Discussion:Which states return a trucking company require to file?

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Discussion Forum Index --> Tax Questions --> Which states return a trucking company require to file?


Snp (talk|edits) said:

6 April 2007

I have a trucking company as new client located in VA and often make trips to other states. The question is does a trucking company require to file some kinds tax returns to every state its trucks drive thru or based on a truck's destination? I had a trucking company client about ten years ago from different state and my memory is not clear on it. I guess this is a states' question. Does anybody have information on this subject?

Acctax (talk|edits) said:

6 April 2007
No, only files VA return.

Dar

Snp (talk|edits) said:

6 April 2007
Thanks, Dar. I am glad somebody is up this late, not just me. This client is my accounting client. The reason I was asking is that when we were looking for other cpa to do his tax returns, some high ranking cpa was mentioning that this client needs to file other states returns, also. Besides this comment, I think I filed NY and New Jersey returns for my old trucking client from Ohio domicile, because some trucks passing thru these states or their destinations were in these states. However, I am not quite sure.

Klesher (talk|edits) said:

6 April 2007
Agree with ACCtax - I have over the road truckers - you only need to file in their resident state

JEllegate (talk|edits) said:

6 April 2007
Snp - if you have a trucking company (as opposed to an independent driver although I imagine the same rules would apply to independent operators) you should take a look at each state's (that the company drives through/to) apportionment rules for trucking companies. I think you'll find that each state want's a slice of the pie! And this is only in reference to income tax...you also have road taxes to deal with). Sometimes those "high ranking CPA's" do acyually know what they are talking about.

Snp (talk|edits) said:

6 April 2007
Thank you everyone. However, I agree with more JEIlegate on this matter. Because that is what I remember. I just wanted someone's opinion on this matter and tell me "yea, that is what you got to do" talk to each state and their regulations. It is quite over whelming to think about call each state and offering the their portion of pie when it should been done already by own tax accountant. And the benefit of doubt, perhaps his own tax accountant has better reasons not filing other state returns. I do not know. Since, I started my own practice, I have more doubts myself, more questions myself, and more confused. The good thing is I get some assurances from you guys. Thank you all.

Acctax (talk|edits) said:

6 April 2007
Just driving thru a state would not make you subject to the income tax of that particular state. It would be insanity to try to pro-rate income & expenses per state. States want their slice of the pie when it comes to IFTA fuel tax but that is paid to your home authority who disperses it out. "Road Taxes" Form 2290-Heavy Hwy Tax is paid to the IRS not individual states. Now if he had his own terminals in other states that would be a horse of a different color.

Snp--what kind of operation does he have. Does he operate out of one and only location in VA? If the answer is yes he is required to file VA income tax return only. I prepare more tax returns and do bookkeeping for truckers than any other profession.

Dar

Acctax (talk|edits) said:

6 April 2007
Snp--I have this one particular trucking corp. where I handled the bookkeeping and prepare the return. They travel to SC & VA as well as NC. I do not filed returns for those states. They have been in business for over 10 yrs and never heard a peep from anybody.

Being an independent trucker with 1 location versus any other entity with 1 location does not make a difference. Believe me you do not have to file other states if you have only 1 location.

Dar

Will (talk|edits) said:

6 April 2007
I agree with JEllegate also. It is a state by state basis. As far as the income tax goes, it is going to rely on the states interpretation of nexus. I have an NAEA Journal article that claims some states do in fact want a piece even if the truck is just driving through. Certainly many states will be looking to assess on any pick-ups (FOB) that occur in their borders.

I also agree with Acctax that good taxation compliance for inter-state trucking companies is insanity.

As you probably know SNP, VA is one of three states that adds a fuel surcharge on a quarterly filing in addition to what is assessed at the pump. It is only assessed on fuel consumed in the state so there will be an extra bit of quarterly accounting there I believe.

Kvaccounting (talk|edits) said:

6 April 2007
I am a bookkeeper for trucking company that was makes deliveries in all 48 states. A truck was stopped in New Jersey and the company HAD to PAY a 2000.00 tax assesment becouse we were dropping or picking up things in the state and no income tax returns were filed for New Jersey. The truck company is based in Maine. The CPA for the trucking company is working on the problem now. I do not know the website address but look up New Jersey motor transport association. They gave us some info on the situation. States are very broke right now and will try to get money any way that they can.

Acctax (talk|edits) said:

6 April 2007
Will, are we talking about IFTA fuel reports or tax returns? As far as IFTA is concern, yes, they will get their piece of the pie but when it comes to tax returns that is a different animal. I have never heard of a single location (fixed) trucking company that had to pro-rate all expenses and income between the different states they drive thru or drive into. I don't see how it can be done.

If you get a chance, let me know how to get the NAEA article you were talking about.

Dar

Drpcpa (talk|edits) said:

6 April 2007
We have clients here in Wisconsin that are OTR as well, and are required to file other states income tax returns along with Wisconsin, even though this is the only location. Pennsylvania, Ohio and New York I recall have been particularly good at letting businesses know that there is a filing requirement. If you want to double check, try calling Pennsylvania Department of Revenue and ask them.

JEllegate (talk|edits) said:

6 April 2007
When dealing with trucking companies (or airline/railroad/bus ect...) most states have special INCOME apportionment rules that apply despite an insufficient level of nexus. A group of states follow the UDIPTA rules, most others have their own. This means that even if taxpayer is just driving through the state it is not safe to assume that there isn't a filing and corresponding income approtionment requirement. For example (easiest one I could find) take a look at §201(a) of the Illinois Income Tax Act which provides that a tax measured by net income is imposed on a corporation for the privilege of earning or receiving income in Illinois...whether or not there are stops or deliveries in that State. I know that NY and PA have similar rules...I suspect most do. I agree that IFTA is another animal but Snp's question was concerning income tax. I make the distincion between "company" and "independent driver" solely upon the assumption that an independent driver is not housed in a business entity. The general rules I am talking about concern business entities...I don't know much about sole proprietors as I don't deal with many but, again I would suspect that similar rules would apply regarless of the legal structure.

KatieJ (talk|edits) said:

6 April 2007
JEllegate is right; most states require interstate trucking companies to file and pay income taxes. Many states have special apportionment rules for interstate trucking; a few just use the UDITPA formula, which is not a very good fit. But nexus is really not an issue here. If a trucking company is driving its trucks over the state's highways and streets on a regular basis, it certainly has a physical presence there and is availing itself of the state's services. Driving through is just as much nexus as pickups and deliveries. (Think about the damage those big trucks do to your local streets and highways if you doubt it.)

There is a difference, however, between the tax liability of the trucking company and the tax liability of the truck driver. Federal law provides that the compensation of an employee of an interstate trucking company is subject to individual income tax on his earnings only in his state of residence: 49 U.S.C. Sec. 14503(a).

An owner-operator (self-employed) trucker would be subject to the same income tax rules and apportionment formula as any other interstate trucking business.

Acctax (talk|edits) said:

6 April 2007
Ok guys, point proven...that now means that 95% of all independent truckers are guilty of failing to file tax returns, essentially tax evasion.

Dar

KatieJ (talk|edits) said:

6 April 2007
Very likely, Dar. However, there may be exclusions for owner-operators in some states.

Arman barsamian (talk|edits) said:

6 April 2007
It's like the "jock" tax on truckers...I will say that a small trucking company with less than 3 or 4 rigs could comply with multi-state rules. But, once we're talking about many vehicles, multiple origins and destinations, then it's a compliance nightmare.

KatieJ (talk|edits) said:

6 April 2007
Thirty years ago, when I was a tax auditor for the California Franchise Tax Board, I audited several good-sized multistate trucking companies, including one based in Salt Lake City. They all seemed to manage somehow, even in those days before fancy computer programs.

The apportionment formulas are generally based on revenue miles. The more sophisticated ones, like California's, assign long-haul trucks and trailers, long-haul drivers' wages, and long-haul gross receipts to the numerators of the property, payroll and sales factors on a revenue miles basis. Local equipment, payroll, and gross receipts go to the numerator in their geographic location. Some states just apportion all the income by revenue miles -- that's the way Illinois does it.

The record-keeping was probably somewhat easier in those days, in a sense, because they had to keep track of a lot of things for ICC purposes and the revenue miles numbers just fell out of the ICC reports -- which they had to do anyway. Most of those reporting requirements have gone away now, so the only reason to keep track is for state tax purposes.

Riley2 (talk|edits) said:

6 April 2007
KatieJ, unincorporated independent operators are now protected from state taxation (other than from their resident state) under federal statute. Thus, we need to distinguish between a one-man operation and a fleet of tractors.

KatieJ (talk|edits) said:

8 April 2007
Riley, I don't doubt what you say. These things are always happening while my back is turned <G>. But do you have a cite for that?

Riley2 (talk|edits) said:

8 April 2007
Yes. See 49 USC § 14503(a)(1) and 49 USC § 31132.

KatieJ (talk|edits) said:

8 April 2007
Thanks!

Kathyt (talk|edits) said:

16 May 2007
How about this one, just had a client call, she (LA resident) bought one truck and is leasing it to a trucking company (company based in MS); but she never drives the truck, she hired a driver who is a resident of CA. Long hauls-all over the country, the trucking company who she's leasing the truck to handles all of the IFTA & other filings, but she has to hire and pay her own driver. So in this case, would she withhold CA tax on driver, pay CA unemployment, what about income tax? Her income is strictly from leasing of the truck to the trucking company.

Smog (talk|edits) said:

16 May 2007
Nobody mentioned personal property taxes. If I remember correctly, OK and AR had personal property taxes based on ratio of miles run in state versus total miles. Had to keep track of tractor and triler separately.

KatieJ (talk|edits) said:

18 May 2007
Kathyt, the driver himself is subject to individual income tax only in his state of residence. So if he is a CA resident, your client should withhold California tax and cover him for unemployment in CA.

BRiggins (talk|edits) said:

1 October 2009
I have a new client who is a single member LLC trucking company organized in SC. The LLC owns and operates two trucks (one by the owner-member who resides in SC and the other by an employee who resides in OK). I am right in thinking that the company should withhold OK taxes on the employee? Also should the LLC also allocate income and expenses to OK and SC when they file their individual return? Thanks in advance for any advice.


Debwatsoncpa (talk|edits) said:

27 August 2010
My client State of Colorado resident sole proprietor (sp) trucking company. State of NE audited and demanded income based on the IFTA miles driven in NE... said that we picked up or delivered a load therefore we had "nexus" in the state. We prepared 6 years non resident returns for a total of $300 state taxes a refund for Colorado due to taxes paid in other states and a $500 tax return prep fee. LOL gotta luv taxes

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