Trucking Advice on Bar Coding Fuel Tax Returns

N E W S F L A S H

2-D Bar Coding of Tax Returns to Revolutionize IFTA Filing Process OTS Develops Software Solution in co-operation with the State of Indiana

Indiana's Department of Revenue first introduced the two dimensional bar coding of tax forms in 1999. The use of two-dimensional bar-coding and scanning to automate the capture of tax return data has emerged as a useful alternative filing method. The system greatly simplifies processing, and speeds up the response rate in that refunds will be issued in about two weeks, and even sooner, if the DOR is authorized for direct deposit.

At the recent (July, 2000) IFTA conference in Edmonton, the state of Indiana unveiled its plan to expand the use of bar coding to all IFTA returns within the very near future. In response to this technological advancement in return processing, OTS is co-operating with the State of Indiana to incorporate 2-D output capability in OTS' Fuel & Mileage Tax Compliance Software: RoadTaxTM. This will allow taxpayers to comply with this soon to be required filing methodology. OTS is the only IFTA tax preparer to date to have developed this key software ingredient, in co-operation with the State of Indiana.

Four other states have followed Indiana's lead and will begin bar coding returns in 2000-2001, with 18 more states expected to follow suit by 2002, as this is the future of compliance.

TAX DEVELOPMENTS

FEDERAL EXCISE - Satellite communications systems are exempt of the 12% tax, according to a recent Technical Advice Memorandum (TAM). The subject memo holds that such systems are not defined as (taxable) 'parts and accessories', as they are addressed under section 4051(b)(1) of the Code. The TAM basically relied upon a 1964 Revenue Ruling, which said that two-way mobile transceivers designed for communication were specifically not subject to the tax, under the then operative Code section 4061. Be aware that a TAM cannot be relied upon as precedent by the Service, and, that in the instant case, the Service only addressed certain basic components of the system (meaning some other unspecified components may be taxable on their own, or, if sold in conjunction with the basic components, render the entire system subject to tax.). A Bill has been introduced that will simplify the excise tax imposed upon heavy truck tires. HR 4342 imposes upon the manufacturer, producer, and importer of rubber tires used on highway vehicles, a tax of 8 cents per 10 pounds of the tire load capacity in excess of 3,500 pounds. Tire load capacity is defined as the maximum rating labeled on the tire. For those tires with single and dual load markings, the higher rating of the two will be used.

MICHIGAN The Tax Tribunal ruled that a taxpayer was actually a transportation company and not an employee / vehicle leasing company for purposes of the Single Business Tax. In the instant case, the out-of-state (trucking) company operated tractors and trailers within Michigan for its parent company, in conjunction with the parent's business as a motor common and contract carrier. The taxpayer failed in its argument that is was a leasing company that leased drivers and vehicles to the parent. As a true transportation company, the taxpayer had to compute its single business tax liability using the single-factor revenue miles apportionment method.

PENNSYLVANIA A contract motor carrier whose independent owner-operators traveled within the State, created sufficient nexus to subject the carrier to the capital stock and franchise tax and net income taxes. The carrier's PA activity was comprised of 3% (1.89M) of total miles traveled, and 0.1% (100 pickups / deliveries) of all pickups / deliveries. A PA DOR policy states that nexus is created if one travels 50,000 revenue miles in PA or incurs 20% or more of its revenue miles in PA during the tax year, and, makes 12 or more pickups or deliveries in PA during that same tax year.

COLORADO The State House has approved two bills that will lower truck taxes. The first expands the sales tax exemption to all trucks registered under the IRP. Previously, only vehicles permanently licensed/registered and domiciled outside of Colorado were deemed exempt of tax. The second measure proposes to limit the State's specific ownership tax to the actual purchase price of a vehicle. Current law calls for a tax base in excess of actual cost.

MISSOURI Exempt of sales tax are parts / equipment purchased for the repair and maintenance of motor vehicles operated by a common carrier. A recent case (Hogan Motor Leasing), extended the exemption to satellite-tracking and communication units that, in addition to the hardware that allowed communication, included components that allowed the office to monitor a driver's operations, including speed, distance traveled, fuel economy, idle time; as well as enabled the shop to monitor a truck's performance and diagnose problems such as low oil pressure, battery voltage, coolant levels, etc. In addition, the Court ruled in the instant case that the subject units were exempt upon initial purchase even though the latter referenced operational / maintenance functions were not actually operational until several months after the date of purchase.

LOUISIANA The sales tax exemption afforded trucks and trailers used in interstate commerce has been extended to June 30, 2002. This exemption was scheduled to expire on June 30, 2000.

**States in red have changed rates this quarter