States amping up to tax electric vehicles under IFTA
With more states charging fuel taxes on electric vehicles (EVs), motor carriers must know how to report operations of electric-powered qualified motor vehicles in their fleets.
Various alternative fuels – including electricity – must be reported on tax returns under the International Fuel Tax Agreement (IFTA). Indiana is the latest to embrace the trend, while also adding a new twist.
Spark of innovation: Indiana charging by the mile
Previously, three states taxed electricity as a fuel – Iowa, Pennsylvania, and Wyoming. These three jurisdictions impose tax on electricity consumed in qualified motor vehicles by applying a tax rate to the net taxable fuel – kilowatt hours (kWh).
During its 2023 legislative session, Indiana expanded its fuel use tax laws under IFTA to include a tax on qualified alternative fueled vehicles, notably those powered by electricity.
The twist? Indiana imposes that tax by applying a tax rate to the taxable distance in the state. The new requirement went live beginning January 1, 2024.
How to report qualified electric vehicles under IFTA
States have discretion as to the actual format, whether reporting is done with paper forms or via electronic filing. However, certain basic elements must be included in the reports.
Report the total distance in the jurisdiction for the vehicles reporting EV as a fuel type.
Report the taxable distance in the jurisdiction for the vehicles reporting EV as a fuel type.
Report as tax paid fuel any electricity placed into the supply storage unit of the EV on which tax was paid. Retain documentation as proof of tax payment.
Report, as part of total fuel, any electricity placed in the supply storage unit of the EV. For jurisdictions that do not tax electricity as a fuel or impose a consumption tax on taxable distance, electricity purchased in those jurisdictions must still be reported as part of total fuel. This allows calculation of the correct consumption rates and appropriate fuel taxes.
Calculate a consumption rate (xx.yy per kWh) for the EV fuel type by dividing the total distance by the total fuel rounded to two decimal places (similar to the MPG or KPL calculation).
To calculate tax:
For a jurisdiction that applies the tax rate to net taxable fuel (e.g., IA, PA, WY): | 1. Divide the jurisdiction taxable distance by the consumption rate to arrive at the taxable fuel. 2. Subtract any tax-paid fuel from the taxable fuel to arrive at the net taxable fuel. 3. Multiply the net taxable fuel by the tax rate to arrive at a tax or credit due. |
For a jurisdiction that applies the tax rate to taxable miles (e.g., IN): | Multiply the jurisdictional taxable distance by the tax rate to arrive at the tax or credit due. |