How Does the IFTA Fuel Tax Work?

The IFTA stands for the International Fuel Tax Agreement. It is an agreement between the lower 48 states in the U.S. and 10 provinces in Canada which simplifies fuel tax reporting. Trucking companies travel between jurisdictions on a daily basis.

Without this agreement, carriers would have to turn in many separate reports abiding by the mandates of each state. With IFTA, carriers only have to create one quarterly report for the state they’re registered in. The agreement was intended to reduce paperwork and save time.

How Does It Work?

While the IFTA can make things easier, in the long run, it can seem difficult to understand at first. Basically, when a commercial motor vehicle buys fuel, the taxes are credited to the account of the licensee. Then, the IFTA fuel tax report is filed at the end of that fiscal quarter. The report lists how many gallons have been bought and how many miles have been traveled.

When the average fuel mileage is applied to the number of miles traveled in each jurisdiction, that determines the tax liability. In the state of New York, Kentucky, and New Mexico, a weight-mile tax is applied on top of the usual taxes.

The fuel taxes are paid to the base jurisdiction or the home jurisdiction that the vehicle was registered in. Fuel tax audits are also performed by them. Then, the members will transfer the funds and IFTA tax rates accordingly.

When Is The Report Due?

These fuel reports are due four times per year. Specifically, on the last day of the month after each quarter is completed: April 30th, July 31st, October 31st, and January 31st. (If one of these days falls on a Saturday, Sunday, or holiday, then the new due dates moves to the next business day.)

The report is required to be turned in, even if there wasn’t any taxable fuel used during that quarter. If reports are not filed on time, if they are not filed at all, or if the taxes turned in are underpaid, fines and penalties will follow.

Who Needs To File A Report?

According to the TruckingOffice IFTA Resource Center, you need to have your IFTA license if you operate a qualified motor vehicle in the 48 lower states of the United States or one of the Canadian provinces that is a member of the International Fuel Tax Agreement.

They say that your vehicle must follow these requirements to be qualified:

1. Has 3 or more axles
2. Has 2 axles and a gross vehicle or registered gross vehicle weight of over 26,000 pounds or 11,797 kilograms
3. Used in a combination that has a combined or registered gross vehicle weight of more than 26,000 pounds or 11,797 kilograms

Motor homes or other recreational vehicles aren’t considered to be qualified motor vehicles in this way because they are used for personal reasons. The vehicles that need to be registered with the IFTA are used in business operations.

How Do You File A Report?

You can either submit your report by mail or electronically. The forms are available 30 days prior to when the report is due. They are to be submitted to the Department of Revenue in your home jurisdiction that you are licensed in. Just search the department’s website for the forms. Don’t forget to send a check in the mail or pay online with the forms.

What Are IFTA Extensions?

No matter how well you plan to file your IFTA on time, things happen to disrupt your good intentions.  Unexpected vehicle repairs or other problems may have you counting pennies. So, if you see that your IFTA fuel tax reporting or payments will be late, you can request an extension.  

Remember, the license renewal application is due December 31st.  You should apply for the extension early before the renewal deadline.  Also, to get an extension, your IFTA account must be current.  

According to a form the IFTA memorandum issued in October 2020,  base jurisdictions can approve extensions.  But, it may be difficult to get approval unless there are emergency circumstances. 

In 2020, the trucking industry suffered setbacks due to COVID-19.  As a result, the blanket extension allowed truckers a two-month grace period for displaying renewed decals and licenses.  So, check with your home jurisdiction to find out if any other extensions are in place.

An approved extension gives you a grace period until March 1st to display the renewed decals and license on your vehicle.  But, you should continue to display the previous year’s decals and license until the renewals arrive.  The IFTA grace period is only valid if you have submitted your renewal application on time.

All of these tasks can be time-consuming and difficult to manage while also working on your business. Call TruckingOffice today at (800) 253-9647 for a free 30-day trial of our services to help manage these tasks for you!