Table of Contents

International Fuel Tax Agreement

Companies that run an interstate operation must abide by the International Fuel Tax Agreement (IFTA). With fuel being a big part of running a trucking company, it is important to know all about IFTA. Unfortunately, most carriers find IFTA reporting a complex hassle, while others are unaware of IFTA as a whole. If you relate to those carriers, continue reading to gain a better understanding of IFTA.

What is IFTA?

The International Fuel Tax Agreement consists of 10 Canadian Provinces and the 48 continental United States of America (excluding the District of Columbia). IFTA improves the efficiency of fuel tax payments between those states/provinces included within the agreement. The efficiency comes from interstate carriers’ ability to report and pay taxes for the fuel consumed across state lines with a single fuel tax license.

How IFTA Works

Before the enactment of IFTA, the responsibility fell on the carriers to obtain permits for every state and province entered. States and Provinces began to notice “some states would get less tax from heavy trucks and buses, proportionate to the operations of those vehicles, compared to other states”. This is why IFTA was enacted. The states are now responsible for collecting taxes on net fuel use, processing fuel tax returns, and distributing the funds to other states. For carriers, they need to report their interstate fuel use to their base jurisdiction.

IFTA Application & Filings

License & Decals

All carriers based in a state or jurisdiction that is part of the IFTA and operates a qualified motor vehicle must apply for an IFTA license.  According to the International Fuel Trade Association, “A Qualified Motor Vehicle is a motor vehicle used, designed, or maintained for transportation of persons or property and:
1)  has two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds or 11,797 kilograms; or
2)  has three or more axles regardless of weight; or
3)  is used in combination, when the weight of such combination exceeds 26,000 pounds or 11,797 kilograms gross vehicle or registered gross vehicle weight.”
 
Depending on the jurisdiction, the application process may vary, but the basic information required for new applications consists of the carrier’s:
  Registered Business Name
  Mailing Address
  Federal Business Number
•  USDOT Number
 
After the application submission, if approved, the base jurisdiction will send the IFTA license which must be copied and placed in every qualified motor vehicle. Along with the license, two decals will be provided for each qualified motor vehicle, including information on required records and rules to stay in compliance. Decals are only valid for the current year, meaning that carriers must renew annually or face penalties imposed by IFTA-member jurisdictions.

Finding Your Base Jurisdiction

A base jurisdiction is where:
•  you have your qualified motor vehicle(s) registered, and
•  you have some travel, and
•  the operational control and operational records are maintained or can be made available.

Companies with vehicles registered in more than one jurisdiction must contact one of their jurisdictions. There is a possibility to consolidate the operation under one license. To contact your base jurisdiction visit: https://www.iftach.org/Carriers/.

Tax Filings

Every quarter, IFTA requires carriers to file an IFTA fuel tax return with their base state. To prepare the report you need:
•  The total miles driven with the qualifying motor vehicle(s) in each state whether or not it participates in IFTA
•  The total gallons or liters of fuel consumed by the qualifying motor vehicle(s) in each state whether or not it participates in IFTA
•  Complete detailed list of vehicle(s):
•  Truck/Unit Number
•  Gross Vehicle Type
•  Fuel Type
•  Fleet Name
•  Fleet Number
•  Make
•  Model
•  Business Information:
  EIN
  Name of the Company
  Type of Business
  Business Address
  IFTA Details:
  Country
  Base Jurisdiction
•  IFTA Account Number

Carriers should also look up the tax rates for each jurisdiction to assist with these filings. It is important to note that these rates can change each quarter. With all this information gathered, the carrier can file the IFTA Quarterly Fuel Tax Return online or by mail (depending on the base jurisdiction).

Carriers should also look up the tax rates for each jurisdiction to assist with these filings. It is important to note that these rates can change each quarter. With all this information gathered, the carrier can file the IFTA Quarterly Fuel Tax Return online or by mail (depending on the base jurisdiction).

IFTA Tax Filing Calculations

For each jurisdiction, the IFTA licensee must perform a couple of calculations. Only round to the second decimal place.

IFTA
•  Fuel Mileage Per Jurisdiction:
Step 1)  Total Miles Driven ÷ Total Gallons Purchased = Total Fuel Mileage
Step 2)  Total Miles Driven in State X ÷ Total Fuel Mileage = Total Fuel Consumed in State X

EXAMPLE:
You purchase a total of 5,000 gallons of fuel for the quarter and drove 34,000 miles, making your Total Fuel Mileage 6.8 miles per gallon. If you drove 13,600 miles in Georgia, your Total Fuel Consumed in Georgia is 2,000.
 
•  Taxes Owed Per Jurisdiction:
Step 1)  Total Fuel Consumed in State X x Fuel Rate for State X = Fuel Tax Required in State X
Step 2)  Fuel Tax Required in State X Total Fuel Tax Paid in State X = Fuel Tax Owed to State X
To find the Fuel Rate for a state click HERE.

EXAMPLE:
The Total Fuel Consumed in Georgia for the quarter is 2,000 gallons. You go online to find this quarter’s tax rate for the state of Georgia and see it is 0.2200. This means the Fuel Tax Required in Georgia is $440. You look through your fuel receipts and add up the Total Fuel Tax Paid in Georgia to be $396. Finally, you subtract the $440 from the $396 to see that you owe Georgia $44 in Fuel Taxes. If the Fuel Tax Owed to a state is negative, that means you bought more fuel in that state than you consumed in the state as a whole.


•  Total Fuel Taxes Owed:

Step 1)  Add Up All Fuel Tax Owed to Each State.

EXAMPLE: You now add the Fuel Tax Owed in Georgia ($44) to the Fuel Tax Owed in Other States you drove through that quarter such as Florida (-$102), South Carolina ($28), and Tennessee ($62). The total comes out to $32 Total Fuel Tax Owed on your IFTA Fuel Tax Report.
  
There are many services and programs out there to assist with your IFTA calculations. The most important thing to remember is to remain organized with the miles driven per state, fuel purchased per state, and taxes paid per state. If you utilize a program or software that calculates any of this information for you, make sure to keep track and organize all original documents for when the filing period comes around to simplify the process.
 
Things to Note:

The above calculations skip some parts of the IFTA tax reporting. Things to remember consist of:

Taxable Miles:
Most jurisdictions equate total taxable miles to total miles driven, but other jurisdictions allow mileage exceptions meaning they are not counted as taxable. Fuel Trip Permits are an example of this. Visit https://www.iftach.org/ to view all the exempt jurisdictions.

Taxable Gallons Consumed:
Step 1)  Total Taxable Miles ÷ Total Fuel Mileage = Total Taxable Gallons Consumed
Step 2)  Total Taxable Gallons Consumed Total Tax on Gallons Purchased = Net Taxable Gallons
 
 Surcharges:
Certain jurisdictions also have a surcharge when fueling within that state. Surcharges give these states the opportunity to keep a portion of the money no matter where the fuel is used. As a tip, make sure. to only purchase the amount of fuel you expect to use within jurisdictions that apply surcharges.
To calculate the surcharges:
 Total Gallons Consumed in State X x Surcharge Rate in State X = Surcharge Required in State X

Filing Deadlines

Every quarter you are responsible for filing your IFTA Report. Each quarterly deadline occurs on the last day of the next month after the quarter has ended. If that day falls on a weekend or holiday the deadline will be moved to the following business day. All reports must be filed even if you have not conducted any operations or driven out of your base state for that quarter period.

Quarter Period Deadline
First Quarter
Janurary - March
April 30th
Second Quarter
April - June
July 31st
Third Quarter
July - September
October 31st
Fourth Quarter
October - December
January 31st

Late or Not Filing Penalties

Late submissions are subject to $50 fines or 10% of their total net tax due with their return, whichever is greater. If you fail to file on time, you will have 30 days to complete the filing requirements before the suspension of your license. Other penalties include a carrier’s operations being shut down. Not sending in an IFTA report is considered a form of tax evasion, so do your best to submit your reports on time.

IFTA Audits

IFTA requires jurisdictions to audit 3% of their accounts (not including new accounts) annually. Most accounts get audited through random selection, but the chance of a carrier getting audited increases with each error-filled report.

Tips to Avoid Audits

Although there is no full-proof way to completely avoid an audit, there are ways to help reduce the chances of becoming audited.

•  Review the Trip Sheets
•  The less continuity within your trip (i.e. Reaching Virginia from Georgia without any records of the states in between) the more likely you are to be audited.
•  Record Non-Taxable or Personal Mileage
•  Avoid gaps within your trip’s records.
•  File the IFTA Report On Time
•  Late filings increase your chances of getting audited (and being fined).
•  Record Mileage and Fuel Use
•  This reduces mistakes and increases the accuracy of the quarterly MPG calculations.
 
While it can be a pain to monitor everything, staying organized and keeping track of your records could help prevent you from audits and inaccurate reports.

IFTA & Insurance

So why would your insurance agent need your IFTAs? IFTA reports help show a pattern of travel. Insurance companies utilize this information to better understand a trucking company’s driving radius and travel areas (i.e. primarily city or rural). These factors can affect the insurance premium price. Having your quarterly IFTAs handy can help speed up the insurance renewal process and gives companies more options when looking for the best policy fit. 

Those coming up for their first-year insurance renewal should especially put together an IFTA report for their insurance agent. Since new ventures (2 years or less) have limited authority history, IFTAs can be a great way for insurance companies to gain a deeper understanding of a trucking company’s business.

Marquee Insurance Group is established within the transportation industry, specifically by leading freight & factoring companies (NTG & OTR). We focus solely on commercial trucking insurance, making us true trucking specialists. As a company, Marquee continues to adapt and deliver innovative solutions that empower our insureds all whilst leading with exceptional customer service. Let us help you keep trucking! Get a free quote today by calling (833) RING-MIG or submitting a request.

Share:
More Posts
Slow Season Solutions
Slow Season Solutions

Avoid letting your business slow with the season by utilizing this time wisely. Use this extra time by making smart choices when it comes to

Hauling with Amazon
How to Haul with Amazon

Amazon is a multibillion-dollar company best known for its fast deliverability of products. Within the trucking industry, Amazon created Amazon Relay, a straightforward and easy-to-use

Financial Planning with PreFi

October kicks off Financial Planning Month, so we wanted to share some important information about premium financing that could help you save money and keep

Tune-Up

Marquee TV gives you the scoop on all things tune-up for National Tune-Up Day! Watch Dee and Tanner explain important maintenance tips for keeping your

Need Commercial Trucking Insurance?
What Topic Should We Cover Next?