If you’re new to the trucking industry, you may not know that at one time, truckers were required to get fuel permits from each state on their route. This requirement made the process of calculating and distributing fuel taxes a burdensome, inefficient task for everyone involved. But with the creation of the International Fuel Tax Agreement (IFTA), the process became much easier.
IFTA allows US states and Canadian provinces, known as jurisdictions, to get their fair share of fuel use taxes. Drivers report mileage to their base state only, which in turn takes care of distributing the taxes among the jurisdictions on that driver’s route. This process saves everyone a great deal of time, paperwork, and headaches.
Of course, there are other reasons why the IFTA is important to the trucking industry and the safety of our highways. Here are a few of those reasons.
Uniformity, Accountability, and Efficiency
Under IFTA, all commercial motor vehicle (CMV) drivers and vehicles need to meet specific qualifications, thereby keeping everyone on the same page. Annual licenses and decals are and strict requirement. Also, IFTA reporting must be done quarterly to ensure that all taxes are paid in a timely manner.
Fines and penalties are imposed for delinquent reporting or payment in order to keep everyone accountable. This process also improves efficiency by addressing errors or delinquencies on an ongoing basis. Drivers with expired licenses or decals can be placed out of service temporarily, which can be devastating to some operations.
Less Paperwork = Reduced Driver Fatigue
Driver fatigue is an ongoing problem faced by the commercial motor carrier industry. In fact, more than 13% of truck accidents involve drowsy drivers. One of the culprits that contribute to a driver’s exhaustion is the sheer volume of paperwork they need to submit daily. Rather than going home and crawling in for a good night’s sleep, drivers sit up all hours of the night filling out forms and reports. However, IFTA eliminates some of that paperwork, thus reducing driver fatigue and improving highway safety.
Where Does the Money Go?
Americans depend on truckers for distributing products nationwide. In order to deliver those products, truckers must rely on the roads, bridges, tunnels and other transportation infrastructure. Currently, the US has a backlog of infrastructure maintenance that would improve highway safety and reliability if the work could be done. Fuel taxes are one way to meet that goal. As a result of the IFTA, fuel use taxes are efficiently collected and paid so the states can use the money as needed to improve highway conditions.
How Are IFTA Reports Calculated?
When the term IFTA reporting comes up, most truckers cringe. That’s because the quarterly reports can be tedious and complicated, especially for truckers who still do the reports by hand. Calculating fuel taxes for each quarter is stressful because errors can lead to the revocation of your IFTA permit.
To manually calculate fuel taxes owed, make sure you have all fuel purchase receipts, a record of miles traveled by state, and current IFTA tax rates.
Next, follow this formula to calculate fuel mileage for the entire quarter:
- Total miles in all states ÷ the total gallons purchased in all states = Overall fuel mileage.
- Total miles in each state ÷ by the overall fuel mileage = Total gallons burned in that state. Do this for each state traveled.
- Total gallons burned in the state x the tax rate for that state = Tax required for that state.
- Gallons purchased in each state x the tax rate for the state = tax you already paid at the pump.
- The overall fuel tax required for the state – the fuel tax paid = Tax owed.
The good news is, IFTA calculations can be easier with our TruckingOffice TMS. Our program does the math, ensures accuracy, and saves a lot of your valuable time.
TruckingOffice Helps You Stay IFTA Compliant
To ensure that IFTA can do its job properly, truckers must be diligent in keeping their payments up-to-date and accurate. That’s why we created our TruckingOffice TMS package. With our program, you’ll never miss an IFTA quarterly report and you’ll know the math is accurate. No more worries about fines, late penalties, or time off the road. But our TMS does much more than keep up with IFTA reporting. Everything you need to know about your operation’s expenses, profits, invoicing, dispatches, maintenance, and more is right at your fingertips.
It’s no big secret. The best way to run a profitable business is to reduce costs and improve profits. Our package was designed for truckers by truckers, so it has what you need to get organized and make money.
Give our TMS a try. We’re so sure you’ll like it, we’ll let you drive it around the block for 30 days, free of charge. When you’ve finished with the free trial, we’ll be on hand to help you get started.