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Company Vehicle Taxed? (California) California

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  • Company Vehicle Taxed? (California) California

    I came across this older thread,

    and it raised questions about my own position.

    I have a company vehicle (and company gas card). Without having an employee manual or policy readily available - I am basing my question off what I was verbally told. My 'head boss' said that we're allowed to make a stop at the store on our way home, etc., a small 'errand' is ok. My direct boss has made remarks to the extent of 'drive it wherever, just don't get caught at beach/bar/etc with it'. Some employees get rid of their personal vehicles all together and seem to manage with just a company vehicle.

    I specifically asked when I was being hired if the company vehicle was in any way taxed/considered income (based on friends that were once in that situation) - and was told no. Are they 'right' in whatever they've told me/are doing - in the sense of not 'taxing' me or keeping track of miles used for personal reasons? What about possible repercussions if somehow this came back on me later? IRS audit for this kind of situation?

    I guess the original thread brought up something to my attention that I was otherwise not aware of, just want to be sure if I need to keep some record of if/when I do use it for personal reasons to protect myself.
    Last edited by blueeclipsegt; 03-20-2011, 09:47 PM.

  • #2
    IRS is more likely to audit the employer then the employees, but if IRS catches the employer, the resulting toxic waste will flow down hill to the employees. Very basically, the entire value of using the vehicle is fully taxable to the employee, until/unless the employer can support the business usage of the car. The actual calculations are fairly complicated and are discussed in IRS publication 15B, but lets very over simplify things and say that Bob has a company car and drives 12,000 miles. Lets say per the IRS instructions the value of those 12,000 miles is $6K. If the employer has made no effort to document business usage, then the entire $6K is taxable wages to the employee, retroactively if necessarily. The employer is also subject to employment taxes on that number. Which is why employers/employees should be keeping track of business usage. There is also an attractive safe harbor method for the commuting miles of a company owned car.

    Not your question, but a lot of employers no longer use company cars at all because this is such a rat's nest. It is easier to just let the employee's use their own cars, and have the employee's document all business miles for reimbursement.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)


    • #3
      Does it matter that the work itself requires a certain vehicle? Our vehicles are required to be 4 wheel drive, used off road, and must have certain equipment attached to them. It would be impossible for anyone to use their own personal vehicle - there would have to be rather permanent modifications made and quite frankly it would be trashed in no time.


      • #4
        It might work. There is something called a "work vehicle" exception in the Portal-to-Portal act. A vehicle that by it's nature cannot normally be used for commuting or personal use. Say a dump truck for example. I cannot say what federal DOL or CA-DLSE will consider to be a legally valid "work vehicle". I can say that the employer owning the vehicle by itself does not remotely qualify.

        You could try giving CA-DLSE a call. Be very specific about exactly what is special about the vehicle. Specifically mention the Portal-to-Portal act and the "work vehicle" exception.

        And you have a different issue. There are two very different groups of agencies involved. Federal and state DOL (CA-DLSE is CA DOL) care about hours worked. IRS and CA-FTB however care about taxation and the Portal-to-Portal Act is a DOL law. I am not sure I know exactly how IRS and CA-FTB slice the taxable balony with work vehicles. You can start with IRS publications 15B and 463. I am not saying for sure that CA-FTB follows IRS's lead on this, but the chances they are better then the chances they do not.

        Federal DOL and IRS are sort of aware of each other rules and make some small effort to keep their rules similar. The problem is that what I know about "work vehicles" are entirely from the DOL rules. I am sure that IRS has looked at the issue and has opinions. I just do not know what those opinions are. Sorry.
        Last edited by DAW; 03-22-2011, 06:37 PM.
        "Reality is that which, when you stop believing in it, doesn't go away".
        Philip K. **** (1928-1982)


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