How to Calculate IFTA Taxes and File Your Quarterly Return

The International Fuel Tax Agreement (IFTA) streamlines fuel tax reporting for motor carriers operating across state and provincial lines. IFTA allows carriers to obtain a single license from their base jurisdiction, covering all IFTA member jurisdictions. Its purpose is to ensure fuel taxes are distributed to the jurisdictions where fuel is consumed, replacing the need for individual fuel permits and reducing administrative burdens for interstate carriers.

Identifying Your IFTA Obligations

Motor carriers must determine if their vehicles meet the criteria for IFTA reporting. A “qualified motor vehicle” is defined as one used to transport persons or property that meets specific weight or axle requirements. This includes vehicles with two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds (11,797 kilograms).

Vehicles with three or more axles, regardless of weight, also qualify for IFTA. Any vehicle used in a combination that exceeds 26,000 pounds gross vehicle or registered gross vehicle weight falls under IFTA regulations. Recreational vehicles, such as motor homes used for personal pleasure, are exempt from IFTA licensing unless used for business purposes.

Once a vehicle is IFTA-qualified and operates in two or more IFTA member jurisdictions, the carrier must obtain an IFTA license and two decals from their base jurisdiction. The base jurisdiction is where the carrier’s operational control and records are maintained. An IFTA license and decals permit travel across all IFTA jurisdictions and simplify quarterly fuel tax reporting to a single entity.

Gathering Necessary Data for IFTA Calculation

Accurate record-keeping is important for IFTA tax calculation and compliance. Carriers must accurately document all mileage and fuel purchases for each qualified vehicle. These records are subject to audit and must be retained for at least four years from the return’s due date or filing date, whichever is later.

Mileage records require detailed trip logs or electronic data, such as GPS tracking. For each trip, documentation should include the date, origin, destination, route of travel, and beginning and ending odometer readings. This information allows for the calculation of miles traveled within each jurisdiction, distinguishing between taxable and non-taxable miles where applicable.

Fuel purchase records must contain specific details to be valid for tax credit. Each fuel receipt should show the date of purchase, the seller’s name and address, the number of gallons purchased, the fuel type, and the price per gallon or total sale amount. Include the vehicle unit number or other licensee identifier on the receipt.

For bulk fuel purchases, additional records are necessary, including the date of withdrawal, the quantity of fuel, fuel type, and the unit number of the vehicle into which the fuel was placed. Maintaining separate summaries of mileage and fuel purchases by jurisdiction, on a monthly and quarterly basis, simplifies the calculation process.

Step-by-Step IFTA Tax Calculation

Calculating IFTA taxes involves a methodical approach, utilizing the gathered mileage and fuel data. First, sum all taxable miles driven by your qualified vehicles in each IFTA jurisdiction for the reporting quarter.

Next, determine the overall fuel mileage (MPG) for your fleet by dividing the total miles driven across all jurisdictions by the total gallons of fuel purchased. This fleet average MPG is used to calculate fuel consumed in each jurisdiction by dividing the miles driven in that jurisdiction by the overall fleet MPG.

After establishing the fuel consumed in each jurisdiction, sum all fuel purchased in each respective jurisdiction. This figure represents the tax-paid fuel for which you may receive credit. Fuel taxes are paid at the pump, and IFTA ensures these taxes are distributed to the jurisdictions where the fuel was consumed.

Apply the current IFTA tax rates for each jurisdiction. These rates change quarterly and are published by IFTA Inc. on their website. Use the rates applicable to the specific reporting quarter.

Finally, calculate the net tax or refund for each jurisdiction using the formula: (Fuel Consumed in Jurisdiction × Tax Rate) – (Fuel Purchased in Jurisdiction × Tax Rate). A positive result indicates tax due to that jurisdiction, while a negative result indicates a credit or refund. Summing these results across all jurisdictions yields the total IFTA tax due or refund for the quarter.

Submitting Your IFTA Tax Return

Once the IFTA tax calculation is complete, submit the quarterly tax return. IFTA returns are due on the last day of the month following the end of each calendar quarter. The specific deadlines are April 30 for the first quarter (January-March), July 31 for the second quarter (April-June), October 31 for the third quarter (July-September), and January 31 for the fourth quarter (October-December).

If a due date falls on a weekend or a state holiday, the deadline is extended to the next business day. File a return every quarter, even if no taxable miles were traveled or no tax is due. Failure to file on time can result in penalties, a minimum of $50 or ten percent of the net tax liability, whichever is greater.

Most state and provincial IFTA agencies provide online portals for electronic filing, which is the most efficient method for submission. Some jurisdictions may also accept returns via mail. When filing electronically, the system performs the calculations based on the mileage and fuel data entered, simplifying the process.

If taxes are due, payment can be remitted through the online portal or by mail with the paper return. If a refund is due, it will be processed by your base jurisdiction. After filing, retain copies of the submitted return and all supporting documentation for audit purposes.