International fuel tax agreement.

• Author: O'Connell, Frank J., Jr.
• Position: Commercial motor carriers

Each state imposes a tax on commercial motor carriers for fuel consumed on its roads and highways. A carrier pays tax at the time of purchase. However, the carrier may not entirely consume the fuel in the state in which purchased. For example, a carrier pays tax to all the states in which its drivers travel on long hauls, even though they do not refuel until they return to their state of origin. However, the carrier can obtain a refund from states in which the driver traveled, for fuel not consumed in that state.

Prior Reporting Practices

A carrier or other fuel consumer traveling through various states used to file several motor-carrier returns and refund claims. In the early 1990s, states began to look at ways to consolidate the filing of motor-carrier returns into one report. The result was passage of the International Fuel Tax Agreement (IFTA). The IFTA eased the burden on carriers who filed motor-carrier returns for each state in which they traveled. However, it did not ease the burden of complying with each state's regulations. The states are not uniform on the tax rate or as to the tax. Certain vehicle types are not subject to the IFTA, and these exemptions differ from state to state.

Current Reporting Practices

A taxpayer must apply for an IFTA fuel tax license. A carrier operating in two or more member jurisdictions must have a license under this agreement.

Under the IFTA, a taxpayer files one report for all jurisdictions (U.S. and Canada) in which its drivers travel; currently, 48 states (excluding Alaska and Hawaii) and 10 Canadian provinces are IFTA members. The fuel tax rates apply to the gallons of fuel consumed, and differ in each state or province. Six states impose a surcharge (in addition to the tax imposed at the pump), based on gallons of fuel consumed. The carrier pays the tax to the IFTA organization, which acts as a clearinghouse and distributes the tax collected to the appropriate state. The information required on these forms is uniform from state to state and generally includes the following:

* IFTA member jurisdiction. Each state in which the vehicle traveled or purchased fuel.

* Fuel type. The type of fuel used in the vehicle (e.g., diesel, propane or gas).

* Total miles traveled in each jurisdiction. The miles traveled in each state, based on odometer readings or other means.

* Taxable miles traveled in each jurisdiction. The miles driven in each state, net of any exempt miles.

* Taxable gallons used in each jurisdiction. The gallons of fuel consumed in each jurisdiction, net of any exempt gallons.

* Tax paid on gallons placed in vehicles in each jurisdiction. Actual tax paid in each jurisdiction.

* Net taxable (refund) gallons. The difference between gallons consumed and gallons on which the carrier paid tax in each jurisdiction.

* Tax due (refund). Based on the statutory tax rate that each state imposes.

Filing Requirements

The IFTA requires reports from commercial motor carriers traveling in interstate commerce using a qualified motor vehicle. A qualified motor vehicle is a...