CTA: Truckers win one battle against state taxes, but the war goes on

TORONTO (Dec. 23) — The Canadian Trucking Alliance said truckers have won a battle but not the war against a proliferation of state taxes not covered by the Canada-U.S. tax treaty or NAFTA.

This month, Michigan Governor John Engler agreed to a temporary moratorium on the application of the state’s single business tax (SBT) on Canadian businesses, a move CTA chief executive David Bradley called a “stay of execution.”

A growing number of states including New York, Massachusetts, Ohio, South Carolina, and Pennsylvania have started or stepped up efforts to collect what are variously known as franchise taxes, gross receipts taxes, or single business taxes, which are imposed on a company’s gross revenues instead of profits, Bradley said.

The state taxes are not considered corporate income taxes by Canadian tax authorities; consequently, the U.S.-Canada Tax Treaty does not apply and Canadian businesses do not qualify for foreign tax credits. U.S. carriers, meanwhile, generally do receive a tax credit from their home jurisdication for the tax paid elsewhere, Bradley added.

A study commissioned by the association showed that profit margins for Canadian trucking companies operating to or from northeastern U.S. jurisdictions were in the range of 2.5% to 15%. When the franchise taxes were applied, the margins on these trips were reduced by between 5% and 35%..

“This is highway robbery and anti-trade,” said Bradley. “Unless something is done, the situation will only get worse as other states will no doubt get in line for this potential cash-cow.”

He said the CTA has lobbied the office of the Minister of International Trade, the Minister of State for Finance, the Consul Generals of Detroit, Buffalo, and Boston, as well as the departments of foreign affairs and transport in order to seek action to stop the state taxes.

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