Understanding the International Fuel Tax Agreement (IFTA)
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If you operate a trucking business using CDL-required vehicles, you’ve likely heard of IFTA. The International Fuel Tax Agreement plays a key role in how interstate carriers report and pay fuel tax when traveling across state lines or Canadian provinces.
This guide explains how the IFTA agreement works, which vehicles are required to participate, and how carriers file an IFTA quarterly tax return to stay compliant.
What Is the International Fuel Tax Agreement?
The International Fuel Tax Agreement (IFTA) is a cooperative fuel tax agreement between U.S. states and Canadian provinces. Its purpose is to simplify fuel tax reporting for motor carriers that operate in more than one jurisdiction. IFTA is not an additional tax; it redistributes fuel tax revenue to the jurisdictions where fuel is actually used rather than where it is purchased.
Before IFTA was established, carriers were required to obtain separate fuel tax permits for each state or province they traveled through. That system created unnecessary administrative work and inconsistent tax reporting. The IFTA program replaced that process with a single license, one IFTA account, and one quarterly tax return filed through a base jurisdiction.
Under the agreement, fuel tax revenue is distributed based on where fuel is actually consumed, not where it is purchased. This ensures fair tax allocation across member jurisdictions.
All U.S. states except Hawaii are members of IFTA. All Canadian provinces participate as well. Canadian territories are not required members.
Which Vehicles Are Required to Register Under IFTA?
IFTA applies to qualified motor vehicles used for the transportation of persons or property that meet at least one of the following conditions:
- Three or more axles, regardless of weight
- Two axles with a gross vehicle weight over 26,000 pounds
- Combination vehicles that exceed 26,000 pounds
Qualified motor vehicles operating in more than one IFTA member jurisdiction must have an active IFTA license and properly displayed decals to operate on public highways. To be subject to IFTA, the vehicle must also operate in two or more IFTA member jurisdictions.
Vehicles used strictly as a recreational vehicle, such as RVs, are not required to register under IFTA.
How IFTA Works for Interstate Carriers
Once a carrier registers, the base jurisdiction issues an IFTA license and decals. These credentials allow IFTA carriers to operate legally across all member jurisdictions without obtaining separate fuel permits.
As a vehicle travels, fuel is purchased normally at the pump. Fuel taxes are paid at the time of purchase and later reconciled through the quarterly report. At the end of each calendar quarter, carriers submit a tax return that includes:
- Total distance traveled
- Miles driven in each jurisdiction
- Fuel purchased by fuel type
The base jurisdiction calculates whether the carrier must pay additional tax or is owed refunds and distributes payments accordingly.
Each state and province sets its own tax rates, which can change quarterly. Carriers are responsible for filing accurate reports and maintaining records.
What Is a Qualified Motor Vehicle?
A qualified motor vehicle under the IFTA agreement is any vehicle used in commercial transportation that meets axle or weight thresholds. A qualified motor vehicle does not include a recreational vehicle and is used, designed, or maintained for the transportation of persons or property in a commercial capacity.
This includes straight trucks, tractor-trailers, and combination vehicles when registered gross vehicle weight limits are exceeded. Vehicles that do not meet these standards generally do not require IFTA registration unless they operate as part of a qualifying combination.
IFTA Licensing and Registration
Motor carriers must apply for an IFTA license through their base jurisdiction. The state or province where a carrier obtains its IFTA credentials is known as the base jurisdiction. An IFTA license is issued annually, along with two decals for each qualified motor vehicle. This typically requires submitting an application that includes:
- Business and carrier information
- Vehicle details and registered weight
- A valid USDOT number
Once approved, the carrier receives an annual license and two decals per qualified vehicle. Licenses must be renewed each year and maintained in good standing. IFTA licenses and decals must be renewed annually to remain valid and avoid suspension of operating credentials.
Failure to renew, maintain records, or submit required reports can result in penalties or enforcement action.
Eligible Fuel Types Covered by IFTA
IFTA applies to fuel used in qualified vehicles, including:
- Diesel
- Gasoline
- Compressed natural gas
- Liquefied natural gas
Carriers must report fuel consumption by fuel type on each quarterly return. Fuel purchase receipts and mileage logs must be maintained in case of an audit. Drivers must record miles driven in each jurisdiction and retain fuel purchase receipts to support quarterly reporting.
Fuel tax rates vary by jurisdiction and fuel type, so accuracy is critical when completing reports.
How to File an IFTA Quarterly Tax Return
To participate in IFTA, carriers must first register with their base state or province and obtain an active account. Once registered, an IFTA quarterly tax return must be filed for every calendar quarter, even if no travel occurred.
Each report must include:
- Distance records for all travel
- Fuel purchase records
- Tax-paid fuel documentation
Carriers must maintain detailed mileage and fuel records for at least four years in case of an audit. Returns are due on the last day of the month following the end of the quarter. If the due date falls on a weekend or holiday, the next business day becomes the official due date. Carriers are also required to file a fourth-quarter IFTA report covering all operations for that calendar quarter.
Late filing or failure to submit a complete report may result in penalties, interest, or suspension.
IFTA Decals and Vehicle Compliance
Each qualified vehicle receives two IFTA decals, one for each side of the cab. These decals must be clearly visible and properly maintained.
A copy of the IFTA license must also be kept inside the vehicle at all times. Together, the license and decals confirm that the vehicle is authorized to operate under the IFTA program.
Failure to display decals or maintain records can lead to fines or loss of operating privileges.
What Is a Base Jurisdiction?
The base jurisdiction is the state or province where a carrier registers its IFTA account. This jurisdiction handles licensing, tax processing, audits, and communication on behalf of all other IFTA members.
If a carrier operates in multiple states or provinces, only one base jurisdiction is selected for reporting and compliance purposes. The base jurisdiction is also responsible for conducting IFTA audits on behalf of all other member jurisdictions.
Frequently Asked Questions
No. IFTA is only required for carriers that operate qualified vehicles in two or more member jurisdictions.
Recreational vehicles and commercial vehicles that do not meet axle or weight requirements are generally exempt.
Reports are filed once per calendar quarter and must be submitted by the required due date.
Late filing may result in penalties, interest, and possible suspension of your IFTA account.
Decals must be placed on both sides of the cab and kept in good condition, with a copy of the license maintained inside the vehicle.
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