IFTA tax stands for International Fuel Tax Agreement. But what is this tax and why do commercial fleets need to worry about it? We’ll dive into this and more below.
What Is IFTA Tax?
If you’re new to commercial fleet taxes, you may wonder, what is IFTA tax? Simply put, the IFTA tax is an agreement between US states and Canadian provinces to make it easier for commercial drivers to pay the appropriate fuel taxes in each jurisdiction. Through IFTA taxes, fleets can determine how much they should pay to each state or province and then file to pay anything owed or get refunds where they may have overpaid.
Why Is IFTA Tax Important?
Each state or province collects fuel taxes from drivers to pay for road construction and maintenance. Without an agreement like the IFTA, commercial motor carriers would have to file for a fuel tax license in each jurisdiction where they typically operate. With the IFTA, they can report and pay taxes across many states or provinces under a single license.
How To File IFTA Taxes
IFTA tax filing doesn’t have to be complicated. Register your business for an IFTA license in the state or province where your principal place of business is located. You can register online in most states through your local comptroller’s office. You’ll then receive official IFTA decals, which you must display on your vehicle.
You need to file IFTA taxes every quarter. First, use an IFTA mileage calculator to determine your taxes due and credits owed for each state or province. You’ll then need to follow the filing instructions for the state or province where you’re licensed.
Understanding IFTA Fuel Tax Rates
IFTA fuel tax rates vary widely since each state or province sets its own fuel taxes. Also, states may raise or lower their fuel tax rates as they see fit. Rates also typically vary based on the type of fuel. This is why it’s essential for fleets to stay on top of the tax rates in any jurisdictions where they typically operate.
To make the process easier, use the fuel tax rate database. It’s managed by the International Fuel Tax Association and lists the fuel rates in each jurisdiction. While you can view both US and Canadian rates at any time, be aware that the numbers listed are not finalized until the date specified on the page.
FAQs about IFTA Taxes
What are IFTA taxes?
IFTA taxes are fuel taxes paid by commercial fleets that operate in multiple US states or Canadian provinces.
How is IFTA tax filing done?
IFTA taxes are filed in the state where your primary business is located. You must use an IFTA mileage calculator to determine your liabilities and credits in each jurisdiction where your fleet operates.
What are the current IFTA Fuel Tax Rates?
IFTA fuel tax rates vary by jurisdiction and by fuel type. Check out the IFTA fuel tax rate database for details.
How does the IFTA Tax work?
Using an IFTA mileage calculator, commercial fleets can determine how much fuel tax they owe to each state, and how much credit they are owed. IFTA taxes then allow them to settle these debts all at once for each quarter.
What penalties are associated with IFTA Tax non-compliance?
If your business is selected for an IFTA audit, you can be required to pay hefty fines for non-compliance. These penalties can be up to 10% of the amount past due, including interest. Failure to comply with IFTA tax requirements can also lead to suspension of license or revocation.
How often should IFTA Taxes be filed?
IFTA taxes, like many business taxes, must be filed quarterly. The due dates are as follows:
- 1st quarter (January to March) taxes are due by April 30
- 2nd quarter (April to June) taxes are due by July 31
- 3rd quarter (July to September) taxes are due by Oct. 31
- 4th quarter (October to December) taxes are due by Jan. 31
ExpressTruckTax Can Help Reduce Fleet Costs
Fuel costs, IFTA taxes, and toll costs can all add up to a hefty budget for commercial trucking. Let ExpressTruckTax help you tame these expenses by streamlining your toll costs with a customized solution. We work with owner-operators and large fleets alike. Contact our team today. We’d love to discuss how we can help!