White Nelson Diehl Evans is dedicated to providing high quality, client focused tax, financial accounting and advisory services to assist our many customers in the transportation and logistics sector:

  • Trucking
  • Warehousing and Logistics
  • Distributors
  • Fuel Distribution
  • Non Vessel Freight Forwarding and Consolidation
  • Fulfillment
Multi-State Tax Considerations

Trucking companies are subject to special rules under the Multistate Tax Compact (MTC)and Regulation tax code to address income from both interstate, intrastate and the proper apportionment rules. The Uniform Division of Income for Tax Purposes weighs three factors when determining the apportionment of income across state lines. Property, payroll and sales are all measured when calculating how income should be apportioned for any company conducting business in more than one state. For interstate trucking companies however, those three factors may not result in a fair apportionment. For example, it is difficult to calculate value of property (trucks) that routinely cross state borders. The MTC rules provide modifications to each of the three factors to more accurately reflect the multistate tax implications.

The property factor is modified for trucking companies to calculate the value based on a ratio of mobile property miles in the state to the total mobile miles. Payroll also factors in the ratio of mobile miles in-state to the total mobile miles. The sales factor also incorporates a ratio of in-state miles to total miles for hauling, freight, mail and express that originate or terminate within the state. Upon the adoption of Proposition 39, California departed from the 3-factor apportionment rules and instead uses a single sales factor. This single sales factor, like most other states, is a ratio of the in-state miles to total miles.

Interstate trucking businesses need to be aware of the rule modifications to revenue apportionment to insure that the multistate tax reporting is in compliance with the MTC regulations. White Nelson Diehl Evans has many years of experience working with interstate trucking clients to assure that all tax compliance is met.

Employee vs. Independent Contractor Considerations

Some businesses create an Independent Contractor Agreement, have a driver sign it and think they are protected against any action by the driver or department of labor to be reclassified as an employee. It is important to know that the Labor Commissioner and courts look behind any contract to review the facts surrounding the relationship between the “contractor” and the company. For trucking companies, the most important factor is the level of control the company has over the driver. Does the company have the right to control the manner and means of accomplishing the desired result? Some examples of this control are requiring the driver to change the scheduled route, telling the driver where to have the truck maintained, providing instructions to the driver on how to deliver loads, monitoring the truck location via GPS and mandating the driver hold required licenses in the company name.

There are other examples of facts or circumstances that would give weight to a higher level ofcontrol, but the existence of one or more of these facts will give weight to the Court finding that an employer/employee relationship exists. Some critical elements to support an independent contractor relationship are: the driver works under minimal supervision, the driver can haul for other companies and is not exclusive, the driver determines his own schedule and can select whichever route he determines is best and the required licenses are in the name of the driver only.

In additional to the level of control, other factors that are tested to properly classify drivers are the type of work, if the work performed is part of the regular business of the trucking company, the place of work and the equipment used belongs to the company, the skills required (the higher the skill level, the less likely driver is an employee), duration of services performed (project by project vs. hired without any set haul), the method of payment (project vs. salary).

In 2011, California passed into law SB459 which imposes severe monetary penalties for“willfully misclassifying” an employee as an independent contractor.

White Nelson Diehl Evans experts can make sure your company is not held liable for driversmisclassified as independent contractors when instead they are “under dispatch” and employees of the company. The IRS taxes this issue seriously and can impose significant fines which is why we work with our clients to make sure compliance aligns with their business objectives.


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Tax Planning Guide

At White Nelson Diehl Evans, we know how difficult it is to stay ahead of the complex and dynamic tax laws. From new standards changing revenue recognition rules to the impact of the Affordable Care Act, our goal is to help our clients stay in front of tax issues that impact your bottom line. To help in this effort, we have put together a comprehensive tax-planning guide and it’s available to download for free.

Partner Testimonial

“With a heritage serving hundreds of industrial companies, we recognize that the transportation and logistics sector keeps the economy on the move. At WNDE, we understand that time equals money, for our clients in this space, and we strive to deliver timely audit, tax and advisory services to help them improve margins and returns.”

Deana Bowden Audit Partner