All about IFTA: What You Need to Know
Paying taxes is one form of civic duty. Every person, entity, company, or industry is obliged by local, state, and federal laws to contribute as taxes are a shared enterprise. In this way, everyone can stay in business and be law-abiding citizens. Businesses such as those in the telecommunications industry, food industry, and commercial transportation industry help drive the economy by paying taxes.
In the trucking industry, the International Fuel Tax Agreement, or IFTA, is a cooperative agreement between 48 states in the US and 10 provinces in Canada to permit carriers crossing different jurisdictions to file and pay taxes for the fuel consumed by their vehicles across states using one fuel tax license for the purpose of efficiency and uniformity in taxation involving fuel.
How It Works
IFTA helps trucking businesses reduce administrative costs, and lessens clerical work involved. To add to that, it also ensures proper compensation for jurisdictions with roads being used by heavy and large commercial vehicles.
Reporting inter-jurisdictional fuel use will only be done to the base state, who will, in turn, be responsible for tax collection, processing fuel tax returns, fund distribution, and conducting audits to enforce IFTA compliance.
Who are Involved
IFTA requires “qualified motor vehicles”, which means vehicles built and used to transport property or people, that are either: a) any vehicle with two axles and a gross vehicle weight of over 11,797 kilograms or 26,000 pounds; b) a vehicle of any weight but with three or more axles; or c) vehicle that exceeds 11,797 kilograms or 26,000 pounds, to carry an IFTA license.
They should also be based in a member state or province and have two or more member jurisdictions covered by their operations.
Calculating IFTA Fuel Tax Reports
This will involve 4 primary steps:
1) tracking the total miles covered in each state or province;
2) adding up fuel purchases;
3) computing fuel consumption per state or province, and
4) calculating taxes owed for each state and province.
After these 4 steps are completed, all figures computed will be added up.
Carriers will also have to keep in mind the taxable miles, taxable gallons consumed, and other surcharges for a more accurate calculation of the fuel tax reports. Also, fuel tax reports should still be made quarterly even if no freight was moved, if the fleet remained inactive, or if the fleet did not operate beyond jurisdictional limits for the quarter.
Penalties involving IFTA
Late filing of IFTA fuel tax returns will incur penalties, amounting to $50 or 10% of the total tax due, depending on which is higher.
Failure to report an IFTA fuel tax return for a quarter will result in possible termination of the IFTA license after 30 days.
The IFTA can be quite too much to absorb in one sitting. However, with today’s modern technology, dispatching software and applications have built-in IFTA calculators that can help simplify the job.
Book a demo with InnoPortal, your reliable dispatching software in the commercial transportation industry.
