fuel

The process of determining the amount due under the International Fuel Tax Agreement (IFTA) involves several key steps. First, a qualified motor carrier must meticulously record the total miles traveled within each jurisdiction that is part of the agreement. Separately, the total gallons of fuel purchased in each jurisdiction must be documented. Using these records, the miles traveled in each jurisdiction are divided by the total gallons of fuel consumed to determine the vehicle’s fuel mileage. This fuel mileage is then used to calculate the fuel consumption in each jurisdiction. The amount of fuel consumed in each jurisdiction is then multiplied by that jurisdictions fuel tax rate to arrive at the tax liability for that jurisdiction. Finally, the tax liability is compared to the fuel taxes already paid in each jurisdiction. Any difference is either paid to, or refunded by, the jurisdiction during the IFTA filing process. An example: A truck travels 1,000 miles in State A and averages 5 miles per gallon. It consumed 200 gallons in State A. If State A’s fuel tax rate is $0.30 per gallon, the fuel tax liability is $60. If the driver purchased and paid taxes on 250 gallons in State A, resulting in $75 paid, the driver is entitled to a $15 credit from State A.

Adhering to the IFTA agreement provides a streamlined approach to fuel tax reporting for interstate carriers. It simplifies what would otherwise be a complex web of individual state reporting requirements. This efficiency reduces administrative burden and costs for carriers, and facilitates the efficient collection of fuel taxes by member jurisdictions. The agreement’s origins lie in the need for a standardized system, evolving from earlier attempts at reciprocity to the current structure which promotes fairness and reduces opportunities for evasion. Its impact is realized in the increased compliance rates and more equitable distribution of fuel tax revenue.

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