Truckers are essential to the economy for decades, transporting goods across the country and beyond. While fuel is one of the most significant expenses for truckers, they must pay fuel taxes to various states and provinces. In addition, The International Fuel Tax Agreement (IFTA) is a program that simplifies fuel tax reporting for truckers who operate across multiple states or provinces.
In this blog, we will discuss IFTA in detail, so truckers can comply with the law, save time and money.
IFTA - What is it?
IFTA stands for international fuel tax agreement. It is basically a cooperative agreement between 48 US states and 10 Canadian provinces. Moreover it simplifies the reporting and payment of fuel taxes for trucking industry operating in multiple jurisdictions. It also helps in ensuring uniformity and consistency in fuel tax reporting. Compliance with IFTA regulations for IFTA member jurisdictions are a must for all motor carriers that meet certain weight requirements and travel.
How does it Work?
IFTA works by reporting and paying fuel taxes for trucking companies to a single jurisdiction, rather than filing separate reports for each state or province they operate in.
Companies must obtain an IFTA license from their base jurisdiction and maintain detailed records of their fuel purchases and usage to comply with IFTA regulations.
How to Obtain an IFTA License
A trucking company must submit an application and meet specific eligibility requirements to obtain an IFTA license, such as;
- Having an established place of business and operating qualified motor vehicles.
- Once approved, the company will receive an IFTA license and decals for each qualified vehicle.
How to Complete IFTA Report
IFTA reporting involves several responsibilities including obtaining an IFTA license in their primary jurisdiction by submitting an application that requires details such as their;
- Registered business name
- Primary mailing address
- Federal business number
- USDOT number
Once the application is approved, the carriers are provided with decals. It should be displayed on their vehicles, and a license that should always be present in the vehicle. Moreover, carriers are required to maintain a record of all the miles driven, fuel purchased, and fuel tax paid in each jurisdiction. These records must be submitted quarterly to their base state or jurisdiction. After the quarterly tax return is filed, carriers may be liable to pay taxes if they are owed, or they may receive a refund.
Streamlining the Process:
The base jurisdiction processes reports and payments from other states/provinces. It is essential for fleet managers to submit IFTA fuel tax reports quarterly. It allow the Department of Transportation (DOT) access to their reports at any time.
Quarterly IFTA Tax Reporting
Companies should always calculate the fuel amount used and mileage traveled in each jurisdiction quarterly. In addition, they should also report the total amount of fuel tax owed to their base jurisdiction. Moreover, companies should maintain detailed records to support their fuel tax calculations in case of an audit.
Base jurisdictions will distribute the fuel tax revenue to other IFTA jurisdictions based on the mileage traveled in each jurisdiction by the carrier.
Benefits of IFTA
There are several benefits of the International Fuel Tax Agreement (IFTA) for truckers, including:
● Simplified Tax Reporting Process:
IFTA provides a simplified and standardized approach to fuel tax reporting. This enables motor carriers to report and pay fuel taxes to a single jurisdiction.
This eliminates the need for carriers to comply with varying tax rates and regulations across multiple jurisdictions.
● Reduced Administrative Costs:
IFTA reduces administrative costs for motor carriers by standardizing the fuel tax reporting process. Motor carriers can save time and expense of preparing separate tax returns for each state or province. Thus, focusing on other aspects of their business operations.
● Increased Compliance and Accuracy:
IFTA requires motor carriers to maintain detailed records of their fuel purchases and usage, and to report their fuel tax liabilities accurately to their base jurisdiction. This procedure promotes compliance with tax regulations and reduces the likelihood of errors or inaccuracies in reporting. Additionally, IFTA provides a framework for auditing and enforcement, ensuring that carriers are held accountable for their reporting obligations.
How does IFTA help Truckers?
IFTA enables truckers by simplifying and standardizing the fuel tax reporting process. While trucking companies can report and pay fuel taxes to a single jurisdiction? It also eliminates the need to comply with varying tax rates and regulations across multiple jurisdictions, reducing administrative costs and increasing compliance and accuracy.
As a result, truckers can invest in other areas of their business operations cost effectively and timely. Lastly, the simplified reporting process also reduces the likelihood of errors or inaccuracies in reporting, helping truckers avoid penalties or fines from tax authorities.
To conclude we can say that the above guide proves that IFTA is a critical program that simplifies the reporting and payment of fuel taxes for commercial motor vehicles operating across state lines. Mores, this blog is all about trucking companies that are getting advantages from IFTA. One of the primary benefits that trucking companies can utilize is streamlining their complex tax reporting processes and avoiding penalties for non-compliance.
At the last, it is evident that compliance with IFTA regulations can lead to better cost management, as companies can accurately track fuel consumption and identify areas for improvement.