Years ago, every state had its own regulations and mandates regarding IFTA fuel tax report requirements. Most have now become members of the IFTA. An acronym for the International Fuel Tax Agreement, the system works to standardize many of the varied and (occasionally) contradicting rules that many states used to create. Some may retain additional requirements for their fuel tax reporting. However, the process has become a lot simpler now that many have adopted this more universal standard. That makes it smart to use a trucking management software like TruckingOffice Pro to compute your IFTA filing.
How Does IFTA Work?
Under the International Fuel Tax Agreement, motor carriers that operate in multiple states or jurisdictions need only file one fuel tax return each quarter with their base jurisdiction. Before IFTA, drivers had to purchase multiple fuel permits for interstate travel. This was a costly and time-consuming hassle. With IFTA, a motor carrier receives an IFTA license and IFTA stickers for each qualifying vehicle. IFTA stickers require renewal every year.
The International Fuel Tax Agreement applies to the lower 48 states and 10 Canadian provinces, known as member jurisdictions. Under IFTA, motor carriers file a single quarterly fuel tax report with their base jurisdiction. The IFTA report determines the taxes owed or the refund due. It can then redistribute the taxes to each member jurisdiction. It is based on the number of miles driven in that particular jurisdiction.
IFTA tax filing may seem complicated and confusing. Once you understand the basics of IFTA reporting, you’ll see that it is a much more convenient and sensible process. With IFTA, you can quickly and easily complete your fuel tax reports for the quarter using the Department of Revenue’s online IFTA Fuel Tax System and ensure that you remain compliant with IFTA reporting requirements. That way, you can focus on doing what you do best – driving.
Registering a base state.
Because most trucking companies operate all over the country. Or at least across a wide region, it can be difficult to know in which (or even in how many) states to register as a base. The IFTA does not set absolute standards for these. So, you will need to contact the local register if you have a place of business in a state. Additionally, you’ll need to maintain mileage records, and/or register your vehicles there.
Qualified vehicles and fuels.
Here the IFTA is a little more specific with its fuel tax reporting requirements. To be qualified, a motor vehicle must travel in at least two IFTA jurisdictions. Additionally, it must weigh over 26,000 pounds, or have three or more axles on the power unit. Or (less applicable to truck companies) be a bus that can carry at least 20 passengers. These vehicles must use diesel, propane, or natural gas for proper tax reporting and licensing. Though some jurisdictions will require even gas-powered vehicles to be licensed.
Every vehicle belonging to a carrier must apply for an annual license. Two decals validate this which goes on either door. You must contact your local department of motor vehicles for an application for a new vehicle. However, the IFTA will send renewal applications automatically for the following years. Once approved, every qualified vehicle must carry a copy of the distributed licenses.
Fuel tax reporting.
A must submit your fuel tax reports four times a year. It must cover all of a carrier’s qualified vehicles. Scheduled in quarters on the calendar year, a check must accompany each report to cover any tax payment due. These must be made payable to the base state’s Secretary of State. Furthermore, reports will reveal that you have accumulated a tax credit from tax-paid fuel. If this number exceeds whatever you owe, a refund or additional credit to cover future payments will be given.
In order to receive those refunds or tax credits, receipt information from tax-paid purchases must accompany each quarterly fuel tax report. These receipts must include the following. The date of purchase, fuel type, seller’s name, and address, purchaser’s name, vehicle registration number, the total amount of sale, and the number of gallons purchased.
In addition to keeping up with fuel tax reporting, all registered carriers must maintain records of individual vehicle mileage reports. These must be summarized monthly. Additionally, the must include information on all fuel bought at service stations.
Breaking it Down State by State
Each vehicle belonging to a motor carrier is required to apply for an annual IFTA license. You can apply for an IFTA license by submitting an IFTA-1A Application to the Department of Revenue.
According to IFTA requirements, when applying for an IFTA license, you will be required to provide the following information:
- Proof of residency – You must have proof of a valid physical address (lease or mortgage statement) in your state of residence. You must also provide proof that you filed income taxes with the Department of Revenue for the previous three years.
- License plate – You must have an International Registration Plan license plate unless you are using a farm or transporter plate on your vehicle.
- DOT number – If you are driving for someone else, you will need to provide a copy of your DOT authority lease and your Registrant DOT Number.
- Owner/Officer information – You will have to provide the names and Social Security Numbers of all owners or officers.
IFTA and Your Trucking Business
IFTA was created to simplify the reporting of fuel used by carriers that operate in multiple states. However, without a clear understanding of IFTA requirements, you could end up incurring unnecessary costs and/or penalties. With an IFTA sticker, you have a license that covers all of the states that you operate in. That means you no longer have to purchase multiple permits for interstate travel.
You simply pay the appropriate IFTA fuel tax to your base jurisdiction, and the taxes are distributed to each member state or jurisdiction based on the number of miles you traveled in each state. Say, for instance, that you fuel up and pay tax in Pennsylvania and then drive into West Virginia, Ohio and Indiana. The IFTA says taxes from the Pennsylvania fuel purchase will be distributed to West Virginia, Ohio, and Indiana based on the number of miles you drive in each of those states. IFTA fuel tax gets calculated each quarter, and any money owed or credited is due at that time.
One of the most common sources of confusion regarding IFTA fuel tax is the fact that tax rates differ from state to state. Under IFTA, if you purchase fuel in a low-cost state and use that fuel in a high tax state, you could end up owing taxes at the end of the quarter. Conversely, if you purchase fuel in a high-cost state and use that fuel in a low tax state, you could end up with a credit at the end of the quarter. IFTA reporting and everything that goes along with it may seem like a hassle. But with your individual IFTA login, it is easy to take care of your IFTA requirements online.
Handling IFTA Reporting Transactions
Motor carriers can handle all of their IFTA reporting transactions using the Department of Revenue’s online IFTA Fuel Tax System. Once you have your IFTA license, log into the system using your IFTA login. From there you can process and pay your quarterly tax returns, order additional IFTA stickers and manage other important aspects of your license.
All the information you need to take care of your IFTA requirements is in one convenient place. Thanks to our TruckingOffice IFTA fuel tax software.
These IFTA fuel tax report requirements are specific and can be at times aggravating. But compared to the hassle of complying with multiple states’ standards, the universality of IFTA’s regulations is a welcome thing. For more information on IFTA software for trucking, check us out!