The International Fuel Tax Agreement (IFTA) simplifies calculating and distributing fuel taxes for truckers. Yet for many in the trucking industry, making sure each vehicle complies with this regulation—and getting those calculations right every quarter—feels like a complex puzzle.
But what if IFTA compliance, instead of being a cumbersome chore, became a streamlined task? A process devoid of those constant second-guesses and exhaustive paperwork checks?
With the advent of technology and specialized software, this isn’t just wishful thinking. These digital solutions are revolutionizing IFTA compliance, making it more approachable and manageable. Before we go over them, let’s take a brief look at IFTA compliance and why it matters for your business.
What is IFTA?
IFTA, short for the International Fuel Tax Agreement, is an important deal between 48 U.S. states and 10 Canadian provinces. Its main goal? To make fuel tax simpler for truck drivers who travel across different areas. Here’s a quick breakdown:
Before IFTA: Truck drivers had to get a separate fuel permit for every state or province they entered. This meant more paperwork, different rules in each place, and extra costs.
With IFTA: Truck drivers now report their fuel use to just one place, their home state. This state takes care of the tax, processes the information, and shares the money with other states involved. This state also checks to make sure everyone follows the rules.
Who Uses IFTA?: Carriers that are based in a member state and drive in multiple member areas. IFTA focuses on larger vehicles: those weighing over 26,000 pounds, having three axles, or meeting certain weight limits.
In simple terms, IFTA helps make the fuel tax process easier and more organized for truck drivers and fleet managers.
Calculating IFTA Fuel Tax Reports: The Typical Process
The usual way of determining IFTA fuel tax involves these key steps:
Mileage tracking: The first thing trucking companies must track is miles driven in each state. This is often done by noting odometer readings when crossing state lines. An alternative, more accurate method? Using ELD systems combined with telematics. This tech captures GPS location, fuel use, mileage, and more without manual intervention.
Recording fuel purchases: Then comes the task of documenting every fuel purchase. The receipt must detail the date of purchase, seller’s location, vehicle plate number, type of fuel, price per gallon, and the driver’s name.
Computing fuel consumption: With the miles and fuel data at hand, the next step is to determine the overall fuel mileage. It’s a simple calculation: total miles divided by total gallons. This gives an average fuel consumption rate, which can then be applied to each jurisdiction.
Determining tax amount: Each jurisdiction has its own fuel tax rate. So, fleet managers consult updated fuel tax charts. A point to note: rates may change, settling only by March 1.
Finalizing the fuel tax: The last step ties everything together. Using all the gathered data, trucking companies deduce the exact tax owed in each jurisdiction. The formula is straightforward: tax required minus tax already paid equals the tax owed.
How IFTA Reports Are Filed
Even though you can file FTA reports online, it can get tedious since there are various steps involved in the process:
Preparation: Before even beginning, you’re tasked with gathering all your fuel receipts and ELD data.
Data entry: Manually entering these details into an Excel spreadsheet or the system can be time-consuming and error-prone.
State portal navigation: Accessing and understanding the state’s tax return website, registering or logging in, and then finding the right ‘IFTA return’ section adds more layers to the task.
Verification and review: After input, there’s the challenge of verifying MPG and tax computations against your records, ensuring no discrepancies.
Finalization and risk: The final submission step may seem simple, but a mistake here means you can’t go back to edit your work, potentially causing hassles later.
How a Quality TMS Simplifies IFTA Tax Fuel Reporting
IFTA tax fuel reporting demands attention to detail. Carriers are often buried in tasks like tracking fuel and maintaining credentials. Enter trucking management software (TMS)—it simplifies by storing all IFTA data efficiently.
Quick access to organized data is especially useful during audits. When paired with fuel cards, the specialized fuel tax reporting software within the TMS suite provides an exact record of fuel used across states and provinces.
Moreover, the TMS takes care of essential IFTA paperwork. Decals, fuel tax permits, and other credentials? All managed, ensuring smooth operations in every jurisdiction.
Historically, IFTA reporting was a manual chore for fleet managers and drivers, encompassing everything from tracking mileage to logging fuel purchases. This not only consumed time but also introduced room for human errors—errors that might appear trivial but can critically skew your tax report.
By leveraging IFTA fuel tax reporting software, you can streamline this process and avoid penalties for late filing. All it takes is a few clicks to generate and file IFTA reports for your firm.