IFTA is the International Fuel Tax Agreement, intended to streamline what used to be a cumbersome licensing process. But even though the agreement has increased the uniformity of rules and saved trucking fleets lots of money, it can still be confusing for those unfamiliar with IFTA registration.
IFTA: International Fuel Tax Agreement Explained
IFTA provides a straightforward avenue for participating American states and Canadian provinces to get compensation from trucking fleets that use their roads.
Carriers are required to report their fuel usage to their home state or province, which then collects appropriate fuel taxes and hands over the funds due to the other states or provinces the fleet drove through.
How IFTA Reporting Works
Every operator of a qualified motor vehicle is required to submit an IFTA application.
Once you submit your application, you’ll receive an IFTA license and sticker for each vehicle that you operate. After you’ve received your IFTA license, the amount of fuel you purchase is logged into your IFTA account.
Each quarter, you’re required to submit an IFTA report that lists the gallons purchased and the miles driven. Based on the location you purchased the gas and where the fuel was utilized, the report will help you determine if you still owe tax money or if you're due a refund.
So, how does IFTA work exactly? Drivers pay taxes at the pump, which are then disbursed to each state. The taxes are calculated and distributed based on the number of miles the vehicle is driven in each state.
For example, if a driver fuels up in Colorado and travels to Kansas, Kansas will receive a portion of the taxes from the Colorado fuel purchase based on the miles driven in the state. If a driver purchases fuel in a state with a low tax rate and drives into a high tax rate state, they will most likely owe taxes at the end of the quarter.
Alternately, if they purchase fuel in a state with a high fuel rate and they drive into a state with a low rate, they'll likely receive a credit at the end of the quarter.
IFTA Sticker Requirements
An IFTA sticker is a credential required to be displayed on all interstate commercial vehicles operating under IFTA. The sticker shows that the vehicle is registered for IFTA fuel tax reporting and serves as proof that the carrier has an IFTA license to traverse between member jurisdictions.
The decal features the licensee’s name and IFTA license number, along with the license’s expiration date.
Vehicles need to have a valid, up-to-date IFTA decal clearly affixed to the passenger side of the cab to legally operate across borders without paying additional fuel taxes at every pump. The sticker ensures compliance and simplifies audits for tax collectors.
Having the right IFTA sticker format, visibility, and validity is essential for interstate trucking compliance.
- Must be displayed on the exterior of the truck’s cab. Common placement is the lower front corner of the passenger door.
- All IFTA registered vehicles must have a sticker to legally operate on the interstate without paying taxes at each pump.
- The sticker design and layout are standardized across all IFTA member jurisdictions. It must include the carrier’s name, IFTA license number, and expiration date.
- Stickers are typically two inches high by five inches long.
- Must be visible and legible for enforcement officers, who are usually inspectors at weigh stations. Damaged or unreadable stickers may result in fines.
- Carriers must replace IFTA decals that are damaged or upon license renewal. Updated stickers are distributed with each new license.
- Stolen, lost, or illegible stickers must be promptly reported and replaced by contacting the base jurisdiction’s motor carrier division.
- Failure to display a valid IFTA tax sticker can result in costly fines. It may also lead to fuel tax evasion penalties.
What is the purpose of IFTA?
Before IFTA came along, every state and province had its own fuel permitting system. Trucks would need to seek out a permitting office, fill out the required paperwork, and wait for it to be filed.
This system wasted fuel, time, and resources, plus the rules were different for every location, so there couldn’t be a reasonable expectation of how much time it would take.
Thanks to IFTA, the process was consolidated to make fuel permitting much faster, saving fuel and administrative costs, and eliminating confusing and sometimes contradictory rules.
Who needs to file IFTA?
In the U.S., every state must file except for these three:
- Hawaii
- Alaska
- District of Columbia
In Canada, the following provinces are also required to file:
- Alberta
- British Columbia
- Manitoba
- New Brunswick
- Newfoundland
- Nova Scotia
- Ontario
- Prince Edward Island
- Quebec
- Saskatchewan
Forty-eight U.S. states and 10 Canadian provinces are member jurisdictions with IFTA. If your company only operates motor vehicles in a single jurisdiction and never crosses into another one, then you won’t have to register.
For vehicles that do operate in two jurisdictions or more and are designed, used, or maintained to transport people or goods, there are thresholds your vehicles must meet to fall under IFTA regulation:
- Two axles
- Registered gross vehicle weight is more than 26,000 pounds or 11,797 kilograms
- Three or more axles
- Any vehicle exceeding 26,000 pounds or 11,797 kilograms
If a vehicle normally weighs less than 26,000 pounds or 11,797 kilograms but exceeds that weight when carrying cargo, it will be subjected to IFTA registration.
IFTA Due Dates
Thankfully, you don’t have to research “when is IFTA due.” There are only four due dates per year:
- January-March (Quarter 1): April 30
- April-June (Quarter 2): July 31
- July-September (Quarter 3): October 31
- October-December (Quarter 4): January 31
What happens if I miss the IFTA reporting deadline?
Missing an IFTA quarterly fuel tax schedule deadline is penalized similarly to not filing other taxes. Late IFTA submissions, failure to file, and underpayment result in fines of $50 or 10% of the net tax liability, whichever is greater.
Even if no tax is due, you still face a $50 late filing penalty. All delinquent IFTA taxes are also subject to interest penalties until the tax is paid.
How to File an IFTA Report
Now, let’s look at how to file.
Step 1: Find your state/province’s IFTA website
Each state and province has its own website for filing, which you can find with a quick internet search.
Step 2: Create your IFTA Account
Before you can file, you’ll need to create an account. You’ll also be able to take care of any license information or issues and get decals.
Step 3: Provide Information
The application will have fields for all of the information you’ll need to enter:
- Total mileage in each jurisdiction
- Location of purchased fuel
- Cost of purchased fuel
Once you’ve entered your info, you’ll either have a credit, or you’ll owe some taxes.
Step 4: Pay taxes
If you owe taxes, your state’s online portal will let you take care of that. Reporting may be automatic if you’re using digital load boards or telematics software.
Because these types of software track exact mileage and location, most have a built-in ability to calculate and report IFTA taxes. Also, if you’re using a factoring company, they probably offer free IFTA reporting.
Tips for IFTA reporting
In order to be successful with your IFTA reporting, consider the following tips that can help you better understand the process.
Registering a base state
The transportation industry ships goods and cargo all over the country. Because many of the companies that operate trucks transport across the country as a whole or to a specific region, it can be difficult to determine which state to register as your base.
You should contact your local register in the state where your business is located to determine your registered base.
Qualified vehicles and fuels
Your motor vehicle is responsible for IFTA filing if it meets at least one the following:
- Weigh over 26,000 pounds
- Have three or more axles on the power unit
- Carry at least 20+ passengers
Each of the vehicles listed above must use propane, natural gas, or diesel to meet the proper reporting and licensing requirements, but some jurisdictions are now requiring gas-powered vehicles to also be licensed.
Applications
As a carrier, you are required to apply for an annual license. The IFTA will send you renewal applications every year. After your application is approved, you’ll receive two decals to validate your IFTA license to place on your vehicle’s door.
If you add a new vehicle to your fleet, you must contact your local department of motor vehicles (DMV) to start an application for the new vehicle’s IFTA license.
Fuel tax reporting
You are required to report your fuel tax quarterly, which means four times a year. This report should cover all of your qualified vehicles.
Receipts
You are required to submit receipt information for fuel purchases. The receipts must include the following information:
- Date of purchase
- Fuel type
- Seller’s name
- Seller’s address
- Purchaser’s name
- Vehicle registration number
- Total amount of the sale
- Number of gallons purchased
Records
Along with keeping your receipts, you’ll also need to keep records of your vehicle mileage. These reports can be summarized monthly and must include information on the fuel bought at each service station.
IFTA requirements
Every vehicle that belongs to you as a motor carrier is required to apply for or renew an annual IFTA license. The following information is what is required when you apply.
- Proof of residency: You must provide a physical business address in your base jurisdiction, such as a lease or utility bill. Specific documentation requirements vary by jurisdiction.
- License plate: Unless you’re utilizing a farm or transporter plate, you’ll be required to have an International Registration Plan license plate.
- DOT number: If you're driving for a company or for someone else, you’ll be required to provide a copy of your Registrant DOT number and your DOT authority lease.
- Owner-operator information: You will also need to provide the names and Social Security Numbers of each owner-operator.
Using Fuel Cards to Simplify IFTA Quarterly Reporting
One way to simplify the IFTA filing process is to use trucking fuel cards offering location and mileage tracking, in addition to specialized reporting capabilities. The best fuel card companies with these features can help you comply with IFTA reporting requirements in a few key ways:
- Detailed fuel purchase data: Diesel cards provide detailed data on every fuel purchase including the date, location, gallons purchased, and cost. This eliminates the need to collect and organize paper fuel receipts. Having all fuel data in one digital place makes preparing IFTA reports much easier.
- Automated mile tracking: Many fuel cards have built-in GPS tracking that automatically logs miles driven in each jurisdiction. This automates what can be a tedious manual process of documenting miles for IFTA. The mileage data can feed directly into IFTA reporting.
- Tax rate determinations: Fuel card systems often calculate the proper tax rates and exemptions for fuel purchases based on the jurisdiction. This reduces human error in determining which taxes apply. The fleet fuel card does the tax work automatically.
- Remittance of fuel taxes: Some truck fuel cards offer services to remit fuel taxes directly in each jurisdiction on behalf of the trucking fleet. This means freight companies don’t have to determine how much they owe to which jurisdictions and handle tax payments themselves.
By taking advantage of these fleet card benefits, trucking companies can reduce administrative burden and improve compliance.
Streamline your day-to-day operations.
Automatic accounting features, including fuel expense tracking and purchase alerts, helps you to streamline fleet management. Customizable reports make your day-to-day operations a breeze.
4 Common IFTA Reporting Mistakes to Avoid
While the IFTA reporting process was intended to make things smoother for the transportation industry, it does have the potential to have fines and penalties associated with it. Drivers can face those issues along with being audited if there are IFTA reporting errors.
1. Estimating fuel calculations
You may think you can estimate your fleet’s average number of miles per gallon and the average number of miles traveled. However, estimating such important details can be a very costly mistake.
In order to stay in compliance with IFTA regulations and to receive refunds or tax credits, you need all your receipts, as well as the number of miles traveled, documented. If you don’t accurately account for these details and you choose to estimate your fuel instead, you might find yourself being audited.
2. Not recording personal miles
Another IFTA requirement is that you record all of the miles you’ve driven, including your personal mileage. Make sure you are reporting every mile that you drive, which includes the mileage put towards personal errands, loading, and unloading. The mileage gaps will raise a red flag in your driving trips if every mile is not recorded, even for personal use.
3. Odometer or GPS issues
As previously stated, your IFTA reporting must be accurate. This means that if anything impacts the accuracy of your vehicle mileage, you need to record it. If your vehicle’s GPS or odometer malfunctions, be sure to flag it when you file since it can affect your report.
4. Filing late
One of the biggest mistakes you can make with your IFTA reporting is not submitting the report on time, meaning you’ve filed it too late. Follow the dates outlined by the IFTA officials for your quarterly filings.
As a reminder, the dates are April 30, July 31, Oct. 31, and Jan. 31. If you do not file by these timelines, you’ll run the risk of being fined.
How to Calculate IFTA in 5 Steps
To figure out exactly how much you owe, follow these five steps.
Step 1: Track miles traveled
Record the miles that your fleet has traveled in each state or province. Drivers will need to keep accurate Records of Duty Status by logging their odometer readings when going across state or provincial borders. If you use fleet managing software, your drivers may be exempt.
Step 2: Determine sum of fuel purchased
You’ll need receipts for this step to prove how much fuel your fleet actually bought. The information you must have is the date, name of the seller, location of seller, type of fuel, truck plate number, gallons bought, price of fuel per gallon, and name of the driver.
Step 3: Determine fuel used in each state or province
Here’s the formula for finding the information for this step:
Miles Driven ÷ Gallons Used = Fuel Mileage
The next formula will help you figure out how much fuel was used in a given state or province:
Miles Driven in Jurisdiction ÷ Miles Per Gallon = Fuel Used in Jurisdiction
Let’s say the truck drove 500 miles in a particular jurisdiction. The calculation would be:
500 ÷ 5 = 100 gallons
Repeat for each truck and jurisdiction.
Step 4: Calculate taxes
This step is where your IFTA calculator software will come in handy. The rate you’ll pay per state or province depends on the quarter. IFTA’s website features a chart that gives current rates.
Step 5: Final figures and payment
To calculate exactly what you owe each state or province, use the following formula:
State or Province Fuel Tax Required – State or Province Fuel Tax Paid = Tax Owed
All that’s left to do is to pay.
IFTA special reminders
Proper IFTA reporting takes some planning ahead. Make sure you take the following into consideration early, so you do not have to scramble when it comes time to report.
Tracking miles
Tracking miles manually is inexact and leaves you open to either under or over-reporting your mileage. Using telematics software that tracks exact mileage avoids this, as does using a fuel card for payments.
International use
Just because your fleet pays IFTA registration doesn’t mean your drivers can cross the border as they please. Your drivers will have to get clearance to work across the border, with their passports, and your vehicles and loads will have to be approved for travel into Canada.
To drive through Ontario, you’ll need a Commercial Vehicle Operator Registration (CVOR), and in Quebec, you’ll need a Registration Identification Number (RIN).
Penalties
If you don’t file on time, you’re going to face late penalties, which are either $50 or 10% of your delinquent taxes, depending on which amount is greater.
Automated reporting
Because telematics relies on GPS tracking to see exactly where your trucks are and how far they’ve traveled, the software can automatically compile and report this information, so you don’t even have to think about it.
These programs often come with an IFTA calculator, too. Because penalties and fees are levied most often when filing is late or inaccurate, telematics removes these possibilities.
IFTA vs opting out
Remember that if you are required to file with IFTA, you still have to, even if your fleet hasn’t traveled out of your jurisdiction during a reporting period. Also, if you qualify for IFTA licensing but choose not to take part, you can obtain specific permits for the locations where you need to travel.
If, say, your routes only seldom take you out of a single jurisdiction, you may find that obtaining permits as needed is a more economical route.
Your state may have rules that go further than the federal guidelines. Florida, for instance, does not require IFTA registration on government-owned vehicles, but this may not be the case for your state.
FAQ
What is IFTA in trucking?
The International Fuel Tax Agreement (IFTA) is an arrangement between the contiguous U.S. and the 10 Canadian provinces that allow motor carriers to register their fuel usage in one state. It also permits them to have tax assessments paid to the areas in which they drive, according to their fair share. Carriers no longer have to register for every state or providence they drive in throughout the year.
Why does IFTA exist?
IFTA exists to simplify the reporting and payment of fuel taxes for interstate motor carriers. It standardizes the administrative processes so carriers don’t have to file tax returns with each jurisdiction they operate in.
Are IFTA taxes deductible?
Because the IRS deducts work-related expenses, and the IFTA taxes are most likely being paid because of work-related fuel usage, it pays to deduct these taxes.
Do local trucks need IFTA?
No, local trucks that operate solely within one state do not need IFTA licensing or reporting. IFTA applies only to qualified motor vehicles traveling interstate across member jurisdictions.
What states are non IFTA jurisdictions?
The non IFTA jurisdictions are Alaska, Hawaii, and the District of Columbia. These jurisdictions have not joined the cooperative IFTA program for fuel tax agreements.
What is an IFTA audit?
An IFTA audit will be required if there is an estimated tax reporting, bad or insufficient GPS data, and various other common issues. During the audit, an IFTA representative will look over your fuel receipts and mileage records as a way of addressing problems within your quarterly report.
What triggers an IFTA audit?
A few things can trigger an IFTA audit, including late returns, amended returns, fuel consumption discrepancies, large refunds, and closed accounts.
Can you file your IFTA quarterly taxes online?
E-filing is the easiest and most popular option for filing your quarterly IFTA report. You can file electronically using Webfile or EDI software. Some TPSs can prepare ready-to-file reports based on automatically recorded data to streamline filing further.
Who needs an IFTA sticker?
Any commercial motor vehicle operating interstate with a gross vehicle weight of over 26,000 pounds (11,797 kg), has two or more axles, and is used for business must display an accurate IFTA sticker in the cab to indicate active annual fuel tax license registration as part of IFTA.
How do you get IFTA stickers?
Obtain IFTA decals after successfully processing annual fleet registration with your base jurisdiction’s department of transportation or motor vehicles/carrier division. IFTA stickers featuring your license number and expiration are distributed with license renewal paperwork.
