Have you ever wondered why you pay so much in fuel taxes? Have you wondered how your fuel tax is calculated? If paying fuel tax seems confusing and cumbersome now, it certainly has come a long way from twenty years ago. The International Fuel Tax Agreement (IFTA) was created to simplify the reporting of fuel used by trucks operating in more than one jurisdiction and its mission was to create a more convenient process for drivers. While the process is more convenient, it can still be confusing. Here is some information to help you understand more about the IFTA and how it affects you.
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| Before the IFTA drivers had to use a "Bingo Plate" that showed all the states a fuel permit was purchased for. |
Before the IFTA was created, a driver had to purchase a fuel permit for every state in which they ran and these permit stickers were collected on a “Bingo Plate.” Many states established a Port of Entry where permits were distributed and taxes paid. This caused drivers to run miles out of route, wasting precious time and fuel.
So how does IFTA work?
IFTA takes the tax you pay at the pump when you buy fuel, and shares it with states and provinces where you use that fuel. If you purchase fuel in Pennsylvania and run through Ohio to Michigan, the taxes you paid at the pump in PA will be redistributed to cover the tax you owe Ohio and Michigan. IFTA issues one fuel tax license that covers all the jurisdictions where you operate. You do not need a fuel trip permit for each state.
Find out if your carrier (if leased onto one) provides any of these fuel tax services:
- Pays fuel taxes for their drivers (this is rare, but if so, you will want to purchase fuel by the actual billboard price)
- Calculates fuel taxes for their drivers and settlement deduct balances owed
- Routes trucks to fuel stops based on fuel prices and fuel taxes
If your carrier requires you to file your own fuel tax reports, you may want to hire a fuel tax firm or purchase reputable software. (This is common with small carriers.)
Take advantage of the services your carrier does provide.
Carriers inevitably have larger resources than any single I/C on the road. This generally means they have already invested in Fuel Tax software to maximize fuel savings for all their trucks. If you work with a carrier that routes your truck to fuel stops, be smart and take advantage of service. Too often I hear “My carrier routed my truck 20 miles across the state line to purchase 120gal of fuel when the price is $0.08/gal higher over there.” What the I/C is not realizing is he will end up spending $0.14/gal in addition Fuel Tax.
Be aware of the states that do not have the same fuel tax as other states.
Indiana, Kentucky and Virginia have something called a “Surcharge.” This is a kind way of saying these states are keeping part of your money. Only purchase the amount of fuel in these states that you plan on burning in these states. Oregon never entered into the International Fuel Tax Agreement (IFTA), so they do not charge any fuel taxes at the pump. This may sound great, but it means any fuel purchase in Oregon that leaves the state will be charged fuel taxes at the rate of the state it is burned in. Hawaii and Alaska are not part of IFTA; they do not charge fuel taxes at the pump. The Northwest Territories, Nunavut, and Yukon are also not members of IFTA.
Register with the IFTA.
If your rig has two axles and a gross vehicle weight exceeding 26,000 pounds, three or more axles regardless of weight, is used in combination, and/or when the weight of such combination exceeds 26,000 pounds, you must register with the IFTA. If you qualify for IFTA but do not choose to register, you must obtain fuel trip permits to travel into or through each member jurisdiction.
- You must apply to your base jurisdiction for an IFTA license and decals for each qualified motor vehicle that you operate in more than one IFTA member jurisdiction.
- An IFTA license is issued by the state you choose as your base jurisdiction. This base jurisdiction will be the state in which your carrier operates if you are leased on with a carrier. If you run under your own authority, your base jurisdiction is the state where your truck is registered.
- Procedures for obtaining the license vary according to your base jurisdiction. The IFTA website has a “One Stop Shop” which provides a list of contact information for all of the base jurisdictions. http://www.iftach.org/
- The registration fee varies according to the base jurisdiction.
- IFTA licenses and decals are valid from January 1 to December 31 of each year.
- IFTA licenses must be renewed by March 1 of each year and a valid decal displayed on each vehicle.
- You are required to keep a copy of this license in your truck at all times.
- If you operate multiple trucks, you only need one IFTA license, but a copy of it must be kept in
every truck. A decal must be displayed on each truck.
- IFTA maintains a list of fuel tax rates by state. This list is updated quarterly. Click here for the fuel tax rates by state.
When do you have to file your fuel tax reports?
Under IFTA, you are required to file quarterly fuel tax reports.
- The reporting quarters and due dates are:
Reporting Quarter Due Date
| January - March |
April 30 |
| April - June |
July 31 |
| July - September |
October 31 |
| October - December |
January 31 |
The IFTA is certainly a more efficient and effective program to simplify the payment of fuel taxes than the previous bingo plate method. But still, taxes are confusing. Fuel tax is no exception. If you would like more information on IFTA and how your fuel tax is calculated contact www.atbsshow.com and a Business Consultant can help you determine how fueling in different states affects your business.