What is IFTA Tax?
International Fuel Tax Agreement (IFTA) is an agreement between the Canadian Provinces and the lower 48 states of the United States of America and this tax is to simplify the fuel usage by motor carriers who operate in more than more jurisdictions.
Alaska, Hawaii and the Canadian Territories are not required to participate even though this applies to all of Canada and the rest of the U.S. Operators with IFTA will receive an IFTA license and two decals. The drivers of the carries are required to file quarterly reports and these reports are used to calculate the net tax or the refund due from the collecting states and to which states they are due.
To Whom Does This Apply To?
Following are the requirements for the carriers to receive an IFTA license:
There are certain requirements that the driver and the motor vehicle need to meet in order to get an IFTA license.
- A vehicle that weighs more than 26,000 pounds or 11,797 kilograms.
- the power unit has three or more axles, regardless of the weight.
- If the gross weight of the vehicle is 26,000 pounds or more and the power unit has two axles.
- A vehicle that weighs more than 26,000 pounds or 11,797 kilograms. The motor vehicle should be designed, maintained and used for the transportation of goods and property.
Are There Any Exceptions?
The following are the motor vehicles who are not required to file for IFTA:
There are certain exceptions, whoa re not required to file for an IFTA tax, they are
- Buses when used for personal pleasure by an individual
- Pick up trucks with attached campers
- A few states exempt farm vehicles and/or government vehicles from filing for IFTA
- Recreational vehicles
Applying for IFTA
Filling out the form at your base is the first step in applying for IFTA, also it is a point to note that the forms may vary in different places and serve different purposes.
Some of the basic information that needs to be filled are:
- The mailing address of the business
- Business number
- Registered name of the business
- USDOT number
The forms are available online and can be downloaded, the completed IFTA forms can be sent via mail. The IFTA authorities in your state will issue your official IFTA decals for the current year after processing your application, also a temporary IFTA license can be sent to you via fax.
How To File For IFTA taxes
Drivers are required to file for IFTA taxes on a quarterly basis.
- April 30th – 1st quarter
- July 31st – 2nd quarter
- October 31st – 3rd quarter
- January 31st – 4th quarter
The amount of fuel consumed in each state or jurisdiction should be recorded by the drivers and the fleet managers as it is their responsibility to do so. The readings on an odometer should also be recorded as the drivers cross each jurisdiction/state. This can easily be calculated with the help of dispatch tracking software.
Calculating The Amount of Fuel Purchased
Drivers are required to calculate the total amount of fuel used up in each state/jurisdiction.
The drivers are required to save the original invoices and receipts as proof, that payment of the fuel taxes has been done. Here are the details that the documents should include
- Purchase date
- Name and location of the fuel seller
- Drivers name
- Price per gallon
- Vehicle Plate Number
- Type of fuel was purchased
How to Calculate The Amount of Fuel Consumed
There is a formula which you can use if you have the mileage and the amount of fuel purchased in each state
Total Number of Miles Driven In a State ÷ Total Amount of Fuel Purchased = Overall Fuel Mileage
For calculating the amount of fuel consumed by your fleet, use the following
Total Number of Miles Driver In a State ÷ Overall Fuel Mileage = Total Amount of Fuel Consumed in the State
Calculation of The Taxes Owed
The drivers are required to calculate the amount of fuel purchased in each state, as this is one of the most important factors in calculating the taxes owed.
The following formula can be used to extract the accurate answer:
Fuel Tax Required in State X – Fuel Tax Paid in State X = Fuel Tax Owed to State X
Drivers originally used to record and track the miles and fuel purchase manually, now there are tax reporting sheets from the Owner-Operator Independent Drivers Association (OOIDA) that driver can use to track the miles and fuel purchase and also they can turn to the help of cloud-based services and fleet management software for even better results in terms of, ease of use.
Calculating IFTA taxes is mentally exhausting when you have to keep a track of all the factors and then calculate, but this task can be made easy by using the help of dispatch tracking software and fleet management software.
There are many dispatch tracking software available in the market, dispatch software basically helps the organization track their assets in real-time and also can help in the calculation of the IFTA taxes and by using the help of the software and not doing it manually, removes the possibility of man-made error.