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Industry insight In today’s competitive freight market, controlling costs can be the difference between staying profitable and falling behind. Yet many trucking companies are unknowingly leaving money on the table by overpaying sales tax on equipment purchases that may actually qualify for exemption under federal excise tax (FET) rules. The Overpayment Problem When purchasing tractors, trailers, or specialized equipment, trucking companies often pay sales tax at the point of purchase. Dealers and vendors, however, may not always apply the correct exemptions. This leads to carriers absorbing thousands—or even millions—of dollars in unnecessary costs over time. Much of the confusion stems from the interaction between state sales tax laws and the federal 12% excise tax (FET) on heavy trucks, tractors, and trailers. While the excise tax has its own set of rules and exemptions, many states mirror those exemptions in their sales and use tax laws. That means if a vehicle or piece of equipment qualifies for FET exemption, it may also be exempt from state sales tax. Common Examples of Exempt Equipment Trucking companies may qualify for exemptions on: Highway tractors and trailers used primarily in interstate commerce. Special-use equipment that meets weight or design thresholds under FET law. Add-on components or retrofits that are directly related to the operation of an exempt vehicle. In practice, though, many companies simply pay the sales tax invoice without reviewing whether the exemption applies. Why This Matters Now Margins in trucking are tighter than ever. Fuel, insurance, and driver wages continue to climb, while freight rates fluctuate. Sales tax can represent 6–9% of an equipment purchase price—a $150,000 tractor could carry an additional $9,000 to $13,000 in unnecessary sales tax if an exemption was overlooked. Multiply that across a fleet purchase, and the impact can be significant. For growing fleets or companies refreshing equipment annually, reclaiming these overpayments can directly strengthen cash flow and bottom-line profitability. How to Avoid Overpaying Review Past Purchases – Many states allow companies to file for refunds of sales tax paid in error, sometimes for up to three or four years. Coordinate with Dealers – Ensure that equipment vendors understand and apply the correct exemption certificates at the time of purchase. Consult Indirect Tax Experts – Sales and excise tax laws vary by state and are complex. A knowledgeable tax advisor can help identify exemptions, file refund claims, and structure purchases correctly going forward. Train Procurement Staff – Your team should know when to flag a transaction for tax review rather than automatically paying the billed tax. Bottom Line Sales tax on trucks, trailers, and related equipment is not always a given. Many trucking companies pay more than they should simply because they don’t connect excise tax rules to their state sales tax liability. With careful review and proper planning, fleets can capture meaningful savings—dollars that can be reinvested into operations, drivers, and growth.

Trucking companies live at the intersection of complex tax systems: federal excise taxes on heavy highway vehicles and tires, state and local sales/use taxes on equipment and parts, fuel and road taxes, and a thicket of fees and surcharges. This guide focuses on two of the most commonly confused areas when buying, leasing, or maintaining equipment: federal excise tax (FET) and state/local sales and use tax . The goal is to help carriers, private fleets, and owner-operators recognize where tax applies, where exemptions may exist, and how to structure clean, audit-ready transactions. What Counts as “Trucking Equipment”? When tax rules talk about trucking equipment, they usually include: Power units: over-the-road tractors, straight trucks, gliders, day cabs, sleeper cabs. Trailers: dry vans, reefers, flatbeds, lowboys, tanks, dumps, chassis/intermodal, specialized units. Bodies and upfits: dumps, boxes, mixers, cranes, liftgates, refrigeration units, PTOs. Components and attachments: fifth wheels, APUs, telematics, collision-avoidance systems, tarps, hitches. Consumables and parts: engines, transmissions, tires, brakes, DEF systems, electronics. Why it matters: different taxes use different definitions. For instance, federal excise tax targets certain heavy highway vehicles and related bodies/parts. State sales tax rules usually tax tangible personal property unless a specific exemption applies, and they may treat titled vehicles and trailers differently from other equipment. Federal Excise Tax (FET) on Heavy Highway Vehicles What it is: A federal tax—commonly 12%—on the first retail sale of certain heavy trucks, tractors, trailers, and truck bodies intended for highway use. It can also apply to lease transactions (treated like sales in many contexts) and to certain installations or conversions . Big ideas to know (plain-English): Scope: New sales of most heavy highway tractors and many trailers are potentially in scope; certain bodies installed on a truck can also be taxable. When “repairs” look like “manufacturing”: Significant rebuilds, glider installations, or conversions can trigger FET even if you think you’re only “repairing.” Price you pay vs. price that’s taxed: FET is generally computed on the price of the taxable article, including charges for accessories and installations made within a short period of the sale (often referred to as the “6-month rule” in industry practice). Exemptions exist: Examples include sales for resale, exports, certain public uses, and items not intended for highway transportation (mobile machinery). But each exemption has tight definitions and documentation requirements. Tires: There is a separate federal excise tax on certain heavy truck tires, typically based on weight rating. This is distinct from the 12% heavy vehicle FET. Practical advice: Get the seller’s FET position in writing. If a dealer says “no FET on this unit,” ask why and keep the documentation. Coordinate timing of add-ons. Accessories or bodies installed around the time of purchase may be included in the FET base price. If you plan staged installations, understand how timing affects tax. Beware of “cheap” sale prices. If the price looks artificially low compared to fair market value while other charges are loaded elsewhere, tax law can recompute a taxable price. Keep build sheets and invoices. If an audit shows a major rebuild or conversion, you will need records to support why FET did—or did not—apply. Sales and Use Tax Basics for Equipment and Parts Sales tax generally applies to retail purchases delivered in a state. Use tax applies when you buy out of state (or without tax charged) but use, store, or consume the item in a taxing state. Key points for trucking: Titled vehicles and trailers: Some states collect tax through motor vehicle or county titling offices; others treat trailers like equipment and tax them through standard sales tax channels. Leases vs. purchases: States vary—some tax the full selling price upfront; others tax each rental payment. TRAC leases and finance leases can be treated differently. Parts and maintenance: Parts are usually taxable; labor can be taxable or exempt depending on the state and whether the work is repair/maintenance versus manufacturing or installation. Extended warranties and service contracts are state-specific. Freight/fees: Delivery charges, doc fees, and shop supplies are taxable in many states if they are part of getting the item to you or into working order. Use tax catches “tax-free” deals. Buying in a low-tax state doesn’t immunize you. If you bring the unit home and title or predominantly use it in your state, use tax often applies (with credit for legally paid tax elsewhere). Common Exemptions and How to Use Them (Carefully) Resale/Dealer Exemption If you are buying to resell or lease (for example, a related leasing company that will rent equipment to the carrier), you may use a resale certificate. This shifts tax to the end user. Misuse of resale certificates is a top audit issue—use them only if you truly resell or lease. Rolling Stock / Interstate Carrier Exemptions Several states offer reduced rates or exemptions for motor carriers operating predominantly in interstate commerce . The tests differ—some require a minimum percentage of interstate miles or loads; others require common/contract carrier authority. Documentation usually includes mileage logs, bills of lading, and proof of interstate operations . Expect close scrutiny; rules change frequently. Occasional/Casual Sale Purchases from private parties can be exempt in some states, but many jurisdictions exclude motor vehicles and trailers from the casual-sale exemption or collect tax at titling. Always check the vehicle/trailer rules separately from general equipment rules. Trade-In Credits Many states allow you to reduce the taxable price by the value of a qualifying trade-in. The credit may be limited to “like-kind” property (e.g., a trailer for a trailer). Keep appraisals and trade-in paperwork. Manufacturing or Agricultural Exemptions Carriers sometimes try to apply “manufacturing” or “processing” exemptions to their shops. These rarely apply to standard repair/maintenance of rolling stock. Don’t rely on these without a state-specific ruling. Direct Pay Permits Larger fleets can obtain a permit to self-assess tax directly to the state. This can simplify purchasing across states and avoid vendor over- or under-collection, but it increases your compliance responsibility. Tires, Cores, and Environmental Fees FET on heavy truck tires is separate from heavy vehicle FET. Tire dealers often handle collection/remittance, but audit adjustments still fall back on records. Waste tire fees, battery fees, and core charges are state-specific. Most are taxable; some aren’t. Make sure your AP system codes these consistently. Cross-Border Operations: Sourcing and Credits Sourcing: Sales tax generally follows the place of delivery or titling , but states have special rules for vehicles and trailers. If a tractor is delivered and titled in State A, then quickly used in State B, State B may still assess use tax on a portion or all of the price. Credit mechanisms: Most states grant a credit for tax legally paid to another state on the same item. The credit is limited to the amount of tax that state would have charged , and documentation is essential. IRP/IFTA is not sales/use tax. Apportionment under IRP and fuel tax reporting under IFTA do not replace sales or use tax obligations. Nexus for Carriers You can owe sales/use tax in a state even without a terminal there. Nexus can be created by: Having drivers or agents regularly present. Owning or leasing property (trailers parked at a customer yard, drop lots). Delivering and installing equipment in the state (for shop operations). Nexus analysis affects your obligation to collect tax from customers (if you sell or lease equipment/parts) and your obligation to self-assess use tax on your own purchases. Documentation: Your Best Audit Defense For equipment transactions, auditors expect a clean file. At a minimum, organize: Bill of sale or lease agreement with make/model/VIN, delivered location, and price allocation. FET statement from the seller (tax charged, not charged, and why). Title and registration papers matching the state tax treatment. Exemption certificates (resale, rolling stock, government, export), fully completed and timely. Interstate evidence for rolling stock exemptions (mileage reports, bills of lading). Invoices and build sheets for bodies, upfits, and accessories, with dates (for FET and sales tax sourcing). Proof of tax paid in another state if you are taking a credit. Shop records showing parts vs. labor lines and descriptions. A neat audit file often shortens examinations and reduces assessments. Frequent Pitfalls (and How to Avoid Them) “We bought it in a tax-free state.” Use tax back home is still likely. Plan for it and document credits. Mislabeling rebuilds as repairs. If the scope of work is significant, you can trigger FET. Review major rebuilds with your tax advisor before cutting the PO. Relying on an old rolling stock exemption. States revise rules. What was exempt last year may now require a new certificate or a higher interstate threshold. Ignoring leases and buyouts. Some states tax each rental; some tax the upfront “selling price.” Lease buyouts can be taxed differently from the stream of rent you already paid. Structure with tax in mind. Bad AP coding. Freight, doc fees, shop supplies, environmental fees—your system needs rules for when these are taxable. A few wrong defaults can add up across hundreds of invoices. Assuming dealer paperwork is always right. Dealers are helpful, but they do not control your use, title, or tax nexus. Validate the dealer’s tax treatment against your facts. Missing trade-in credits. If your state allows them, make sure the paperwork is complete and values are clearly assigned. Planning Strategies That Actually Help Front-load the tax conversation. When negotiating price, also negotiate who bears FET, what’s in the taxable base, and which state will source the sale. Stage installations deliberately. If you’re adding expensive bodies or refrigeration units, consider delivery timing and where work is performed. Consider a leasing entity. Some fleets place equipment in a related lessor that rents to the carrier. This can centralize exemption certificates and use tax accruals and may unlock resale/lease exemptions where appropriate. Get legal and tax advice before restructuring. Use direct pay (where eligible). It reduces vendor errors and gives you control over multi-state accruals. Standardize your exemption packet. A single folder that includes resale certificates, rolling stock affidavits, authority letters, and a point of contact for verification saves time. Run periodic reverse audits. Review the last 24–36 months for over-paid tax on exempt transactions and for under-accruals. Corrections before an audit are cheaper. How a Professional Tax Services Engagement Works (Trucking-Focused) A well-run engagement typically follows this path: Scoping call to confirm what you buy (power units, trailers, shop parts), where you operate, and how you title/register. Data pull: vendor master, 12–36 months of AP detail, lease schedules, equipment master, and key contracts. Rate and rule map: build a state-by-state profile for titled vehicles, trailers, parts, labor, and common fees; confirm rolling stock or other exemptions. Methodology: for equipment, analyze FET exposure and state sourcing; for parts and maintenance, recalculation can be performed using an agreed rate table and your company’s exemption logic. Findings: a schedule of tax refunds to recover (over-collections) and exposures to accrue (under-collections), with documentation packs. Implementation: vendor letter templates, corrected exemption certificates, and AP coding rules. Defensibility: create an audit file with statutes/rulings, certificates, and transaction-level workpapers. Training: short sessions for purchasing, fleet, and AP teams so the fixes stick. Quick Reference Checklists Pre-Purchase (Power Unit/Trailer): Where will we take delivery and title ? Is FET being charged? If not, why not—document it. Are we claiming a rolling stock exemption ? Get the state’s current form and fill it out now. Do we have a trade-in ? Will it qualify for a credit? Are we staging bodies/upfits? Confirm effect on FET and sales tax. Who pays freight, PDI, doc fees —and are they taxable? Shop/Parts Purchasing: Parts taxable? Labor taxable? If mixed, are lines separately stated ? Environmental fees and shop supplies—taxable or not under your state’s rule? Are we using a direct pay permit ? If so, has the vendor stopped charging tax? Do we have current resale or exemption certificates on file for vendors who need them? Leases: Is this a true lease or financing ? How does the state tax each rent vs. upfront? If there’s a buyout , how will the state tax that payment? Who handles FET on a lease? Clarify in the contract. FAQs Does having interstate authority automatically qualify me for rolling stock exemptions? No. Many states require proof of predominant interstate use (often a percentage threshold) and sometimes specific carrier status. Keep logs and bills of lading. If a dealer doesn’t charge me tax, I’m clear, right? Not necessarily. If tax was due, the state can assess use tax against you later—plus penalties and interest. We operate in many states. Is there an easy way to get “one exemption to rule them all”? Unfortunately, no. You need the right certificate for each state and transaction type (resale, rolling stock, government, etc.). Do IRP and IFTA filings help my sales/use tax situation? They don’t replace sales/use tax, but mile and jurisdiction data can help prove interstate use for exemptions and allocations. Can we recover over-paid tax on past purchases? Often yes, subject to each state’s statute of limitations (commonly 3–4 years) and the availability of documentation. The Bottom Line The taxes surrounding trucking equipment aren’t intuitive. Federal excise tax has its own vocabulary and triggers. State and local sales/use taxes vary widely on vehicles, trailers, leases, parts, and labor. Two companies buying the same tractor/trailer package can face different outcomes simply based on where delivery occurs, how the deal is structured, and which exemptions are supported by the records. The smartest approach is process-driven : Decide your tax position before you sign. Lock down documentation the day of the transaction. Keep AP coding consistent and review it quarterly . Use professionals to map multi-state rules, scrub historical purchases, and set you up with clean exemption management and audit files. Doing this well lowers your all-in cost of capital on equipment, reduces audit risk, and avoids nasty surprises when cash is tight. Transportation Tax Consulting is here to help!

When a trucking company runs into trouble, “Why not sell?” sounds like the obvious move. In practice, many carriers—large and small—choose an orderly wind-down over a sale. That decision isn’t about stubbornness or pride; it’s about math, risk, timing, and the unique web of contracts, regulations, and liabilities that surround motor carriers. This article unpacks the most common reasons owners close the doors rather than transact, and it offers practical considerations for those trying to evaluate their options. 1) The Hard Math: Thin Margins, Heavy Capex, and Working-Capital Drag Trucking is brutally capital-intensive. Tractors, trailers, telematics, shop tooling, parts inventory, and facility leases consume cash. Meanwhile, revenue is often concentrated in a handful of shippers or brokers who pay on 30–60+ day terms while fuel, tolls, lumper fees, driver pay, and maintenance must be paid weekly. That timing gap creates persistent working-capital pressure. In a sale, buyers focus on sustainable earnings and free cash flow, not gross revenue. If the company has been discounting rates to keep trucks moving, running too many empty miles, or absorbing accessorials, EBITDA can be razor-thin or negative. A buyer will price the deal off normalized earnings; lenders will cap leverage; and any add-backs the seller hopes to claim (one-time repairs, COVID relief, etc.) will be scrutinized. If the enterprise value that emerges can’t clear secured debt, tax leakage, cure costs on contracts, and a risk discount for open claims, a sale becomes uneconomic. Owners then rationally ask: “Why sell my life’s work for zero—or hand over a check to sell?” 2) Insurance and “Nuclear Verdict” Exposure Even carriers with strong safety cultures face tail risk from catastrophic accidents. Claims can take years to resolve and may exceed policy limits. Buyers fear stepping into a minefield of pending or latent claims; sellers fear the size of escrow holdbacks and indemnities buyers will demand to cover that risk. If the expected escrow is so large that the seller’s net proceeds are minimal, the owner may prefer to shut down, keep insurance in runoff, and resolve claims over time without transferring the risk—or the company—to a third party. In some cases, the mere existence of severe claims or a deteriorating loss run can chill buyer interest or kill financing outright. 3) Lender Control, Cross-Collateralization, and Covenant Traps Most trucking balance sheets are weighed down by equipment loans, floor-plan or TRAC leases, and revolving lines tied to receivables. These agreements often: Blanket all assets under a UCC-1, limiting the ability to sell “just the good stuff.” Include cross-default and cross-collateralization provisions—miss a covenant on one facility and you’re in default everywhere. Require lender consent for asset sales, contract assignments, and changes of control. If the sale proceeds won’t fully satisfy secured obligations, lienholders can block the sale, demand a forced auction, or push for a 7/11 (Chapter 7 liquidation or Chapter 11 sale) where they control the process. Faced with that dynamic, an owner may choose an orderly wind-down to avoid a fire sale they don’t control. 4) Contracts That Don’t Travel Freight relationships are personal. Even with formal master service agreements, many shippers and brokers include anti-assignment clauses or require fresh vetting of safety scores, insurance, and EDI/visibility integrations. Some lanes exist only because of a dispatcher’s relationships or a local operations manager’s responsiveness. Buyers discount revenue they aren’t confident will stick. If 40% of your loads depend on the owner’s cell phone and text threads, a buyer will treat that revenue as evaporative at closing—leading to a lower price or earn-out heavy structure. Sellers often reject contingent payouts that require them to “work for the buyer” for years to get paid, and they may conclude a wind-down returns more certain value through piece-meal asset dispositions. 5) Regulatory Overlays: Safety Scores, Audits, and Permits A carrier’s USDOT and MC authority, CSA/SMS safety profile, HOS/ELD compliance, hazmat endorsements, and state permits are highly scrutinized. Recent out-of-service orders, BASIC percentile spikes, or audit findings can scare buyers and insurers. Because reputational and regulatory standing is difficult to transfer, buyers would rather cherry-pick assets and people into their existing authority than buy a corporate shell with history attached. If an “asset-only” structure is the only path—and it yields limited proceeds—sellers sometimes choose to shut down and auction assets on their own timetable. 6) Labor and Workforce Complexity Trucking’s people issues can sink a deal: Driver status : Employee vs. independent contractor classification is under active scrutiny. Misclassification risk (including taxes, benefits, and wage claims) is a classic buyer deterrent. Unions and pension liabilities : Multiemployer pension plan withdrawal liability or unsettled grievances can dwarf deal value. Driver pipeline : If the company relies on a single terminal’s driver community that is already tapped out, buyers may not believe they can maintain headcount post-closing. When buyers price these risks, sellers may decide the haircut is too steep. 7) Equipment Leases and the “Underwater” Problem In a down market, used tractor/trailer values may fall below payoff amounts. If a buyer won’t assume leases at above-market rates, the carrier must either buy out or early-terminate leases—often at a penalty. Multiply that across a fleet and the pre-closing cash requirement can exceed the likely purchase price. Shutting down and returning units under the lease terms (or surrendering them in a negotiated workout) may minimize total cash outlay versus selling the company. 8) Tax Friction: Depreciation Recapture and Basis Mismatches Trucking companies typically use accelerated tax depreciation on rolling stock. In an asset sale, the portion of the purchase price allocated to equipment can trigger depreciation recapture taxed at ordinary income rates for the seller. If there’s also low basis real estate or appreciated land, tax friction increases. When owners realize how little cash they net after federal and state taxes, they sometimes conclude that an orderly liquidation—spreading asset sales over time and managing allocations—delivers a superior after-tax outcome. 9) Environmental Exposures at Shops and Yards Maintenance facilities can carry hidden environmental liabilities: underground storage tanks (USTs), waste oil, parts washers, stormwater compliance, battery/solvent disposal, and paint or body shop residues. Buyers will demand Phase I/II environmental diligence and require the seller to fund remediation or stand behind broad indemnities. If remediation is costly or uncertain, the escrow required can consume the deal. Shutting down and remediating on the seller’s own timeline—often with the help of state programs—can be more predictable. 10) Successor Liability: Why Buyers Fear the Shell Even in an asset deal, plaintiffs may argue “successor liability” where the buyer continues the same business with the same people, equipment, and customers. That fear leads to belt-and-suspenders protections: larger escrows, longer survival periods, tighter indemnities, and reps about safety, wage-hour, and environmental compliance. If the seller can’t tolerate those strings, there may be no deal to make. 11) Timing and Runway A sale takes time: quality of earnings, diligence, lender approvals, definitive documents, consents. If cash burn is acute—fuel cards pulled, insurer demanding a massive renewal premium, lender imposing a lockbox—there may be no runway to complete a sale. A controlled shutdown minimizes chaos: finish the loads, return equipment, collect receivables, pay drivers, and close books without the distraction of a protracted auction. 12) Culture and Identity For many founders, the company’s name is on the doors of the trucks. A sale that requires rebranding or immediate integration into a competitor can feel like erasing a legacy. That emotional reality shouldn’t drive the economics—but it often matters at the margin when the sale payoff is modest. Owners may prefer to close with dignity rather than sell for a nominal sum and watch their brand disappear. 13) When Valuation Doesn’t Clear the Stack The capital stack—secured debt, equipment liens, trade payables, taxes, claim reserves—must be satisfied before equity sees a dollar. In a soft rate environment or a post-accident year, the enterprise value can be below the stack. If management believes a sale only benefits creditors while leaving owners exposed to indemnities, a wind-down directed by the owners (or, if necessary, by a Chapter 7 trustee) can be more rational. 14) Illustrative Patterns (Hypotheticals) Regional reefer carrier with three significant cargo claims in the last 18 months and a pending wrongful death case. The buyer demands a multi-year escrow larger than the proposed purchase price; insurance renewal quotes triple. Owner shuts down, auctions trailers at season’s end, and services claims with remaining cash. Dedicated contract carrier serving a single anchor shipper under an agreement prohibiting assignment. The shipper will rebid the lanes post-sale with no guarantee. Buyer’s valuation collapses. Owner winds down after a 90-day notice period, and drivers migrate to the shipper’s new awardees. Owner-operator fleet using 1099 drivers. A buyer’s counsel raises reclassification exposure and insists on a steep price cut plus indemnity. Owner declines and elects a broker-only pivot, retiring the carrier authority and selling rolling stock over time. 15) What a Shutdown Actually Looks Like An orderly wind-down is not a disappearance overnight. A disciplined plan typically includes: Stop the bleeding : Reduce or pause new loads unless profitable after fuel; tighten credit; conserve cash. Communicate with stakeholders : Insurer, lender, key shippers/brokers, drivers, and landlords—set expectations and negotiate short-term accommodations. Finish safely : Complete committed loads to avoid claims and chargebacks; document deliveries. Return or sell equipment : Coordinate with lessors and lenders; schedule inspections; avoid “abandonment” fees; consider targeted private sales for best price. Collect receivables : Deploy a collections plan; reconcile EDI disputes; offer small discounts for prompt payment rather than account aging into chargeback territory. Address employees : Comply with wage laws and any required notices; pay out final wages timely; preserve records. Insurance tail : Keep appropriate coverage in force for a claims tail; notify carriers of the wind-down; evaluate runoff endorsements. Regulatory shutdown : File required withdrawals or deactivations; close IFTA/IRP accounts; cancel permits thoughtfully to avoid unintended tax bills. Tax and final filings : Handle sales/use tax, fuel tax, payroll tax, property tax on rolling stock, and final income tax returns. Maintain records : Accident, maintenance, driver qualification, HOS logs, and ELD records should be archived to defend future claims. 16) Why a Buyer Can’t “Just Take the Lanes” From a distance it seems easy for a competitor to pay something—anything—to step into the freight. But true value is often in people and process , not paper contracts. If drivers won’t transfer, if the dispatcher who knows the yard foreman at the receiver won’t stay, if the buyer’s cost stack (insurance, shop overhead) is higher, the lanes may not be profitable for the buyer. Buyers discount accordingly, and sellers find the offers underwhelming. 17) Alternatives Between Sale and Shutdown Before pulling the plug, owners can explore middle paths: Targeted asset sales : Sell late-model tractors or specialty trailers to strategic buyers while returning older units to lessors; this can raise cash with less friction. Contract novations : Where allowed, negotiate three-party novations with anchor shippers to transfer dedicated lanes—and collect a modest novation fee. Section 363 sale (Chapter 11) : A court-supervised asset sale can cleanse liens and claims while letting the business operate. It requires funding and tight execution but can unlock value when lenders are cooperative. Assignment for the benefit of creditors (ABC) : In some states, an ABC can be a faster, less expensive path to liquidate assets under fiduciary control. Brokerage carve-out : Shut down the asset-based carrier but keep (or spin off) the brokerage that requires little capex and can scale flexibly. Management earn-out : For some strategic buyers, a short, well-defined earn-out tied to weekly revenue retention may be palatable if escrow terms are reasonable. Insurance renegotiation : If the renewal shock is the trigger, shop for alternatives or adjust deductibles/retentions paired with stronger safety programs. 18) Pre-Sale Hygiene to Improve Marketability If you’re considering a sale—even a slim one—clean up the following to maximize options: Safety file : Tackle BASIC alerts, remediate audit findings, and document corrective action. Claims posture : Reserve appropriately; pursue subrogation; push to resolve minor claims; track loss-run improvements. Equipment ledger : Reconcile VINs, titles, payoffs, and maintenance logs; cure liens or be ready with payoff letters. People : Lock down key dispatcher and terminal manager commitments; clarify driver status and agreements. Contracts : Inventory MSAs, identify anti-assignment clauses, and draft novation templates in advance. Financials : Produce monthly P&Ls by terminal and by lane if possible; separate one-time costs; prepare a credible fuel surcharge and accessorial reconciliation. Taxes and permits : Bring IFTA/IRP/FET current; resolve delinquencies that would derail diligence. Environmental : Order a Phase I if you have shop property; fix obvious issues (spill kits, drum labeling, manifests). Sometimes a bit of hygiene flips the recommendation from “shut down” to “sell assets smartly.” 19) Owner Psychology and Negotiation Leverage When buyers sense distress, offers plummet. Some owners elect to stop negotiating from weakness : they announce a planned wind-down, secure their people, and sell assets at market via multiple channels. Ironically, clarity can draw late interest from buyers who now see a discrete, risk-bounded opportunity (“We’ll take 25 reefers and hire 30 drivers, no corporate liabilities”). The point isn’t to play games; it’s to choose the path that yields the best risk-adjusted net for owners, employees, and creditors. 20) A Quick Checklist: “Should We Sell or Shut Down?” Ask these questions and be candid with the answers: Will a buyer’s enterprise value—after diligence discounts— clear the debt stack and provide net cash worth the time, indemnities, and escrow? Are our top five customers contractually assignable, and what percent of revenue would truly transfer? What are our loss runs and pending claims? Would a reasonable buyer or lender underwrite them? Are we underwater on equipment? What is the cash cost to cure or return units? Do we face classification or pension risks that a buyer will price harshly? Can we operate safely and maintain insurance through a 90–150 day sale process? What is the after-tax net under (a) an asset sale vs. (b) an orderly liquidation? Where is our leverage with lenders, landlords, and counterparties? If we shut down , can we do so without triggering additional claims (abandoned loads, wage claims), and do we have a plan to collect receivables? Which path—sale, hybrid, or shutdown— maximizes certainty while minimizing personally guaranteed exposure? 21) The Bottom Line A trucking company may shut down rather than sell because the sale price can’t overcome debt and risk; because buyers won’t take on the regulatory, insurance, and labor liabilities; because contracts won’t transfer; because closing logistics and taxes erode proceeds; or because the company simply lacks the cash runway to complete a transaction. Far from being an admission of failure, an orderly wind-down can be a disciplined, fiduciary decision that protects drivers, shippers, and creditors while preserving the owner’s sanity and limiting future risk. If you’re at this crossroads, map the numbers honestly, pressure-test your assumptions with trusted advisors, and run both models —sale and shutdown—side by side, including taxes, cure costs, and tail liabilities. The right choice is the one that yields the best risk-adjusted outcome for the stakeholders you care about. 

Executive Summary Trucking companies operate on razor-thin margins, and most leaders look to fuel optimization, driver retention, and freight mix to protect profitability. Yet a surprising share of lost profit hides in plain sight: the sales tax arena. Misapplied exemptions, inconsistent treatment of repairs and parts, overlooked use tax, and fragmentation across states can quietly drain hundreds of basis points from EBITDA. This article explains where those leaks occur, how to quantify their impact, and a practical roadmap to reclaim dollars without adding trucks, lanes, or headcount. Why Sales and Use Tax Is a Profit Center—Not Just a Compliance Obligation Sales and use tax is often seen as a pass‑through—collected on taxable sales and remitted—so it’s rarely framed as a strategic lever. In multi‑state trucking operations, however, the mechanics are more nuanced: You buy substantial volumes of taxable inputs (parts, tires, shop supplies, tools, software subscriptions, telematics devices, and even office equipment). If a vendor fails to charge the correct tax—or overcharges—you either remit use tax or pay too much and never recover it. Many purchases are conditionally exempt depending on use (rolling stock, repairs for interstate carriers, manufacturing/processing exemptions on in‑house fabrication, etc.). Misclassification in either direction costs money: pay tax unnecessarily, or under‑accrue and later fund assessments, penalties, and interest. Decentralized procurement (shops, terminals, road calls) plus high vendor turnover magnify error rates. A 1–3% error rate on eight‑figure spend is six‑figure leakage annually. Audit posture influences outcomes. When records are incomplete, auditors estimate—almost always to the taxpayer’s detriment. Proactive documentation can shift that curve. Bottom line: treating sales and use tax as a controllable cost—managed like fuel or maintenance—can liberate material profit. The 12 Most Common Profit Leaks for Trucking Operations 1) Rolling Stock and Component Exemptions Misapplied Many states provide exemptions or reduced tax rates for rolling stock used in interstate commerce . Eligibility often hinges on: Vehicle weight thresholds; Miles or trips outside the state; Common carrier vs. private carrier status; Ownership vs. lease; and Where title/possession transfers. Two recurring issues: Over‑payment : Paying tax on tractors, trailers, or major components (engines, transmissions, APUs) that qualify for exemption when you buy in the wrong state or the vendor defaults to tax. Under‑accrual : Claiming an exemption without satisfying registration, affidavit, or apportionment requirements—leading to assessments later. Fix : Standardize purchase channels for equipment; maintain exemption certificates and interstate use documentation; and align accounting codes so large components are flagged for review. 2) Repairs, Parts, and Maintenance—Taxability Varies by Context Repair labor and parts are treated differently state‑to‑state. Common pitfalls: Lack of separation on invoices between labor and parts where labor is exempt. Shop supplies (rags, solvents) deemed taxable consumables even if rolled into a repair order. Mobile service in cross‑border areas where the “place of service” changes tax outcomes. Fix : Require vendors to separately state labor vs. parts; embed tax rules in purchase order terms; and ensure mobile service tickets capture GPS/terminal data to pin the taxing jurisdiction. 3) Tires, Retreads, and Environmental Fees Besides sales tax, tires may carry state environmental fees or differential rates. Misapplied fees, or treating retreads as the same as new tire sales, cause small errors that compound at scale. Fix : Catalog tire SKUs with tax attributes (new vs. retread, off‑road vs. on‑road) and validate environmental fee application. 4) DEF, Lubricants, and Non‑Fuel Fluids Diesel Exhaust Fluid and certain lubricants are sometimes exempt or taxed differently from fuel. Vendors and shop teams may default to the fuel tax rules or retail norms. Fix : Maintain a commodity matrix for fluids. Where DEF qualifies for exemptions tied to pollution control equipment, collect and store the necessary use statements. 5) Rentals, Leases, and Sub‑leases of Equipment The tax treatment of daily rentals , capital leases , and long‑term operating leases varies. You might be paying tax on the full buy‑out value when a stream‑of‑rental tax would be cheaper—or vice versa. Sub‑leasing to owner‑operators or affiliates introduces another layer of complexity. Fix : Centralize lease review with tax. Model both options (up‑front vs. periodic taxation) and choose the lower‑cost path per state. 6) Telematics, ELDs, and Software as a Service (SaaS) SaaS, data services, GPS hardware, and content subscriptions are taxed inconsistently across states. Invoices often bundle hardware + software + service under a single line. Fix : Require itemization and map each component to state rules. Negotiate vendor contracts that separate tangible hardware from digital services. Set up AP coding to drive the right tax treatment. 7) Accessorials and Surcharges on Customer Invoices Fuel surcharges, detention, lumper fees, and ancillary services may be bundled into the tax base in some jurisdictions, even if freight itself is exempt. If invoicing systems are not configured properly, you either over‑collect (risking exposure and customer friction) or under‑collect (eroding margin through assessments). Fix : Build a taxability matrix for each price element. Configure the invoicing engine so fuel surcharge, accessorials, and third‑party pass‑throughs follow the proper tax flags by state and by commodity/service. 8) Interstate Commerce and the “We Don’t Owe Tax” Myth Teams sometimes assume that if a shipment crosses state lines, everything related to it is exempt. Not true. Many states tax in‑state services (e.g., truck repairs performed within the state) regardless of the shipment’s interstate nature, and they may tax tangible personal property used in the state even if purchased elsewhere without tax. Fix : Train terminal leaders and shop managers to separate sales tax on purchases from exempt freight charges . Use geolocation on service events to determine the taxing situs. 9) Drop Shipments and Multi‑party Transactions For parts distribution or specialized equipment, drop shipments can trigger unexpected nexus and collection obligations, especially when selling to owner‑operators or affiliates across states. Fix : Map drop‑ship supply chains and ensure you have correct resale documentation from intermediaries. Where your vendor cannot accept your exemption certificate type, structure the transaction to minimize tax friction (e.g., multi‑step invoicing, certificates that the vendor can honor). 10) Related‑Party and Intercompany Charges Shops that recharge parts/labor to operating entities, or corporate allocations for IT/telematics, can create taxable transfers . Auditors scrutinize intercompany documentation, especially when markup policies are inconsistent. Fix : Document intercompany agreements; decide whether to treat internal shops as cost centers or profit centers; and align tax treatment with that structure. Avoid casual “management fee” descriptions—be specific about the underlying goods/services. 11) Local Taxes, Home‑Rule Cities, and Special Districts Beyond state law, home‑rule localities (notably in certain states) have their own rules and audits. A terminal inside city limits may face a different tax landscape than one outside, despite sharing a ZIP code. Fix : Maintain a GIS overlay of terminals and service locations with local jurisdiction boundaries. Configure your tax engine to respect home‑rule variations. 12) Use Tax Accruals—The Silent Margin Eroder When vendors don’t charge tax correctly, you must self‑assess use tax . Many AP systems lack the fields, controls, or discipline to do this accurately. The result: either over‑accrual (immediate margin hit) or under‑accrual (future assessment with penalties and interest). Fix : Build automated use‑tax rules tied to item codes and vendors. Reconcile accruals monthly and true them up after periodic audits or reverse audits. Quantifying the Impact: A Simple Model Leaders often ask, “How big could this be for us?” Here’s a practical way to estimate without a full forensic review. Identify Spend Buckets (annual): Apply an Error Band by bucket (conservative averages seen in multi‑state trucking environments): Estimate Leakage : Multiply spend by the midpoint of the applicable error band. Overlay Audit Risk : For categories with historical under‑accrual, add penalties and interest (often 10–25% of understated tax over the look‑back period). It is common for mid‑sized carriers to uncover six to seven figures in recoveries and prospective savings. Reverse Audits: Turning Compliance Gaps into Refunds A reverse audit reviews past purchases to identify tax paid in error, preparing refund claims with vendors or states. In trucking, high‑yield areas include: Exempt rolling stock components taxed at purchase; Over‑taxed repairs where labor should have been exempt; SaaS and data services mischaracterized as taxable software licenses; Environmental fees misapplied on retreads or exempt classes of tires; and DEF treated like taxable fuel in states where exemptions exist. Keys to success: Pull data directly from AP and purchasing systems (not just PDFs); Normalize vendor names and map to spend categories; Sample invoices to validate patterns before filing large refund claims; Maintain defensible documentation (exemption certificates, use statements, mileage apportionment) to support eligibility; and Coordinate refunds with your use‑tax accrual process to avoid whipsaw effects (e.g., claiming a refund while continuing to over‑accrue). Building a Sales & Use Tax Operating System (SUT‑OS) Think of sales and use tax like a micro‑ERP within your finance stack. An effective SUT‑OS has four layers: Policy Layer Data & Master‑File Layer Process Layer Technology Layer When these layers work together, tax becomes a controlled cost driver rather than an audit roulette wheel. People and Training: Where Leaks Really Start Even the best rules fail without front‑line adoption . Focus training on: Shop managers and parts purchasers : How to code invoices, when to ask for itemization, and when to require certificates. AP processors : Recognizing red flags (bundled SaaS invoices, missing labor/parts split, suspicious environmental fees). Sales & billing teams : Charging tax on accessorials correctly; avoiding over‑collection; maintaining customer exemption files. Terminal leaders : Understanding interstate exemptions vs. in‑state service tax rules; capturing situs data for mobile repairs. Tip : Build micro‑checklists that sit in the workflow—PO creation, invoice approval, customer setup—so the right questions are asked at the right time. The Audit Lifecycle—and How to Win It Audits happen. The difference between a routine exam and a profit hit is preparation. Pre‑Audit Hygiene Scope and Sampling Issue Triage Settlement and Prospective Fixes Owner‑Operators, Subcontractors, and the Grey Areas Trucking networks rely on a mix of company drivers and owner‑operators (O/Os) . Sales and use tax issues arise when: You sell parts or fuel internally to O/Os at terminals—are you collecting the right tax? Do you have resale certificates when appropriate? You lease terminals, yard space, or equipment to O/Os—are these leases taxable in the state? You pass through third‑party services (lumper, towing) on customer invoices—does the pass‑through become part of the tax base? Good practice : Treat O/O interactions as third‑party commerce from a tax perspective. Maintain customer/vendor profiles and certificates as if they were external. M&A, New Markets, and Nexus Shock Acquisitions can trigger sudden nexus in unfamiliar jurisdictions. Assumptions from the legacy footprint often fail post‑deal. Common surprises: Local taxes in home‑rule cities; Different treatment of SaaS and data services; Rolling stock exemptions that require specific registration or affidavits; and Pre‑existing exposure at the target related to poor use‑tax accruals. Integration playbook: Conduct a SUT due diligence workstream alongside financial diligence; Harmonize item masters and tax rules on Day 1; File nexus registrations promptly where activities begin; and Consider voluntary disclosure agreements (VDAs) to cap historical exposure in newly discovered jurisdictions. A 90‑Day Action Plan to Reclaim Hidden Profit Day 1–30: Baseline and Quick Wins Pull 12–24 months of AP data; classify vendors and spend categories. Identify top 20 vendors by tax risk (parts distributors, tire suppliers, telematics providers, shops). Sample invoices for each category; note recurring issues (missing labor separation, bundled SaaS, misapplied fees). Launch vendor conversations to correct go‑forward invoicing (itemization, certificate acceptance, rate tables). Day 31–60: Build Controls 5. Configure AP rules to auto‑accrue use tax by item code where vendors frequently miss. 6. Stand up a certificate management process for rolling stock, resale, and service exemptions. 7. Publish a two‑page policy for shops and terminals: what’s taxable, what’s exempt, when to escalate. 8. Start a reverse audit on the two highest‑yield categories (e.g., rolling stock components and SaaS/telematics). Day 61–90: Industrialize 9. Integrate a tax engine or rules service to ERP/TMS for invoicing and AP. 10. Create a dashboard: error rate by category, open refund claims, accrual variance. 11. Run an audit simulation using a statistical sample to size residual exposure and validate controls. 12. Present results to leadership with a run‑rate savings estimate and next‑year roadmap. Technology Enablers: Right‑Sizing the Stack Not every fleet needs a heavyweight tax engine, but a few capabilities pay for themselves: Certificate Management : Digital repository, renewal workflows, and vendor/customer lookups. Item‑Level Tax Rules : Whether through a tax engine or ERP logic, tag parts, fluids, SaaS, and equipment with tax attributes. Geospatial Jurisdiction Mapping : To handle home‑rule cities and mobile services correctly. Analytics : Automated detection of invoices with suspect tax (e.g., repair orders without labor/parts split; SaaS invoices with one bundled line; tire invoices with missing fee codes). Document Automation : OCR that preserves line‑level detail so tax can be analyzed programmatically. If you already run AP automation and a TMS, you may be 70% of the way there. The incremental lift is in mapping taxonomy and building the rules. Culture: Making Tax Boring (in a Good Way) The goal is not to turn shop managers into tax experts. It’s to make the right decision obvious in the workflow. That means checklists, defaults, and nudges: Default PO templates with placeholders for labor vs. parts lines. Tooltips in the invoicing system that explain when fuel surcharge is in the tax base. Hard stops when a high‑risk vendor invoice lacks itemization. When people don’t need to think about tax, they won’t—and that’s how leaks stay plugged. Measuring Success: KPIs That Matter Track a handful of KPIs monthly: Effective error rate : Tax corrections / in‑scope spend. Use‑tax true‑up variance : Accrued vs. remitted. Refund pipeline : Claims filed, approved, and cash collected. Audit outcome trend : Initial proposed assessments vs. final—target a shrinking delta. Training coverage : % of frontline users who passed the micro‑modules. Tie a portion of G&A efficiency goals to these KPIs to keep attention on the dollars. Frequently Asked Questions Q: Are freight charges taxable? A: Often no when separately stated for transporting goods, but accessorials (detention, lumper, inside delivery) may be taxable in some jurisdictions. Configure invoice lines accordingly. Q: If we operate interstate, are our truck and trailer purchases automatically exempt? A: Not automatically. Many states offer exemptions with specific qualifications (weight, miles out‑of‑state, carrier status) and documentation (affidavits, registrations). Without paperwork, you risk assessments. Q: Can we rely on vendors to get tax right? A: Vendors vary widely in sophistication. You’re ultimately responsible for use tax where vendors under‑collect, and you’ll lose margin where they over‑collect unless you pursue refunds. Q: What’s the typical ROI on a reverse audit and control build‑out? A: Carriers frequently see 3–10x first‑year ROI combining cash refunds, reduced audit exposure, and lower go‑forward tax on purchases. Q: Do home‑rule cities really audit? A: Yes, in certain states they do—and they often have rules that diverge from the state’s. Treat them as distinct jurisdictions in your setup. Case Snapshots (Composite Examples) Regional TL Carrier (300 power units): Problem: Over‑taxed on rolling stock components and SaaS/ELD bundles. Action: Reverse audit identified $420k in refunds; AP rules added for use‑tax accrual; vendor contracts amended for itemization. Result: $420k cash + $180k annual run‑rate savings. Specialized Flatbed Operator (multi‑state terminals): Problem: Tire environmental fees and local tax misapplication in home‑rule cities; owner‑operator parts counter sales under‑collected. Action: Jurisdiction mapping; point‑of‑sale tax flags; training at parts counters. Result: $210k exposure avoided; $90k in refunds; clean subsequent audit. Dedicated Contract Carrier (private fleet conversion): Problem: Lease vs. buy tax modeling ignored; paid up‑front tax on assets better suited to rental‑stream taxation. Action: Restructured equipment acquisition; implemented lease tax model by state. Result: 70 bps improvement in annualized cash outflow on capex program. Leadership Checklist: Are We Leaving Money on the Table? Do we have a single owner for sales & use tax policy who can say “yes/no” with authority? Is there a living matrix of taxability by state for our top 50 purchase and invoice categories? Are AP and shops required to separate labor and parts on all repair invoices? Do we routinely accrue use tax on vendors known to miss tax, with monthly true‑ups? Is our certificate file complete, digital, and monitored for expiration? Are telematics/SaaS invoices itemized with hardware vs. service separated? Do we track home‑rule jurisdictions and configure systems accordingly? Have we conducted a reverse audit in the last 24 months? Do we simulate an audit sample annually to validate controls? If you answered “no” more than twice, there is likely six‑figure value waiting to be captured. Conclusion: Make Tax a Margin Strategy Trucking success is usually framed in operational terms: equipment availability, on‑time performance, safety, and driver satisfaction. But as fleets grow across state lines and complexity rises, sales and use tax can quietly become a material source of lost profit. The opportunity is two‑sided: recover past overpayments and build a system that gets it right going forward. With a focused 90‑day plan, disciplined data, and practical controls embedded in daily workflows, carriers can convert tax from a compliance afterthought into a durable margin advantage. Disclaimer: This article provides general information and does not constitute legal or tax advice. Consult qualified professionals for advice tailored to your specific circumstances. Transportation Tax Consulting LLC - www.transportationtaxconsulting.com

Introduction The transportation industry stands at a pivotal moment. As we enter the next twelve months, the sector is navigating a convergence of economic headwinds, regulatory shifts, technological disruptions, and evolving consumer demands. These pressures are not isolated—they intertwine, creating a complex operating environment for trucking, rail, maritime, and air freight alike. While demand for efficient, reliable transportation remains high, the conditions under which carriers must operate are changing rapidly. The question for industry leaders is not whether challenges will arise, but how quickly they can adapt to meet them. 1. Persistent Economic Uncertainty Freight Recession Lingering The freight market continues to feel the effects of a prolonged downturn. Soft spot rates, reduced shipping volumes, and overcapacity—particularly in the trucking sector—are creating a margin squeeze for carriers. While certain segments such as parcel delivery and specialized freight may fare better, general freight operators face tight competition and diminishing returns. Inflation and Interest Rates Inflation remains above pre-pandemic norms, keeping operational costs elevated. Rising interest rates make it more expensive for fleets to finance new equipment or expand capacity, further slowing growth and investment. 2. Regulatory and Policy Pressures Environmental Compliance Government mandates on emissions reduction, particularly the push toward battery-electric and alternative-fuel vehicles, are accelerating. While these transitions promise long-term sustainability benefits, the near-term capital and infrastructure requirements are steep. Charging station shortages, high upfront costs, and uncertain battery life cycles complicate adoption. Legal and Insurance Risks The industry continues to battle “nuclear verdicts” in accident-related lawsuits, driving up insurance premiums. Smaller carriers are disproportionately affected, with some being priced out of the market altogether. 3. Workforce Dynamics Driver Shortages and Retention The long-standing driver shortage persists, though its intensity varies by region and freight type. Retention remains a challenge, as lifestyle considerations, pay disparities, and limited parking infrastructure discourage long-term career commitment. Skills and Training for New Technology As autonomous systems, telematics, and alternative-fuel equipment become more common, the workforce must be retrained. The shortage now extends beyond drivers to include technicians with expertise in high-voltage systems, advanced diagnostics, and data analytics. 4. Infrastructure Constraints Parking and Rest Facilities Truck parking remains the second-highest concern for drivers across the U.S. The lack of safe, accessible, and sufficient parking options increases driver stress and can lead to regulatory compliance issues. Aging Infrastructure Bridges, roads, and port facilities require significant maintenance and upgrades. While recent federal funding packages have earmarked billions for improvements, construction timelines mean the benefits may not be felt immediately. 5. Technology Adoption and Cybersecurity Risks Digitization of Supply Chains The shift toward real-time tracking, automated dispatching, and predictive analytics is transforming logistics. However, these systems require substantial investment and ongoing maintenance, and they can create operational vulnerabilities if not implemented strategically. Cybersecurity Threats Transportation networks are prime targets for cyberattacks. Ransomware incidents and data breaches can disrupt operations, compromise customer trust, and lead to costly downtime. 6. Global Trade Volatility Tariffs and Trade Policy Geopolitical tensions, new tariff structures, and shifting trade alliances are affecting import/export volumes. For multimodal operators, sudden changes in trade flows can disrupt carefully balanced route networks and asset allocations. Port Congestion and Supply Chain Disruptions Though improved compared to pandemic-era gridlock, ports remain susceptible to labor disputes, weather-related shutdowns, and surges in container volume. 7. Strategic Pathways for Resilience To navigate the next twelve months successfully, transportation companies will need to adopt a combination of cost discipline , strategic investment , and collaborative advocacy : Cost Optimization : Leveraging fuel hedging strategies, optimizing routing, and adopting preventive maintenance programs. Diversification : Expanding into niche freight categories or value-added logistics services. Technology Integration : Implementing scalable solutions that improve efficiency without overburdening capital resources. Policy Engagement : Actively participating in industry associations to influence regulatory developments. Workforce Development : Investing in retention programs, training initiatives, and career pathway visibility.  Conclusion The coming year will test the adaptability and resilience of the transportation industry like never before. Economic volatility, regulatory shifts, labor challenges, infrastructure needs, and technological change are converging to create an environment that demands both caution and innovation. Those companies that can stay agile, invest wisely, and anticipate change will not only withstand the turbulence but also emerge stronger, more competitive, and better prepared for the decade ahead.

The U.S. transportation industry is bracing for a transformational shift as Union Pacific (UP) moves to acquire Norfolk Southern (NS) in one of the largest rail mergers in decades. The proposed acquisition would create a coast-to-coast rail giant connecting the West Coast, Midwest, and Eastern Seaboard—effectively redrawing the competitive map of North American freight. While the deal is still pending regulatory approval, its implications are already rippling through the logistics sector. Chief among them is the expected impact on the trucking industry , especially in areas such as: Freight volumes (in trucking tons) Cost per mile for freight movement Trucking profit margins Trucking bankruptcies Consolidation and mergers across transportation sectors This article breaks down each of these impacts in detail and explains how industry players should prepare for the coming realignment. Rail and Trucking: Interlinked but Competitive For decades, rail and trucking have operated in a complementary yet competitive fashion. Rail moves about 28% of U.S. freight ton-miles, while trucking dominates the short-haul and last-mile segments with about 72% of freight by tonnage. The rise of intermodal freight , where goods are shipped via multiple modes (usually rail + truck), has intensified this relationship. The Union Pacific–Norfolk Southern merger would create a truly transcontinental rail system , enabling uninterrupted rail service from Los Angeles to Atlanta, and from Seattle to the ports of Virginia. This significantly enhances rail's competitive position over long-haul trucking, especially for shippers looking to cut costs. How the Merger Will Impact Trucking Freight Volumes Shift to Intermodal Rail One of the first and most visible consequences of the acquisition will be a significant shift of freight from trucks to rail , especially intermodal shipments. The newly combined rail network will offer: More direct intermodal corridors Lower transit times between major ports and inland hubs Economies of scale that reduce the cost per container Major corridors likely to see freight diversion from truck to rail include: Los Angeles ↔ Atlanta Dallas ↔ Charlotte Chicago ↔ Norfolk Kansas City ↔ Savannah According to industry estimates, this shift could pull as much as 5–8% of truckload freight volume off the highways over the next three to five years. Estimated Trucking Tons Lost The American Trucking Associations (ATA) reports that the U.S. trucking industry hauls about 11.5 billion tons of freight annually . If 4–5% of that moves to rail, the trucking industry could lose over 400 million tons per year in long-haul freight—a staggering blow concentrated on large national carriers and long-haul routes. Short-haul and regional carriers will be less affected, but OTR (over-the-road) carriers will bear the brunt. Cost Per Mile: Downward Pressure How Rail Lowers Freight Costs Railroads move freight more efficiently over long distances. According to the Association of American Railroads (AAR), trains can move a ton of freight over 470 miles on a single gallon of fuel . This efficiency translates to lower rates for shippers. Whereas long-haul trucking averages $2.05 per mile , intermodal rail can offer rates closer to $0.85–$1.15 per mile , especially on lanes over 1,000 miles. The combined UP-NS network will allow for more direct east-west intermodal services, cutting out handoffs and inefficiencies. As a result: Rail rates may drop 5–10% in targeted lanes Trucking rates will feel downward pressure, especially in contract negotiations Brokers and shippers will have more leverage when choosing modes Margin Squeeze on Trucking At the same time, trucking costs continue to rise due to: Fuel price volatility Equipment and insurance inflation Driver shortages and wage hikes Regulatory compliance costs This divergence between rising costs and declining pricing power could compress profit margins industry-wide—especially for carriers unable to pivot into regional, niche, or intermodal-support roles. Impact on Trucking Profits Profitability Trends Public carriers like Knight-Swift and J.B. Hunt have already flagged lower operating ratios in recent quarters due to soft volumes and competitive pressure. This trend will likely deepen post-merger. Mid-size carriers operating in high-volume corridors—particularly from the Midwest to the Southeast—will face: Reduced revenue per truck Higher empty mile ratios Tougher rate negotiations Forecasts suggest that average net profit margins in truckload freight could fall from 6.5% in 2023 to under 4% by 2026 for those heavily exposed to long-haul lanes now being targeted by rail. Winners and Losers Winners: Trucking companies with intermodal partnerships Regional LTL carriers Drayage and first-mile/last-mile operators Losers: Long-haul OTR operators Non-asset 3PLs with limited modal flexibility Carriers with high fixed costs and low rate flexibility A Surge in Trucking Bankruptcies? Current Strains Even before this rail acquisition, trucking bankruptcies had been on the rise. According to Broughton Capital and FreightWaves, over 1,600 carriers exited the market in 2024 , largely due to: Spot rate softness Fuel cost volatility Increasing debt loads from pandemic-era fleet expansions Merger-Related Fallout As the merged UP-NS entity pulls freight volume and pricing power away from trucks, expect a second wave of bankruptcies—especially among: Small carriers dependent on spot freight Mid-size fleets locked into uncompetitive contract terms Operators with high leverage or limited cash flow Estimates suggest 2,000–2,500 additional carrier exits by 2027 . The fallout will hit some regions harder than others—particularly the Southeast, Ohio Valley, and Southern California. Transportation Mergers: Domino Effect Trucking Consolidation Will Accelerate To survive and compete, many trucking firms will pursue: Strategic M&A to gain scale and diversify offerings Tech integration for load optimization and routing Modal diversification into LTL, final mile, or warehousing Recent examples: Knight-Swift acquiring U.S. Xpress TFI International expanding its LTL and dedicated divisions Werner and ArcBest investing heavily in 3PL technology Expect more roll-ups of regional players and increased activity in distressed asset sales. Rail-Broker Collaboration Will Grow This merger may also encourage tighter integration between rail carriers and logistics providers. Look for: Rail–broker joint ventures Co-branded intermodal offerings Tech-driven visibility platforms to support rail-truck integration Truckers who embrace these changes and reposition as logistics partners—not just asset providers—stand to benefit. What This Means for Shippers, Brokers, and Drivers Shippers Pros: Lower rates on long-haul freight Better intermodal coverage from coast to coast More carrier options in integrated supply chains Cons: Learning curve in managing intermodal freight Risk of delays during rail network integration Less redundancy in modes if trucking capacity contracts Freight Brokers Pros: Opportunity to offer modal flexibility and optimization Chance to grow intermodal brokerage offerings Cons: Margin pressure on traditional TL brokerage Need to invest in rail rate knowledge and capacity access Truck Drivers Long-haul drivers will see the biggest impact: Potential for reduced miles and earnings Consolidation of routes and terminals But growth may emerge in: Regional driving Port and terminal drayage Dedicated, private fleet operations Retraining and geographic flexibility will be key to long-term stability. Regulatory and Infrastructure Outlook Surface Transportation Board Scrutiny The STB is reviewing the UP–NS deal carefully, focusing on: Market power and competition Service quality during integration Access for short-line railroads Expect some conditions imposed—like terminal access provisions or service guarantees—but the merger is likely to proceed, given the precedent set by recent CP–KC Southern consolidation. Infrastructure Investment Boom Post-merger, expect: New intermodal terminals Upgraded rail yards and drayage infrastructure Greater emphasis on digital platforms for shipment visibility Trucking companies with the capital to co-invest or co-locate near these hubs will benefit the most. Conclusion: Disruption Is Opportunity for the Prepared The Union Pacific–Norfolk Southern acquisition represents more than a business deal—it’s a strategic inflection point for the transportation industry. While trucking volumes, profit margins, and company count may shrink in the near term, those who adapt will find new niches, new partners, and new ways to serve a rapidly evolving freight economy. The winners will be: Intermodal-savvy Tech-forward Financially disciplined Strategically agile Those who cling to the status quo? They may find themselves outmaneuvered—not just by railroads, but by the freight ecosystem of tomorrow.

August 4, 2025 The second half of 2025 will be one of the most unforgiving periods in recent history for small and mid-sized motor carriers in the United States. While freight volumes have remained steady, the financial and legal landscape surrounding trucking has grown hostile—marked by escalating costs, regulatory burdens, and economic volatility. Bankruptcy filings by carriers have surged in the first half of the year, and the pressure will only intensify. For those in leadership—owners, CFOs, fleet managers—understanding the core risks is not just helpful; it is essential to survival. This article breaks down the top reasons why a motor carrier is likely to go bankrupt in H2 2025 , with a focus on critical factors including insurance costs, legal exposure, interest rates, tariffs, and broader consumer behavior . Soaring Insurance Costs and Shrinking Availability The trucking insurance market in 2025 is increasingly dominated by high deductibles, nuclear verdict risk , and a shrinking pool of underwriters . For many carriers, insurance is now the second-highest fixed cost after fuel or payroll—and it’s growing faster than any other line item. Key Factors: Annual premiums often exceed $25,000–$35,000 per truck. Deductibles have ballooned to $50,000–$100,000 in many policies. Insurers are exiting high-risk states (e.g., California, Texas), leaving carriers scrambling. Carriers with even one minor CSA score blemish or prior accident claim may find themselves uninsurable or priced out , especially if they operate older equipment or haul higher-risk freight like hazmat or produce. Bankruptcy Trigger : A single loss of insurance coverage (or a 2x rate hike) can effectively shut down operations overnight , as FMCSA registration depends on valid insurance. Lawsuits and the Rise of Nuclear Verdicts Legal risk is one of the most underestimated threats to a motor carrier’s financial survival. Trial attorneys across the U.S. have aggressively targeted trucking companies, using dashcam footage, driver logs, and company records to build high-value cases—often with jury verdicts exceeding $10 million . Common Scenarios: A distracted or fatigued driver causes a multi-vehicle collision. Failure to properly maintain brakes or tires leads to injuries. Inadequate driver training or lack of documentation becomes evidence of negligence. Even carriers who are partially at fault or not negligent can face years of litigation , settlements, and rising insurance reserves. The mere threat of a nuclear verdict can push insurers to settle high, raising premiums for the entire fleet—and damaging a company’s ability to grow or retain shippers. Bankruptcy Trigger : A single judgment over policy limits may force the fleet owner to liquidate assets or restructure under Chapter 11. High Interest Rates and Cost of Capital As of Q3 2025, the Federal Reserve has held interest rates near 5.25% , and inflation remains sticky despite early-year optimism. This has a direct and punishing effect on leveraged motor carriers. Financial Impacts: Truck and trailer financing rates are now 9%–13% , depending on credit. Lines of credit have become tighter and more expensive . Carriers with equipment loans or factoring arrangements face growing interest burdens. Moreover, smaller carriers —especially those dependent on factoring companies for working capital—are exposed to predatory terms , leaving them with little room for error if freight invoices are delayed or disputed. Bankruptcy Trigger : Interest burdens squeeze margins to the point that even profitable operations can’t maintain liquidity , resulting in missed payroll, repossessions, or default. Tariffs and Cross-Border Trade Friction While tariffs are usually discussed in geopolitical terms, their effects are very real for motor carriers—especially those involved in import/export freight, intermodal drayage, or cross-border hauling with Mexico or Canada. The Trump administration’s 2025 trade bill—commonly referred to as the One Big Beautiful Bill —introduced a new wave of tariffs on consumer goods, electronics, and components from China, the EU, and Mexico. In response, several trading partners have retaliated, causing supply chain disruption and freight slowdowns . Freight Market Consequences: Tariffs have led to order delays and reduced freight volume . Retailers and manufacturers are stockpiling less , lowering the need for transportation services. Uncertainty is shifting supply chains toward domestic production , which could reduce cross-border hauls in the short term. Bankruptcy Trigger : Declining international or port-related freight causes revenue shortfalls that carriers can’t offset quickly enough with domestic lanes. Consumer Index & Freight Demand Volatility The U.S. Consumer Confidence Index (CCI) and Consumer Spending Reports for Q2 2025 have been underwhelming, driven by inflation fatigue, rising credit card debt, and continued layoffs in white-collar sectors. What does this mean for motor carriers? Domino Effect: Retail and discretionary goods freight is softening. Final-mile and regional carriers are particularly vulnerable. Spot market rates for dry van and reefer freight have declined by 12–18% year-over-year . Inventory levels are leaner, and warehouse throughput has slowed. Even contract carriers are seeing delays in RFP renewals , while some shippers are rebidding mid-cycle to lower their freight spend. Bankruptcy Trigger : Revenue drop, especially in Q4 peak season, combined with fixed operating costs, forces negative cash flow for consecutive months . Failure to Maintain Compliance & Rising Operating Costs Beyond fuel and insurance, compliance has become more expensive and harder to manage. States have intensified audits of: Sales and use tax filings IFTA and HVUT registrations Driver employment classification (W-2 vs. 1099) Equipment depreciation and use exemptions Fines for non-compliance are high and often retroactive . A small fleet that misclassifies drivers or fails to update multi-state registrations can face six-figure back taxes and penalties —often without warning. Additionally: Tolls are up in 27 states as of mid-2025. Several states have introduced new vehicle miles traveled (VMT) fees . Some states are auditing IRP apportionment data with new algorithms. Bankruptcy Trigger : Surprise assessments or penalties can destroy margin and credibility with lenders, landlords, and shippers. Unprofitable Growth or Overexpansion Ironically, many carriers that are filing for bankruptcy in 2025 are not failing due to lack of freight—they’re failing due to expansion without financial discipline . Carriers that: Added trucks rapidly during the 2021–2022 boom Failed to lock in stable contract freight Took on high-interest equipment loans Didn’t invest in compliance, training, or tech …are now facing a perfect storm of declining rates and rising costs. Bankruptcy Trigger : Fleet size outpaces management capability, resulting in driver turnover, asset underutilization , and default on fleet loans. Owner Burnout and Exit Without Planning In many small and family-owned carriers, the owner is also the CFO, dispatcher, recruiter, and compliance officer. The emotional and mental weight of managing insurance renewals, lawsuits, breakdowns, and driver shortages is taking its toll. In H1 2025, over 1,400 carriers filed for bankruptcy—many of which were profitable on paper but suffered from burnout, lack of succession planning , or inability to refinance loans. Signs of Burnout-Induced Closure: Owner begins delaying IFTA, registration, and maintenance filings. Payroll starts to slip, and key staff leave. Owner stops bidding on new lanes or pursuing growth opportunities. Bankruptcy Trigger : Emotional disengagement leads to inertia , and the business collapses from within—even without catastrophic loss. Final Recommendations: How to Avoid the Cliff If you're a motor carrier executive or owner reading this, here’s how to proactively avoid bankruptcy: Financial Conduct a 12-month cash flow forecast under three rate scenarios. Refinance any high-interest debt before Q4. Use factoring selectively—avoid contracts with monthly minimums or hidden fees. Legal & Compliance Perform a risk audit with legal counsel. Review every driver’s DQF, MVR, and training file. Invest in accident response protocols and dashcams . Strategic Diversify into specialized freight (e.g., flatbed, hazmat, intermodal drayage). Build direct shipper contracts rather than relying on brokers. Reinvest in technology : TMS, compliance tracking, and freight optimization tools. In Closing: Survive Now, Thrive Later The second half of 2025 will be remembered as a cleansing cycle for the trucking industry . Carriers that ignored risk management, over-relied on spot freight, or failed to adapt to rising capital costs will struggle—or fold. But those that take action now—by improving compliance, reducing legal exposure, and managing debt—can not only survive but emerge stronger when the market rebounds.  The road ahead is rough. But it's not impassable.

Owning a trucking company in 2025 is a bold undertaking. You're not just moving freight—you’re operating within one of the most heavily regulated, scrutinized, and legally exposed industries in the U.S. From managing fuel costs to hiring drivers, from DOT audits to accident litigation, trucking company owners must be part strategist, part operator, part compliance expert—and always ready to solve problems. So, what is it really like to own a trucking company in today’s market? Let’s take a closer look at the opportunities, financial pressures, operational trends , and—importantly—the legal risks facing today’s fleet owners. The State of the Industry: Profitable, But Precarious The American trucking industry hauls over 70% of the nation’s freight tonnage —it’s indispensable. But while freight is flowing, operating a fleet is more expensive and complex than ever. In 2025, the landscape includes: Depressed freight rates from overcapacity High insurance premiums Aggressive legal targeting of carriers after accidents Driver shortages and retention challenges Expanding regulatory oversight from state and federal agencies Owning a trucking company may look like a stable business on paper—but beneath the surface, daily decisions carry legal, financial, and reputational risks . Revenue, Margins, and the Real Numbers Trucking is a volume-based game. Most small to mid-sized carriers operate on net margins between 4% and 10% , with razor-thin profit per mile. Fuel and wages dominate the cost structure, but legal expenses are increasingly impactful. Revenue Streams: Contract freight Spot market loads Fuel surcharges Brokerage or 3PL services Warehousing (for hybrid operators) Expense Drivers: Fuel (25–35%) Driver wages and benefits (30–40%) Insurance (rising 10–20% year-over-year) Legal and litigation costs Equipment payments, repairs, and technology Many owners are learning the hard way that a single lawsuit can wipe out an entire year’s profit—or more. Truck Accident Liability: A Growing Risk One of the biggest threats to fleet profitability and survival today is legal exposure from accidents. Why It’s Getting Worse: The rise of nuclear verdicts (jury awards exceeding $10 million) Plaintiff attorneys targeting small fleets with weak compliance Use of dashcam, telematics, and driver logs as evidence Expanded liability for indirect parties , including brokers and shippers In states like Texas, Florida, and Georgia, aggressive legal environments mean trucking companies can be dragged into multi-year lawsuits even when fault is disputed or shared. Real-World Impact: Higher insurance deductibles Lost productivity during investigations or depositions Damaged CSA scores and loss of customer contracts Owner/operator stress and risk of bankruptcy If you're not prepared for litigation, you're not ready to run a fleet in 2025. Regulatory & Insurance Pressures Regulatory Burden: Fleet owners must comply with: FMCSA regulations (Hours-of-Service, drug testing, equipment standards) DOT safety audits and roadside inspections HVUT, IFTA, IRP, and multi-state registrations Sales tax and FET for equipment purchases Failure to comply opens the door for lawsuits —especially if records are missing or drivers are improperly classified. Insurance Costs: Annual premiums can exceed $15,000–$25,000 per truck High deductibles or self-insured retention models are becoming common Insurers increasingly deny coverage for fleets with poor safety records Many owners are forced to operate with reduced coverage or face non-renewals, exposing them to catastrophic out-of-pocket risks. Compliance, Taxation, and Risk Management Owning a trucking company means constantly engaging with regulatory requirements: 1. FMCSA & DOT Compliance Hours-of-Service (HOS) enforcement is tight ELDs (Electronic Logging Devices) are universal Random drug/alcohol tests are required Safety scores (CSA) directly impact your ability to win freight A single violation can spike your insurance costs or make you less attractive to brokers. 2. Sales & Use Tax / Excise Tax Trucking companies often overpay on sales tax for trucks, trailers, and parts if they’re unaware of exemptions. Owning a fleet requires state-by-state tax knowledge or partnerships with specialty tax consultants. Additionally, Federal Excise Tax (FET) on new heavy vehicles (12%) remains a major burden—and is currently under IRS review for reform. 3. IFTA, IRP, HVUT, and Multi-State Complexity You’ll need to manage: IFTA fuel tax filings quarterly IRP apportioned plates HVUT (Form 2290) annually Registration and filing in all states where you have “nexus” This compliance web is time-consuming and costly if mismanaged. Many trucking company owners now outsource these filings to tax professionals. Freight Markets and Revenue Pressures Freight demand has normalized post-pandemic, but rate compression remains a serious concern. Digital brokers, large carriers, and AI-powered pricing tools are pressuring small fleets. You’ll need to balance: Spot vs. contract loads High-risk vs. low-liability freight Volume vs. safety record Some freight may be profitable—but if it's in high-litigation corridors or requires inexperienced drivers , the long-term legal risk could outweigh short-term gain. The Driver Management Challenge Drivers are both your greatest asset—and your biggest liability. Workforce Challenges: Aging driver base (average age: 47+) High turnover rates (70%+ in some segments) Driver shortages persist, especially in long-haul Pressure to hire quickly leads to lower vetting standards But an unqualified or poorly trained driver is a legal time bomb. Legal Exposure from Driver Conduct: Distracted driving (cell phones, fatigue) Hours-of-Service violations Poor safety history or license status Failure to document pre-trip inspections Plaintiff attorneys routinely use driver files, training records, and internal communication to prove negligence. Owning a trucking company today means documenting every training session, policy update, and disciplinary action. Mental Load of Ownership: Compliance Meets Courtroom Running a trucking business in 2025 requires more than hustle. It demands: Constant monitoring of driver behavior A legal-minded approach to documentation Tech-savviness to manage TMS, ELD, GPS, and AI-based reporting Vigilance about accident prevention and post-incident response One poorly handled accident—or a missed regulatory filing—can trigger a cascade of lawsuits, audits, and lost contracts. Owning a trucking company isn’t just about logistics. It’s about risk containment . Using Technology to Reduce Liability While tech is often seen as a cost center, the right tools can protect you: Must-Have Solutions: Dashcams with forward- and driver-facing lenses TMS with driver management, load tracking, and compliance features ELD systems integrated with driver coaching and alerts Safety analytics platforms to predict risk by driver or lane Incident response apps to guide drivers after crashes Properly deployed, these tools provide defensive evidence , reduce risk, and can lower insurance premiums. Legal Best Practices for Fleet Owners To protect yourself and your business, implement: Written safety policies Documented training programs for all new and existing drivers Accident response protocols , including camera footage preservation Regular audit of driver qualification files (DQFs) Proactive legal consultation before you're sued Many small fleet owners wait until a claim is filed. In today’s climate, that’s too late. Preventative legal strategy is a must. How Owners Are Thriving Despite the Risks Despite challenges, many trucking companies are growing successfully by: Focusing on specialized freight (reefer, hazmat, dedicated lanes) Building direct shipper relationships (more control, less litigation risk) Maintaining pristine safety records and documentation Hiring experienced drivers with performance-based incentives Partnering with legal, tax, and compliance advisors Success in 2025 isn’t about being the biggest fleet. It’s about being the smartest operator . Strategies for Thriving in 2025 and Beyond To succeed as a trucking company owner in today’s market, consider: 1. Niche Down Instead of trying to haul anything and everything, build expertise in: Reefer freight Hazmat Construction materials Final-mile white glove delivery Shippers will pay a premium for specialization and reliability . 2. Build Strategic Partnerships Work directly with shippers, tax consultants, freight brokers, and driver staffing firms to offload administrative weight and focus on growth. 3. Prioritize Cash Flow Over Growth It’s tempting to add trucks during a market surge—but many go bankrupt due to poor cash flow. Invest in fuel cards, factoring, and lines of credit early to stay liquid. 4. Stay Ahead of Regulation From emissions rules to labor classification laws, transportation rules are changing fast. Monitor FMCSA updates, state-level taxation trends, and DOT policy changes closely. Final Thoughts: Ownership in 2025 Is Not for the Faint of Heart Owning a trucking company in today’s market requires more than just trucks and drivers—it requires resilience, creativity, compliance savvy, and tech fluency. It’s not just about hauling freight; it’s about running a lean, optimized, and legally sound enterprise in one of the most regulated sectors in America.  The barriers to success are high—but so is the demand. If you can navigate the maze, streamline your operations, care for your drivers, and manage your financials with precision, there’s still plenty of money to be made in trucking. Need help managing compliance, taxes, or scaling operations? Transportation Tax Consulting LLC specializes in helping owners maximize savings, avoid audits, and grow smarter.