International Fuel Tax Agreement (IFTA)

Scope

The International Fuel Tax Agreement (IFTA) is an agreement among member jurisdictions (the lower 48 United States and 10 Canadian provinces) for the collection and distribution of fuel use tax revenues.

IFTA allows carriers (including private carriers) to obtain one license and file one quarterly tax return. The carrier obtains the IFTA license through the base jurisdiction and files the taxes and makes tax payments (as applicable) to the base jurisdiction. The base jurisdiction then distributes the necessary fuel taxes to other jurisdictions.

Regulatory citations

• International Fuel Tax Agreement Articles of Agreement

Key definitions

• Base jurisdiction: The member jurisdiction where qualified motor vehicles are based for vehicle registration purposes.
• Jurisdiction: A state of the United States of America, the District of Columbia, a province or territory of Canada, or a state of the United Mexican States.
• Total distance: All miles or kilometers traveled during the tax reporting period by every qualified vehicle in the licensee's fleet, regardless of whether the miles or kilometers are considered taxable or nontaxable by a jurisdiction.

Summary of requirements

IFTA applies to qualified motor vehicles operating in more than one jurisdiction. A “qualified motor vehicle” is a motor vehicle used, designed, or maintained for transportation of persons or property, and that:

• Has two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds or 11,797 kilograms; or
• Has three or more axles regardless of weight; or
• Is used in combination, when the weight of such combination exceeds 26,000 pounds or 11,797 kilograms gross vehicle weight.

Qualified motor vehicles do not include recreational vehicles. Vehicles operating strictly intrastate are not required to register under IFTA in most cases, but some jurisdictions might require them to be reported.

All carriers operating qualified motor vehicles in more than one jurisdiction are required to:

• Register all “qualified motor vehicles” with their base jurisdiction for fuel tax reporting to cover all IFTA jurisdictions by filing one application with the applicable fee.
• Display (per vehicle) two IFTA decals and carry a copy of the IFTA license in each vehicle.
• File one quarterly IFTA tax return with the base jurisdiction, paying any tax due member jurisdictions with one check (some jurisdictions will allow annual returns under certain circumstances).

A carrier may opt to obtain trip permits for each trip the qualified vehicle makes into another jurisdiction.

Obtaining the IFTA license. Persons requiring an IFTA license apply through their base jurisdiction. Application fees vary throughout the jurisdictions. The application requests information about the applicant such as type of business and jurisdictions where the applicant will be traveling.

The license is valid from January 1 through December 31 and must be renewed each year. Some jurisdictions may charge a fee for renewal. In addition, new decals are issued each year and there may or may not be fees for obtaining new decals.

Recordkeeping. IFTA licensees are required to keep records of fuel purchased, received, and used in the course of business. The records must contain items such as date of each receipt of fuel, name and address of the person from whom the fuel was purchased or received, and the number of gallons/liters of fuel received. Licensees must also keep detailed distance records showing the taxable and non-taxable use of fuel, distance traveled for taxable and non-taxable use, and distance recaps for each vehicle for each jurisdiction in which the vehicle operated.

At a minimum, licensees must keep mileage data on each vehicle for each trip. Distance records produced by a means other than a vehicle-tracking system that substantially document the fleet’s operations must contain the following elements:

• Beginning and ending dates of the trip to which the records pertain;
• Trip origin and destination;
• Routes of travel;
• Beginning and ending reading from the odometer, hubodometer, engine control module (ECM), or any similar device for the trip;
• Total trip distance;
• Distance traveled in each jurisdiction during the trip; and
• Vehicle identification number or vehicle unit number.

Distance records produced wholly or partly by a vehicle-tracking system, including a system based on a global positioning system (GPS) must include:

• Original GPS or other location data for the vehicle to which the records pertain;
• Date and time of each GPS or other system reading, at intervals sufficient to validate the total distance traveled in each jurisdiction;
• Location of each GPS or other system reading;
• Beginning and ending reading from the odometer, hubodometer, engine control module (ECM), or any similar device for the period to which the records pertain;
• Calculated distance between each GPS or other system reading;
• Route of the vehicle’s travel;
• Total distance traveled by the vehicle;
• Distance traveled in each jurisdiction; and
• Vehicle identification number or vehicle unit number.

In order for the fuel purchases to count as tax-paid fuel purchases, a licensee must keep records proving that the tax was in fact paid at the time the fuel was purchased. Acceptable records to satisfy this requirement must contain date of purchase, seller’s name and address, number of gallons/liters purchased, fuel type, price per gallon/liter or total amount of sale, unit numbers, and purchaser’s name.

Records must be retained for four years from the date of filing the tax report based on the records.

Tax reporting. Licensees are required to file quarterly tax returns and pay any taxes due with their base jurisdiction. Quarterly tax returns are files according to the following:

IFTA audits. In order to ensure licensees are keeping up with the IFTA requirements, the base jurisdiction may audit IFTA licensees. The base jurisdiction audits licensees on behalf of all member jurisdictions. The auditor will review the licensee’s recordkeeping and tax returns and check for possible errors or omissions in the records or tax returns.