What is IFTA?

The International Fuel Tax Agreement, commonly known as IFTA, allows for easier collection and distribution of fuel tax revenues for motor carriers and jurisdictions in the lower 48 United States and 10 Canadian provinces.

Under IFTA, motor carriers engaging in interstate commerce obtain one license through their base jurisdiction. The base jurisdiction then distributes the necessary funds to the appropriate jurisdictions.

An IFTA-qualified vehicle is used, designated, or maintained for transporting people or products. A qualified vehicle:

• Has two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds (11,797 kilograms);
• Has three or more axles regardless of the weight; or
• Is used in combination, when the weight of such combination exceeds 26,000 pounds gross vehicle weight.

Under IFTA guidelines, all carriers are required to:

• Register with their base jurisdiction for fuel tax reporting;
• Display two IFTA decals per vehicle and carry either a paper or electronic version of their license in each vehicle; and
• File quarterly IFTA tax returns with their base jurisdiction.

An IFTA license is valid from January 1 through December 31, and carriers must renew their license each year. Carriers are issued new decals each year. The new decals may or may not require annual fees, depending on the jurisdiction.

Carriers are required to file quarterly tax returns with their base jurisdiction according to the following deadlines:

• January-March: April 30
• April-June: July 31
• July-September: October 31
• October-December: January 31

This is one of the most painful parts of IFTA and one which can be alleviated greatly through the use of ELDs.

The convenience of filing fuel tax returns with one jurisdiction does come with one caveat: an intense amount of recordkeeping.

Carriers must keep the following information when recording distance miles electronically:

• GPS location or data for each vehicle;
• Date and time of GPS system reading;
• Location of each GPS or system reading;
• Beginning and ending readings from odometer, hubodometer, or similar device;
• Calculated distance between each GPS point;
• Route the vehicle traveled;
• Total distance traveled;
• Distance within each jurisdiction; and
• Vehicle identification number.

Carriers are required to keep records of fuel purchased, received, and used. Fuel receipts must include the information below to qualify for tax-paid credit. Required information includes:

• Date of purchase,
• Seller’s name and address,
• Number of gallons purchased,
• Total amount of sale,
• Purchaser’s name and address,
• Fuel type, and
• Vehicle identification number.

If carriers use bulk fuel, those requirements differ slightly than retaining retail receipts or fuel cards.

Carriers must maintain their distance and fuel records for both quarterly tax returns and potential audit situations. Carriers need to keep IFTA records for at least four years.

Carriers are also required to keep any unused decals for four years for auditing purposes.

Carriers who fail to pay their quarterly tax bills face fines and a suspension of their license.

A jurisdiction can revoke or suspend the license of any carrier who fails or refuses to file a tax report. The jurisdiction also has the authority to assess a penalty of $50 or 10 percent of the carrier’s delinquent taxes, whichever is greater, for failing to file a tax return, filing a late tax return, or underpaying taxes due.

Audit assessments can also be severe if auditors find information is missing or incorrectly reported.

The chance of an audit may seem rare, as jurisdictions are required to randomly audit just 3 percent of its licensees each year. But audits can also be triggered because of the following actions:

• Delinquent or late filings;
• Amended returns;
• High/low miles per gallon reporting; or
• Closing an account.

To learn more about IFTA requirements download our "Motor Carrier Tax and Registration" whitepaper.

No more tracking down drivers' missing paperwork and miles! J. J. Keller® ELDs and Vehicle Tracking devices automatically record and transmit miles traveled within each state to the Encompass® back office. Learn more.