How to calculate ifta
The International Fuel Tax Agreement (IFTA) is an agreement between the 48 contiguous US states and 10 Canadian provinces to simplify the reporting of fuel taxes for operators of qualified motor vehicles. The goal of IFTA is to ensure that fuel taxes are accurately distributed among the member jurisdictions, while reducing administrative costs for both carriers and governments. In this article, we will guide you step-by-step on how to calculate IFTA for your fleet.
Step 1: Determine if Your Vehicle Qualifies for IFTA
To be considered a qualified motor vehicle under IFTA, your vehicle must meet one of the following conditions:
– Have two axles and a gross vehicle weight or registered weight exceeding 26,000 pounds (11,797 kilograms)
– Have three or more axles regardless of weight
– Have a combined weight exceeding 26,000 pounds (11,797 kilograms)
Step 2: Register for an IFTA License and Decals
If your vehicle qualifies for IFTA, you need to obtain an IFTA license and decals from your base jurisdiction. Each fleet must apply for a separate license and receive two decals per qualifying vehicle.
Step 3: Track Mileage per Jurisdiction
Record the total distance traveled by each IFTA-qualified vehicle in each jurisdiction during the reporting quarter. Maintain accurate records to prevent discrepancies or audits in the future.
Step 4: Record Fuel Purchases
Keep track of all fuel purchases made by each qualified motor vehicle in any jurisdiction during the reporting quarter. Fuel receipts or invoices should include details like date of purchase, seller’s name and address, price per gallon or liter, and the number of gallons or liters purchased.
Step 5: Calculate Fuel Tax Liability
To determine your IFTA tax liability:
1. Divide total miles driven in each jurisdiction by your fleet’s average miles per gallon (or kilometers per liter) to calculate the taxable gallons or liters consumed.
2. Multiply the taxable gallons or liters consumed by the fuel tax rate for each jurisdiction.
3. Subtract the fuel tax paid on fuel purchases from the total fuel tax liability calculated in step 2 to determine your net IFTA tax payable or credit.
Step 6: Submit Your IFTA Tax Return
Prepare and submit your IFTA tax return, including all taxes owed or credits due, by the respective deadlines. These deadlines are typically April 30th, July 31st, October 31st, and January 31st for each reporting quarter. Failure to file on time can result in penalties and interest charges.
Calculating IFTA can seem daunting, but with accurate record-keeping and a clear understanding of the process, you can ensure compliance and prevent any complications down the road. Stay up-to-date with fuel tax rates in each jurisdiction, maintain consistent per-jurisdiction mileage records, and carefully track fuel purchases to simplify your quarterly reporting process.