Truck Drivers and Motor Carriers
Driver Inc. practices
Truck drivers may be encouraged to become incorporated to provide their services, despite having all the characteristics of an employee. In fact, some carriers occasionally force their drivers to incorporate themselves in order to reduce their own employer tax burden.
Known as Driver Inc., this practice is not illegal but you should understand the tax obligations of corporations before agreeing to become incorporated.
Tax consequences of incorporation
If you are a truck driver and decide to become incorporated, your corporation is responsible for making source deductions and paying employer contributions. In other words, you are responsible for making these deductions and paying these contributions.
In addition, we may consider your Driver Inc. corporation to be a personal services business (PSB), in which case it cannot, for example,
- claim the reduced income tax rate available to small business corporations
- deduct most of the usual business expenses
Richard's Driver Inc. corporation mainly provides services to business XYZ. The business provides Richard with a truck and pays the operating costs.
Apart from the fact that Richard is incorporated, his relationship to business XYZ is effectively an employer-employee relationship.
Therefore, if Richard's corporation were deemed to carry on a PSB, it would not be eligible for the reduced income tax rate applicable to small businesses. Nor would it be able to deduct most expenses available to other corporations, such as:
- office supplies
- travel expenses
- meals
- cell phone
On the other hand, it would be able to deduct such expenses as:
- Richard's wages
- any benefits or allowances it grants to Richard
For more information, see Special Rules for Corporations Carrying On a Personal Services Business.
Criteria for determining whether your corporation is carrying on a PSB
To determine whether your Driver Inc. corporation is carrying on a PSB, we look at your degree of subordination (through your corporation) to the carrier. For example, if you meet the following criteria, you might actually be considered an employee of the carrier:
- You assume no financial risk, that is, you don't earn profits or incur any losses.
- You're not free to offer your services to any business you want.
- You don't own a truck or equipment.
- You don't cover your operating costs.
- You don't receive or handle customer complaints.
- You have to perform every task assigned to you.
- Your holidays and any leave must be approved by the carrier.
To learn more, see Corporations Carrying On a Personal Services Business, where you'll find information for a wide audience that is also useful for truck drivers.
GST and QST
If you transport passengers or freight in or outside Québec, you must follow GST and QST rules.
To learn more, see Transportation – Applying the GST and QST.
Fuel tax and tobacco tax
If you're a carrier of bulk fuel or you transport tobacco, you have certain obligations. For example, you must hold a permit and manifest and keep registers.
To learn more, see Fuel Tax and Tobacco Tax.
International Fuel Tax Agreement (IFTA)
If you provide interprovincial or international passenger or freight transportation, you may be subject to the International Fuel Tax Agreement (IFTA).
Under this agreement, you don't have to file fuel tax returns for every member jurisdiction you travel in.
For more information on the IFTA and how it works, see International Fuel Tax Agreement (IFTA).
Assistance
We offer individual and group meetings to help the self-employed and small and medium-sized businesses (SMBs) understand their rights and tax obligations. For more information, see Assistance Program.
We also give online presentations (in French only). To learn more, see Presentations by Revenu Québec.