How Does IFTA Tax Work for Interstate Truckers?

Understanding IFTA Basics and Applicability

The International Fuel Tax Agreement (IFTA) is a cooperative agreement among most U.S. states and Canadian provinces. It simplifies fuel use tax reporting for motor carriers operating across multiple jurisdictions. Before IFTA, truckers often needed separate fuel tax permits and to file reports for each state or province they traveled through. IFTA streamlines this process, making interstate operation more efficient.

IFTA establishes a “base jurisdiction” concept, where a carrier registers and files one quarterly fuel tax report. The base jurisdiction then distributes collected taxes to other member jurisdictions where the carrier operated. This centralizes reporting, eliminating multiple accounts and reports.

To qualify for IFTA, a motor vehicle must be used, designed, or maintained for transporting people or property and meet specific criteria. This includes vehicles with two axles and a gross vehicle weight (GVW) or registered gross vehicle weight exceeding 26,000 pounds (11,797 kilograms), or vehicles with three or more axles regardless of weight. The agreement also applies to vehicles used in combination that exceed 26,000 pounds GVW. Compliance is required for qualified motor vehicles operating in two or more IFTA member jurisdictions.

Certain vehicles are exempt from IFTA requirements. These typically include recreational vehicles used solely for personal pleasure (e.g., motor homes, pickup trucks with campers). Farm vehicles or government vehicles may also be exempt, depending on specific jurisdictional rules.

Getting Your IFTA License and Decals

Apply for an IFTA license and decals through your base jurisdiction’s motor vehicle department or equivalent tax agency, typically where vehicles are registered or records maintained. The base jurisdiction administers your IFTA account and processes quarterly reports.

The application requires specific business and fleet information. Provide your business name, physical address, and Federal Employer Identification Number (EIN). Vehicle details (VINs, make, model, year, GVW) and business contact information are necessary.

Upon approval, your base jurisdiction issues an IFTA license and two decals for each qualified vehicle. A copy of the license must be carried in the cab, and two decals must be displayed prominently on both sides of the vehicle’s cab. Decals (typically 3×3 inches) include the IFTA logo, jurisdiction designation, and year. Failure to display credentials can result in citations or require a trip permit.

The IFTA license and decals are valid for one calendar year, expiring December 31st. Annual renewal is necessary to maintain compliance. Many jurisdictions offer a grace period, often extending through February of the following year, allowing operation with previous year’s decals if renewal was submitted on time. Submit renewal applications well before year-end for a seamless transition and prompt receipt of new credentials.

Tracking Mileage and Fuel Purchases for IFTA

Accurate record-keeping of mileage and fuel purchases is essential for IFTA compliance. Carriers must track miles traveled and fuel purchased within each IFTA jurisdiction. These records form the basis for calculating quarterly fuel tax liability or refund.

Precise odometer readings are essential for mileage tracking. Record the odometer at the beginning and end of each trip, or when crossing into a new IFTA jurisdiction. Data capture methods range from manual trip logs to automated systems (e.g., ELDs, GPS tracking). Electronic systems should capture data at regular intervals, including date, time, latitude, longitude, and odometer readings.

For fuel purchases, receipts are necessary to claim tax credit. Each receipt must show date, seller’s name and address, gallons or liters purchased, fuel type, and price. Only fuel put directly into the vehicle’s tank counts; bulk purchases require separate inventory records. These records allow for net fuel tax calculation, determining the difference between fuel purchased and consumed based on miles driven and the vehicle’s fuel efficiency.

Maintain organized, auditable records for a minimum of four years from the tax return’s due or filing date, whichever is later. Records are subject to audit by the base jurisdiction. Incomplete documentation can lead to adjustments in fuel consumption, tax credits, or jurisdictional distances, potentially resulting in additional tax liabilities and penalties.

Filing Your IFTA Quarterly Tax Return

After tracking mileage and fuel purchase data, file the IFTA quarterly tax return. IFTA operates on a fixed quarterly schedule.
Q1 (Jan-Mar): Due April 30th.
Q2 (Apr-Jun): Due July 31st.
Q3 (Jul-Sep): Due October 31st.
Q4 (Oct-Dec): Due January 31st of the following year.
If a due date falls on a weekend or legal holiday, the deadline extends to the next business day.

Submit returns via your base jurisdiction’s online tax portal; some may offer mail-in options. Transfer summarized data—miles traveled and fuel purchased in each jurisdiction—onto the IFTA tax form or into online fields. The system or form calculates the net fuel tax owed or refund due, accounting for varying fuel tax rates.

If tax is owed, remit payment electronically through the online portal, often via electronic funds transfer. If a refund is due, the base jurisdiction processes it. After submission, expect communications from your base jurisdiction, including clarification requests or audit notifications. IFTA jurisdictions audit a percentage of accounts annually, so compliant businesses may be selected for review.