Finding the Best Carrier– Question 3

by Timothy Brady on August 17, 2012

What does the carrier pay for? What does the trucker pay for?

As was discussed in last month’s column on truck insurance, the uniqueness of trucking is there’s no single rule when it comes to for what a lease operator is required to pay. Every carrier management will have its own ideas and programs regarding the different expenses, and what’s taken from a lease operator’s revenue and what isn’t. Now let’s discuss the other costs some carriers will cover and others won’t.

Keep in mind it’s not as important as to who pays what expense; what’s most important is whether after all expenses have been paid out, the money left is the amount you need: to send to the house, have something in reserve to cover the unexpected, sustain yourself and family during a downturn and actually grow your net worth.

There’s an accounting/bookkeeping term called the Break-even Point (BeP). This is where the amount you earn is equal to the amount you spend. So the purpose of this particular question is to ascertain what some of your costs are going to be and it compares to the amount of money you’ll earn at a particular trucking company. Does it actually cover the costs for which they’ll be charging you – plus your other expenses? And does it leave you enough to send a salary to the house and put a reasonable sum into the reserve account for the future? These are big questions which require important answers.

So the questions you need to ask are: What does the carrier pay for?  What do I pay for?

Again let me stress every carrier’s lease agreement for running under their authority is different. The written lease agreement is the final word, so make sure if it’s said and it’s important, it’s included in the final lease agreement you sign. Don’t assume its there- read the entire document, and review it with an attorney if necessary to understand it. Always remember what you sign becomes your legal obligation and the rules you’ll operate under while leased to that carrier.

Some of the areas that are options for many trucking companies are:

Base Plate/Permits – Every carrier will be a bit different as to how management wants to handle this, as there are many factors dependant upon the state in which they are located. As an example, Illinois base plate and IRP regulation are as follows:  One plate and one cab card is issued to each vehicle registered. Registration fees are then apportioned among the International Registration Plan (IRP) member jurisdictions according to the percentage of total fleet distances generated in that jurisdiction.

Taxes/Fuel/Ton-Mile – Here again, it’ll depend on the state in which the carrier’s home offices are located. Many carriers register their fleets under the International Registration Plan. The IRP is a registration reciprocity agreement among states of the United States, the District of Columbia and provinces of Canada providing for payment of apportionable fees on the basis of total distance operated in all jurisdictions. The operative phrase here is ‘total distances traveled by a fleet,’ not a single truck. Because the IRP calculates the fees and taxes on a fleet and not by the truck mileage basis, many carriers develop their own means of charging their lease operators for the fuel or Ton-mile taxes. So it’s important to understand their methodology in order to anticipate what your share will be. Other carriers will pay the entire amount but then in actuality pay a smaller percentage or mileage fee to the trucker.

The other annual tax that must be paid is the Federal Highway Use Tax or FHUT, better known in the industry as IRS Form 2290.  The Federal Highway Use Tax, or FHUT, is a federal highway tax levied each year on businesses and independent contractors who own vehicles with a taxable gross weight of 55,000 pounds or more, and who expect to use the vehicle more than 5,000 miles a year on public highways.

Something every trucker should know concerning the FHUT; the tax follows the vehicle and not the owner or lessee of the vehicle. If the tax wasn’t paid in a prior year and you purchased the truck this year, you’d be liable for the tax for the year in which you didn’t own the truck. So before you close a deal on a truck, always ask for proof of payment and also research through the VIN # with the IRS to be sure there aren’t any unpaid FHUT taxes due.

Scale Tickets/Tolls – This is different from carrier to carrier as to whether the trucker or trucking company pays for these expenses. Keep in mind that if a trucking company says they’ll pay for either of these or both of them, they’ve calculated that cost into what they’ll pay you to haul a load. Not a bad or good thing; just be sure you understand the details.

Drug Testing – There are pre-employment drug tests, random drug tests, ones for DOT physicals and post-accident. Every company has a different policy covering drug tests. Some will insist you pay for all drug tests, some will cover one or two types but not the others, and occasionally there’s a carrier that pays for all of them.

Satellite Communications/Cell Phones/Air Cards – The vast majority of carriers will subsidize the cost of satellite communications like QUALCOMM, others will pay the entire cost. When it comes to cell phones, that policy is as varied as the number of different cell phone companies and their plans. Some carriers pay for a portion, others don’t pay anything. The most important part here is to make sure you know the wireless carrier that is most compatible with their dispatch communication system. Nothing is worse than to be on a system with which you can’t communicate.

Other – I have touched on many of the most common services and items that can either be paid for by the carrier or the trucker, but the list is as varied as the hundreds of thousands of trucking companies in the US. There are a multitude of costs in the operation of a truck, and different operations have different needs and requirements. Flatbedders have straps and tarps which need repair and replacement from time to time. A tanker or refrigerated trailer has washout costs. There’s damage to tires and equipment costs and insurance deductibles, and the list goes on and on. Just make sure you ask and get the answers to exactly which costs you’re responsible for paying.

Trucking can be a costly endeavor, but knowing the ones for which you’re responsible is invaluable. Knowing you have the revenue to cover all of them and have a profit, priceless.

{ 0 comments… add one now }

Leave a Comment

CommentLuv badge

Previous post:

Next post: