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Flott & Co. is a recognized expert in the U.S. taxation of international transportation activity, which applies to all foreign transportation companies that operate to, into, or from the territory of the United States.
U.S. Taxation of International Shipping
We have been assisting companies on matters involving the U.S. Taxation of International Shipping since the law affecting international shipping was changed in the Tax Reform Act of 1986. When tax returns were due in 1988 for the 1987 tax year, the first year in which the new rules applied, Stephen Flott worked with the IRS to develop an acceptable form of exemption statement. Our practice involves monitoring changes and developments in the tax and assisting foreign companies with their compliance obligations. We have advised the London Club, the Greek Shipping Cooperation Committee in London, and the Union of Greek Shipowners on the application of the tax and the exemptions since 1988. A recent presentation on the tax can be found in Publications.
Most of the firm's clients in this area of the practice are international tramp shipping operators who earn voyage and time or period charter hire. Flott & Co. keeps them regularly advised on developments on the tax and its enforcement. In addition the firm monitor's and advises clients on other developments at the IRS and the U.S. Treasury that affect ship owners with vessels calling at U.S. ports. For example, in 1997, we were successful in working with U.S. Treasury officials to eliminate any doubt about the exemption of foreign seamen's wages from U.S. withholding taxes. We also helped Malta prepare a draft note to replace its treaty exemption when the U.S. summarily cancelled the US-Malta Treaty.
By treating representation on a group basis, the firm is able to keep its fees for compliance very low. An explanation of the fee structure and standard terms can be found in How We Charge.
US Taxation of International Road Transportation
Many Canadian motor carriers are exempt from U.S. tax on their U.S. source income by reason of the U.S.-Canada Tax Treaty. However, any Canadian motor carrier who generates U.S. source income, even if that carrier is not required to pay U.S. tax, has to file an annual U.S. tax return to disclose its treaty base position. The penalty for not filing the disclosure is $10,000 per year.
Canadian based bus operators qualify to claim a refund of 17¢ per U.S. gallon on all diesel fuel purchased in the United States. Since most Canadian motor carriers purchase their fuel in the U.S. on a tax paid basis, this refund represents a direct savings. However, to obtain the refund the carrier must file a US tax return as well as additional forms. We assist carriers with compliance on this matter for a fixed fee based on the size of the refund.
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