Understanding The International Fuel Tax Agreement

International fuel tax agreement or simply IFTA is the agreement between the U. S. states and the Canadian provinces about the payment of taxes on the motor fuel used by commercial vehicles. IFTA let the commercial vehicle register in one state and the fuel tax to be distributed among the participating states according to their fair share. 

If you are a commercial truck or bus operator, you must have a fair idea about the fuel tax you have to pay to each state your vehicle passes through. IFTA makes it easy for commercial truck or bus driver to submit fuel tax reports. As a part of the International Fuel Tax Agreement, the vehicle that travels through multiple states can get a single permit that allows it to cross the borders of the state without any hassle. IFTA also lets you report and pay your fuel tax to one state and hence simplify your obligations towards the authorities. You have to pay the tax on the fuel used by the commercial vehicle in each state. The number of miles driven and the amount of fuel used in each state needs to be recorded and reported by the driver quarterly. 

States that signed the international fuel tax agreement

IFTA agreement is signed between most of the U.S. states and the canadian provinces, but not all the states are part of it. These states do not recognize the IFTA permit. Therefore the commercial operators have to pay these states fuel taxes separately. 

Types of vehicle falls under the IFTA

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You don’t have to get an IFTA license for every vehicle. There are three types of commercial vehicle that fall under the IFTA regulations.

  1. Two axle vehicle with the gross weight exceeding 26000 lbs.
  2. Any vehicle with three or more axles.
  3. Any vehicle with a trailer must have gross weight more than 26000 lbs. 

Agricultural vehicles have some special rules for the IFTA. The registration fee is different for most of the states. Once you register your vehicle in any participating state, a single permit allows you to drive through all the member states. You will receive two decals to paste on your vehicle. The validity of the license and the decals is between January 1 to 31 of December. Permit is renewed annually by filing an application for renewal online and then printed and sent to the respective office. 

How to calculate IFTA?

To calculate the IFTA tax, the first thing you need to know is the number of miles driven in each state or use ifta fuel tax software. Then you need the fuel receipts from every state. With this record, you can find the amount of fuel burned in a particular state

IFTA tax for a state = tax rate of that state multiply by the amount of fuel used in that state

It is a very difficult task for the drivers to keep the record of all the miles driven in a particular state accurately. But nowadays there are many automated softwares available for fleet operators to record and report the miles driven in every state accurately. This is a great help for the drivers as they can now focus on driving.

IFTA tax must be filed quarterly. Therefore you need the miles and fuel purchased receipts for the whole quarter to find out your IFTA tax for the state. The due date is the last date of the month following the quarter being reported.


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Benefits of IFTA

The main beneficiary of the IFTA regulations are the drivers who regularly cross the multiple states and purchase the fuel from any single or multiple state. There are multiple benefits of the IFTA regulations. 

  • Less paperwork : IFTA allows the drivers to manage their paperwork quite efficiently. They don’t have to purchase the permit at the port of entry of each state. This reduces the paperwork considerably.
  • Save time : The drivers don’t have to stop at each point of entry of the states for the tax purpose. This will save a lot of time and improve delivery timing. 
  • Less accounting error : With less paperwork, there is less chances of an accounting error. 

International Fuel Tax Agreement with fuel tax software simplifies the reporting for commercial vehicle operators. For the drivers who occasionally drive between multiple jurisdictions, a single trip permit is still available. They just have to purchase the single trip permit at the point of entry. This permit is valid for one trip with fixed miles covered and for a particular time period.

If you do not file your IFTA tax on time, the authority can penalize you with a cash penalty. If you still don’t address the tax, this will result in the revoking of your IFTA permit.

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