What is the International Fuel Tax Agreement (IFTA)?
If you own a trucking company that utilizes CDL-required vehicles then you’ve probably heard about IFTA (International Fuel Tax Agreement). However, you may wonder what IFTA is, if it applies to you, and how you file for it. All of that information and more will be covered in this article.
What is IFTA?
The IFTA is a system that makes it easier for trucking companies to pay fuel taxes when they travel across different states and Canadian provinces. Created to simplify the process and reduce paperwork, IFTA allows these companies to register in just one state and have their fuel taxes fairly distributed to all the areas they drive through. This agreement helps ensure that fuel taxes are paid efficiently and accurately.
Why Was IFTA Created?
In the 1980s, multiple states created agreements to share fuel tax revenues and remove the need for separate permits. This eventually led to the IFTA system we have today.
Before IFTA, drivers needed a separate permit for each state or province they entered, which they got at specific entry points. This added a lot of extra work and paperwork for interstate trips.
Fuel taxes are paid when fuel is bought and are different in each state or province. Trucking businesses have permits that set their fuel tax rates, and they keep records to calculate and adjust their taxes every three months.
How Does IFTA Work?
A truck that is registered with IFTA gets a fuel tax permit from one state. As the truck travels through participating states or provinces, the fuel taxes paid are credited to the permit owner’s account. At the end of each quarter, a report is filed detailing the miles driven and fuel used in each area. IFTA then calculates the taxes owed or credits due for each state to ensure proper fund distribution.
What Counts as IFTA Qualified?
FTA applies to commercial motor vehicles (CMVs) that:
- Have three or more axles, or
- Have two axles and a gross weight of over 26,000 pounds,
- And are used to transport goods or passengers across at least two IFTA member states or provinces.
All U.S. states except Alaska and Hawaii, and all Canadian provinces are members of IFTA.
*Personal vehicles used for recreation are not covered by IFTA.
How Do You Apply for IFTA?
If your business needs an IFTA license, you must apply in your company’s home state. Application forms are available online and are managed by each state’s Department of Transportation or tax agency.
Basic information required by the IFTA application includes:
- USDOT number
- Registered business name
- Mailing address
- Federal business number
Here is a list of all 50 state-specific IFTA websites.
IFTA Home State
The vehicle’s home state is where it is registered and where the operator can access the vehicle’s records. If a vehicle is registered in more than one state, the operator must choose one state to manage the IFTA license.
Filing Reports With IFTA
At the end of each fiscal quarter, the license holder files a fuel tax report showing miles driven and fuel bought in each participating state or province.
Supporting documents include:
- Vehicle mileage record
- Distance records
- Fuel records
- Tax-paid retail fuel purchase receipts
All relevant data, such as gap miles and fuel receipts, must be included when filing IFTA reports.
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