Logistics companies have a lot of the same opportunities for tax planning that any other company would have (such as creating qualified retirement plans, choosing the right method of accounting [cash basis or accrual], taking 100% bonus depreciation, etc.) but there are a few tax moves that logistics companies should pay special attention to.
The first is fuel credits. If you paid an excise tax for fuel used on your auxiliary power units, reefer trailers, yard trucks, forklifts, etc. you may be eligible to claim the fuel tax credit which is $0.183 per gallon for off-highway use and $0.243 per gallon for nontaxable use of undyed diesel fuel. Some states also offer their own version of this tax credit that can be used to offset taxes to their state.
Bonus depreciation for equipment is another major tax strategy to consider as it can allow you to deduct the entire purchase price of much of the equipment you’d use in your logistics business in the year you buy it, even if most of it is financed over a number of years. You should not, however, buy equipment just to reduce your tax liability in a given year. If there’s not enough of a business case to buy the equipment without the resulting tax savings, then it may not be a wise decision from the standpoint of your overall financial situation. Additionally, when you sell the equipment, you will have to pay depreciation recapture tax at 28% which may be higher than the tax rate the applied to the deduction when you took it. Ultimately, when you identify the need for the equipment, you want to be strategic about what tax year you buy it in and whether it makes sense to depreciate the asset entirely in year-one as opposed to spreading it over multiple tax years where your income (and tax rate) might be higher.
If you own buildings for your facilities, you’ll probably want to have a cost segregation study performed. These studies are a hybrid of engineering and accounting with the end goal to identify a substantial portion of the building assets that can be depreciated much quicker (sometime all in the year of the study) than the normal 39.5 year cost recovery period. Essentially what you’d be doing is pushing forward some of your depreciation deductions to the here and now as opposed to taking them over the following decades.
Another tax credit that could be valuable for your logistics business is the Work Opportunity Tax Credit which can be as high as $9,600 per eligible new hire that meets the criteria specified by the program. Generally, this includes certain targeted groups such as food stamp recipients, unemployed veterans and other disadvantaged groups.
The last major item to keep an eye on specific to logistics businesses is sales tax exemptions offered by various states. These exemptions mean that you don’t have to pay sales tax on certain purchases for certain equipment as well as certain repair services for the states that offer these incentives.