Federal Excise Tax Guidelines for Tire Tax Credit on trucks and trailers subject to FET

Originally published in the March 2014 edition of Tech Trends (e-newsletter and as an article within NTEA News), this article is also available to you below as an employee of an NTEA member company.

Calls and emails regarding Federal Excise Tax (FET) have surged in the last few months. Since FET is 12% of the retail sales price on a taxable item, it is critical for the seller to be able to accurately determine when the tax is applicable and precisely how much is due. A common question involves how to handle the tire tax credit when determining FET to be collected on a truck chassis or trailer chassis. Much of the confusion stems from the lack of readily available information on how much FET has been collected on the tire, seeing as it is calculated and paid by the tire manufacturer.

Key Guidelines

• When selling an FET-taxable truck chassis or truck body, the seller can deduct the amount of FET collected on the individual tires from the total FET due.
• FET on a tire is based on the load rating of the tire and is set by a specific formula. The individual tire manufacturers calculate the FET due based on the tire size and construction, and they pay the FET directly to the Internal Revenue Service.
• So, how does an upfitter find out how much FET was paid on a specific size and type of tire? The tire manufacturers include the FET amount as part of their price lists, and the MSRP price list normally has a column for FET. As an upfitter, if you have a good relationship with a local tire dealer that supplies your shop with tires or that you refer your customers to for tire replacement and warranty, the dealer can be an excellent resource for tire FET documentation. Remember to get the specific FET information by brand (i.e., Goodyear, Bridgestone, etc.) and tire size and load rating.

Are you faced with technical or engineering challenges?
Contact the Technical and Engineering Hotline at (800) 441-6832 for individual attention on varied topics such as Federal Excise Tax, truck certification and labeling, vehicle compliance and truck spec’ing. The Hotline is available Monday–Friday, 8AM–5PM (EST). Members can contact the Association as frequently as needed.