If you are a trucker who travels across state lines, then you need to be familiar with IFTA.
But, what is IFTA for trucking exactly?
In this guide we’ll tell you everything you need to know about IFTA, from how it works to how to file your taxes.
Let’s get started!
What is the International Fuel Tax Agreement?
IFTA is a structured arrangement among 48 U.S states and 10 Canadian provinces to simplify the reporting of fuel taxes by truckers and trucking companies.
The International Fuel Tax Agreement, or IFTA, is an agreement between states in the United States and Canada that establishes a system for the collection and remittance of fuel taxes. The agreement was created in 1983 and has been amended several times.
IFTA’s purpose is to streamline the process of paying fuel taxes for interstate trucking companies. The agreement sets forth uniform rules for the calculation and reporting of fuel taxes, and provides for the exchange of information between states.
Why Is IFTA Important?
Before 1983, paying fuel taxes was an exhausting, time-consuming experience that demanded truckers to stop at every port of entry to get a permit. The IFTA system was introduced to enable commercial motor vehicles and related companies to register in one state and have their taxes paid out to all participating regions based on their fair share. With the help of modern technology, IFTA trucking simplifies fuel tax payments for everyone involved.
How Does IFTA Work?
The program requires all IFTA-registered vehicles to obtain a fuel tax permit from one of its member states. When the vehicle drives through any participating territory, the resulting fuel taxes are credited to the licensee’s account.
At the end of each quarter, a fuel tax report showing the distance traveled and the fuel consumption in each region is produced. The program mandates trucks or power units to renew their licenses annually, and file reports every quarter, even if you don’t drive beyond their home state.
IFTA further calculates the tax credits for each state, to determine their tax liability and oversee the appropriate distribution of funds.
The revenues collected from truck drivers or trucking companies are used to maintain the roads we use. Heavy commercial vehicles are leading contributors to the wear and tear of most roads.
How Drivers Benefit From IFTA
The program relieves truckers and trucking companies from keeping up with loads of paperwork. Before IFTA, drivers had to deal with several jurisdictions to pay fuel taxes. Some requirements were even contradictory, resulting in significant stress and confusion.
IFTA’s automated system also helps drivers to avoid the errors that come with paperwork. If you have dealt with manual paperwork, then you probably have an idea of how error-prone they are. Hence, the IFTA program is a motivating factor for most truck drivers who love driving but don’t appreciate the paperwork involved.
Buying temporary permits now and then can end up being quite expensive. IFTA allows truckers to make quarterly fuel tax payments to their home state and drive across participant states and provinces as much as they want to.
What Vehicles Qualify for IFTA?
All commercial motor vehicles that are used or designed for the transportation of cargo or passengers are eligible for IFTA registration. To qualify, the vehicles have to meet the following requirements:
- Must have 3+ axles regardless of weight.
- Must have two axles and a gross weight exceeding 26,000 lbs. (11,797kgs).
- Should have a combination weight exceeding 26,000 lbs. of gross vehicle or registered gross vehicle weight.
- Is operated in more than one U.S state and/or Canadian province, which are IFTA members.
Registering for IFTA
IFTA requires all vehicles to be registered in one state. The state where a vehicle is registered is considered the vehicle’s home state. An operator or trucking company can access a vehicle’s operating records from its home state.
In instances where a vehicle is registered in several states, an operator should approach one of the states to determine whether the vehicle can be consolidated under a single license.
Registering for IFTA trucking is as easy as they come. Simply visit the Federal Highway Administration to access the list of State Department of Transportation websites.
When Should You Apply for Your IFTA License?
You should apply for an IFTA license if you have a “qualified motor vehicle” as outlined above. The application process occurs annually, and a license is effective from 1 January to December 31st.
You should renew your license each year, starting in late October. Most states offer a grace period for license renewal that extends up to the last day of February the following year.
Do You Need an IFTA License?
If you are based in a member jurisdiction and have a “qualified motor vehicle” operating in two or more jurisdictions, then you definitely need an IFTA License. The latter will save you the inconvenience of applying for a permit every time you cross borders, and also save you tons of paperwork.
Recreational vehicles such as motor homes, school buses, pick-up trucks with attached campers, and buses used for personal pleasure by an individual are exempt from IFTA trucking.
Filling Reports with IFTA
To file your IFTA reports, you need to produce your quarterly motor fuel tax report, detailing the miles traveled in all participating jurisdictions, as well as the gallons of fuel purchased in each jurisdiction. Include supporting documents such as vehicle mileage records, fuel and distance records, gap miles, and fuel purchase receipts
When are the Reporting Periods?
Under the IFTA program, licensees need to report every quarter as follows:
- January to March (Reports due April 30)
- April to June (Reports due July 31)
- July to September (Reports due Oct. 31)
- October to December (Reports due Jan. 31)
How do you Calculate IFTA?
- Track the miles you’ve traveled in each state/province
The first step toward calculating IFTA is gathering records of the total distance covered (in miles) in each jurisdiction.
- Adding fuel purchases
Gather records of the total amount of fuel (in gallons) purchased in each jurisdiction traveled.
- Calculate the fuel consumed by state/province
Divide the total miles covered by the total amount of fuel consumed to obtain the overall fuel mileage. Next, calculate the total number of gallons consumed in each member jurisdiction. To do this, put your overall fuel mileage calculation into the formula below.
Total Number of Miles Driven Per [State/Province] ÷ Overall Fuel Mileage = Total Fuel Consumed in Each [State/Province]
- Calculating How Much You Owe in Taxes for Each State or Province
Use the IFTA-calculated rates to determine the IFTA tax amount you owe for each quarter to each jurisdiction. You can find the correct quarterly tax rate for each state here. Notably, the IFTA tax rates are updated quarterly, so you might want to confirm the latest numbers before calculating and submitting your tax return.
- Final Step
The final step of filing your IFTA taxes is putting all the information together to find out the exact fuel tax you owe each jurisdiction using the formula below:
Fuel Tax Required in Each [State/Province] – Fuel Tax Paid in Each [State/Province] = Fuel Tax Still Owed to Each [State/Province]
Is there a difference between taxable miles and IFTA miles?
IFTA miles refer to all miles your vehicle moved throughout the quarter in each IFTA-only jurisdiction, including mileage for movement around your yard, to the mechanic, empty or deadhead miles, and any other personal conveyance miles.
Taxable miles refer to all miles covered by an IFTA-registered vehicle in each jurisdiction during the quarter, including the IFTA miles, non-IFTA miles, and non-taxable miles.
What are IFTA and Non-IFTA jurisdictions?
IFTA jurisdictions are U.S states and Canadian provinces that are members of the IFTA agreement. Forty-eight U.S states and 10 Canadian provinces are part of the agreement. Non-IFTA jurisdictions, on the other hand, refer to territories in the U.S.A and Canada that are not members of IFTA.
They include Hawaii, Alaska, the District of Colombia, Nunavut, Yukon Territory, and Northwest Territory.
Are there penalties if you fail to comply with IFTA?
Late reports, underpaying taxes, or failure to file returns can incur a penalty of $50 or 10% of the quarter’s net tax liability, whichever is greater. Drivers and organizations face interest on all delinquent taxes due to each jurisdiction at the rate of 1% per month.
What are the tax rates for IFTA?
There is no standard IFTA tax rate across jurisdictions. Each jurisdiction imposes a specific tax on IFTA-registered trucks. You need to check out the IFTA tax rates every quarterly to ensure your returns are up to date.
Dealing with tons of fuel tax paperwork can be exhausting, frustrating, and demotivating. Not to mention how time-consuming it is. This is why we consider IFTA one of the best things to ever happen in the trucking industry.
Today, more trucking companies are opting for the seamless IFTA program to save time and money. Current technology, such as Telenomics, has made it easier to keep track of IFTA-registered vehicles, including the fuel gallons consumed and the distances covered across every jurisdiction.
If you have a commercial vehicle or a trucking company with fleets that qualify for IFTA registration, we highly recommend that you love yourself enough to give IFTA a chance.
It will simplify your life in ways you couldn’t have imagined.