Filing the Federal Excise Tax (FET) on tires involves understanding specific regulations and requirements to ensure compliance and avoid potential penalties. Here are seven key considerations to keep in mind:
1. Understanding Taxable Tires
The FET applies to tires used on highway vehicles that are wholly or partially made of rubber and marked according to federal regulations for highway use. The tax is imposed on taxable tires sold by the manufacturer, producer, or importer at the rate of $0.0945 per 10 pounds of the maximum rated load capacity over 3,500 pounds. For bias-ply or super single tires (excluding those designed for steering), the rate is $0.04725 per 10 pounds.
2. Identifying Exempt Tires
Certain tires are exempt from the FET, including:
Recapped or Retreaded Tires: If previously sold in the U.S. and taxable at the time of sale, these tires are exempt after being recapped or retreaded domestically.
Tire Carcasses: Tires unsuitable for commercial use.
Bus Tires: Tires used primarily (more than 50%) for intercity or local buses, and substantially (85% or more) for school buses, qualify for exemption.
Military Use Tires: Tires sold exclusively for the Department of Defense or the Coast Guard.
Mobile Machinery Tires: Tires used exclusively on mobile machinery.
Proper documentation and registration are essential to claim these exemptions.
3. Special Rules for Manufacturer-Owned Retail Stores
Manufacturers who deliver taxable tires to their own retail outlets are liable for the FET upon delivery, as if the tires were sold at that time. This rule ensures that the tax is applied consistently, regardless of the point of sale.
4. Tax Implications for Imported Tires
Importers of articles equipped with taxable tires (e.g., vehicles) are treated as the manufacturers of those tires and are liable for the FET upon sale of the article. This provision does not apply to automobile bus chassis or bodies.
5. Claiming Credits or Refunds
A credit or refund (without interest) is allowable on tax-paid tires if the tires have been:
Exported.
Sold to a state or local government for exclusive use.
Sold to a nonprofit educational organization for exclusive use.
Sold to a qualified blood collector organization for use in connection with vehicles primarily used in blood collection, storage, or transportation.
Used or sold for use as supplies for vessels.
Sold in connection with qualified intercity, local, or school buses.
The person who paid the tax is eligible to make the claim.
Check out our blog on the discount on tire excise tax for a detailed explanation.
6. Compliance with Filing Requirements
Entities responsible for paying the FET on tires must file Form 720, the Quarterly Federal Excise Tax Return, with the IRS. Timely filing and accurate reporting are crucial to avoid penalties. It's advisable to maintain detailed records of all taxable tire transactions, including sales, exemptions, and tax payments.
7. Staying Informed on Legislative Changes
Tax laws are subject to change. For instance, the termination date for the FET on tires has been extended multiple times, with the current termination set for October 1, 2028. Staying updated on such legislative changes is essential for compliance.
Read IRS Section Code 4071 to understand more about the Federal Excise Tax on tires, including its applicability, exemptions, tax rates, and compliance requirements.
WRAP:
By considering these factors, businesses can navigate the complexities of the Federal Excise Tax on tires more effectively, ensuring compliance and optimizing potential tax benefits
File your Federal Excise Tax on Tires online with Simple720 today!