August 27, 2021

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IFTA: what it is and what it goes with

IFTA stands for the International Fuel Tax Agreement – it is required in 48 out of the 50 states in the USD (excluding Alaska and Hawaii) and 10 provinces of Canada (northern Canadian territories do not participate). IFTA significantly simplifies fuel tax reporting and payments for owner-operators.

What are the purposes of IFTA?

Before IFTA, each truck was required to have a separate decal for every state it operated in. Fleets also had to deal with numerous rules, definitions, filing periods, and reporting requirements – it involved hours of clerical work.

IFTA benefits both: the owner-operators and the states (provinces).

First of all, it simplifies the payment of taxes: there is one tax report that represents the net tax to all jurisdictions. It enables inter-jurisdictional carriers to use a single fuel tax license to report and pay taxes on the fuel their vehicles consume.

Secondly, IFTA ensures that each state or jurisdiction gets its share of tax revenue.

And last but not least, it reduces the number of forms and decals the trucker must keep track of – it saves costs and time for the inter-jurisdictional carrier.

Who qualifies for the IFTA license?

IFTA applies to carriers that have qualified motor vehicles used, designed, or maintained for the transportation of persons or property and have:

  • two axles and a gross or registered gross weight greater than 26,000 pounds (11,797 kilograms), or
  • three or more axles regardless of weight, or
  • a combination vehicle (vehicle and trailer) with a declared combination weight greater than 26,000 pounds (11,797 kilograms)

Besides, motor vehicles must be used for business purposes and travel between at least one other jurisdiction.

IFTA compliance

To comply with IFTA basics, you must do the following:

  1. Renew your IFTA license annually. A valid IFTA decal must always be on your truck. The decal for each year expires on January 1st of the following year.
  2. Track the number of miles driven in each state: drivers must record their odometer readings when crossing the state borders.
  3. Add fuel purchases. Carriers must save the original receipts or invoices to verify they paid the fuel tax. It must contain the following details: fuel purchase date, name and location of the fuel seller, type of fuel, number of gallons purchased, price per gallon, vehicle plate number, driver’s name.
  4. Calculate fuel consumed per state. First, divide the total miles (TM) by total gallons (TG):
    TM ÷ TG = Overall Fuel Mileage
    Next, input your overall fuel mileage (OFM) into the formula below to calculate the number of gallons consumed by fleet in each jurisdiction:
    Total Miles in State A ÷ OFM = Fuel Consumed in State A
    Calculate taxes owed for each state:
    Fuel Tax Required in State A – Fuel Tax Paid in State A = Fuel Tax Owed to State A
  5. Keep all fuel tax records at your workplace for a minimum of 4 years.
  6. Every 90 days, complete and submit an IFTA report. The IFTA reports must be submitted by April 30th, July 31st, October 31st, and January 31st.
  7. Pay all IFTA taxes due by the deadline.

IFTA filing deadlines

Fuel taxes are calculated quarterly, as previously stated, and any taxes owed are due at the end of each quarter, on April 30, July 31, October 31, and January 31. It is easy to miss a deadline, especially if you operate your business on your own, so don’t wait until the last minute to prepare your paperwork for filing.

For your trucking company to stay compliant, you must learn how to properly file IFTA reports. This is more important than you would think. Even slight mistakes on your IFTA forms can result in significant fines and penalties, and in certain cases, an audit. It must be avoided at all costs.

Let Fleep Care Group do it for you

IFTA is entirely dependent on the owner-operator to accurately report mileage traveled and fuel that was purchased and consumed. You can avoid the IFTA hassles with the appropriate assistance.

All of your IFTA reports will be set up, maintained, and filed by Fleet Care Group. We will handle all of the tedious work for you, ensuring that you pay only what you owe and nothing more. You’ll be amazed at how simple it can be.

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