Background
The business venture that appears to be a potentially profitable idea is establishing a hotshot trucking company in Texas. For a start, one vehicle will be used for the transportation of loads within a regulated timeframe discussed with the clients. The partnership will have certain liabilities that need to be taken care of in regards to specific tax regulations and regulatory rules implied by state agencies. Thus, it is vital to take into consideration agencies and tax laws that cover the guidelines for this particular business model and the services that it will provide for clients.
Tax Laws
First, it is essential to consider some of the tax requirements from maintaining a financially ethical business practice. The specific domains that will be discussed are:
- Franchise tax (state).
- Property tax (local).
- Self-employment tax.
- Employment tax.
- Excise tax.
Texas imposes a franchise tax on most businesses, excluding sole proprietorship. According to researchers, this system is a measurement that combines gross receipts and personal income tax (Lawson, 2018). Depending on how big the business is, the rate is between 0.375 and 0.75% (Texas Comptroller of Public Accounts, 2021). Moreover, researchers highlight that the Texan market is relatively attractive due to lower state and local tax regulations (Saving, 2017). Property tax is not a state regulation but a local unit that goes to the funding of roads, schools, etc. (Texas Comptroller of Public Accounts, 2021). Moreover, self-employment and employment taxes cover Medicare and Social Security for the business owner and employees. The excise tax, in this case, is regulated through form 2290. This is a federal tax that covers businesses operating with trucks and machinery designed to carry heavy loads (Internal Revenue Service, 2021). Thus, federal, state, and local taxes are filled through different forms depending on where the funding goes.
Regulatory Agencies
There are various agencies in the state of Texas that regulate such businesses as hotshot trucking companies. The central one is the Texas Department of Motor Vehicles. Based on the department’s regulations:
- The load cannot extend more than four feet beyond the rear of the vehicle.
- The vehicle is to be shorter than 45 feet.
- The height must not exceed 14 feet.
- Specific commercial licenses are required depending on the vehicle.
- Specific registration plans are implemented for commercial vehicles operating on more than one jurisdiction (Texas Department of Motor Vehicles).
Moreover, there is a need for vehicle inspections, which are done by DPS (Department of Public Safety). Based on these regulations:
- Annual safety inspections are required.
- Certain vehicles have to pass emission tests.
- In case the vehicle does not pass, waivers and time extensions are available.
- Annual inspections are needed for vehicles powered by gasoline.
- Window tints with a light transmission measurement of under 25% are prohibited.
The regulations are implemented by the Texas Department of Public Safety (2021). By following all the regulations mentioned above and taking into consideration tax specifications that correspond to this particular business, the company will operate under all the rules and guidelines approved by the state and federal agencies. Moreover, an organization compliant with all the financial and safety measures is less likely to meet challenges when entering the market and operating. Implementing all the rules requires the purchase of vehicles that can pass safety and emission tests without additional changes. Furthermore, using existing resources in regards to tax laws (federal, state, and local) is essential for having ethical approaches in regards to the economy of the proprietorship.
References
Business taxes. Internal Revenue Service. (2021).
Franchise Tax. Texas Comptroller of Public Accounts. (2021).
Lawson, R. (2018). The Economics of Gross Receipts Taxes: A Case Study of Ohio. For Your Own Good: Taxes, Paternalism, and Fiscal Discrimination in the Twenty-First Century. Arlington, VA: Mercatus Center at George Mason University.
Regulatory services. Texas Department of Public Safety. (2021).
Saving, J. L. (2017). Texas Taxes: Who Bears the Burden? Southwest Economy.
Property tax assistance. Texas Comptroller of Public Accounts. (2021).
TxDMV home. Texas Department of Motor Vehicles (2021).