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Key basics (Trailer-specific):

• Tax rate: 12% of the taxable sales price

• When it’s paid: At the time of the first retail sale

• Who pays it: The manufacturer, producer, or importer (often passed on to the buyer)

• Reported on: Form 720 – Quarterly Federal Excise Tax Return

Important: FET is not the same as HVUT (Form 2290).

• FET (Form 720): One-time tax at sale

• HVUT (Form 2290): Annual highway use tax paid by vehicle owners

Yes. There are legal exemptions that allow you to eliminate FET on trailers, provided you meet the IRS eligibility criteria and maintain proper documentation.

Below are the valid trailer-related FET exemptions supported by IRS rules and industry guidance.

1. Non-Highway Use Trailers

According to IRC §4053(1), FET does not apply if the trailer is:

• Designed primarily for off-highway use

• Used in locations such as:

• Farms

• Mines

• Oil fields

• Construction sites

• Industrial yards

2. Trailers Designed for Specialized Non-Transportation Functions

According to Treasury Regulations §48.4051-1, Certain specialty trailers are exempt when their primary function is not transportation. Examples include trailers permanently equipped for:

• Pumping

• Mixing

• Drilling

• Processing

• Power generation

The equipment must be permanently mounted, and the trailer’s transportation function must be secondary

3. Exported Trailers

Trailers sold for export outside the United States are exempt from FET if:

• They are not used within the U.S.

• Export documentation is properly maintained

4. Sales for Resale (Dealer Inventory)

FET is not due when:

• A trailer is sold to a dealer or reseller

• The trailer is purchased strictly for resale, not end use

FET is applied only at the first retail sale, not at wholesale or inventory transfers.

5. Used Trailers

FET applies only to new trailers. If a trailer has been previously sold at retail, or previously placed into service it is considered used, and no FET applies on resale.

6. House Trailers

According to  IRC §4053(2), Certain house trailers are exempt when they are:

• Designed for residential use, and

• Not primarily intended for highway transportation of property

7. Separately Sold Trailer Parts and Accessories

According to Treasury Regulations §48.4051-1(e), FET does not apply to:

• Parts or accessories

• Sold separately from the trailer

If parts are sold as part of the completed trailer, they may be included in the taxable price.

Also Refer to IRS Link for more knowledge regarding your exemptions.

Conclusion

Federal Excise Tax on trailers is not unavoidable, but exemptions apply only when IRS conditions are strictly met. Understanding whether your trailer qualifies based on design, use, sale type, or destination is essential to staying compliant and avoiding unnecessary tax costs.

Though you have many exemptions available you should be clear with which exemption you can apply for your filing and filing your FET on trailers is very crucial if you are subject to it.