Federal Excise Tax (FET) on Trucks, Trailers & Fuel

A federal excise tax is a tax on the sale or use of particular products or services — not a general tax on income or profit. Congress attaches excise taxes to specific items such as motor fuel, heavy highway vehicles, tires, and air transportation. The seller, manufacturer, importer, or service provider is usually responsible for remitting the tax to the IRS, even though the cost is typically built into the price the customer pays.

When people in the trucking and equipment world say "FET," they usually mean the federal retail excise tax on heavy trucks, trailers, and tractors — a 12% tax that can add tens of thousands of dollars to the price of a new rig. Fuel sellers, blenders, and importers deal with a separate family of per-gallon fuel taxes. Both flow through the same quarterly return, Form 720. For a full map of every category on the form, see our excise tax categories guide.

Motor fuel carries its own federal excise taxes, imposed on a per-gallon basis. The statutory rates are 18.3 cents per gallon for gasoline and 24.3 cents per gallon for diesel, with kerosene generally taxed at the same rate as diesel. On top of these, a 0.1-cent-per-gallon Leaking Underground Storage Tank (LUST) tax applies — and the LUST tax is due even on certain fuels, such as dyed diesel and dyed kerosene, that are otherwise sold tax-free for nontaxable uses.

Unlike the retail truck tax, fuel tax is imposed far upstream: it attaches when fuel is removed from a terminal at the rack, and the position holder in the terminal is liable. Blenders owe tax when they produce a taxable blended fuel using untaxed components, and importers owe tax on fuel entered into the United States. Alternative fuels such as propane (LPG), compressed natural gas (CNG), and liquefied natural gas (LNG) are taxed under their own line items.

Most businesses never remit fuel excise tax directly because it is collected upstream and embedded in the pump price. But position holders, blenders, refiners, and importers must register with the IRS, report each fuel type under its own IRS number on Form 720, and keep gallon-level records. For a deeper walkthrough, read our guide to fuel excise taxes on Form 720.

Not every heavy-vehicle sale triggers the 12% tax. The most important exclusions and exemptions are:

• Used vehicles previously taxed. The retail tax applies only to the first retail sale. Reselling a used truck, trailer, or tractor on which the tax was already imposed does not create a second tax.
• Vehicles below the weight thresholds. Truck chassis and bodies at or under 33,000 lbs GVW and trailers at or under 26,000 lbs GVW are outside the tax. Small tractors are excluded when GVW is 19,500 lbs or less and gross combined weight is 33,000 lbs or less.
• Repairs and modifications. Repairing or modifying an existing vehicle does not create a new taxable article as long as the cost of the work does not exceed 75% of the retail price of a comparable new vehicle.
• Sales for resale. A sale to a dealer for resale is not a first retail sale; the tax waits until the article reaches a buyer who will use it.
• Exempt purchasers and uses. Sales for export, to state and local governments for their exclusive use, and to qualifying nonprofit educational organizations can be exempt when registration and documentation requirements are met.
• Idling-reduction devices and advanced insulation. The cost of qualifying idling-reduction devices and advanced truck insulation is excluded from the taxable sale price.

Exemptions must be documented. Dealers claiming an exempt sale should retain the required certificates and registration numbers, because the seller — not the buyer — answers to the IRS if an exemption fails.