Fuel taxes are gauged from time to time at every state or province and have to be paid at the time of purchase. Commercial trucking operations hold some IFTA license that order a defined tax rate on motor fuel. All the payouts stay fully and adequately recorded so that the total tax amount can be calculated and adjusted according to quarters. IFTA extends a helping hand to all the trucking business in calculating the amount of tax due or tax credit for each region, amounting the tax liability for each fleet, and understanding the fund dissemination process. 

What is IFTA?

IFTA (International Fuel Tax Agreement) is a type of agreement that can help to ease the fuel use process by motor carriers that operate in more than one jurisdiction. The operator files a quarterly fuel tax report. This IFTA reporting is used to manage the net tax or refund due and to redistribute taxes from settling states to states that it is due. Before IFTA, each state had its fuel tax system and a truck needed tax permits for each state in which it operated. Most states built Ports of Entry to assign permits and enforce tax collection, which is very dependent on the trucking industry and the nations. Pre-IFTA trucks in regional commerce carried specific plates upon which each state’s permit sticker was affixed. This was incompetent and proved to be expensive for each state to manage. IFTA calculator app manages all of the complex federal fuel tax calculators for you.

IFTA is a ‘pay now or pays later’ method, as profitable transports buy fuel, and fuel taxes paid are charged to that licensee’s account. After a fiscal quarter ends, the licensee processes the IFTA report, listing total miles travelled in all jurisdictions and lists total gallons of fuel purchased. The average fuel consumption is then applied to the total miles travelled to understand the tax liability to each jurisdiction. 

According to the International Fuel Tax Agreement (IFTA), one province receives a share of tax based on the number of miles the truck drivers run in each region. So, if a truck driver runs 100 miles in San Francisco and the truck gets 5.9 mpg, he pays tax on 16.9 gallons of used fuel in San Francisco. San Francisco then bills the home state, which bills the truck driver. But if he ends up buying more energy in San Francisco than the mileage requires, San Francisco refunds the home state, compensating the truck driver. 

IFTA License

Who needs an IFTA license?

An IFTA license trims the payment of fuel taxes to multiple jurisdictions where the truck travelled. If someone travels across two or more states, they might be subject to the IFTA license requirement. An IFTA qualified heavy vehicle is the one that is made in order to transport property or people and:

  • Has two axles and a gross mass of over 11,797 kilograms or 26,000 pounds 
  • Of any significance, with three or more axles 
  • Is used in combination and has a weight that exceeds 11,797 kilograms or 26,000 pounds.

Any carrier operating a vehicle or vehicles that fits the above points needs an IFTA license. 

How to get an IFTA license? 

Having an IFTA license is crucial to becoming a successful owner-operator. If the company requires an IFTA license, they need to apply in their base state. License application forms can be found online (it differs by each state), and are administered by the Department of Transportation for your condition, tax collection agency, or other agency. 

The application requires some necessary information, such as: 

  • USDOT number
  • Registered business name
  • Mailing address
  • Federal business number

Once your application is processed, your state IFTA authority will proceed valid IFTA decals for the current year. 

If one owns and operates a commercial truck or fleet that meets IFTA qualifications, they will need an IFTA license to display each vehicle. They are obtained through the state or provincial agency. The mileage in each state must be tracked, and they should keep track of the fuel used in each vehicle.