What Is FET Tax? The 12% Federal Excise Tax on Heavy Trucks

The federal excise tax on heavy trucks, commonly called FET, is a 12 percent tax on the first retail sale of heavy trucks, trailers, and highway tractors. It applies to truck chassis and bodies rated above 33,000 pounds gross vehicle weight, trailer and semitrailer chassis and bodies above 26,000 pounds, and tractors used primarily to pull trailers or semitrailers on public highways.¹ The seller collects it, reports it on Form 720, and remits it to the IRS. Proceeds go to the Highway Trust Fund. Under current law, the tax is scheduled to sunset on October 1, 2028.

What Vehicles Are Taxed

Five categories of articles fall within scope when sold at retail: truck chassis, truck bodies, trailer and semitrailer chassis, trailer and semitrailer bodies, and highway tractors.¹ The weight numbers work as exclusions: trucks at or below 33,000 pounds and trailers at or below 26,000 pounds are out. Anything heavier, based on the manufacturer’s gross vehicle weight rating, is in.

The vehicle also has to be designed to carry loads over public highways. A Class 8 semi, a heavy dump truck, and a large flatbed trailer are typical taxable articles. Equipment built strictly for off-road work generally is not, though occasional off-road use does not remove a highway-capable vehicle from the tax.

Section 4053 exempts several articles even when they cross the weight thresholds. Among them: ambulances and hearses, house trailers, camper coaches and self-propelled mobile home bodies, concrete mixers, trash containers not permanently mounted to a chassis, rail trailers and rail vans, farm equipment for feed, seed, and fertilizer, idling reduction devices, and mobile machinery whose chassis is specially built to carry equipment for construction, mining, or farming and could not carry other loads without major structural modification.² Vehicles sold for export are exempt too, but the seller must obtain proof of exportation within six months or become liable for the tax as of the day that window closed.³

How the 12 Percent Is Calculated

The tax equals 12 percent of the retail sale price, including any parts or accessories sold with the vehicle or in connection with the sale.¹ Several charges come out of the base when they appear as separate line items on the invoice:

Transportation and delivery charges to get the vehicle to the buyer.
State and local sales tax, if separately stated.
Installation labor for parts and accessories, if separately stated. The parts themselves remain taxable.
Non-transportation equipment mounted on the vehicle that does not contribute to its highway transportation function.
Used components the buyer supplies for incorporation into the taxable article.

A trade-in on a separate vehicle does not reduce the base. The 12 percent runs on the full sale price before any trade allowance. Sellers who bundle excludable items into a lump price make those items taxable by default, so line-item invoicing matters.

Tires sold with a taxable vehicle are already taxed under Section 4071. To avoid double taxation, the seller subtracts that Section 4071 tire tax as a credit against the 12 percent FET.¹ Missing this credit means overpaying.

Parts, Accessories, and Rebuilds That Trigger the Tax

The tax can attach after the sale too. If an owner, lessee, or operator installs any part or accessory on a taxable vehicle within six months of the date it was first placed in service, that installation itself is subject to 12 percent on both the parts and the labor.¹ Two carve-outs apply. Replacement parts, meaning identical swaps for worn components, are not taxed. And if the total price of all non-replacement parts, accessories, and installation on a given vehicle stays at or below $1,000, no additional tax is owed. Cross that $1,000 aggregate and the whole amount becomes taxable. The installer carries secondary liability, so shops adding aftermarket equipment to new heavy trucks should watch the running total.

Used vehicles are normally outside the tax because FET applies only to the first retail sale. The exception is heavy rebuilds. When the cost of repairs and modifications on a used vehicle exceeds 75 percent of the retail price of a comparable new article, the IRS treats the rebuild as a new taxable article subject to the full 12 percent.³ This catches wreck restorations and major conversions. Anyone planning a frame-off restoration on a Class 8 truck should price the work against a comparable new unit before starting, because crossing the 75 percent line can create a five-figure tax bill.

How Leases Are Treated

Leasing does not avoid the tax. A long-term lease, defined as one year or more including renewal options, that occurs before a first retail sale is treated as a taxable sale, with the lessor owing the tax when the lease begins.³ When the lessor is the manufacturer, producer, or importer, the tax is figured on a constructive sale price the IRS derives from what similar articles sell for at retail, plus a presumed markup, rather than on the lease payment. For lessees, the practical effect is that FET cost is typically baked into the monthly payment.

Reporting and Paying: Form 720

FET on heavy vehicles is reported quarterly on Form 720, the Quarterly Federal Excise Tax Return. Heavy vehicle taxes go in Part II. Filing deadlines are:⁴

Q1 (January through March): due April 30
Q2 (April through June): due July 31
Q3 (July through September): due October 31
Q4 (October through December): due January 31

Each taxable transaction needs the vehicle’s 17-character VIN, the date of sale, and the final sale price. Multiply the total taxable sales for the quarter by 0.12, subtract the tire tax credit, and enter the result. Returns can be mailed to the IRS center listed in the instructions or filed through an authorized e-file provider. A missing or incorrect VIN can get a return rejected.

Payment goes through the Electronic Federal Tax Payment System (EFTPS). Most federal excise taxes require semi-monthly deposits, but Part II taxes, including the heavy vehicle tax, are an exception: they are payable with the return rather than through semi-monthly deposits.⁴ EFTPS enrollment can take several business days, so set it up well before a deadline.

What Late Filing or Payment Costs

Miss the filing deadline and the failure-to-file penalty is 5 percent of the unpaid tax per month or partial month, capped at 25 percent.⁵ The failure-to-pay penalty adds 0.5 percent per month on tax shown but not paid, also capped at 25 percent. They run concurrently, and interest runs on top. On a $50,000 bill, five months of combined penalties alone would add roughly $13,750. Fraudulent failure to file jumps to 15 percent per month with a 75 percent cap. Reasonable cause is a defense but must be raised after a penalty notice arrives.

How FET Differs From the Heavy Vehicle Use Tax

FET is often confused with the heavy vehicle use tax, or HVUT, and the two are not the same. FET under Section 4051 is a one-time 12 percent tax on the first retail sale, reported by the seller on Form 720.¹ HVUT under Section 4481 is an annual tax on the use of any highway motor vehicle with a taxable gross weight of 55,000 pounds or more, reported by the vehicle’s registered owner on Form 2290.⁶ Both feed the Highway Trust Fund. A new Class 8 tractor typically triggers both in its first year on the road: FET once at purchase, HVUT every year afterward.

The 2028 Sunset

Under current law, the 12 percent FET ceases to apply on and after October 1, 2028.⁷ Congress has extended the tax multiple times before. If the sunset holds, a truck sold at retail on September 30, 2028, owes the full 12 percent while the same truck sold the next day owes nothing. Fleet operators planning large purchases near that window should follow the legislative calendar rather than assume either outcome.

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 4053 – Exemptions
3
Internal Revenue Service. Publication 510, Excise Taxes
4
Internal Revenue Service. Instructions for Form 720
5
Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax
6
Federal Highway Administration. Heavy Vehicle Use Tax (HVUT) – What Is It and Who Must Pay It?
7
Office of the Law Revision Counsel. 26 USC 4051 – Imposition of Tax on Heavy Trucks and Trailers Sold at Retail