The International Fuel Tax Agreement (IFTA) has stringent record-keeping requirements, and complying with these requirements is mandatory. Despite the exhaustive list of records required, you must keep them organized and available if you are audited. The following information provides what you need to know about the IFTA and record-keeping requirements.
What is the IFTA?
The International Fuel Tax Agreement, often referred to as simply IFTA or IFTA tax, is an agreement that applies to the continental United States and ten Canadian Provinces. As a result, motor carriers operating in these areas can report and pay fuel taxes under a single IFTA license.
This agreement is based on the International Registration Plan, referred to as IRP, a registration agreement between the contiguous United States and Canadian provinces that provides proportionate payments of registration fees. These fees are based on the total distance operated in each participating jurisdiction.
Before the IFTA was enacted, truckers would have to obtain a separate fuel permit from each state or province. Additionally, each jurisdiction had its own policies, filing due dates, and reporting requirements, resulting in a massive amount of paperwork, even for a relatively short trip.
With IFTA, carriers must register in their base state or province, report on all fuel use to that state or province, and pay the corresponding taxes. In turn, the state or province will distribute appropriate funds to the other states where you operate, simplifying your paperwork requirements.
As each driver uses a vehicle based in their home state, the carrier must have specially marked Apportioned, APP, or PRP license plates. Additionally, they must carry a cab card that lists the jurisdictions the vehicle is valid to operate in and how much weight it is registered to carry.
What carriers require an IFTA license?
Suppose you operate a qualified commercial motor vehicle in more than one state in the United States or Canadian Provinces that are members of the IFTA. In that case, you may qualify for an IFTA license if your vehicle meets the weight requirements, which include the following:
- Has three or more axles
- Has two axles and a gross vehicle or registered gross vehicle weight exceeding 26,000 pounds (or 11,797 kilograms)
- It is used in a combination that has a combined or registered gross vehicle weight exceeding 26,000 pounds (or 11,797 kilograms)
Commercial motor vehicles operating only in one state do not require an IFTA. Recreational vehicles also do not qualify for IFTA licenses since they are not used for commercial purposes. Additionally, when interstate travel is solely between Mexico and California, you are not required to obtain an IFTA license.
If the vehicle is required to obtain IFTA, it must complete the following requirements:
- Register in a base state. If the motor carrier has vehicles registered in more than one state, they must coordinate this with the local registration office in each state.
- Complete an application for each eligible vehicle. When the application is approved, you will receive a decal that must be displayed on the side of the truck cab. Renewal of the IFTA license must be completed annually between October and the end of the calendar year.
- The application for a new account can generally be completed online but may require additional information and documentation, including:
- Proof of residency - You will need to provide proofs based on a specific list of items the state is willing to accept so they can verify them as bona fide.
- All tax liabilities must be in good standing. This includes other states than the one you plan to apply in if you have had a legal obligation in the past to file taxes in those states.
- License plate - you must also show that the vehicle has an approved International Registration Plan license plate (apportioned plate). The apportioned plate does not need to be in your name. However, if it is in a different name, you may need to show proof of a lease agreement giving you the right to use the plate.
- USDOT number - you must operate under a valid and active USDOT number. If you are leasing your authority from another motor carrier you may be asked to provide a copy of the lease agreement giving you the right to use that number. If you are operating under your USDOT number it must be in good standing with the Federal Motor Carrier Safety Administration.
- Owner/officer information - you must document the company's owner or officer's full name and Social Security numbers.
As you can see, many documents are required to show compliance with IFTA. Carriers must maintain complete records to demonstrate compliance in the event of an audit. Failure to comply could result in fines or penalties.
What records do I need to keep related to the IFTA fuel tax quarterly reports?
IFTA record-keeping must also include the IFTA fuel tax reports that are submitted quarterly. If you miss a payment or make a late payment, you will also have to pay penalties. The IFTA tax reporting deadlines include the following dates:
- January 1 - March 31: Deadline is April 30
- April 1 - June 30: Deadline is July 31
- July 1 - September 30: Deadline is October 31
- October 1 - December 31: Deadline is January 31
To maintain compliance with IFTA and IRP, comprehensive data of miles driven and fuel purchases must be retained. However, it can be collected using paper documentation, such as fuel receipts, or digital documentation, such as fuel card reports, electronic logging data, or vehicle tracking data. Generally, complete records contain a combination of these data collection methods.
The following mileage information must be collected and retained.
- Original GPS or location data for the vehicle
- Date and time of GPS readings
- Location of each GPS or system reading
- Odometer readings, including beginning and ending odometer data
- The calculated distance between GPS readings
- Route of travel
- Total trip miles
- Distance traveled in each jurisdiction
- Vehicle identification information
- Proof of fuel purchases. Fuel receipts must include the following information. Receipts with insufficient information are a red flag for auditors and could cause issues for you.
- The date of purchase
- The seller’s name and address
- The number of gallons purchased
- The total amount of the sale
- The purchaser’s name and address
- Fuel type
- Vehicle number
Aside from the vehicle identification information and proof of fuel purchase, all of the data is tracked by an Electronic Logging Device (ELD) in modern trucks. These ELDs are mandated by the FMCSA for use in commercial trucks, with extremely few exceptions. Therefore, the resulting reporting from the truck will contain a list of jurisdictions the truck has driven in and the number of miles driven in those jurisdictions.
Record retention for IFTA means that carriers must include the monthly and quarterly data for up to six and a half years. Additionally, carriers must keep mileage records from the close of the registration year in which the records were used to obtain registration (which may mean more than six years of information in some instances).
IFTA record keeping must be very detailed and thorough. As such, it can be time-consuming and stressful. Therefore, many motor carriers and truckers work with service providers to implement tools that automatically track and retain the required data, which can significantly simplify this process.