What Is FET Tax? Federal Excise Tax on Heavy Trucks

The FET tax on heavy trucks is a one-time 12% federal excise tax the IRS collects on the first retail sale of heavy highway trucks, trailers, and tractors that exceed set weight thresholds. The seller reports and pays it on Form 720. Under current law, the tax is scheduled to expire on October 1, 2028, unless Congress extends it.¹

Which Vehicles the Tax Applies To

Three types of equipment can trigger FET at first retail sale: truck chassis and bodies, trailer and semitrailer chassis and bodies, and highway tractors. The “first retail sale” is the first time a manufacturer, producer, or importer sells the article to the end user. If a manufacturer leases the vehicle or puts it into service before selling it, that use can itself trigger the tax.¹

Weight thresholds decide whether a given vehicle is in or out:

Truck chassis and bodies are taxable only when suited for a vehicle with a gross vehicle weight above 33,000 pounds.
Trailer and semitrailer chassis and bodies are taxable only when suited for a unit with a GVW above 26,000 pounds.
A highway tractor is taxable unless its own GVW is 19,500 pounds or less and its gross combined weight with a trailer is 33,000 pounds or less. A tractor that fails either test owes the tax.¹

These weights are based on the manufacturer’s rated capacity, not the scale weight on the day of sale. The GVW appears on the vehicle identification plate or in documentation provided to the buyer. If a vehicle is later modified to carry more than its original rating, the IRS may reclassify it based on functional capacity.

How the 12% Is Calculated

FET equals 12% of the total price paid for the taxable article. “Total price” is broader than the sticker figure — it includes any charge to place the vehicle in a condition ready for use, such as delivery and setup.²

A few items come out of the tax base:

The FET itself. The 12% is not calculated on top of itself.
State and local retail sales tax, if separately stated on the invoice.
Used components the buyer supplies for installation in the new vehicle, such as a used engine.²

Trade-ins do not reduce the taxable price. The IRS treats the trade-in allowance as part of the total consideration paid, so the 12% applies to the full price before any trade-in credit.³

When a vehicle is leased for one year or more instead of sold, the IRS treats the lease as a first retail sale. The tax base is the lessor’s cost of the vehicle plus any parts and accessories the lessor installed, along with a markup percentage that reflects average retail margins for that type of equipment.²

Parts and Accessories Added Later

Parts and accessories sold with the vehicle at the first retail sale go into the tax base automatically. The rule extends to equipment installed separately within six months after the vehicle is first placed in service, but only if the combined cost of parts, accessories, and installation charges during that window exceeds $1,000. At or below $1,000, nothing more is owed. Once the threshold is crossed, the 12% applies to the entire amount spent during the six-month period, not just the amount above $1,000.³

Two categories are permanently excluded from this six-month rule regardless of cost: qualified idling reduction devices (such as auxiliary power units that reduce engine idling) and insulation with an R-value of at least R35 per inch.⁴

Exemptions

Several sales are exempt even when the vehicle clears the weight thresholds. The buyer must give the seller an exemption certificate documenting the basis at the time of sale.

Vehicles sold for export to a foreign country. If the seller cannot later produce proof of export, the seller becomes liable for the tax.³
Sales to a state or local government for its exclusive use.
Sales to nonprofit educational organizations that are tax-exempt under section 501(a), maintain a regular faculty and curriculum, and have a regularly enrolled student body, for the organization’s exclusive use.
Bodies primarily designed to handle feed, seed, or fertilizer, such as spreaders, haulers, and loaders used on farms. The exemption covers the body and its parts only, not the chassis it is mounted on.
Any ambulance, hearse, or combination of the two.³

The Mobile Machinery Exception

Equipment that looks like a truck but functions as a mobile workstation may fall outside the definition of a highway vehicle. The chassis has to pass three tests:

Machinery for construction, mining, drilling, farming, or a similar nontransportation operation is permanently mounted (welded, bolted, or riveted) to the chassis.
The chassis is specially designed to serve only as a mobile platform and power source for that specific machinery.
The chassis could not be converted to carry ordinary freight without substantial structural modification.⁵

Well-drilling rigs and concrete pump trucks commonly qualify. A flatbed truck with a detachable crane does not, because the chassis can haul ordinary loads without modification.

FET Is Not the Same as the Heavy Vehicle Use Tax

FET and the Heavy Vehicle Use Tax (HVUT) are separate federal taxes on different events. A single vehicle can owe both.

FET is a one-time 12% tax paid on Form 720 when a heavy truck, trailer, or tractor is first sold at retail, using the weight thresholds above.¹
HVUT is an annual tax on Form 2290 for vehicles operating on public highways at a registered gross weight of 55,000 pounds or more. It ranges from $100 to $550 depending on weight and is due by the last day of the month following the month the vehicle is first used on public roads.⁶

A new 80,000-pound tractor-trailer, for example, triggers the 12% FET at purchase and a $550 annual HVUT for each year it operates on public highways.⁷

Who Files and When

The seller — not the buyer — reports and pays FET to the IRS using Form 720, Quarterly Federal Excise Tax Return. FET on heavy trucks is reported in Part II, which means the tax is payable with the quarterly return rather than through semimonthly deposits. Most filers submit payment through the Electronic Federal Tax Payment System (EFTPS).⁴

Quarterly deadlines:

January through March: due April 30
April through June: due July 31
July through September: due October 31
October through December: due January 31⁴

If a due date falls on a Saturday, Sunday, or legal holiday, the deadline moves to the next business day.

Penalties for Late Filing or Payment

Missing a Form 720 deadline can trigger two penalties at once:

A late filing penalty of 5% of the unpaid tax for each month or partial month the return is late, capped at 25%.
A late payment penalty of 0.5% of the unpaid tax for each month or partial month the payment is overdue, also capped at 25%. The rate rises to 1% if the balance remains unpaid 10 days after the IRS issues a notice of intent to levy.⁸

Interest also accrues on any unpaid balance, compounded daily. The IRS updates the underpayment rate quarterly, and it applies to unpaid tax, penalties, and previously accrued interest.⁹

When FET Can Be Refunded

If FET was paid on a vehicle that later qualifies for an exemption, the IRS treats the payment as an overpayment when the vehicle is:

Exported after the tax was paid
Sold or resold to a state or local government for exclusive government use
Sold or resold to a qualifying nonprofit educational organization for its exclusive use
Used as supplies for vessels or aircraft¹⁰

To claim the refund, the person who paid the tax generally has to show that they did not pass the cost along to the buyer or that they have already reimbursed the buyer. The filer can also submit written consent from the buyer authorizing the refund. These credits are paid without interest.¹⁰

The 2028 Expiration

Under current law, FET on heavy trucks, trailers, and tractors expires on October 1, 2028. After that date, no 12% tax will apply to first retail sales unless Congress passes new legislation.¹¹ Congress has extended this tax multiple times before, so fleet operators planning large purchases around the deadline should watch legislative activity rather than assume the sunset will hold.

1
Office of the Law Revision Counsel. 26 USC 4051 – Imposition of Tax on Heavy Trucks and Trailers Sold at Retail
2
Office of the Law Revision Counsel. 26 USC 4052 – Definitions and Special Rules
3
Internal Revenue Service. Publication 510 – Excise Taxes
4
Internal Revenue Service. Instructions for Form 720
5
eCFR. Part 48 – Manufacturers and Retailers Excise Taxes
6
Internal Revenue Service. Instructions for Form 2290
7
Federal Highway Administration. What Is the HVUT and Who Must Pay It?
8
Internal Revenue Service. Information About Your Notice, Penalty and Interest
9
Internal Revenue Service. Quarterly Interest Rates
10
Office of the Law Revision Counsel. 26 USC 6416 – Certain Taxes on Sales and Services
11
Office of the Law Revision Counsel. 26 USC 4051 – Imposition of Tax on Heavy Trucks and Trailers Sold at Retail