Tucked into the new highway and energy laws are scores of tax provisions, including several that affect truck owners. Here's a rundown. The highway act extends the five existing Highway Trust Fund (HTF) taxes until September 30, 2011. The underlying rates are left untouched for the taxes on gasoline and gasohol; diesel and kerosene; “retail” sales of trucks, tractors, and trailers; truck tires; and heavy vehicle use. But the law manages to direct some more revenue into the HTF in ways that should benefit honest truckers by making more cheaters pay the full cost of fuel.
The biggest change in dollar terms is to make all kerosene sales after September 30 subject to the 24.4¢/gal. HTF tax, except for fuel placed directly into the wing of an aircraft. This measure is designed to thwart users who have been paying the 21.4¢ aviation tax rate and then using the fuel for trucks. Now, users will have to apply for a refund for the difference if they use the fuel in an airplane. Although it sounds like a small difference, Congressional staff estimate that the evasion has been costing the HTF — and honest truckers — roughly $50 million per year.
The act targets cheaters who blend untaxed, adulterated fuel with taxable fuel by imposing a $10,000 penalty on anyone who knowingly sells on-highway diesel that does not comply with EPA's low-sulfur standard. In addition, farmers who buy clear (taxable) diesel fuel after September 30 will have to pay the HTF tax and then claim a refund if they use the fuel on a farm, instead of buying the fuel tax-free.
The act delivers relief to a small class of tractor buyers. Until now, all new highway tractors — whatever their weight — have been subject to the 12% “retail” excise tax. After September 30, tractors with a GVWR of 19,500 lb. or less will be exempt if combined with a towed vehicle in a combination that has a GVWR of 33,000 lb. or less.
Owners of vehicles that use fuel for non-transportation purposes such as PTOs and concrete pumping did not win the fuel tax exemption they hoped for.
The energy act aims to encourage the use of various alternative fuels. Two provisions affect diesel. One is a 14% reduction in the diesel tax rate for diesel that is blended with at least that percentage of water. A second provision extends through 2008 the income tax credits enacted last year for biodiesel.
The energy act has two small revenue raisers involving fuel. The act reinstates an expired tax of 5¢/barrel tax — just over 0.1¢/gal. — on crude oil and imported fuel that goes into the Oil Spill Liability Trust Fund. Another 0.1¢ tax, for the Leaking Underground Storage Tank Trust Fund, will stay in place instead of expiring at the end of September. Finally, the act clarifies that the definition of a “super single” tire, which since last year has been taxed at only half the rate of other truck tires, does not cover steering-axle tires.
The bottom line: Despite all the hoopla about these bills, and the years it took to enact them, neither one makes fundamental changes in fuel taxes or the funding of the HTF. However, such changes remain probable within a few years. The highway act sets up a National Surface Transportation Infrastructure Financing Commission to consider alternative approaches for generating revenues for the HTF, which will most likely be drained by the end of 2009. And many of the tax breaks in the energy act expire at the end of 2007, meaning that Congress will soon be on the hunt again for revenue to extend them. As with these bills, carriers will need to remain vigilant, so they don't “pick up the bill.”