Retail Excise Tax: Heavy Trucks, Trailers & Tractors | Form 720

Retail Excise Tax at a Glance

What Is the Federal Retail Excise Tax?

The federal Retail Excise Tax is generally a 12% tax on the first retail sale of certain heavy trucks, trailers, semitrailers, and highway tractors.

It can apply to:

• Truck chassis and bodies
• Trailer and semitrailer chassis and bodies
• Highway tractors
• Certain parts and accessories sold with taxable vehicles

The tax is reported on Form 720, Quarterly Federal Excise Tax Return, under IRS No. 33.

Who May Be Responsible for Retail Excise Tax?

The seller is generally responsible for reporting and paying the federal Retail Excise Tax.

Businesses that may need to report the tax include:

• Heavy truck dealers
• Trailer and semitrailer dealers
• Commercial vehicle sellers
• Highway tractor dealers
• Manufacturers making taxable retail sales
• Importers making taxable retail sales

Not every truck, trailer, or tractor is taxable. Vehicle type, weight, use, and applicable IRS exemptions can affect whether the 12% tax applies.

What Vehicles Are Subject to Retail Excise Tax?

Federal Retail Excise Tax generally applies to the first retail sale of qualifying:

Truck Chassis and Bodies

Certain heavy truck chassis and bodies are subject to the 12% Retail Excise Tax.

IRS weight requirements and exclusions apply, so sellers should verify whether a particular truck qualifies as taxable before reporting the sale.

Trailers and Semitrailers

Certain trailer and semitrailer chassis and bodies can also be subject to the 12% tax.

Taxability depends on the vehicle specifications and applicable IRS requirements.

Highway Tractors

The tax generally applies to qualifying tractors chiefly used for highway transportation in combination with a trailer or semitrailer.

Certain lower-weight tractors are excluded under IRS rules.

What Is the First Retail Sale?

The Retail Excise Tax generally applies to the first retail sale of a taxable vehicle.

A first retail sale generally occurs when a taxable vehicle is sold for use rather than for resale.

Special rules can apply when a vehicle has previously been sold, leased, or used. Sellers should determine whether the transaction is the first taxable retail sale before calculating the tax.

How Is Retail Excise Tax Calculated?

The federal Retail Excise Tax is generally calculated as:

For example, the seller determines the taxable sales price of the qualifying vehicle and applies the 12% federal excise tax rate.

Certain parts and accessories sold with the vehicle may also be included in the taxable sales price.

When entering an applicable taxable sale, Excise720 can help calculate the Retail Excise Tax and prepare the Form 720 return for electronic filing.

Parts and Accessories

Certain parts and accessories sold on or in connection with a taxable truck, trailer, semitrailer, or tractor may also be subject to Retail Excise Tax.

Whether a particular part or accessory is included depends on how and when it is sold in connection with the taxable vehicle.

Replacement parts and certain qualifying equipment may receive different tax treatment.

Retail Excise Tax Exemptions

Not every truck, trailer, semitrailer, or tractor is subject to the federal Retail Excise Tax.

Depending on the vehicle or transaction, exclusions or exemptions may apply based on factors such as:

• Vehicle weight
• Vehicle design
• Intended use
• Certain government sales
• Certain qualifying exports
• Specific non-highway uses
• Other IRS exemptions

Businesses should verify that an exemption applies before excluding a vehicle sale from Form 720.

Retail Excise Tax and Vehicle Weight

Vehicle weight can affect whether a truck, trailer, semitrailer, or tractor is subject to Retail Excise Tax.

The IRS provides specific weight thresholds and vehicle classification rules. Sellers should use the vehicle's applicable Gross Vehicle Weight (GVW) information and current IRS guidance when determining whether a vehicle is taxable.

There is no need to calculate GVW separately if the appropriate manufacturer or vehicle documentation already provides the required information.

Leased Heavy Vehicles

Special Retail Excise Tax rules can apply when a taxable vehicle is leased before its first retail sale.

Depending on the lease arrangement, the transaction may be treated as a taxable sale or use.

Businesses that lease heavy trucks, trailers, or tractors should determine whether the lease creates a federal Retail Excise Tax obligation.

Section 4051(d) Tire Credit

A federal excise tax credit may be available for certain taxable tires sold on or in connection with the first retail sale of a taxable vehicle.

The applicable section 4051(d) tire credit is generally claimed on Schedule C (Form 720).

Businesses claiming the credit should maintain supporting records for the tires and related tax.

When Is Retail Excise Tax Reported?

Retail Excise Tax is generally reported quarterly on Form 720.

If a due date falls on a Saturday, Sunday, or legal holiday, IRS rules generally move the filing deadline to the next business day.

When your taxable vehicle sales are ready to report, you can prepare and electronically file Form 720 with Excise720.

How to Prepare for Retail Excise Tax Filing

Before preparing Form 720, gather information about taxable vehicle sales for the quarter. Useful information can include:

Determine whether each vehicle represents a taxable first retail sale and calculate the applicable Retail Excise Tax.

Once the required information is available, Excise720 can be used to prepare and e-file Form 720 for applicable Retail Excise Tax under IRS No. 33.

Common Retail Excise Tax Filing Mistakes

• Applying the tax to every truck: Not every truck, trailer, or tractor is taxable. IRS exclusions and exemptions may apply.
• Using the wrong sales price: Certain parts and accessories may need to be included in the taxable sales price.
• Ignoring the first retail sale rule: The tax generally applies to the first taxable retail sale.
• Missing vehicle weight requirements: Vehicle weight can affect whether the tax applies.
• Missing available exemptions: Certain vehicles, uses, or transactions may qualify for an exemption.
• Ignoring lease rules: Leasing a vehicle before its first retail sale can create special tax consequences.
• Missing an applicable tire credit: A section 4051(d) tire credit may be available in qualifying situations.

Retail Excise Tax Filing Checklist

Before filing, confirm that you have:

1. Identified potentially taxable vehicles.
2. Confirmed whether each transaction is a first retail sale.
3. Verified the vehicle type.
4. Reviewed applicable vehicle weight requirements.
5. Determine the correct taxable sales price.
6. Included taxable parts and accessories when required.
7. Reviewed available exemptions.
8. Checked applicable lease rules.
9. Reviewed eligibility for the tire credit.
10. Reported applicable tax under IRS No. 33.
11. Maintained supporting vehicle and sales records.

Retail Excise Tax Filing Pricing

Frequently Asked Questions