Who Pays IFTA Tax? A Guide to Fuel Tax Liability

The International Fuel Tax Agreement (IFTA) is a cooperative arrangement among U.S. states and Canadian provinces. Its primary purpose is to simplify fuel tax reporting and payment for commercial motor carriers operating in multiple jurisdictions, ensuring fair and efficient collection. Before IFTA, carriers needed individual fuel tax permits for each state or province. IFTA streamlines this, allowing a single license and quarterly report to cover obligations across all member jurisdictions.

Determining IFTA Tax Liability

A motor carrier’s obligation to comply with IFTA depends on specific criteria related to their vehicles and operations. IFTA applies to “qualified motor vehicles” used for commercial purposes. A vehicle is generally considered qualified if it is designed, used, or maintained for transporting people or property and meets certain weight or axle requirements.

Specifically, a qualified motor vehicle typically has two axles and a gross vehicle weight (or registered gross vehicle weight) exceeding 26,000 pounds (11,797 kilograms). Alternatively, a vehicle with three or more axles qualifies, regardless of its weight. Vehicles used in combination, where the combined weight exceeds 26,000 pounds, also fall under IFTA regulations. The vehicle must also operate in at least two IFTA member jurisdictions (U.S. states or Canadian provinces) to be subject to the agreement.

Obtaining an IFTA License and Decals

Once a motor carrier determines they are subject to IFTA, they must obtain an IFTA license and decals from their “base jurisdiction.” The base jurisdiction is generally the state or province where the carrier’s qualified vehicles are registered, where their operations are controlled, and where their operational records are maintained or accessible. It is also expected that the carrier accrues mileage within that jurisdiction.

The application process typically requires specific business information. This includes the business name, physical address, and a Federal Employer Identification Number (FEIN). An FEIN is a unique nine-digit tax identification number issued by the Internal Revenue Service (IRS) to business entities. Vehicle details, such as Vehicle Identification Numbers (VINs), are also necessary for the application. Upon approval, the base jurisdiction issues one IFTA license and a set of two decals for each qualified vehicle. A copy of the IFTA license must be carried in each qualified motor vehicle, and the two decals must be prominently displayed on both sides of the vehicle’s cab.

IFTA Fuel Use Reporting and Payment

IFTA licensees are required to file quarterly fuel tax reports with their base jurisdiction. These reports consolidate all fuel purchased and miles traveled across all IFTA member jurisdictions. The essential data points to track for accurate reporting include the total miles traveled within each jurisdiction and the total fuel purchased in each jurisdiction. Carriers must maintain detailed records, such as original fuel receipts and odometer readings, to substantiate the information reported.

The tax calculation involves determining the net tax or refund owed based on the vehicle’s overall fuel mileage and the difference between fuel purchased and fuel consumed in each jurisdiction. If more fuel tax was paid at the pump in a jurisdiction than was consumed there, a credit may be due; conversely, if more fuel was consumed than purchased, additional tax is owed. These quarterly reports are generally due on the last day of the month following the end of the quarter: 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). Even if no mileage was traveled or fuel purchased in a given quarter, a report must still be filed.