IFTA stands for the International Fuel Tax Agreement, legislation that simplifies the reporting of the fuel that motor carriers, truckers and owner operators use for their businesses. Prior to the IFTA, drivers needed to buy fuel permits in each state, which became a cumbersome process for drivers who had to frequently cross state lines.
Some states have different fuel taxes than other states, which can get complicated. However,the IFTA enables the fuel tax to be distributed to the states that your truck passes through. Today, the process is simplified for trucks that exceed 26,000 pounds and seeing as you can obtain a single fuel trip permit as opposed to permits in each state. This affects your business in a few ways:
Applying for an IFTA license
You will have to apply for an IFTA license for each truck or vehicle. This license will be issued in your base state (the state in which your business operates and where your trucks are licensed). The costs involved with these licenses are different depending on your home state and they are valid from the 1st of January until the 31st of December of each year.
Filing fuel tax reports
You will need to file a fuel tax report each quarter. Fuel taxes also change each quarter in certain states, so it’s important to stay up to date with fuel tax changes so that you can calculate your business expenses accordingly.
Most states in America and most provinces in Canada are IFTA members, so it makes sense to register for a license and keep track of your miles and fuel expenses to submit this information to the tax authorities each quarter. In our next blog post, we will be discussing IFTA audit reporting requirements.