Posted on May 9th, 2019
If you’re in the transportation industry you’ve probably heard the acronym IFTA floating around. But what exactly is it?
As a reminder: IFTA stands for International Fuel Tax Agreement. At its simplest, it’s an agreement among the lower 48 states and most Canadian provinces to simplify fuel usage reporting by motor carriers operating in multiple jurisdictions (such as those with vehicles traveling in more than one state), requiring them to file their quarterly tax return in one state instead of all those they operate in.
However, even with IFTA being sold as a streamlined process – which it is, particularly when compared to methods prior to the agreement’s implementation – it still requires a lot of time, money and resources to complete all that’s involved, especially for interstate carriers operating large fleets. To put this in perspective, we at Aim have a team working full time all year long to ensure IFTA compliance.
Depending on a carrier’s unique situation, IFTA may not just simplify quarterly fuel tax returns; it could also save a significant amount money.
“One thing I can’t recommend enough is to speak with your tax consultant about the laws in your base jurisdiction,” said Aim Director of Licensing Will Rauber. “Depending on the equipment you’re operating and how you operate it, you could save hundreds, even thousands of dollars a year.”
Who Does IFTA Apply to?
IFTA only applies to what’s known as a ” qualified motor vehicle,” which defines a vehicle as:
- Having two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds or 11,797 kilograms
- Having three or more axles, regardless of weight
- A vehicle that exceeds 26,000 pounds or 11,797 kilograms
And, to reiterate, this only applies to vehicles operating in multiple jurisdictions.
If you’re running only a couple of trucks, record keeping and filing under IFTA isn’t too intensive. For carriers managing large fleets, on the other hand, it can feel like quite an involved process.
To complete IFTA’s quarterly tax returns, trip reports and fuel records are required. Each component must include specific information or carriers run the risk of fines to the tune of thousands of dollars.
Trip reports must include:
- Date of trip (start/end)
- Trip origin and destination (including waypoints on the trip)
- Routes of travel
- Beginning and ending odometer or hubometer readings
- Total trip miles
- Mileage by state/province (jurisdiction breakdown)
- Unit number or vehicle identification number (VIN)
- Vehicle fleet number
- Registrant’s name
Fuel records must include:
- Date of purchase
- Seller’s name and address
- Number of gallons/liters purchased
- Fuel type
- Price per gallon or liter (or total amount of sale)
- Unit numbers
- Purchaser’s name
For carriers electing to capture distance data electronically, they must ensure their devices record everything that is required in a trip report, but it must also include latitude and longitude data points. Records showing only total distance aren’t acceptable.
So, for businesses going the electronic route for distance recordkeeping must log:
- Original GPS or other location data for the vehicle to which the records pertain;
- Data and time of each GPS or other system reading (IFTA requires that readings be at intervals sufficient to validate the total distance traveled in each jurisdiction);
- Location of each GPS or other system reading;
- Beginning and ending reading from the odometer, hubodometer, engine control module (ECM) or any similar device for the period to which the records pertain;
- Calculated distance between each GPS or other system reading;
- Route of vehicle’s travel;
- Total distance traveled by the vehicle;
- Distanced traveled in each jurisdiction; and
- Vehicle identification number or vehicle unit number.
Forgetting to include the proper documentation or information is a good way to trigger an audit. Although, as a bottom line, each year IFTA randomly audits 3% of licensed members from each jurisdiction.
Licensees can make sure they’re prepared for an audit through proper and organized recordkeeping. Auditors will need access to various pieces of information, and the last thing anyone wants is to be scrambling to put it all together at the last second, increasing the chances of human error.
Carriers can also:
- Make sure the mileage tracker (GPS, AOBRD, ELD) is recording data frequently and accurately
- Be precise when taking odometer readings; they should match trip logs
- Never have missing or inaccurate mileage or fuel data for each quarter
- Save all documentation used for IFTA tax return filings for at least six years
- Keep original driver records as auditors usually prefer to see the originals even when recording software is being utilized
In short, smart, efficient record keeping will help you avoid interest, penalties and fines in the unlikely but very possible event of an audit.