If a carrier pumps 200 miles worth of fuel in Indiana but drives 100 of those miles in Ohio, will he have to file a separate fuel tax report in both states? Before IFTA, the answer would have been yes. But in 1996, the International Fuel Tax Agreement (IFTA) was created to streamline fuel tax processes and allow carriers to submit a single fuel tax form, even when operating in more than one state.
Although IFTA has alleviated many of the pain points of fuel tax reporting, it can still be a cumbersome process for many fleets, particularly since it needs to be filed four times a year. To help your fleet streamline its IFTA process, we've created a guide to understanding the agreement and making sure your business avoids common filing mistakes.
What is IFTA reporting?
Before IFTA, fleets were required to obtain a fuel permit in each state they operated in. This was challenging for carriers as it forced them to file fuel tax reports across multiple states—each one containing a unique set of requirements depending on specific state laws. This not only made compliance difficult for carriers but also stalled operations. But in 1983, Arizona, Iowa, and Washington came together to create a simpler solution that would eliminate some of the compliance inefficiencies carriers experienced, while still honoring tax owed for each state a vehicle operated in.
Over ten years later, in 1996, IFTA as it’s known today was launched. IFTA is an agreement between the lower 48 states and 10 Canadian provinces that aims to simplify reporting of fuel use by interstate motor carriers operating qualified motor vehicles in multiple jurisdictions. Put simply, IFTA was created to streamline fuel reporting for trucks that drive in several locations. It applies to all parts of the United States except for Alaska, Hawaii, and the District of Columbia, and also excludes all territories in Canada.
What are IFTA requirements?
There are a number of fuel tax reporting requirements to be aware of when completing your IFTA paperwork.
First and foremost, commercial carriers are required to record miles driven, fuel purchased, and fuel tax paid in each state their vehicles drove in for a given quarter. Keep in mind that you will need to record total miles driven and fuel purchased in each jurisdiction, not just the combined total sums.
That means that if a driver adds fuel to their vehicle in one jurisdiction, he is required to report how many miles that vehicle drove in that jurisdiction as well as any other jurisdiction(s) the vehicle passed through. This report will then allow jurisdictions to collect or credit appropriate amounts of tax based on the mileage traveled.
- Vehicle A pumps 200 miles worth of fuel in the state of Washington
- Vehicle A drives from Washington to Oregon and then back from Oregon to Washington
- Vehicle A has driven a total of 100 miles in Washington and a total of 100 miles in Oregon
- Carrier A notes the mileage in Washington and Oregon for Vehicle A
- Carrier A reports this at the end of the quarter
- Carrier A pays (or is credited depending on the initial tax paid versus the tax rate in the traveled states) 100 miles worth of fuel tax to Washington and 100 miles worth of fuel tax to Oregon
This information is submitted to a carrier’s base jurisdiction which reviews and determines whether the carrier owes taxes or will receive an IFTA return. IFTA, along with the International Registration Plan (IRP), oversee the process and provide assistance to states and provinces on running their individual programs.
The quarterly return due dates are:
- April 30 for January-March (Quarter 1)
- July 31 for April-June (Quarter 2)
- October 31 for July-September (Quarter 3)
- January 31 for October-December (Quarter 4)
Who is required to file an IFTA report?
You are required to apply for an IFTA license and file a fuel tax report if you operate a qualified motor vehicle—but what exactly does that mean? A qualified motor vehicle is defined by IFTA as any vehicle that’s designed to transport people or products and meets the following criteria:
- Includes three or more axles
- Includes two axles and a gross vehicle weight of 26,000 pounds or more
- Is used in a combination that has a combined or registered gross vehicle weight of more than 26,000 pounds
Note that recreational vehicles, like motorhomes, are not considered to be motor vehicles when an individual uses it exclusively for leisure.
How do you register vehicles for IFTA?
To be eligible for IFTA vehicle registration, motor carries must:
- Have an established business in the state from which the motor carrier operates
- Accrue mileage in the designated state
- Maintain operating fleet records in the designated state
- Operate in at least one other IFTA jurisdiction
To register a new vehicle, contact your local DMV for an application. Once you register and create an IFTA account, your carrier will be issued an IFTA license and IFTA decals to place on vehicle doors.
Common IFTA reporting mistakes
Filing your IFTA fuel tax report can feel like a daunting task—but it doesn't have to be. To help your fleet prepare for its next quarterly report, here are four common IFTA reporting mistakes to avoid.
1. Estimating Fuel Calculations
It might be tempting to estimate the amount of fuel your fleet used in the past three months when quarterly IFTA due dates are right around the corner, but this can be a costly mistake. Not only does IFTA reporting require accurate recordings, but incorrect fuel and mileage calculations can put your fleet in danger of an audit.
To take the guesswork out of reporting, use fleet management software to accurately record motor carrier miles for you. Samsara plugs directly into a vehicle's OBD port to automatically record engine data—like miles driven—removing any need to manually track. Plus, identify sources of unnecessary fuel costs with Samsara Fuel, Idling, and IFTA mileage reports. Simply set up Idling Alerts to get notified when drivers are idling or get Fuel Reports emailed weekly to quickly review fleet fuel activity all in one place.
2. Not recording personal miles
Remember to record every mile driven in your IFTA report, even mileage used for personal errands or loading and unloading. Accuracy is key and IFTA does not distinguish between different route types—a mile is a mile and it must be accounted for when you file your reporting. On the flip side, be prepared to submit an IFTA report for commercial motor vehicles that did not clock any miles during the quarter. If a vehicle did not operate during a particular quarter, you are still required to file an IFTA return as a ‘Zero Miles’ report. To do so, simply file an IFTA return without entering any mileage or fuel data onto the form and select ‘No’ for the ‘No Operation’ option.
3. Odometer or GPS Issues
Your IFTA reporting needs to be accurate. This means that if any part of the vehicle impacting mileage malfunctioned during the reporting period, it needs to be flagged when you file.
If your vehicle experienced things like odometer or GPS issues, or any other problem that could impact mileage, you need to account for it in your IFTA report. A miscalibrated gauge or even worn tires can alter an odometer reading, which can cause an inaccurate mileage reading. To ensure mileage is correctly reported, consider a fuel management solution that automatically pulls engine data to accurately measure mileage.
4. Filing late
The biggest mistake you can make when it comes to IFTA reporting is not submitting the report at all. Filing your IFTA report late or not submitting it will lead to a fine of $50 or 10 percent of the net tax liability, whichever is greater. Plus, your fleet runs the risk of an audit, which is likely to require more time and paperwork than filing the report in the first place.
How do I collect fuel and mileage data for IFTA reporting?
Relying on paper records for IFTA reporting is not only time-consuming but opens up room for human error that could lead to an audit. To accurately track IFTA miles and streamline the quarterly reporting process, fleets can use a telematics provider.
Samsara's electronic logging device automatically tracks every mile your vehicles travel in each jurisdiction. Simply use Samsara fuel, idling, and IFTA reports to identify the sources of unnecessary fuel costs in real time and eliminate extra effort spent on paperwork.
To seamlessly file your quarterly IFTA tax return, reach out for a free demo or free trial with Samsara today.