Speedy Trucking is hired to transport property from a location in City A to a location in City B. The total mileage between the pickup point and the delivery point is ten miles. City B is within 5 miles of the corporate limits of City A.
In many cases, a business may perform both urban transportation and motor transportation activities. In order to report under the proper tax classification the business must segregate their income into the proper reporting classifications. Documentation, such as a log or other record, must be maintained as evidence of actual activities performed. (Failure to maintain proper records may result in the higher tax rate of motor transportation applying to all of the income.)
A sales tax exemption is allowed for certain purchases by motor carriers who operate in interstate and foreign commerce. A “motor carrier” means and includes a natural person, individual, partnership, firm, association, or private or public corporation, which is engaged in interstate commerce and which operates or causes to be operated on any highway in this state any commercial motor vehicle.
The exemption applies to purchases of the following items when used in interstate and foreign commerce:
The following information provides guidance for determining if carrier equipment is used at least 25% of the time in interstate and foreign commerce.
“Substantial part” means that the motor vehicle or trailer actually crosses Washington boundaries and is used a minimum of twenty-five percent in interstate hauling for hire.
Use tax is due for those vehicles which have not been used substantially (more than 25%) in interstate commerce and on which retail sales or use tax has not been paid.
A motor carrier may choose one of the methods listed below to determine if its motor vehicles and trailers satisfy the substantial use threshold for exemption from use tax. The method must be applied to all trucks, tractors, and trailers within the fleet. Regardless of the method selected, a vehicle will not be considered as used in interstate hauls unless the vehicle actually crosses the boundaries of the state and is used in part outside of Washington. The motor carrier may change the method with prior written consent of the Department of Revenue.
Special application to trailers: Motor carriers must keep appropriate records in order to determine the use tax exemption for each individual truck and tractor. Motor carriers are encouraged to keep similar records for each individual trailer, but the Department recognizes that some carriers do not have a system for tracking or documenting the travel of their trailers. When records are maintained to document the use of individual trailers, use tax liability for trailers must be determined on the basis of those records.
In general, the activity of hauling for hire is not subject to the business and occupation (B&O) tax. However vendors selling to truckers are subject to tax as follows:
Dump truck operators perform a variety of activities and the taxability of the operators depends on the activity performed. For example, when an agreement calls for the mere transportation or loading and dumping dirt, the operator is subject to the public utility tax under either the motor or urban transportation classification.
See Excise Tax Advisory (ETA) 3050.2021 -Dump Truck Operators for several different types of operations and the resulting tax liability.
Most situations that apply to trucking activity, in general, also apply to deliveries by log trucks. However, there are certain exemptions and taxability issues that apply specifically to log truck drivers. Following is information on the PUT tax rate for hauling of logs over public highways, on export sites, hauling on private roads, and fuel refunds:
Effective August 1, 2015, the PUT tax rate for hauling logs over public highways is 1.3696 percent of gross income.
Effective June 7, 2006, owners of truck stops and heavy duty diesel trucks are allowed certain tax incentives for providing or using auxiliary power through on-board or stand alone electrification systems as external power sources to reduce air and noise pollution or reduce the consumption of diesel fuel. This incentive expired on July 1, 2015.
Truck stop owners are eligible for:
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