IFTA is an agreement between 58 IFTA jurisdictions, including every U.S. state (except Hawaii and Alaska), the District of Columbia, and 10 Canadian provinces. This agreement simplifies the reporting of fuel use taxes for motor carriers operating in multiple jurisdictions, making it easier to manage their fleets while reducing administrative costs.
Continue reading to find out why IFTA is important to truckers, the qualifications for IFTA credentials, what IFTA reporting requirements entail, and more.
Why is IFTA Important?
IFTA is essential for companies operating in IFTA member jurisdictions as it streamlines the fuel tax reporting process. Motor carriers just need to submit a single fuel tax return for all the jurisdictions they are in instead of filing multiple tax returns in each one.
Generally, IFTA reporting makes the fuel tax process more efficient and cost-effective, allowing trucking companies to save time and money.
How Does IFTA Work?
The IFTA agreement applies to qualified motor vehicles that meet the following criteria but not limited to:
- Commercial motor vehicles designed, maintained, and used for the transportation of persons or property
- Have two or more axles and a gross vehicle weight of more than 26,000 pounds, OR
- Have at least three axles (no weight requirements)
- Operate in at least two IFTA jurisdictions
It’s essential to note that private and recreational vehicles are not considered qualified motor vehicles under the IFTA agreement.
Further, each member jurisdiction in the IFTA agreement issues IFTA decals to motor carriers based on the vehicle’s registered base jurisdiction. These decals must be displayed on the vehicle to indicate the payment of the IFTA tax liability.
Fleets operating in multiple jurisdictions must file quarterly IFTA tax returns, including fuel tax reports for each member jurisdiction in which they operate. These quarterly tax returns must be filed by the due date to avoid penalties and interest charges.
IFTA Qualifications Explained
Commercial carriers must meet specific criteria to be eligible for an IFTA license under the International Fuel Tax Agreement. They include having a place of business in one of the member jurisdictions, maintaining control over qualified motor vehicles, and keeping accurate records of fuel purchases and use.
Additionally, commercial fleets operating between the U.S. and Canadian borders must also adhere to the International Registration Plan (IRP). This agreement between the U.S. and Canada permits commercial motor vehicles to cross state lines and provincial borders with just one license plate and registration.
How to Register For an IFTA License
To register for IFTA, commercial operators must apply for an IFTA license through their base jurisdiction. The base jurisdiction is the member jurisdiction where the motor carrier has its primary place of business. Once the motor carrier receives its IFTA license, it can begin operating in other member jurisdictions and file IFTA tax returns.
How Do You Calculate IFTA Tax?
Calculating IFTA taxes requires commercial fleets to keep accurate records of fuel purchases and use in each member jurisdiction. This can sometimes be complicated without an Electronic Logging Device (ELD). That’s because fuel tax rates differ depending on the type of fuel used and the location.
Further, IFTA taxpayers must be aware of various calculations. Two of the most important calculations include Fuel Consumption (all miles driven in specific IFTA jurisdictions divided by overall fuel mileage) and IFTA Tax Rate (fuel tax required in IFTA jurisdiction minus fuel tax paid in that jurisdiction).