Are Used and Leased Trucks Subject to FET?
Are used and leased trucks subject to FET, or does the tax only show up when a brand new truck is sold? It depends on the type of transaction, because federal excise tax (FET) on heavy trucks cares more about how a deal is structured than about how the vehicle is used.
The seller or lessor usually owes this tax, and IRS guidance separates a plain resale of an already taxed truck from a first retail sale, a lease, or a taxable use. Truck tax rules can feel fiddly, but once you know what you owe, a Form 720 online portal can make the filing side easier.
Are Used Trucks Subject to FET?
Usually no. The tax lands on the first retail sale, so a truck that already had a taxable event generally falls outside it. Calling a truck “used” is not a safe harbor, though, and IRS Publication 510 lists cases where tax can still apply.
Scenario 1: A fleet resells a truck that was already taxed. Picture a fleet that buys a new truck, pays the tax, and sells it years later. That resale is not a first retail sale, so FET on used trucks is not owed.
Scenario 2: Someone uses a taxable truck before its first retail sale. Yes, tax applies. That person becomes liable as if they had sold the truck at retail.
Scenario 3: A vehicle is exported before its first retail sale and comes back. Yes, tax applies on its first domestic use or sale.
Scenario 4: A trailer or semitrailer is resold within six months of a taxable sale. Yes, tax applies. The seller can claim a credit for the earlier tax.
If that early use was already taxed, a later taxable sale or lease does not bring a second tax.
Does FET Apply to Leased Trucks?
Sometimes. A lease is not a purchase, yet some leases are taxed like sales. Under Publication 510, what matters is whether the lease happens before the truck’s first retail sale, and how long it runs.
Scenario 1: A lease before the first retail sale lasts one year or more, counting renewal options. Yes, it is a taxable sale. The lessor owes the tax when the lease starts.
Scenario 2: A lease before the first retail sale lasts less than one year. Yes, it is a taxable use. The lessor still owes the tax when the lease starts.
Scenario 3: The truck already had a taxable sale, lease or use. No new tax applies. This is why FET on leased trucks mostly comes up for trucks with no earlier taxable event.
The actual term matters more than the contract label, and the rules for long-term lease agreements look at substance. Lessors often buy tax free with a signed statement that they plan to resell or lease the truck long term, so the lease itself triggers the tax.
How lessors figure the tax. The base depends on who the lessor is.
A manufacturer, producer, importer or related person starts from a constructive sales price plus the presumed markup for long-term leases. A retail dealer is not related if its records prove a markup at least that large.
Any other lessor uses its purchase price, installed parts and a presumed markup.
Refer to Code 4052 which gives definition about the terminologies involved in truck tax
When Can Used or Leased Trucks Trigger FET Again?
Two situations can bring tax back on a truck that was already taxed.
Scenario 1: The truck is rebuilt. The test is about cost. Tax does not apply to a repaired or modified truck unless the repairs and modifications cost more than 75% of the retail price of a comparable new one. A remanufactured or substantially restored truck is measured against this test. Over 75%, tax applies. At or under 75%, it does not.
Scenario 2: Equipment is added after purchase. Under the six-month post-purchase installation rules, tax applies to parts or accessories installed by the owner, lessee or operator within six months after the vehicle is first placed in service. The rate is 12% of their price plus installation. Replacement parts are left out. No tax is due at $1,000 or less, but above that, all of it is taxed.
Publication 510 gives an example. A vehicle enters service April 8. The owner installs $850 of parts on May 3 and $300 more on July 15. The total passes $1,000 on July 15, so $138 of tax applies on that date.
How Can Truck Buyers and Leasing Businesses Avoid FET Errors?
Most mistakes come from assuming instead of checking, so a few habits help a lot.
Classify the deal first as a sale, resale, lease or rebuild, because each follows its own rules.
Pull the truck’s prior tax records, read lease terms including renewal options, and log modification dates and costs as they happen.
Keep resale, lease and exemption certificates, and confirm Form 720 requirements.
When a deal still feels unclear, getting qualified tax advice costs less than guessing wrong.
Read our blog on Truck excise tax due date and penalties to stay in compliance with IRS if you are dealing with Trucks
What are the Weight Limits and Exemptions of Trucks?
Truck Chassis and Bodies: Exempt if suitable for vehicles with a gross vehicle weight of 33,000 pounds or less.
Trailer and Semitrailer Chassis and Bodies: Exempt if suitable for vehicles with a gross vehicle weight of 26,000 pounds or less.
Tractors: Exempt only if both conditions are met:
Gross vehicle weight is 19,500 pounds or less.
Gross combined weight with a trailer is 33,000 pounds or less.
Gross Vehicle Weight: Refers to the maximum loaded weight of the vehicle, not its curb weight.
Fully Exempt Vehicles: Certain articles, including rail trailers and ambulances, are exempt from the tax.
Partially Exempt Equipment: Concrete mixer bodies and farm feed bodies are exempt, but their chassis remain taxable.
Tax-Exempt Sales: Sales to government entities, nonprofit schools, and purchasers for export may qualify for tax exemptions, generally subject to registration requirements.
Read our blog on Federal Excise Tax Exemption on Trucks.
What Is Federal Excise Tax (FET) on Trucks?
Under IRC Section 4051, a 12% federal excise tax rate applies to the first retail sale of truck chassis and bodies, trailer and semitrailer chassis and bodies, and tractors chiefly used with a trailer or semitrailer. Parts and accessories sold with them are taxed in the same sale.
Some vehicles are exempt because of weight limits (measured by gross vehicle weight, the maximum loaded weight), their type, or the buyer, such as governments, nonprofit schools and exporters. The seller is liable and reports on Form 720, so this federal excise tax on trucks is separate from the Form 2290 use tax.
Conclusion
Are used and leased trucks subject to FET? That depends on whether the deal is a first retail sale, a long-term lease, or a modification that crosses a legal threshold, so no label alone settles it. Review resales, lease terms and modification costs before assuming a truck is exempt, and if you are still unsure, reach out for help with excise tax-related queries before you file.
Once you know what applies to your deal, Simple720 can help you e-file Form 720 without the paperwork.
File your Truck Excise Tax Online with Simple720 today!
