What is a sales tax exemption?
A sales tax exemption refers to specific transactions or purchases not subject to sales tax, either partially or entirely, based on certain criteria or circumstances outlined by tax laws and regulations. For truckers and trucking businesses, sales tax exemptions are crucial in reducing operational costs and tax liability.
What are the different types of sales tax exemptions?
Each state has different sales tax exemptions and criteria to qualify. Exemptions can occur for several types of transactions, including maintenance, equipment, and other purchases related to trucking operations. Let’s take a closer look at the different types of exemptions available to truckers in varying states:
Exemptions for Equipment:
Trucking businesses frequently invest in equipment and supplies essential for their operations, such as trucks, trailers, parts, and maintenance supplies. Many states offer exemptions or reduced tax rates on purchases of qualifying equipment used directly in the transportation of goods or passengers. Qualifying equipment may include vehicles designed for interstate commerce, trailers, tires, repair parts, and accessories.
Trucking businesses may need documentation such as invoices, receipts, or exemption certificates to claim exemptions for equipment purchases.
Exemptions for Certain Services:
Some states provide exemptions or reduced tax rates on certain services related to trucking operations, such as vehicle repairs, maintenance, and towing. These exemptions typically apply when services are performed on qualifying commercial vehicles used in interstate commerce or other specified activities.
Documentation requirements for claiming exemptions on services may vary depending on state regulations and the nature of the service provided.
Again, exemptions and exemption criteria will vary by state, and some states may not offer any exemptions.
For example, in Florida, “Vehicles used by common carriers in interstate commerce are subject to the FL sales tax only on the ratio of intrastate FL mileage to the interstate mileage traveled by the carrier during the previous year (partial sales tax exemption). Repairs, parts, and other items used on vehicles used for-hire in interstate commerce may be eligible for partial sales tax exemptions.”
In Missouri, “certain vehicles engaged in the transportation of people or property—as well as materials, replacement parts, and equipment for direct use on the vehicles—are exempt from sales and use tax” (JJ Keller).
Do your research to find exemption opportunities for equipment or service expenses when traveling through other states. Visit state websites for further information, exemption forms, and qualification criteria.
What documentation do you need for sales tax exemptions?
Documentation for each state’s sales tax exemptions will vary, but it is common for states to have forms like the one shown below:
Visit your state's website (and those you frequently haul to/through) and keep copies of their available sales tax exemption forms.
Tax laws can be complex and vary based on individual circumstances, so it's always best to consult a qualified tax professional or accountant. Find a tax professional who is well-versed in the trucking industry.
Source: Sales Tax & Exemptions State Comparison | J. J. Keller® Compliance Network (jjkellercompliancenetwork.com)
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Soshaul Logistics LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It is meant to serve as a guide and information only and Soshaul Logistics, LLC does not assume responsibility for any omissions, errors, or ambiguity contained herein. Contents may not be relied upon as a substitute for the FMCSA's published regulations. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.
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