International Fuel Tax Agreement (IFTA)
by Apex Capital | May 10, 2016
A Guide to Your First Year in Trucking
We’ve put together a series of short videos to explain some of the regulations and important topics to know the year after you start your trucking company.
In this episode, we’re learning more about IFTA, or the International Fuel Tax Agreement that motor carriers operating in multiple jurisdictions file. Watch or read the transcript to learn what IFTA is, how it is calculated, and when the filings are due.
Read the Transcript
This video series, “What to Expect as a New Entrant: A Guide to Running Your Trucking Company During the First Year” has been developed by Apex Capital to help you understand the policies and procedures that you must have in place in order to pass your safety audit and receive your permanent operating authority.
Today we’re talking to Reghan Orman about the International Fuel Tax Agreement, or IFTA. Reghan is Associate General Counsel at Apex Capital and she also leads the Apex Startup Program, a program designed to help those interested in starting a trucking company, get their operating authority.
What is IFTA?
IFTA stands for the International Fuel Tax Agreement and what that is an agreement between the lower forty-eight states as well as Canadian provinces that if you’re a motor carrier operating in more than one jurisdiction, helps you to simplify your fuel tax reporting. Once you are registered with IFTA, they’re going to send you a license in the mail, as well as two decals that you can place on both sides of your cab.
Is there a filing associated with IFTA?
There is a filing associated with IFTA and that’s going to be your quarterly fuel tax report, so it’s due every quarter. What that’s going to do is tell you if there are any taxes due or refund owed to you. You then pay that to your base jurisdiction and the base jurisdiction redistributes that tax money accordingly.
How do I calculate my IFTA Tax?
Several components go into calculating your IFTA taxes but probably the most important thing is to remember to keep the receipts of all the gallons you purchase and which jurisdiction or which state you purchase those gallons in. You’re also going to need to know the mileage you have in each particular jurisdiction for each quarter.
Say you have a round-trip run from Florida to Alabama twice each week. We start with the current pump price and the state tax. Please keep in mind that the state taxes can change every quarter and for the sake of this example, we’ll be using the state fuel tax as of April 2016.
But first, we calculate the ex-tax price by subtracting the state tax from the pump price. At the end of this quarter, you’ve driven a total of 10,920 miles in Florida, 8,450 miles in Georgia, and 6,500 miles in Alabama.
Next, take the number of miles driven in each state and divide that by your truck’s miles per gallon. For this example, we’ll use 5.5 miles per gallon.
Finally, to calculate the total taxes due to each state, you multiply the state tax by the gallons used in each state. Adding the three states together, you see you owe a total of $1,156.74 into your IFTA account.
How do I select my base jurisdiction?
Your base jurisdiction for IFTA purposes is the jurisdiction where your qualified motor vehicles are based out of for vehicle registration purposes. That might also be the location where the operational control or the records of that qualifying motor vehicle are kept so it’s just that particular state.
When do I file my IFTA Tax Return?
Your IFTA tax report is going to be due following each calendar quarter on the last day of the next month. So, in other words, for the first quarter, you have until April 30 to file your IFTA report. At the end of the second quarter, you have until July 31. At the end of the third quarter, that’s October 31, and then at the end of the fourth quarter, you have until the next January 31 to file that IFTA report.
Remember that even if you don’t have any reportable fuel tax activity for any calendar quarter, you still need to file your IFTA tax return for that quarter. And your base jurisdiction is also going to help you remember that you need to file IFTA because they’re going to mail a return to you.
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