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The International Fuel Tax Agreement (IFTA) governs the reporting of fuel use by commercial vehicles operating in more than one member jurisdiction. The lower 48 states in the United States and Canadian provinces have signed the agreement, simplifying the fuel tax reporting for interstate carriers.
Regulations require all commercial motor carrier drivers to report how much fuel they purchase. That ensures they pay the proper amount of fuel tax. However, making the calculation becomes complex when they cross state lines or borders between countries. The IFTA seeks to streamline reporting previously handled by each individual state.
Because each U.S. state and Canadian province had different report rules, it made for an inefficient system. IFTA brings the entire system under one set of rules.
Who Does ITFA Apply To?
Only Alaska, Hawaii and the District of Columbia in the United States have not signed on to IFTA. Otherwise, the agreement stands in effect for all the other 48 states and all Canadian provinces.
Commercial vehicles qualify for IFTA if they engage in interstate transport of people or properties and meet the following standards.
- Have two axles and a gross vehicle weight or registered gross vehicle rate more than 26,000 pounds; or
- Have three or more axles, regardless of weight; or
- Are used in combination with a trailer, for a combined gross vehicle weight or registered gross vehicle weight of more than 26,000 pounds.
IFTA is a more efficient system than the previous one that called for each state or province to manage collecting fuel tax. Previously, drivers had to stop each time they entered a new state to get trip permits for fuel taxes. And because of the different systems in each state, the time spent filing reports took longer.
How Does ITFA Work?
If commercial drivers meet the above standards, they can become compliant with the international fuel agreement by registering with the International Registration Plan (IFP). Once they have registered, each truck is provided two IFTA decals that drivers must display to avoid fines. The decals expire annually.
Under the provisions of the ITFA, drivers must report fuel use to their base state. That replaces the old system, in which drivers had to file a report in each state where they operated.
That base state must do the following.
- Process a carrier’s quarterly IFTA tax return
- Collect or refund the carrier a net fuel use tax that represents the taxes owed to or from all the states in which the carrier operates
- Distribute or collect from states the amount of fuel use tax the carrier owes
- Audit carriers on behalf of all IFTA member jurisdictions
The new IFTA system streamlines the fuel reporting process for drivers and fleet managers, making it far more convenient to operate in multiple states and Canadian provinces. By adhering to the rules and following through with the paperwork, commercial fleets can make interstate commerce that much easier to accomplish.