International Fuel Tax Agreement (IFTA) is an agreement between the lower 48 states of the United States of America and the Canadian Provinces, this tax is basically to simplify the usage of fuel by motor carriers who operate in more than more jurisdiction.
Though this applies to all of Canada and the U.S, however Alaska, Hawaii and the Canadian Territories are not required to participate. Operators with IFTA will receive two decals and an IFTA licence and the carries are required to file quarterly reports. These reports will then be used to calculate the net tax or the refund due from the collecting states and to which states they are due to.
Who Does This Apply To?
Following are the requirements for the carriers to receive an IFTA licence:
- The motor vehicle is designed, maintained and used for the transportation of goods, people, and property.
- Regardless of its weight, the power unit has three or more axles.
- The gross weight of the vehicle is 26,000 pounds or more and the power unit has two axles.
- A vehicle which is more than 26,000 pounds or 11,797 kilograms.
What are Some of The Exceptions?
The following are the motor vehicles who are not required to file for IFTA:
- Recreational vehicles
- Pick up trucks with attached campers
- Buses when used for personal pleasure
- A few states have some exemptions on farm vehicles and/or government vehicles.
Which all States Does it Apply To?
- British Columbia
- New Brunswick
- Nova Scotia
- Prince Edward Island
United States of America
IFTA reporting applies to all the states except Hawaii, Alaska and the District of Columbia.
How to Apply
The first thing you need to do if you want an IFTA licence is fill out the form at your base.
Forms may vary and serve different purposes in different places.
Some of the basic information that need to be filled are:
- Registered business name
- Mailing address
- Business number
- USDOT number
The forms can be downloaded online and the completed IFTA forms can be sent by mail. After processing your application, the IFTA authorities in your state will issue your official IFTA decals for the current year and temporary IFTA licence can be sent to via fax.
Filing IFTA taxes
For IFTA reporting, it requires you to file taxes on a quarterly basis
- April 30th – 1st quarter
- July 31st – 2nd quarter
- October 31st – 3rd quarter
- January 31st – 4th quarter
Following are the steps in your IFTA tax calculations:
Tracking Miles in Each State
It is the responsibility of drivers and fleet managers to record the amount of fuel consumed in each state/jurisdiction. Drivers also must record the readings on their odometer when they cross each state/jurisdiction. You can use fleet management softwares to make these tasks easier.
Calculating Fuel Purchase
Drivers are also responsible for calculating the total amount of fuel used in each state/jurisdiction.
An important point note is that the drivers must save the original receipts or invoices to prove that payment of the fuel taxes has been done. Following are the detail that the documents are required to have:
- Date of purchase
- Name and location of the fuel seller
- What type of fuel was purchased
- Vehicle plate number
- Price per gallon
- Drivers name
Calculating The Fuel Consumed
After you have the mileage in each state and the amount of fuel purchased in each state/purchased, it is easy to calculate the amount of fuel used in each state by using the following formula
Total Number of Miles Driven In a State ÷ Total Amount of Fuel Purchased = Overall Fuel Mileage
To calculate the amount of fuel your fleet consumed, use the following formula
Total Number of Miles Driver In a State ÷ Overall Fuel Mileage = Total Amount of Fuel Consumed in the State
Calculating Taxes Owed to Each State
The amount of fuel purchased in each state/jurisdiction is required to calculate the amount owed to each state.
Finally you can use the following formula to calculate the exact tax amount you owe each state
Fuel Tax Required in State X – Fuel Tax Paid in State X = Fuel Tax Owed to State X
Originally drivers used to record and track the miles and fuel purchase manually but now the drivers can use the tax reporting sheets from the Owner-Operator Independent Drivers Association (OOIDA) to track the miles and fuel purchase and also they can turn to cloud based services and fleet management software to aid them in the same.
Calculating IFTA taxes can be tiring and mentally exhausting but in this age of scientific advancements it is possible to record your mileage in each state and also to record the amount of fuel purchased and used in every state/jurisdiction by using fleet management software.
There are a lot of GPS vehicle tracker that come along with fleet management software. By using this, you can easily do your calculations accurately as it erases the possibilities of human error in calculations.
When the fleet tracking data is combined with the tax software can help you calculate you IFTA taxes and make sure you’re paying only what you owe.