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INTERNATIONAL FUEL TAX AGREEMENT (IFTA)

The International Fuel Tax Agreement (IFTA) simplifies fuel tax reporting for commercial motor carriers operating in multiple U.S. states and Canadian provinces. Instead of filing separate tax returns with each jurisdiction, carriers file a single quarterly report with their home state (base jurisdiction), which then handles the distribution of taxes to other jurisdictions. 
 
How IFTA Works: A Step-by-Step Overview
The core principle of IFTA is that fuel taxes are ultimately paid to the jurisdictions where the fuel is used (consumed), not necessarily where it is purchased. 
    1. Obtain a License and Decals: Qualified motor carriers (generally vehicles over 26,000 pounds gross weight or with three or more axles that travel in more than one IFTA jurisdiction) must register with their base jurisdiction to receive an IFTA license and two decals for each qualifying vehicle.
  • Track Operations: Carriers must maintain detailed records of all travel and fuel purchases for each vehicle during the quarter. Key information includes:
    • Total miles traveled in each jurisdiction.
    • Total gallons of fuel purchased in each jurisdiction, supported by receipts detailing the seller's name/location, date, fuel type, price, and gallons purchased.
  • File Quarterly Report: At the end of each calendar quarter, the carrier submits a single consolidated fuel tax return to their base jurisdiction. This must be filed even if no taxable fuel was used or no travel occurred outside the base state. The due dates are:
    • Q1 (Jan-Mar): April 30
    • Q2 (Apr-Jun): July 31
    • Q3 (Jul-Sep): October 31
    • Q4 (Oct-Dec): January 31
  • Tax Calculation and Reconciliation: The base jurisdiction calculates the carrier's average fuel mileage (MPG) and uses it to determine the amount of fuel consumed in each state.
    • The system compares the tax already paid at the pump in each jurisdiction to the tax owed based on consumption and that jurisdiction's specific tax rate.
    • If a carrier purchased more fuel (and paid more tax) than they consumed in a high-tax state but drove many miles in a low-tax state, they may be due a refund or credit.
    • If they purchased fuel in a low-tax state and drove in high-tax states, they will owe additional tax.
  • Payment and Distribution: The carrier makes one payment (or receives one refund) through their base jurisdiction, which is responsible for clearing the accounts and transferring funds to or collecting funds from all other member jurisdictions. 
 
Key Benefits
  • Simplified Compliance: Eliminates the need for carriers to obtain individual fuel permits for every state or province, saving significant administrative time and effort.
  • Equitable Revenue Distribution: Ensures each jurisdiction receives its fair share of fuel tax revenue for road construction and maintenance, based on actual road usage.
  • Standardization: Provides uniform reporting requirements and definitions across all member jurisdictions. 
For more information, including current tax rates and filing procedures, visit the official IFTA, Inc. website or your base jurisdiction's transportation or tax authority website.