Owner-Operator IFTA Fuel Tax Reporting

The International Fuel Tax Agreement (IFTA) is required in 48 of the US states and 10 Canadian provinces. ifta fuel tax reporting All owner-operators are responsible for paying fuel taxes and filing IFTA reports on time. Calculating IFTA can become very complicated; therefore, using available software will save time and headaches.

What is IFTA?

IFTA was created to simplify tax reporting for owner-operators. Also, to ensure each state received their share of the tax money for fuel used in their state, but not necessarily purchased there.

  • Tax payments simplified across state and national borders.
  • Each state or jurisdiction has their own tax requirements owner-operators are required to pay.
  • Truckers will not have to keep track of so many decals, form, and other fuel amenities.

Most states and provinces use the tax money they receive to improve and build highways.

Who IFTA Affects

IFTA does not apply to recreational or personal vehicles. However, if your truck has a gross vehicle weight (GWV) of 26,000 pounds or more, then you are required to file IFTA. If your truck does not meet the GVW requirement but has three or more axles, you are still required to file IFTA.

Another requirement, is if you cross state lines or transporting products, you must file IFTA reports.

Owner-Operator’s IFTA Requirements

To stay in compliance with IFTA’s basics, make sure you know the rules and stay up-to-date on them. Being organized is key to ensuring you have all the paperwork needed. The following will help you get started.

  • Keep track of all miles run in each state and fuel purchases.
  • IFTA requires owner-operators to display a current decal visibly on the truck at all times. Decals change every year on January 1st; truck drivers have until February 28th of that year to replace them without being subjected to fines.
  • IFTA reports and tax payments are due every 90 days with deadlines on the last day of January, April, July, and October.
  • Retain the last four years of fuel tax records in case DOT audits you.

IFTA Fuel Buying Strategies

Where you fill up determines which states receive your tax payments. The best strategy to abide by is the same as with any purchase; the cheapest. You can determine the most affordable fuel cost by the per-gallon tax rate from the per-gallon pump price. When deciding the cheapest fuel after IFTA and taxes, you will want to compare with all the states you are going to travel in between fuel stops. It is a good idea to get in the habit of planning your fuel stops before you begin your route.

You can plan your route and find the lowest fuel prices by using online resources. Some will just show you an average fuel cost per state, but some will show individual fuel station costs.

The overall real fuel prices are generally close to the same costs within $.40 or so. It is easy for new owner-operators to think there is not much difference between which fueling station they choose. However, when it comes to paying the tax, this is when you will notice the difference.

States Charging Fuel Surcharges

Virginia, Kentucky, and Indiana charge a surcharge on fuel burned in their states. This surcharge is regardless of whether you bought fuel in this state or not. The surcharge is added to the tax the state is going to receive per the IFTA reporting. The added charge does not affect an owner-operator’s fuel buying strategy; it affects the route planning. The longer you spend driving in these states, the more it is going to cost you in fuel surcharges.

Avoiding IFTA Payments

The simple answer is owner-operators cannot avoid IFTA payments. Some driver’s attempt to avoid paying IFTA by purchasing only enough fuel to make it to the next state. While drivers will pay less in IFTA payments, in the long run, you are paying more by missing fuel-saving opportunities.

When truck drivers purchase enough cheaper fuel in one state to make it to the next state, the fuel cost could be higher in the next state. In the end, the route could cost them more by not filling up in the first state that provided the cheaper fuel cost. The only time this strategy is helpful, is if the owner-operator is short on cash flow and needs the money at this time. However, this is not recommended in the long run. Planning your route and buying strategy will help increase your cash flow long-term.

Calculating IFTA Payments

Some owner-operators want to figure the IFTA payments on their own rather than using a software. While this might save you money on software, or someone else doing them, it is very time consuming. Make sure you have all your paperwork ready and in order.

  1. First, calculate all miles driven for the previous quarter in each state or province.
  2. Next, add up how many total gallons of fuel was purchased. Then, determine how many gallons were purchased in each state.
  3. Calculate total fuel mileage for the quarter by taking your total miles driven and divide by the total gallons purchased. Next, figure out total fuel mileage per state by dividing each states driven miles by the overall fuel mileage.
  4. Next, you will determine the fuel tax you owe for each state. You will need a current chart for state tax rates. Take the total number of gallons purchased in each individual state times that states fuel tax rate.
  5. For each state that requires IFTA payments, you will take the fuel tax required and subtract the fuel tax you paid. This number will be how much you owe in IFTA payments to this state.
  6. You will add all states tax numbers to determine the total amount you will put on your tax form.

ELDs and IFTA Fuel Tax Reporting

Some ELDs offer software that automatically calculates the IFTA tax due. These ELDs allow truck drivers to upload fuel receipts, use GPS to automatically calculate miles driven and gallons of fuel purchased in each IFTA jurisdiction. The software keeps a running total to make reporting easier. Using an IFTA reporting software will lessen the chances of a mistake being made and increases your time on the road.