As a general rule, a Canadian trucking company does not pay U.S. federal income tax on certain activities undertaken in the United States. According to IRS Publication 597, under the Canada Income Tax Treaty, transportation companies operating their trucks as a common carrier shall be exempt from federal income tax.
However, any Canadian company engaged in cross-border trucking operations should consult with a U.S. tax professional to confirm that the company meets all the requirements for the exemption. Further, even though a company may qualify for exemption from the federal income tax, there might be U.S. state tax issues that must be addressed. The state tax situation may be further complicated when Canadian trucks are operating in multiple states, which could lead to failure to file penalties and interest in each state where the trucks are operating.
At Arora Law PC, we can help you to comply with all of your federal and state tax obligations. Do not delay and schedule your free consultation.
