Bipartisan Senate Bill Targets Repeal of 12% Federal Excise Tax on Trucks

What is the federal excise tax on heavy-duty trucks and when would repeal take effect?

Senators filed bipartisan legislation in early June 2026 to repeal the federal excise tax (FET) on new heavy-duty trucks, tractors, and trailers. The tax, enacted during World War I, currently adds 12% to the retail price of vehicles over 33,000 pounds gross vehicle weight rating (GVWR). No effective date for repeal has been set because the bill must pass both chambers and be signed into law. The legislation was introduced June 3, 2026.

The FET applies at the point of sale. A new Class 8 tractor with a $150,000 sticker price carries an $18,000 federal excise tax before state sales tax or registration fees. Trailers face the same 12% levy. The tax does not apply to used equipment.

Owner-operators and small fleets typically finance new trucks over five to seven years. The FET increases the principal, which compounds interest costs. A carrier financing that $150,000 tractor at 6% over six years pays roughly $1,080 in additional interest attributable to the $18,000 tax.

Why the push to eliminate the tax now

The federal excise tax was originally imposed in 1917 to fund World War I military production. Congress has left it in place for more than a century. Proponents of repeal argue that the tax no longer serves a defense purpose and penalizes carriers for buying newer, cleaner, safer equipment.

The American Trucking Associations and the Owner-Operator Independent Drivers Association have lobbied for FET repeal for years. Both groups say the tax discourages fleet modernization. Newer trucks meet stricter EPA emissions standards and carry advanced safety systems, collision mitigation, and electronic stability control. The 12% surcharge makes those upgrades more expensive.

Small fleets often keep older trucks in service longer to avoid the tax. A 2015 tractor with 800,000 miles may cost $40,000 to $50,000 used, with no FET. The same carrier faces $168,000 plus tax for a 2026 model. The $18,000 federal levy tips the decision toward the older truck, even when maintenance and fuel costs are higher.

What the bill does and does not change

The Senate legislation repeals the 12% FET on trucks, tractors, and trailers over 33,000 pounds GVWR. It does not touch the federal fuel tax, which funds the Highway Trust Fund. The fuel tax remains 24.4 cents per gallon for diesel.

The bill also does not address state sales taxes or heavy vehicle use taxes. Carriers still owe the annual IRS Form 2290 highway use tax, which ranges from $100 to $550 per year depending on weight. States impose their own sales taxes on truck purchases, typically 4% to 8%.

Repeal would apply to new purchases after the effective date. Carriers who bought trucks in 2025 or early 2026 would not receive refunds. The legislation does not include a retroactive credit.

How repeal affects small-fleet equipment decisions

Eliminating the FET changes the math on new versus used. A small fleet comparing a $150,000 new tractor to a $50,000 used tractor currently sees a $118,000 gap after the 12% tax. Without the FET, the gap drops to $100,000. The carrier can finance the difference over six years at roughly $1,600 per month instead of $1,900.

The savings are larger for fleets buying multiple units. A five-truck fleet replacing its entire roster pays $90,000 in FET under current law. Repeal puts that $90,000 toward down payments, which lowers monthly notes and frees cash flow for fuel, insurance, and maintenance reserves.

Owner-operators leasing to a carrier or running under their own authority face the same calculation. The FET adds $18,000 to the cost of a new Freightliner Cascadia, Peterbilt 579, or Kenworth T680. That $18,000 is capital the operator cannot deploy elsewhere. Repeal makes the lease-purchase pencil differently.

What happens next in Congress

The bill requires passage in the Senate and House, then a presidential signature. No committee hearings or floor votes have been scheduled as of early June 2026. The legislation has bipartisan sponsors, which improves its chances, but Congress must also address how to replace the revenue the FET generates.

The federal excise tax brings in roughly $3 billion per year. That money flows into the general fund, not the Highway Trust Fund. Lawmakers will need to identify offsets or accept a $3 billion annual reduction in federal revenue. Budget negotiations typically slow tax-repeal bills.

Carriers should not delay equipment purchases in anticipation of repeal. The legislative process can take months or years. Fleets that need trucks in 2026 to meet freight commitments or replace aging equipment should proceed with orders. Waiting for a bill that may not pass risks losing production slots at OEMs, which are already quoting 2027 delivery dates for some models.

What carriers should do this week

Carriers planning 2026 or 2027 equipment purchases should run the numbers with and without the 12% FET. Calculate the monthly payment difference, the interest savings, and the impact on cash reserves. If repeal passes, the savings are real. If it does not, the carrier has a baseline for comparing new and used options.

Fleets should also review their trade cycle. A carrier that typically keeps trucks for eight years may find that a six-year cycle makes sense without the FET penalty. Shorter cycles mean newer equipment, better fuel economy, lower maintenance, and fewer roadside breakdowns. The FET has been one barrier to faster turnover. Repeal removes that barrier.

Owner-operators should talk to their lenders about how FET repeal would affect lease-purchase terms. Some lease agreements include the tax in the principal. Others structure it as a separate line item. Clarify whether repeal would reduce the buyout price or the monthly payment. Get the answer in writing before the bill becomes law.