IFTA: Understanding the Basics

It’s that time of the year again as the 2nd quarter is quickly coming to a close. You’ve still got plenty of time to get your IFTA return filed, but it’s time to get started so you aren’t rushing to get everything together on July 31.

While most all heavy vehicles in the US are subject to this tax, a lot of folks aren’t quite sure what IFTA is and what exactly the tax is used for. So keep reading and we’ll explain everything you need to know about the International Fuel Tax Agreement.

What is IFTA?

IFTA is an acronym standing for the International Fuel Tax Agreement. IFTA is an agreement between the lower 48 states of the United States and the Canadian provinces. The agreement was put in place to simplify the reporting of fuel use by motor carriers that operate in multiple jurisdictions. There are a few exceptions to the agreement, which include Alaska, Hawaii, and the Canadian territories.

All operating carriers that must file IFTA returns will receive an IFTA license and two decals for each qualifying vehicle it operates from their base jurisdiction. The carrier is then required to file a quarterly tax report, which is used to determine the net tax or refund due and to redistribute taxes from collecting states to the correct state where the money is due.

Who Must File IFTA Returns?

The tax is required for motor vehicles used, designed, or maintained for transportation of persons or property that:

  • Has two axles and a gross vehicle weight rating or registered gross vehicle weight in excess of 26,000 pounds
  • Has three or more axles regardless of weight
  • Is used in combination, when the weight of such combination exceeds 26,000 pounds gross vehicle or registered gross vehicle weight
There are certain exceptions for recreational vehicles (such as motor homes, pickup trucks with attached campers, and buses) used exclusively for personal pleasure by an individual. Some states also have their own special exemptions that apply to government or farm vehicles.

How it Works

Basically, IFTA works as a “pay now or pay later” system. When commercial vehicles purchase fuel, any taxes paid to the state in the transaction is then credited to that licensee’s account. After the quarter is over, the licensee is required to complete a fuel tax report that lists all of the miles traveled and fuel purchased in participating jurisdictions. The the average fuel mileage is applied to the miles traveled, which determines the tax liability to each jurisdiction. Then the amount of fuel taxes due (or the refund amount due) is paid to or by the base jurisdiction that issued the license. Audits can be conducted at any time, but are only conducted by the base state.

There are three states that also charge additional weight-mile taxes, including Kentucky, New York, and New Mexico. Oregon also charges a weight-mile tax, but does not collect diesel taxes

ExpressIFTA has been making filing your IFTA easier by the year since 2011. In addition to our program’s innovative features that simplify the process, our support team is also available to help you with anything you may need. Just give us a call at 704.234.6005 or email us at support@expressifta.com.

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