Most trucking and transport business owners would have surely heard about IFTA. However, several of them, especially new business owners might not have a clear idea of what IFTA is and why it is important. If you are one among them do not worry because here is everything you need to know about IFTA.
Almost all businesses will have to adhere to a standard set of rules and regulations suggested by the state or federal government. This applies to truck businesses too, as they will have to adhere to material regulations, hours of service rules, USDOT numbering, licensing, and more.
One such regulation that trucking and transport businesses will have to adhere to is IFTA. Most fleet managers will be trying to ensure that their company strictly follows all essential rules and regulations. However, they should also guarantee that carriers and drivers are well-aware of the rules so that they can make better and informed decisions for the sake of the company.
A Beginner’s Guide To IFTA
IFTA is the cooperative agreement between 10 provinces of Canada and 48 U.S states. The agreement permits inter-jurisdictional carriers to pay and report taxes for the fuel consumed by their fleets across these states with one single fuel tax license. To gain a clear understanding of the IFTA agreement, you will need to know why it was introduced.
Truckers were in a difficult and tricky situation before the introduction of IFTA Reporting. This is because they needed to get fuel permits from all states. The issue with this was that the process was quite ineffective and very time-consuming. Fleets had to comply with rules, inconsistent filing periods, and reporting requirements, which involved multiple hours of clerical works and paperwork.
IFTA was able to establish efficiency and uniformity when it comes to fuel tax payments. A recent report indicated that the IFTA has helped trucking businesses to save millions of dollars in administrative costs every year since it was introduced. Every American state except for the District of Columbia, Hawaii, and Alaska are currently members of the IFTA agreement.
How Does IFTA Work
IFTA does not just allow businesses to save millions of dollars, but the agreement also guarantees that jurisdictions will be compensated properly for using their roads for trucks and heavy commercial vehicles. According to the IFA agreement, the carrier will have to provide reports about inter-jurisdictional fuel use only to their base state.
The base state will collect tax from the carriers, process tax returns, and then distribute the funds to other states. It is important to note that the base state is the one who is responsible for scheduling IFTA audits to enforce compliance.
Do I Need IFTA
You may have probably heard several fleet managers and trucking business managers asking the question of “do my business need IFTA”. Carriers will need to get an IFTA license if they are based out of a member state and want to operate across multiple member jurisdictions.
Another factor that plays a key role in determining whether you need IFTA is the type of vehicle you are using. A qualified motor vehicle is defined as a vehicle that is used and built for transporting people or property according to the IFTA. Apart from that qualified motor vehicles will need to fit the below descriptions too.
- Vehicles that have two axles and come with a gross vehicle weight of more than 26,00 pounds or 11,797 kilograms.
- Vehicles with three axles
- Vehicles that exceeds 26,000 pounds or 11,797 kilograms
It is important to note that IFTA carriers will have to register with IRP or International Registration Plan to get compliant with the rules and regulations of IFTA. IFTA decals will be provided to all fleets and trucks, which must be always displayed to avoid fines. The IFTA decals will expire every year.
Completing IFTA Reporting
As we mentioned earlier, IFTA can help trucking and transport businesses to save plenty of their valuable money. In fact, IFTA has been doing it for quite some time. It is evident that trucking businesses that are completing IFTA reporting will be able to cut down costs and ensure compliance. Here are a few steps that carriers will have to follow for completing IFTA reporting.
- Carriers will have to initially obtain an IFTA license, which can be done by submitting an application that includes USDOT number, federal business number, primary mailing number, and registered business name.
- Once the application has been approved, you will start receiving decals, which should be displayed at all times
- RecorAftd all the fuel purchased, miles driven, and fuel tax paid in different jurisdictions
- Submit the IFTA records every quarter to your jurisdiction or base state
- After submitting the quarterly tax return, you will either receive a refund or need to pay taxes
- The payments and reports from other provinces and states will be processed by your base state or jurisdiction
- You will need to submit IFTA fuel tax reports every quarter and ensure that the DOT (Department of Justice) will be able to access it whenever they want.
Using A Fleet Management Software For IFTA Calculation
Until a few years ago, fleet managers and drivers had to track fuel purchases and miles traveled manually to file IFTA taxes. This means that they had to manually account for everything from fuel purchase receipts to miles covered in each state or jurisdiction. It goes without saying that manually filing these details can be quite hard and problematic.
This is one of the major reasons why several trucking businesses have started to use fleet management software systems to calculate miles traveled and track fuel purchases. Businesses who are using such a system will be able to save a considerable amount of employees time, which will result in increased productivity.
Manually collecting and entering these details also increases the chance of error. If that’s the case, then your entire calculation will go wrong. Fortunately, you will be able to avoid the chance of such issues by investing in a reliable and efficient fleet management software system.