What is the International Fuel Tax Agreement (IFTA)?
The International Fuel Tax Agreement (IFTA) is an agreement among U.S. states and Canadian provinces.
IFTA was created for motor carriers who often cross state lines. It simplifies accounting and payment of fuel taxes and relieves trucking companies of some paperwork. Taxes are paid on motor fuels, and IFTA allows commercial motor carriers to register in one state and have these tax assessments paid out to other areas according to their fair share.
Why Was IFTA Created?
Fuel taxes are paid at the time of purchase and assessed in each state or province. Commercial trucking businesses hold permits that determine a specified tax rate on fuel, and their payouts are recorded so that the taxable total can be calculated and adjusted on a quarterly basis.
Drivers had to obtain a permit for every state or province they crossed before to the IFTA program was instated and available at a designated port of entry. Maintaining quarterly filings added a significant amount of extra effort related to interstate truck trips, along with acquiring several permits.
Multiple states entered into agreements to set up a joint revenue distribution program and eliminate the requirement for individual fuel tax permits In the 1980s, which eventually evolved into what we know as IFTA in present day.
How Does IFTA Work?
A truck is IFTA registered and obtains a fuel tax permit from one state under this program. When the commercial vehicle drives through any participating state or province, the tax on fuel purchased there is credited to the permit owner’s account. A fuel tax report is completed at the end of the quarter that details the miles traveled and gallons of fuel for each region. IFTA helps in calculating the amount of tax due or tax credit for each state to determine the tax liability for each and to oversee the distribution of funds properly.
What Counts as IFTA Qualified?
Commercial motor vehicles (CMVs) are IFTA qualified. Specifically, these are commercial vehicles with three or more axles, or with two axles and a gross weight exceeding 26,000 pounds, used to transport goods or passengers. These vehicles are operated in at least two states of the U.S. and/or Canadian provinces which are members of the International Fuel Tax Agreement to qualify for IFTA.
Except for Alaska and Hawaii, all 48 contiguous states of the USA are members of the agreement, along with all 10 provinces of Canada. Private or recreational vehicles for personal use are not subject to IFTA licensing.
IFTA Registration – How Do You Apply?
If your business requires an IFTA license, you need to apply in the companies registered home state. IFTA application forms can be found online. They are administered by each states’ Department of Transportation or tax collection agency.
Below is a list of websites for each state for more information on IFTA Registration:
Basic information required by the IFTA application includes:
- USDOT number
- Registered business name
- Mailing address
- Federal business number
IFTA Home State
A state in which the vehicle is registered is considered the vehicle’s home state, where the operator maintains or can gain access to the vehicle operating records. If a vehicle is registered in multiple states, the operator must contact one state to determine whether the vehicle can be consolidated under a single license.
Filing Reports With IFTA
For filing IFTA claims, at the end of the fiscal quarter the licensee produces a fuel tax report listing miles traveled in all participating jurisdictions and gallons of fuel purchased there.
Supporting documents include:
- Vehicle mileage record
- Distance records
- Fuel records
- Tax-paid retail fuel purchase receipts
- All relevant data such as gap miles and fuel receipts must be included when reporting IFTA claims
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