IFTA: A Detailed Guide to the International Fuel Tax Agreement
IFTA stands for the International Fuel Tax Agreement. It is a tax collection agreement between the 48 contiguous states of the United States and the 10 provinces of Canada. It is designed to reduce the administrative burden of reporting motor fuel taxes in multiple jurisdictions.
The United Mexican States (Mexico), the District of Columbia, Alaska and Canada’s Northwest Territories, Nunavut Territory and Yukon Territory are not members of IFTA. Carriers travelling in these jurisdictions must file certain reports as mandated by these jurisdictions, even if they have an IFTA license.
Motor carriers that travel only between Texas and Mexico are not eligible to apply for an IFTA license and must either obtain a Texas interstate trucker license or purchase a fuel trip permit each time a qualified motor vehicle enters Texas.
TABLE OF CONTENTS
1. What does IFTA stand for?2. Meaning of Qualified Motor Carriers
3. Eligibility
4. Due Dates 2024
5. How to do IFTA?
6. Calculate IFTA Tax
7. License Registration & & Sticker Application
8. Reporting
9. Mileage Tracking
10. IFTA Filing
11. Payment
12. FAQs
What is a qualified motor vehicle?
A qualified motor vehicles a motor vehicle used, designed, or maintained for
transportation of persons or property. They must:
- Have two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds or
- Have three or more axles regardless of its weight
- Or is used in combination, when the weight of such combination exceeds 26,000 pounds gross vehicle or registered gross vehicle weight.
Qualified motor vehicles do not include recreational vehicles. Farm plated vehicles and school buses, meeting the definition of qualified motor vehicle must obtain an IFTA license and fuel decals if travelling in another jurisdiction that requires them.
Who Must File the IFTA taxes?
If you operate a qualified motor vehicle if you’re based in a member state and operate across two or more member jurisdictions, you need to file the IFTA taxes. Failure to file the IFTA return and pay the applicable tax may result in the imposition of penalties.
IFTA Due Dates 2024
IFTA returns are due quarterly, on the last day of the month following the end of the calendar quarter. If the due date is a Saturday, Sunday or a legal holiday, the next business day is considered the due date.
Filing Period | Due Date |
First Quarter | April 30th |
Second Quarter | July 31st |
Third Quarter | October 31st |
Fourth Quarter | January 31st |
How does IFTA work?
IFTA operates on a ‘pay now or pay later’ system. If you purchase fuel for your commercial motor vehicle, the fuel tax you paid will be credited to your account. At the end of the fiscal quarter, you will complete your fuel tax report by listing the miles traveled in all participating jurisdictions and the gallons of fuel that was purchased.
Your average fuel mileage is then applied to the miles traveled to determine the tax liability to each jurisdiction. Any fuel taxes due (or refund) is then paid to (or received from) the base jurisdiction who issued you the license. The member jurisdictions then take care of transferring the funds accordingly.
How do you calculate IFTA?
Your IFTA tax (1) is calculated based on how many gallons of fuel you burn in each state. You need to know details of how many miles you traveled in each jurisdiction and how many gallons you purchased in each jurisdiction.
Once you have these details, you need to calculate your fuel mileage over the quarter and the total gallons burned in each state. Finally, you need to calculate the tax owed in per jurisdiction, and the total amount owed on your IFTA return.
Next, you need to add up all the gallons of fuel you purchased in each state. As well as a running total of all the gallons purchased in all states during the quarter. The fuel mileage across all states for an entire quarter needs to be calculated using the equation:
Total miles driven in all states ÷ Total gallons purchased in all states = Overall fuel mileage
Then you need to calculate the fuel tax required and the fuel tax you already paid to each state based on the gallons burned there using the equation:
Total gallons burned in each state x Fuel tax rate for that state = Fuel tax required for that state
Multiply total gallons purchased in each state by the fuel tax rate for that state to get the fuel tax paid for that state. Likewise, do that for all the other states.
You will need to calculate how much tax you actually owe for each state by subtracting fuel tax required for each state with fuel tax paid in that state.
Finally, you need to calculate the total amount owed on your IFTA return by adding up all the fuel taxes owed to each state. Some of them may be negative and you subtract those amounts from the total.
The negative values indicate that you bought more fuel in that state than you burned, and therefore you paid more in fuel taxes to that state than you were required to pay. In such cases, you won’t get a refund from each state.
How to apply for an IFTA license and IFTA Stickers
You must fill out the IFTA application form used in your base state to apply for IFTA license. A single IFTA license will be issued for your entire fleet of qualified motor vehicles. You must provide some basic carrier information while filling out the IFTA applications, such as:
- Registered business name
- Mailing address
- Federal business number
- USDOT number
Once you’ve entered the above details, you can send the form by mail. Some jurisdictions allow IFTA forms to be sent by fax or through taxpayer service offices. After your form is processed, you will be issued two IFTA stickers for each qualified motor vehicle at no cost. Stickers should be displayed outside the vehicle, one for each side of the cab.
IFTA stickers/ decals are valid from January 1st through December 31st and can be displayed one month before the beginning of a new year, but must be displayed throughout the calendar year the decals are valid.
You must always carry a copy of the IFTA license in your vehicle and properly display IFTA decals on your qualified vehicle or it will not be considered to be operating under an IFTA license.
Operating a qualified motor vehicle without a copy of the original IFTA license may subject you to citations and fines, and you might be required to purchase a fuel trip permit each time your vehicle enters a member jurisdiction.
How does the IFTA reporting system work?
Once you register your qualified vehicle for IFTA, you will receive your IFTA license and decals. Whenever you purchase fuel, the amount paid gets logged into your IFTA account.
At the end of each quarter, you must submit an IFTA report that lists the miles driven and the gallons purchased. These reports will determine either the amount of tax still owed or the refund you are due. The IFTA office in your company’s home state will issue your refund or debt.
How do you file an IFTA report?
There are three ways to file your IFTA report:
- Electronically: you can electronically submit your return online.
- By mail: You can fill out the report and mail it to the authorities. Your return will be considered received by the postmark date on the envelope.
- Manually: you can visit the office and fill out and submit the return directly. Your return is considered received the date it is delivered to the office
How to pay IFTA taxes online?
If you owe taxes, you can pay it online through your debit/credit card or using ACH payment to complete the transaction. If you are expecting a refund, it will be credited back to your account after filing the IFTA report.
IFTA License suspension and revocation
Authorities can suspend or revoke an IFTA license for failure to comply with any of the IFTA provisions such as:
- Failure to file a required IFTA quarterly tax report;
- Failure to remit all taxes for all member jurisdictions; or
- Failure to pay or protest an audit assessment within the established time period.
If your IFTA license has been suspended or revoked, it is advisable to not operate your qualified vehicle. All member jurisdictions will be notified if your license is revoked or suspended.
If you operate the license suspended vehicle, you will be subject to citations, fines, and penalties. In addition, you may be required to purchase fuel trip permits to travel into or through each member jurisdiction.
Recordkeeping of mileage details
Always maintain proper records of your mileage to support the information reported on your quarterly tax reports. These records must contain information such as:
- Vehicle Identification Number (VIN) or vehicle unit number
- Beginning and ending trip dates
- Trip origin and destination
- Travel routes
- Beginning and ending reading from odometer
- Total distance of trip
- Distance traveled in each jurisdiction
If you’ve installed a vehicle tracking system to track distance and related details, you must include:
- Vehicle’s original GPS or other system reading
- Date and time of each GPS reading at intervals sufficient to validate the total distance traveled in each jurisdiction
- Location of each GPS or other system reading
- Vehicle identification number (VIN) or vehicle unit number
- Distance between each GPS or other system reading
- Travel routes
- Total distance traveled by vehicle
- Distance traveled in each jurisdiction
- Beginning and ending reading from odometer
Recordkeeping of fuel details
Like mileage records, you need to keep records of your fuel purchases, with separate totals for each fuel type. The fuel records must contain the following information:
- Date of purchase
- Name and address of the seller (a vendor code, properly identified, is acceptable for this purpose)
- Number of gallons or liters purchased;
- Type of fuel purchased, or the total price of the fuel purchased;
- Price per gallon or liter;
- Evidence of tax paid to a jurisdiction;
- Unit number of the vehicle into which the fuel was placed; and
- Name of the purchaser of the fuel
Acceptable fuel receipts include invoices and credit card receipts. A credit card receipt must document the delivery of fuel into a specific qualified motor vehicle. The receipt should not contain alterations or erasures as it would be considered invalid.
