Fuel expenses heavily influence a fleet’s budget. The key to adhering to fuel management regulations is to stay current on International Fuel Tax Agreement (IFTA) quarterly compliance. Following IFTA guidelines has several advantages, including cost savings and simplified tax procedures.
Keep reading to understand better how to calculate IFTA tax and file quarterly forms. And when you’re finished, check out the other articles in our ‘IFTA reports’ series:
- What is IFTA?
- Understanding IFTA reporting and common mistakes
- How to calculate an IFTA quarterly tax report
- Best fuel cards to streamline IFTA reports
What is an IFTA report?
The International Fuel Tax Agreement (IFTA) was developed to make it easier for American states and Canadian provinces to tax trucking fleets. It helps to eliminate paperwork for trucks crossing state or provincial lines. To stay compliant, trucks need to file an IFTA quarterly report, which covers the fleet fuel purchases and kilometers traveled in each jurisdiction during the quarter. IFTA fuel reports are due four times a year on the last day of the month following each quarter’s close.
The IFTA fuel tax report is necessary even if fleets used no taxable fuel or operations were carried out during the reporting period. You can submit your IFTA reports online. The online system will automatically determine the amount of tax owed in each jurisdiction entered. Late filing of IFTA reports will result in a penalty amount based on the jurisdiction rules and the number of months of late filing.
5 steps for calculating quarterly IFTA tax report
For fleet managers and owner-operators, calculating the quarterly IFTA report can be time-consuming and laborious — especially if you still use paper documentation. The steps for appropriately calculating the quarterly IFTA report and avoiding fines are as follows:
Step 1: Gather taxable miles traveled
Drivers must calculate the miles driven in each state using odometer readings. This is required for all IFTA trucks and jurisdictions. Owner-operators can use software to track the mileage for a fleet and get the required data to file IFTA tax properly.
If you track this manually, it can take a lot of time because there isn’t a proper system for keeping track of mileage reports. Fleets need to be well organized, or they may have trouble calculating the mileage for each state and end up being subject to an IFTA audit.
Step 2: Calculate the sum of fuel purchased
Fleets must accurately account for the total number of gallons of fuel purchased in each jurisdiction throughout the quarter. This is essential data for calculating the International Fuel Tax Agreement quarterly tax, and errors and omissions can be costly. For gasoline purchases, drivers must produce the original receipts or a certified fuel card invoice. These documents must contain the following information:
- Date of the fuel purchase
- Truck driver’s name and vehicle plate number
- Seller’s name and location
- Type of fuel that was purchased
- Number of gallons of fuel purchased
Step 3: Determine state or province fuel usage
Fleets may enter and depart a state or province multiple times. You can use the following formula to calculate the total number of gallons consumed in each jurisdiction:
Total miles driven x average fuel mileage = the amount of fuel consumed in a state or province
Fleet managers must use the above formula for each state or province where the fleet operated during the quarter.
Step 4: Calculate taxes
The next step in the process is to figure out how much IFTA tax your fleet owes for each quarter by state or province. This step includes using the applicable rates calculated by IFTA. You can use the following IFTA calculator formula to find out the IFTA tax required in a state:
The total amount of fuel consumed in the state or province x the state tax rates
The IFTA tax rate varies for each state or province.
IFTA tax rates displayed in the chart are updated every quarter, so it’s crucial to always use the most recent data for your state when calculating and reporting your IFTA taxes. You can find the correct quarterly tax rate for each state and province on the IFTA website.
Step 5: Final figures and amount owed
Calculate the total amount of tax owed in each jurisdiction to obtain your fuel tax. You may calculate the precise fuel tax for each state or territory along your route using the following formula:
Fuel tax required in the state – fuel tax paid in the state
Owners-operators must calculate the additional tax due if the jurisdiction traveled through levies a fuel tax surcharge. They must pay the tax on the fuel consumed because these surcharges are not paid at the pump. The ‘how to calculate tax paid gallons IFTA formula’ is:
Gallons consumed x surcharge rate = surcharge tax owed
Owner-operators must include the surcharge calculation on a separate line of the IFTA report document. There is no need to perform this calculation until the quarter is over and the filing is due because these rates are subject to change.
Using fuel cards to simplify IFTA quarterly reporting
One way to simplify the IFTA filing process is to use trucking fuel cards offering location and mileage tracking, in addition to specialized reporting capabilities. The best fuel card companies with these features can help you comply with IFTA reporting requirements in a few key ways:
- Detailed fuel purchase data: Diesel cards provide detailed data on every fuel purchase including date, location, gallons purchased, and cost. This eliminates the need to collect and organize paper fuel receipts. Having all fuel data in one digital place makes preparing IFTA reports much easier.
- Automated mile tracking: Many fuel cards have built-in GPS tracking that automatically logs miles driven in each jurisdiction. This automates what can be a very manual process of documenting miles for IFTA. The mileage data can feed directly into IFTA reporting.
- Tax rate determinations: Fuel card systems will often calculate the proper tax rates and exemptions for fuel purchases based on the jurisdiction. This reduces human error in determining which taxes apply. The fleet fuel card does the tax work automatically.
- Remittance of fuel taxes: Some truck fuel cards offer services to remit fuel taxes directly in each jurisdiction on behalf of the trucking fleet. This means freight companies don’t have to determine how much they owe to which jurisdictions and handle tax payments themselves.
By taking advantage of these fleet card benefits, trucking companies can reduce administrative burden and improve compliance.
Accurately calculate the IFTA quarterly report
Calculating fuel taxes for each quarter is difficult, and mistakes can result in the revocation of your IFTA authorization. With the implementation of IFTA, trucking companies benefit from uniformity and efficiency in gasoline tax payments between states and Canadian provinces. Owner-operators no longer have to worry about different fuel permits.
Following the steps outlined in this IFTA reporting guide will assist fleet owner-operators in better understanding what information must be included when filing quarterly returns.
FAQ
To calculate the tax-paid gallons, divide the total miles traveled by the total gallons purchased.
Taxable miles are those driven by IFTA-approved trucks that must comply with a jurisdiction’s fuel tax regulations. Total miles is the sum of miles a truck traveled throughout each legal jurisdiction.
The average miles per gallon for IFTA trucks should range between 5 and 10 miles, and remain generally constant for each reporting period.
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