The International Fuel Tax Agreement (IFTA) is an arrangement among U.S. states and Canadian provinces. Taxes are paid on motor fuels, and IFTA allows commercial motor carriers to register in one state and have these tax assessments paid out to all participating areas according to their fair share.
IFTA was created for truckers who frequently cross state lines on their routes. It simplifies accounting and payment of fuel taxes and relieves trucking companies of some paperwork.
Why IFTA was Created
Fuel taxes are assessed in each state or province, and paid at time of purchase. Commercial trucking operations hold permits that dictate a specified tax rate on motor fuel, and their payouts are recorded so that the taxable total can be calculated and adjusted (money owed or money credited) on a quarterly basis.
Prior to the IFTA program, drivers had to obtain a permit for every state or province they crossed, available at a designated port of entry. Acquiring a number of permits and maintaining the quarterly filings added a significant amount of extra effort related to interstate truck trips.
In the 1980s, some states entered into agreements to set up a joint revenue distribution program and eliminate the requirement for individual fuel tax permits. Over the years this program evolved into IFTA today.
How IFTA Works
Under this program, a truck is IFTA registered and obtains a fuel tax permit from one state. When the vehicle drives through any participating state or province, the tax on fuel purchased there is credited to the permit owner’s account. At the end of the quarter a fuel tax report is completed that shows miles traveled and gallons of fuel for each region.
IFTA assists in calculating the amount of tax due or tax credit for each state, to determine the tax liability for each and to oversee the distribution of funds accordingly.
Commercial motor vehicles are IFTA qualified. Specifically, these are commercial vehicles with three or more axles, or with two axles and a gross weight exceeding 26,000 pounds, used to transport goods or passengers.
For IFTA qualification, these vehicles are operated in at least two states of the U.S. and/or Canadian provinces which are members of the International Fuel Tax Agreement.
All 10 provinces of Canada are members of the agreement, as are all 48 contiguous states of the USA. Alaska and Hawaii are not members.
Private or recreational vehicles for personal use are not subject to IFTA licensing.
Registering for IFTA
A state in which the vehicle is registered is considered the vehicle’s home state, where the operator maintains or can gain access to the vehicle operating records. If a vehicle is registered in multiple states, the operator must contact one state to determine whether the vehicle can be consolidated under a single license.
The home state will issue the IFTA vehicle decal. For registering, a list of state Department of Transportation web sites is available online from the Federal Highway Administration.
Filing Reports With IFTA
For filing IFTA claims, at the end of the fiscal quarter the licensee produces a fuel tax report listing miles traveled in all participating jurisdictions and gallons of fuel purchased there. Supporting documents include the vehicle mileage record, distance records, fuel records and tax-paid retail fuel purchase receipts. All relevant data such as gap miles and fuel receipts must be included when reporting IFTA claims.