What is IFTA? Simplified IFTA Reporting for Trucking Businesses

A cooperative arrangement called the International Fuel Tax arrangement (IFTA) makes it easier for interstate motor carriers to record and pay fuel taxes. By IFTA, carriers are only required to submit a quarterly fuel tax return to their base jurisdiction, which after that allows the relevant tax amounts to each jurisdiction by the distance traveled and the fuel used. This method guarantees equitable revenue distribution, lessens administrative overhead, and encourages consistency in fuel tax collection. 

In this blog, we will cover not only IFTA but also how it works and how easily one can create an automated report using TruckX’s Fleet Management software.

What is IFTA?

What is The International Fuel Tax Agreement (IFTA)?

The International Fuel Tax Agreement (IFTA) is an agreement between the 48 US states and Canadian provinces. As a result, the agreement makes it easy for multi-jurisdictional motor carriers to report fuel usage for fuel taxation purposes. Established in 1983 to expedite fuel tax collection, IFTA simplifies reporting and payment of fuel taxes by ensuring uniform and consistent motor fuel tax policies within various jurisdictions. 

Owing to IFTA, motor carriers may use one license for fuel taxes instead of paying a separate fee for each participating state or province they pass through. This eliminates the complexities associated with such processes – thereby reducing administrative workloads and ensuring equity in determining levies based on consumption.

The following is a list of the states and provinces that are members of IFTA:

    • United States

All states except for Alaska, Hawaii, and the District of Columbia

    • Canadian Provinces

Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan

What is the purpose of IFTA?

IFTA’s primary purpose is to streamline and simplify the reporting and payment of IFTA fuel taxes by interstate motor carriers. This includes the following:

    • Simplified Tax Reporting: IFTA makes it easier for truckers to report their fuel taxes. Instead of handling different tax returns in each state or province, they pass through, a carrier can file one consolidated report with its base jurisdiction. This will mean fewer complications and administrative burdens for trucking businesses. 
    • Equitable Tax Distribution: To ensure that every jurisdiction gets its fair share of fuel tax revenues, IFTA calls for an equitable distribution of these monies based on where the fuels have been consumed. For instance, this implies that taxes paid by carriers go to jurisdictions where they operate and use fuel.
    • Standardization & Uniformity: All participating states follow the same definitions, tax rates, and filing requirements as per IFTA. Uniformity means no confusion from different laws or regulations of various states or provinces, which enables compliance instead of carriers dealing with multiple legislations.

How Does IFTA Work

The IFTA program mandates that carriers file quarterly fuel tax reports with their base jurisdiction regardless of the number of jurisdictions they operate in. Under IFTA, carriers register in their base jurisdiction and are issued an IFTA license and decals for each qualifying vehicle owned. They then submit a quarterly fuel tax report detailing the miles traveled and fuel obtained in all member jurisdictions. The base jurisdiction calculates the net tax liability or refund due using the fuel tax rates for each jurisdiction and the carrier’s reported fuel usage.

Who Needs IFTA

Qualified motor vehicles being operated by carriers will be covered under IFTA when they satisfy any one of these criteria:

    • Any vehicle with two axles and a gross vehicle weight over 26,000 pounds (11,797 kilograms).
    • Any vehicle with three or more axles, irrespective of weight or, when combined, exceeds 26,000 pounds (11,797 kilograms).
    • These vehicles commonly involve CMVs, such as large trucks and buses, that transport goods across state lines or provincial boundaries.

What is IFTA Reporting? Create a Report

Creating an IFTA report involves keeping meticulous records and making accurate calculations. Below is a step-by-step guide through the process:

1. Collect Records

Firstly, gather all relevant records for the reporting period, including:

      • Mileage logs: A record of mileage traveled in each jurisdiction.
      • Fuel receipts: These are documents that indicate the purchase of fuel at a particular date, location, and the specific amount purchased.
      • Trip reports: They entail complete travel diaries such as destination, starting point, and route traveled.

2. Calculate Total Miles Driven

Subsequently, sum up all miles driven by every vehicle in every jurisdiction. Accurate mile tracking is essential, as fleet managers and truck drivers use electronic logging devices (ELDs) to get exact figures without errors.

3. Establish Fuel Consumption

Find out each vehicle’s actual fuel consumption, including fuel purchased and used within each jurisdiction. It is necessary that all fuel receipts match the recorded fuel usage.

4. Calculate Miles Per Gallon (MPG)

Divide the total miles covered by the total gallons of fuel used to get the average miles per gallon (MPG) for your fleet.

5. Allocate Miles and Fuel by Jurisdiction

Apportion all miles covered and the fuel used among the jurisdictions. It involves the following steps:

      • Mileage Apportionment: Assign miles traveled to each jurisdiction based on trip records.
      • Fuel Apportionment: Allocate fuel used in each jurisdiction, which may involve prorating fuel purchases based on where they were consumed.

6. File IFTA Quarterly Fuel Use Tax Return

Complete the IFTA quarterly report with the computed data. The report usually includes the following:

      • Total Miles: The sum of all miles traveled in all jurisdictions
      • Total Gallons: Total amount of fuel consumed
      • Jurisdictional Data: Miles traveled and volume of fuel consumed in each jurisdiction

7. Submit Report & Pay

Lastly, submit the completed report with any payable tax receipts to your base jurisdiction by the deadline. Payment can often be completed electronically.

How to Calculate IFTA Tax

Calculating IFTA involves several steps to ensure accurate reporting and compliance. Here’s a detailed guide to the calculation process:

Step 1: Gather Required Data

  • Total Miles Driven: Sum of all miles traveled by the fleet during the reporting period
  • Total Fuel Purchased: Total gallons of fuel purchased during the reporting period

Carriers must save their original invoices or receipts to demonstrate that fuel tax was paid. These records should include the following:

  • Vehicle plate number
  • Driver’s name
  • Fuel purchase date
  • Type of fuel purchased
  • Fuel seller’s name and location
  • Price per gallon
  • Number of gallons purchased

Step 2: Calculate Total Fuel Consumed Per Jurisdiction

To determine how much fuel has been consumed in each jurisdiction, you can use either your total purchased fuel calculations – provided there are no mistakes in your paperwork- or instead, key into a digital log for each jurisdiction traversed by drivers in your fleet using Fleet Management Software which can use GPS and fuel consumption date to ensure data accuracy.

Step 3: Calculate Jurisdictional Miles

In order to accurately record the amount of fuel spent in various jurisdictions, fleet management and drivers need to work closely together: Fleets must manage the duty status data of their drivers with utmost attention to detail. Track the miles traveled in each jurisdiction using trip records. Ensure accuracy as this data forms the basis of your tax liability.

Step 4: Calculate Fuel Use Per Jurisdiction

Calculate your vehicle’s fuel mileage for each jurisdiction once you’ve added up all the miles driven and fuel bought. To determine the overall fuel mileage of your fleet, follow the simple steps below:

Use the formula:

Total Miles Traveled / Total gallons= Overall fuel mileage

For example, if you purchased a total of 2,000 gallons of fuel and covered 11,000 miles, then your overall fuel mileage would be:

11,000 / 2,000 = 5.5 miles per gallon

Enter your total fuel mileage into the following calculation to find out how many gallons your fleet used in each jurisdiction:

Total miles driven in State ‘X’ / Overall fuel mileage = Fuel consumed in State ‘X’

Step 5: Summarize and Report

Finally, compile all the data. Summarize the taxes owed or refunds due, and complete the IFTA report accurately. This includes ensuring all supporting documentation is ready for any audits or verification.

When should you file IFTA Tax Returns?

All IFTA jurisdictions require motor carriers to file tax returns quarterly. Following are the quarterly tax report deadlines:

    • 1st Quarter Deadline (January to March)
    • 2nd Quarter Deadline (April to June) 
    • 3rd Quarter Deadline (July to September)
    • 4th Quarter Deadline (October to December)

In order to avoid any penalties or fines, make sure you file your tax returns before the deadline for each quarter.

IFTA Blog

Automate IFTA Reporting with TruckX ELD Pro

For IFTA calculations, TruckX’s Electronic Logging Devices (ELDs) can help expedite the calculation process and guarantee correctness. Here’s how to use the TruckX All-in-One Fleet Management Platform for IFTA reporting:

1. Automated Mileage Tracking

To begin with, TruckX’s ELD Pro automatically calculates mileage traveled in each jurisdiction or state. It directly plugs into the vehicle’s OBD-II port, recording every driving event. In addition, TruckX ELD Pro tracks vehicle GPS data, which is converted into total miles driven in each geo-location. This minimizes effort and the risk of mistakes, as opposed to manually tracking, recording, and calculating mileage.

2. Integrating Fleet Management Software Data

All TruckX ELD Pro data is automatically uploaded to the Administrator’s Fleet Management Platform. TruckX offers both a comprehensive Web Application as well as Android and iOS-compatible Fleet Management mobile App for on-the-go operations. This interface makes it possible to access, download or share IFTA data instantly.

3. Fuel Purchase Documentation

It is essential to verify that every fuel purchase is adequately recorded and input into the system. The information contains the place, date, and quantity of fuel bought. Additionally, for accurate IFTA calculations, the integration with TruckX’s fleet management software can assist in matching fuel purchase data with mileage records.

4. Prepare IFTA Reports

You can use the TruckX Fleet Management Portal to create IFTA reports. Based on the mileage information from the ELD and the fuel purchase records, the software will determine how much fuel is used in each jurisdiction. Subsequently, this automated procedure increases accuracy and reduces administrative workload.

5. Timely Review and Audits

Lastly, to guarantee accuracy, conduct routine reviews of the data gathered by the ELD and the produced IFTA reports. Maintaining thorough and accurate documentation helps lower the chance of audits and facilitates quicker resolution of discrepancies.

Conclusion

All in all, understanding the International Fuel Tax Agreement (IFTA) and its automated reporting with TruckX ELD Pro is crucial for motor carriers operating across state and provincial lines. By following the reporting and calculation guidelines, carriers can ensure compliance, minimize administrative burdens, and optimize operations. Accurate record-keeping, meticulous calculations, and timely filings are the cornerstones of successful IFTA management.

Additionally, carriers can streamline the process by embracing best practices and leveraging technology, making it easier to navigate the complexities of fuel tax reporting and focus on efficient, profitable operations.