TAM fact sheet on current rolling stock tax

Brief Summary

This legislation seeks to bring Massachusetts in line with a majority of other states within which an exemption from sales and use tax for rolling stock already exists. As drafted, the legislation amends Mass. Gen. Laws ch. 64H (i.e. sales tax) and Mass. Gen. Laws ch. 64I (i.e. use tax) to specifically exempt rolling stock from the sales and use tax. “Rolling stock” is defined as “vehicles such as trucks, tractors, and trailers that transport goods in interstate commerce.”

The legislation does not allow a motor carrier to avoid paying the multitude of fees otherwise required under federal, state and local law. Many other surrounding states (37) do not tax rolling stock; therefore, creating another incentive for interstate trucking companies to either leave Massachusetts or forego it in favor of other states. (i.e. potential companies in the future).

A recent study by Northeastern University’s Dukakis Center has shown that the elimination of the rolling stock tax will potentially produce an additional $15.9 million in additional taxes created by the growth of the for hire portion of the trucking industry. According to the same study, when factoring in private fleets as well, this benefit could double. This initiative will also incentivize trucking companies and companies with truck fleets to use newer, safer and more environmentally friendly trucks in the Commonwealth – whereas the current policy discourages this.

This legislation, which received a favorable report from the Joint Committee on Revenue last session, was included as part of the House Economic Development Bill during the same session.

Rationale

  • The Trucking Association of Massachusetts (TAM), which represents the Commonwealth trucking industry, has seen the trucking industry in Massachusetts decline as many trucking companies move to other states. Part of the reason that trucking companies have left the Commonwealth is due to the Commonwealth’s tax policies.
  • The Massachusetts Department of Revenue started collecting sales and use tax for rolling stock purchased in other states where those states have an exemption in place for rolling stock. The Commonwealth did not have a tax on rolling stock until 1996, but did not enforce the same until 2006.
  • This legislation will create a more attractive environment for trucking companies to remain in the Commonwealth. Trucking companies rely on constantly maintaining and upgrading their equipment. This means purchasing new rolling stock on a regular basis. If they know that their out-of-state purchases will incur an instate tax, the companies will work to reduce their nexus to the taxing state (i.e. Massachusetts).
  • By keeping trucking companies in the Commonwealth, the good jobs and competitive salaries that these companies offer will remain within the state. According to the United States Bureau of Labor Statistics, Massachusetts has the fifth highest annual mean wage for heavy and tractor-trailer drivers within the country. If more trucking companies find Massachusetts tax policy less favorable than neighboring states, the loss of Massachusetts trucking companies will become even more significant.
  • If the Commonwealth discourages trucking companies from domiciling in the state, transportation expenses will rise — further impacting the high cost of living already experienced in the Commonwealth. The costs associated with transporting goods are fairly straightforward. If the Commonwealth’s tax policies cause trucking companies to domicile elsewhere, the additional fuel, tolls and vehicle maintenance, among other costs, will be borne by Massachusetts residents and businesses.
  • This legislation is a matter of common sense. If a company does not purchase a product within State (A), it is not fair for State (A) to tax the company for purchasing a product in State (B). The purpose of taxes and fees is to support the mechanisms that help the taxpayer. (i.e. road and bridges, police, fire, etc.). In the case of the trucking industry, gas taxes, tolls, vehicle registrations and other license fees and taxes cover the expense of the trucking industry. Collecting sales and use tax on rolling stock purchased in other jurisdictions creates a disincentive for companies to expand in the Commonwealth. Given that states such as New Hampshire, which exempts rolling stock from sales and use tax, Massachusetts’ current tax policy will simply lead to higher costs for Massachusetts residents and businesses while driving economic opportunity to neighboring states. Various truck companies, who may be domiciled in Massachusetts or have repair facilities in Massachusetts, are now seeking to locate them outside of the state to reduce the substantial nexus necessary to collect such tax.
  • This legislation will create a more attractive environment for trucking companies to remain in the Commonwealth. By keeping trucking companies in the Commonwealth, the Commonwealth will keep the good jobs and salaries these companies offer within the state. Historically, states have exempted rolling stock from sales and use tax. If the Commonwealth discourages trucking companies from domiciling in the state, transportation expenses will rise further impacting the high cost of living already experienced in the Commonwealth.
  • From a public safety and environmental perspective, this legislation will ensure that trucking companies and companies with truck fleets will run their newer trucks in the Commonwealth. If a company knows that it will have to potentially pay a tax on new rolling stock used in the state, the company will not allow the rolling stock to have any nexus or connection to the Commonwealth. This means that older, less safe and more environmentally unfriendly trucks remain in the Commonwealth.
  • The Dukakis Center at Northeastern University was asked by the Trucking Association of Massachusetts to study the economic impact of the trucking in the Commonwealth. Key findings from the Dukakis Center study, released this Spring, included the following:
    • “The overall trucking industry (including private and for-hire tucking) represent about one in 12 jobs or about 300,000 jobs in Massachusetts in 2017.”
    • “Each local trucking employee on average generates $3,396 per year in state and local payroll, income and property taxes and each local truck on average generates $3,125 per year in taxes from support service activity.”
    • “Most states—37 out of 50—exempt for-hire interstate trucking firms from paying sales tax on new equipment purchases to encourage interstate trade by local firms. States with full exemptions include four New England states—Connecticut, Maine, New Hampshire, and Rhode Island— and a fifth, Vermont, with the tax capped at $1,850 per truck. Massachusetts is the only New England state with no sales tax exemptions for interstate for-hire trucking firms.”
    • “The following occupations illustrate how well these production jobs pay: 1) diesel engine mechanic (2017 US average income=$48,000 and MA=$57,550); 2) riggers (US=$50,270 and MA=$56,650); 3) machinist (US=$44,160 and MA=$51,020); and, 4) heavy and tractor-trailer truck drivers (US=$44,500 and MA=$50,580). Source: Bureau Labor Statistics (2017).”
    • “There are several problems with Massachusetts’ application of sales and use taxes applied to trucks (aka, taxing rolling stock). First, doctrinal inconsistency: most states apportion and promote local trucking activity; Massachusetts does the opposite. Second, taxing rolling stock and increasing the relative tax burden motivates relocation (the impact of state and local taxes on location is well established). Third, the benefits of efficient trucking are broad, but the costs are disproportionately borne by local trucking companies (in a competitive industry passing along these costs to customers is impossible). Last, taxing local companies at a higher rate yields slower local company growth.”
    • “Analysis of the number of for-hire trucking establishments in each state over time illustrates that states that apply sales tax on the purchase of trucks engaged in interstate carriage have significantly fewer firms. From this perspective, we presented a counterfactual consideration above: if Massachusetts for-hire trucking employment grew at the rate of the United States, 2,768 more employees and 2,076 more power units would be operating and generating an additional $15.9 million in tax revenue per year.”
    • “Hence, we find that if Massachusetts’ for-hire trucking industry grew at the same rate as the overall United States rate, we would have 2,768 more employees and 2,076 more power units would be operating. In total, an additional $9.4 million in payroll, income and property taxes, and $6.5 million in taxes related to purchase of support and ancillary services: hence, an additional $15.9 million per year. As Massachusetts private fleets are also subject to the same sales and use taxes, we assume the impact will be similar; hence, total tax implication can twice as much when including supermarket, manufacturing and other private fleets.” (emphasis added).

Environmental benefits of eliminating the tax on rolling stock in trucking

Proposed legislation will encourage trucking companies to reduce emissions and increase fuel efficiency

Legislation being considered in the Massachusetts legislature seeks to bring Massachusetts in line with a majority of other states (37 states, including the six neighboring New England states) within which an exemption from sales and use tax for rolling stock already exists. This proposed legislation does not allow a motor carrier to avoid paying the multitude of other taxes and fees otherwise required under federal, state and local law. However, many other surrounding states do not tax rolling stock; therefore, creating another incentive for interstate trucking companies to either leave Massachusetts or forego it in favor of other states. (i.e. potential companies in the future).

A recent study by Northeastern University’s Dukakis Center has shown that the elimination of the rolling stock tax will actually produce at least an additional $15.9 million in taxes created by the growth of the for hire portion of the trucking industry. From an environmental perspective, this initiative will incentivize trucking companies and companies with truck fleets to buy newer, safer and more environmentally friendly trucks in the Commonwealth – whereas the current policy discourages this. In particular, this legislation will promote a cleaner, greener Commonwealth by promoting the purchase of vehicles with higher emissions standards and greater fuel efficiency.

Emissions

Removing the incentive to hold onto trucks as long as possible in Massachusetts will lead trucking companies to purchase new trucks. As reported by California Environmental Protection Agency, Air Resources Board (ARB), “new technology diesel engines using low sulfur fuel reduce the emissions and risks of diesel particulate matter by over 90 percent compared to diesel engines of the past. This brings the emission levels of PM2.5, oxides of nitrogen (NOx), and gaseous toxic air contaminants from new technology diesel engines down to or below the levels found in the exhaust emitted by other fossil-fueled vehicles, such as gasoline and compressed natural gas vehicles.” By purchasing new trucks, companies will be reducing the presence of particulate matter (PM2.5) by 99% and the presence of nitrogen oxide by 98%. The key, however, is getting older trucks off of the road.

Accessed from California Air Resources Board, https://ww3.arb.ca.gov/newsrel/2012/diesel-tech-faq.htm (Sept. 15, 2019).

The environmental benefits of encouraging the purchase of new trucks is significant. On November 13, 2018, the United States Environmental Protection Agency (EPA) announced the Cleaner Trucks Initiative (CTI), a future rulemaking to update standards for nitrogen oxide (NOx) emissions from highway heavy-duty trucks and engines. Over the last decade, NOx emissions in the U.S. have dropped by more than 40 percent. Nonetheless, EPA expects that heavy-duty trucks will be responsible for one-third of NOx emissions from transportation in 2025. As well, the technology surrounding electric trucks continues to improve – meaning electric powered trucking will be able to eliminate the emissions that have been associated with carbon based fuels. Older trucks, which are often grandfathered when new standards are created, do not have the newest technology.

In all cases, however, Massachusetts’ current law on the taxation of rolling stock creates a disincentive where trucking companies are encouraged to keep their less clean trucks. Notwithstanding the impact Massachusetts current law has on the behavior of national trucking companies, who can simply cycle their older trucks through the state, the current policy is counter-productive to the Commonwealth’s environmental protection strategies. Bringing the rolling stock exemption back to Massachusetts will create an incentive for purchasing cleaner diesel and alternative field trucks in the future.

Fuel Efficiency

According to the Diesel Technology Forum (DTF), “while continuously making commercial trucks more fuel efficient, diesel engine and truck manufacturers have also been making them dramatically cleaner, a significant accomplishment considering that increased fuel efficiency and lower emissions are near opposite and competing forces in diesel engine design. In fact, diesel vehicles manufactured after 2010 achieve an average 5 percent improvement in fuel economy resulting in petroleum reduction equivalent to 5.8 billion barrels of crude oil. An owner of a single Class 8 truck powered by the latest clean diesel engine can expect to save about 960 gallons of fuel each year compared to previous generations of technology. Additional fuel-saving strategies are being developed to improve efficiency, including further engine refinements, vehicle aerodynamics and expanded use of hybrid technology for some applications.”

*Accessed from North American Council for Freight Efficiency,
https://nacfe.org/annual-fleet-fuel-studies/, (Sept. 15, 2019).

Again, the future opportunity for reducing the use of carbon fuels through the purchase of new vehicles will increase. As further reported by the DTF, “[n]ew diesel vehicles are increasing their penetration in the marketplace because they are more fuel efficient, in part, due to meeting the requirements of Phase 1 of the U.S. Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) Fuel Efficiency standards that went into effect in 2014. Manufacturers are also investing new technologies including new engine designs to meet Phase 2 of these rules that kick-in in 2021. Over the lifetime of the vehicles affected by the new rule, the program is expected to reduce oil consumption by more than 530 million barrels, result in more than $50 billion in net benefits, and reduce carbon dioxide emissions by 270 million metric tons.”. But, again, without changing Massachusetts current laws relative to the taxation of rolling stock, companies will not update their vehicles until the last possible moment – thereby increasing our overall carbon fuel consumption.

The elimination of the Commonwealth’s tax on rolling stock will improve air quality and reduce the use of fossil fuels in addition to creating jobs and supporting the future of the trucking industry in Massachusetts.

Pilot program would open long-distance trucking to 18-year-olds

From the Washington Post.

A federal agency is proposing a pilot program to allow people as young as 18 to drive trucks across the country, an idea enthusiastically supported by trucking companies as a way to open the door to recruitment in high schools but facing deep opposition from safety organizations that say it will lead to immature drivers causing more crashes.

Read the full article at the Washington Post.

Second COVID-19 relief package expected soon

The US House of Representatives is set to pass a second COVID-19 relief package – totaling about $900 billion – on Monday night [Dec. 21]. The coronavirus relief is wrapped into a $2.4 trillion spending package. From Forbes.

This proposed bill is being enacted to correct a number of problems that PPP borrowers have had, and also opens the door to new opportunities for borrowers who were not treated as well under the previous program.

The broad parameters concerning the business side of the legislation are generally not surprising, though there are important details still outstanding:

  • PPP first and second draw loans are included . It appears there will be a $284 billion pot for all PPP loans. The maximum loan size for any PPP loan will be $2 million. Additional qualifying expenses for PPP loan forgiveness include computing software to enable remote work for employees, property damage from the public unrest earlier this year, supplier costs of essential goods or services in effect at the time the PPP loan was applied for, and costs related to PPE and adaptive investments made to comply with local governmental mandates. Authority for the SBA to issue PPP first and second loans expires March 31, 2020. PPP loans that are under $150,000 shall have a simplified loan forgiveness application.
  • In order to qualify for a second draw PPP loan, a business may not have more than 300 employees, have spent or will spend their first PPP loan, and demonstrate at least a 25% reduction in gross receipts against same 2019 quarter.
  • The bill allows businesses to deduct expenses associated with their forgiven PPP loans- though we are not sure if there’s a cap on the size of the loan that you can be permitted to deduct (I saw one report of a $150k cap, which wouldn’t be great for us)
  • PPP eligibility expanded to 501(c)(6) entities with some restrictions. A 501c6 is eligible for a PPP loan if it does not receive more than 15% (up from 10% in “908” of its receipts from lobbying. Lobbying activities cannot compromise more than 15% of the activities of the entity, and the cost of lobbying activities of the organization did not total more than $ 1 million during the most recent tax year that ended Feb. 15, 2020. Finally, to be eligible for a PPP loan, a 501(c)(6) cannot have more than 300 employees.
  • Business meals will be fully deductible for the next two years (2021-2022). Currently there is only a 50% deduction for such expenses.
  • The Employee Retention Credit is extended to June 30, 2021. Beginning in January 2021, the new credit rate rises from 50% to 70% of qualified wages. The legislation also expands eligibility for the credit by reducing the required year-over-year gross receipts decline from 50% to a 20% decline.
  • The agreement would also temporarily allow people receiving the Earned Income Tax Credit and the refundable portion of the Child Tax Credit to use their 2019 incomes when applying for the payments. Because the credits are linked to how much people earn, that would help those who’ve seen their incomes fall in the wake of the pandemic.
  • Direct payments: Individuals making up to $75,000 a year will receive a payment of $600, while couples making up to $150,000 will receive $1,200, in addition to $600 per child. The deal also makes the stimulus checks more accessible to immigrant families.
  • Employers who receive Paycheck Protection Program (PPP) loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds . This is retroactive to enactment of the CARES Act.

Updated FMCSA COVID-19 guidance

Please see the attached waivers, Notices of Enforcement Discretion Decision (NEDDs), and Frequently Asked Questions (FAQs), which update FMCSA’s Coronavirus Disease 2019 (COVID-19) guidance previously issued on Sept. 18.

These waivers are posted at the links below and allow carriers and SDLAs to continue to adapt to the pressing issues related to physically distancing and COVID-19 in light of the continuing public health emergency.

These waivers, NEDDs, and FAQs have been updated to extend the expiration date to Feb. 28, 2021, and include the following:

Boyle Transportation on moving COVID-19 vaccine

In a recent CNBC interview, Andrew Boyle, co-president of Boyle Transportation, discussed the recent rollout of the Pfizer COVID-19 vaccine. Boyle Transportation is working with UPS to distribute the vaccine. Boyle was interviewed on the Worldwide Exchange program with Dominic Chu.

Conduct Clearinghouse queries by Jan. 5

As a reminder, employers must conduct Drug & Alcohol Clearinghouse annual queries no later than Jan. 5. The following “last reminder” comes from the Federal Motor Carrier Safety Administration.

If an employer has already conducted a query on all currently-employed CDL drivers, that employer has met the annual query requirement, and is not required to conduct a query for one year from the query date.

Employers may also designate a consortium/third-part administrator (C/TPA) to conduct these queries on their behalf. Employers can log in to their Clearinghouse accounts and access their Query History page (under My Dashboard > Queries) to verify which drivers have been queried, and when each completed query was conducted.

If an employer has not yet conducted a query on each currently-employed CDL driver, the employer must conduct this annual check to meet the compliance requirement.

What do employers need to do to satisfy the annual query requirement?

Per § 382.701, employers of CDL drivers must conduct a query of the Clearinghouse at least once per year for each CDL driver they employ. A limited query satisfies the annual query requirement.

Employers must obtain a general consent from CDL drivers they employ before conducting limited queries in the Clearinghouse to view these drivers’ information (you can download a sample limited query consent form).

You can log in to the Clearinghouse and conduct your annual queries today.

What if an employer conducted a pre-employment query this year?

The pre-employment query will satisfy the annual query requirement for that driver. You are not required to query that driver until one year after that pre-employment query.

To learn more about queries and consent requests, download the Queries and Consent Requests Factsheet.

What is a query plan?

Before an employer can conduct queries in the Clearinghouse, the employer must purchase a query plan. Download the How to Purchase a Query Plan job aid for full instructions.

Diesel tax revenue for states steady during pandemic

From Transport Topics.

Though the loss of revenue from gasoline taxes ultimately caused a steep decline in funding streams that states badly need, the financial picture from diesel tax revenue generated by trucking looks less bleak. That’s because when others stayed home and avoided filling up their tanks, truckers kept hauling and purchasing diesel — pumping money into states’ accounts.

Read the full article at Transport Topics.

FMCSA clarifies ag products that qualify for hours-of-service exemptions

From Heavy Duty Trucking online.

The Federal Motor Carrier Safety Administration has published an interim final rule clarifying agricultural commodity and livestock definitions in hours-of-service regulations.

During harvesting and planting seasons as determined by each state, drivers transporting agricultural commodities, including livestock, are exempt from the HOS requirements from the source of the commodities to a location within a 150-air-mile radius from the source. In addition, the requirement for a 30-minute rest break does not apply to drivers transporting livestock in interstate commerce.

However, the agency found that the definition of those terms was not well-understood and enforced consistently when determining whether the HOS exemption applies.

The clarifications will primarily affect transporters of perishable horticultural commodities, non-processed food, and aquatic animals.

ATA reports FMCSA Emergency Declaration Expansion and Extension

FMCSA has announced that they have expanded and extended the Emergency Declaration that was set to expire on December 31st. A PDF of the declaration is available online here. This extension includes the same regulatory relief for motor carriers and drivers providing direct assistance in support of relief efforts related to COVID-19, as included in the September 11th modified and extended declaration. The primary change with this current declaration is the inclusion of vaccine transportation.

The expanded declaration published today is limited to the transportation of:

  • Livestock and livestock feed;
  • Medical supplies and equipment related to the testing, diagnosis and treatment of COVID-19;
  • Vaccines, constituent products, and medical supplies and equipment including ancillary supplies/kits for the administration of vaccines, related to the prevention of COVID-19;
  • Supplies and equipment necessary for community safety, sanitation, and prevention of community transmission of COVID-19 such as masks, gloves, hand sanitizer, soap and disinfectants, and;
  • Food, paper products and other groceries for emergency restocking of distribution centers or stores.

Please note, this expanded declaration became effective at 12:00 A.M. December 1st, and expires on February 28th, 2021.

As with previous declarations, emergency regulatory relief is provided from parts 390 through 399 of the FMCSRs, including the hours-of-service regulations. Emergency relief does not include certain FMCSR’s related to the safe operation of CMVs, such as controlled substance and alcohol testing, financial responsibility requirements, CDL requirements, operation of a CMV while ill or fatigued, size and weight requirements, and additional FMCSR’s which are outlined in the declaration.

We encourage everyone to review the applicability, restrictions, and limitations which are included in the exemption posted to the FMCSA’s website.