IFTA miles: All are reportable, some are taxable
Knowing the key differences between taxable and non-taxable miles can help you avoid costly errors, minimize payments, and claim your rightful refunds when filing your quarterly fuel tax returns.
ALL miles are reportable
Quarterly fuel tax returns required under the International Fuel Tax Agreement (IFTA) consider the fuel purchased and miles traveled to calculate a net tax balance. You must track and report all miles traveled, including empty or deadhead miles, personal conveyance miles, yard moves, etc., whether the miles are taxable or nontaxable. Exemptions allowed under other programs – like hours of service, for example – do not apply to this program.
Reporting all miles traveled and fuel purchased is important because the “total miles” and “total gallons” are used to calculate the average miles per gallon (mpg) for your fleet vehicles. Incorrectly reporting these totals will throw off the rest of your calculations, including your tax due or refund amounts.
Include all miles traveled for the total miles calculation to achieve the most accurate mpg, and then account for any exempt or non-taxable miles later in the report to keep them out of the “taxable miles” total.
SOME miles are taxable
Exempt miles under IFTA vary considerably by state. A few examples of exempt miles include:
- Forest and agricultural roads in California,
- Turnpike miles in Massachusetts and Nova Scotia, and
- Off-highway and private roads in several states.
In addition, some jurisdictions allow fuel permit exemptions, where any miles driven under the permit are not taxable.
Note that all jurisdictions require documentation to support any claim of tax-exempt or non-taxable miles.
Also, be sure to understand and comply with the terms of any exemptions you claim. Remember those Massachusetts Turnpike miles? To claim those miles as exempt from IFTA, you must:
- Retain all turnpike receipts and fuel invoices, and
- File a separate “Use Tax Return” to the state by April 15 each year the exemption is taken.
Read the fine print for your exemptions
One common mistake is taking IFTA credit for toll miles in New York. While toll miles can be deducted from the New York Highway Use Tax (HUT) return, they are not deductible under IFTA.
Also, special rules apply when reporting travel in Oregon because that state does not impose a tax on motor fuels under IFTA. Instead, they charge a weight-mile tax through a separate filing (similar to those Massachusetts Turnpike miles). Still, for your IFTA return, miles traveled in Oregon are included with your “Total IFTA miles,” and the gallons delivered into your IFTA vehicles in Oregon are included with your “Total gallons purchased,” to calculate your fleet’s average miles per gallon.
Key to remember: Under IFTA, ALL miles must be tracked and reported, but SOME miles are exempt or non-taxable. Understand the difference to avoid errors, minimize payments, and claim refunds when qualified.