One of the more anxiety-inducing parts about owning a business is ensuring that you’re meeting all the proper legal and tax requirements. While taxes can be quite the headache, the Canadian provinces and US states have something that actually makes it simpler when it comes to paying tax on fuel.
It’s called IFTA, and it’s all about international taxes for multi-jurisdictional freight carriers. Here’s what you need to know.
IFTA stands for the International Fuel Tax Agreement. It’s a tax agreement that applies to freight and road transport companies that operate in more than one province or state. Or, as defined in IFTA, you are an interjurisdictional carrier.
In the past, if you transported goods in more than one jurisdiction, the tax on fuel that you used was very complicated to calculate. Every state and province had different requirements, and you had to do a mountain of calculations and paperwork to keep track of it all.
With IFTA, registered carriers get a single license, for the jurisdiction they are based in, and they can report all their fuel taxes in that jurisdiction. There’s still some work involved in tracking how much you drive and where, but it’s a lot simpler, come tax time, to get it all submitted correctly and on time.
It also means that you’re allowed to travel in multiple jurisdictions – so there’s less paperwork down the road – and less paperwork is never a bad thing!
IFTA registration processes depend on which province or state you’re based in, but your local government should have all the information you need to get set up. You can search online for IFTA and the name of your location, and you should be able to find local information.
In most cases, there will be requirements for the types of vehicles you are operating in terms of weight and number of axles. You also need to be operating a commercial transport service that operates in more than one jurisdiction. Recreational vehicles, even if they meet the weight and axle requirements, do not qualify for IFTA.
There are also single trip permits available, if you only travel to other jurisdictions from time to time.
Now that we’ve answered the “what is IFTA in trucking” question, the next big question is where it works.
Unfortunately, it doesn’t work in every state, province, and territory.
In Canada, IFTA applies in all provinces except the Northwest Territories, Yukon, and Nunavut – so if you transport goods to the far north, you’ll still have to report your fuel tax in each area individually. In the U.S., IFTA works in all of the states except Hawaii, Alaska and the District of Columbia.
When you register for IFTA, you will receive licensing documentation as well as a set of decals to display on your qualifying vehicles. These decals are usually valid for one year and may be subject to inspection by local authorities when your vehicles are on the road.
Make sure that your decals are up to date, and that you are using the correct type of fuel. There are hefty fines for not complying with fuel use requirements!
Many companies have vehicles that qualify for IFTA registered in more than one jurisdiction. That can complicate matters a little, but you should always contact one of those jurisdictions (usually wherever your head office is located) to find out. There is a possibility that you might be able to consolidate some of your vehicles under one location, but that will depend on the exact details of your company, and how you operate.
As with any tax related submissions, there is a deadline for IFTA reporting.
IFTA is reported quarterly, and all fuel purchases and jurisdictional travel information must be submitted within one month of the end of each quarter.
Quarters are January to March, April to June, July to September and October to December, and returns are due by the end of April, July, October, and January. You will usually receive an IFTA return form from the jurisdiction you are registered with at the end of each quarter.
There are fines and penalties for late reporting, and if you fail to report your IFTA at all, you may have your registration revoked. You may also have to provide a financial security if your account is not in good standing, or you are considered a payment risk – so it’s always best to stay on time and on top of your IFTA!
IFTA is designed to make reporting fuel taxes across multiple jurisdictions easier, but it does still require you to keep detailed records. If you’re using a transportation management software (TMS), like Rose Rocket, you should have all the data you need when time comes to file. Within Rose Rocket, you can use our IFTA Reporting , which uses the miles and jurisdictions travelled on a Manifest to calculate the IFTA fuel tax for you. Your IFTA report is found within Rose Rocket’s Analytics Dashboard.
To report your IFTA, you will calculate the total tax paid fuel you purchased during the reporting period, and the distance you travelled in each jurisdiction.
Over and underpayments for each jurisdiction will be tallied and added together and will result in a net under or overpayment. If you have underpaid, you will make one payment to your home jurisdiction. If you have overpaid, you will receive a refund from them.
IFTA tax rates are different for each jurisdiction, so your rates may vary based on your home jurisdiction and the distance you travel in each jurisdiction.
IFTA, which is the governing body for the scheme, publishes a quarterly matrix on their website, where you can look up the various rates for each jurisdiction. It’s updated every three months, so it’s worth visiting the site at the beginning of every quarter to access the most recent rates.
Occasionally, you might find that your IFTA return shows “non IFTA miles.” Those are any miles that were travelled in non IFTA jurisdictions. So, if you drove into any states, provinces or territories that aren’t part of the agreement, those miles would not be included in your return.
Sometimes, you no longer need to be registered for IFTA. In that case, you can contact your local jurisdiction, and request cancellation. You will be required to destroy all license documentation and decals. You will, however, be required to retain all IFTA related records for at least four years after you cancel your registration.
If you don’t comply with IFTA regulations, your license can also be revoked. If this happens, you will need to apply for single trip permits every time you plan to travel between jurisdictions. The best way to ensure that this doesn’t happen is to file all your returns when they are due, and to pay any outstanding amounts as soon as they are due.
IFTA registration can be reinstated if it’s been cancelled or revoked. You will need to pay any outstanding balances, and you might have to pay a security fee if your account was not in good standing.
It takes a little effort to register for IFTA and to make sure you submit returns on time, but it definitely streamlines the process of operating in different jurisdictions!
Interested in learning more about IFTA? Check out their website. For more information about specific needs for your jurisdiction, go to your jurisdiction’s website for up to date information.
Please note, this article is just a guide, so be sure to follow instructions from your local jurisdiction’s website on registering and reporting your IFTA taxes.
If you’re looking for an easy way to keep track of all necessary information needed and to calculate the IFTA fuel tax, be sure to check out the Rose Rocket TMS.