The fleet industry has seen many changes throughout the years, most of which have been for the better. For instance, several years ago, each state had its own regulations when it came to fuel tax reporting. Prior to IFTA, truckers were required to obtain fuel permits from every single state they entered. It added extra fees, trips to permit purchasing centers, and extra fuel burn. The rules for reporting and filing were also very inconsistent, making it difficult to comply, even for the most diligent fleets.
Today, most fleets are part of the IFTA (International Fuel Tax Agreement) as an attempt to standardize the industry rules and make it simpler for fleets to stay compliant. What are these simpler rules? And, how can your fleet stay compliant with these regulations?
What Does IFTA Stand For?
Many in the fleet industry can answer the basic question of “what is IFTA?”, but understanding the details is another story. Fleets that adhere to the IFTA know that to renew IFTA licenses they must file and pay a fee—typically $10.00, though it varies by state—by the last day of the year, December 31st.
Right now, 48 states belong to this pact, including ten provinces of Canada. This agreement replaced the old system of collecting fuel taxes and putting decals on trucks for each state of operation. The new system also reduces paperwork requirements and therefore makes it less costly and far easier for fleets to remain compliant.
Who Must Comply with IFTA Requirements?
All carriers need an IFTA license if they’re in a member state, and 48 of the 50 states already participate in the U.S.—with the exception of just Alaska and Hawaii. Of course, there are other requirements, such as the type of vehicle and the gross weight. Here are some of the requirements for an IFTA license:
- Commercial vehicles with two axles and a gross weight of 26,000 pounds (registered or rated).
- Any commercial vehicle with three or more axles.
- Any vehicle that exceeds 26,000 pounds or 11,797 kilograms.
How Does the IFTA Work?
After submitting your application and paying your fees, if you own a “qualified motor vehicle”, you’ll receive your IFTA sticker (or decal) and license for the qualifying vehicle or vehicles. To earn your license, you must follow the IFTA rules. The process is as follows:
- Driver purchases fuel.
- The fuel amount gets logged into an IFTA account for the truck.
- At the end of the quarter, you submit an IFTA report. This includes the miles driven and gas purchased.
- You’ll receive either a bill or refund from the IFTA office based on this reporting.
- You renew your license at the end of each year (with a final deadline of February of the following year).
It’s a requirement for fleets with qualifying vehicles to comply with the IFTA, but there are benefits to doing so. Not only is your paperwork simplified compared to the old system, but carriers only have to report their fuel use to their base state. This ensures that states receive compensation for the use of the roads since heavy trucks cause more road degradation and damage than the average motor vehicle.
What Happens if I Fail to File or Pay a Quarterly Return?
There are several ways you can fail to comply with IFTA rules, such as failing to file a quarterly return (within 30 days of the due date) or failing to make a payment on your quarterly return (within 90 days of the due date). This results in a license suspension and Jeopardy Assessment.
An IRS Jeopardy Assessment identifies an escalation of a tax issue, in which the IRS believes it’s losing money. Your license is suspended until you pay this IRS tax, as well as any interest and penalties. After a Jeopardy Assessment, you have 60 days to file and pay the late fees. If you do not comply you’ll also be responsible for the full amount of the Jeopardy.
What are the IFTA Requirements?
Though the IFTA standardizes tax filing across the nation, you must still register in your base state. This can be a little difficult if you operate across multiple states. There’s no standard for what should qualify as your base state, but the most reasonable solution is to contact your local office where your headquarters are located.
Though there are no base state requirements, there are other standards. Be aware of the following IFTA requirements:
As we’ve already covered, qualified vehicles are vehicles that weigh 26,000 pounds, or have three or more axles. These vehicles must use diesel, propane, or natural gas to qualify for licensing.
The IFTA sends automatic renewal applications each year directly to your fleet office. Each driver must carry a copy of the license for that particular vehicle. There are also two decals that must be on either door of the vehicle. Your application must include the following information:
- Proof of residency
- License plate number
- DOT number
- Owner/officer information
Fuel Tax Reporting
You must submit your report every quarter, or four times a year. This will show that you’ve accumulated a tax credit or rather that you’re prepaying for your fuel taxes. You may overpay, earning you a refund at the end of the year. However, if you underpay, you must pay the remainder of your tax with your new application.
Below we’ve listed the quarterly filing dates for reference:
- 1st quarter (January to March): Deadline April 30
- 2nd quarter (April to June): Deadline July 31
- 3rd quarter (July to September): Deadline October 31
- 4th quarter (October to December): Deadline January 31
Receipts & Records
You must keep receipts of all fuel transactions in order to receive refunds or tax credits. Each receipt must have a date of purchase, fuel type, seller name and address, purchaser name, registration number for the vehicle, sale total, and the number of gallons purchased. You must also keep records of your mileage and summarize them in monthly reports.
Telematics for IFTA Requirements Compliance
Telematics systems make a huge difference in your fleet by optimizing multiple functions—like routing, maintenance, and dispatch. In terms of how telematics can help with IFTA compliance, the benefits lie in the reporting ability of the devices. Telematics devices include route optimization and fuel card integration. With these features, you can schedule rest and fuel stops into your drivers’ daily routes. The fuel cards will provide you with discounts, but the integration with telematics allows you to store the data from each fill-up. The cloud-based software syncs with these devices and stores the data for years in a centralized database, providing you trend reports to help make decisions for your fleet.
Learn more about how telematics can help your fleet, at Azuga. The team at Azuga is here to help improve safety, boost productivity, and even save you money.