The International Fuel Tax Agreement (IFTA) as defined, is an agreement between the lower 48 states of the United States of America and 10 provinces in Canada, to simplify the reporting of fuel use (such as diesel and gasoline) by motor carriers that operate in more than one jurisdiction.
Alaska, Hawaii, and the Canadian territories do not participate. An operating carrier with IFTA receives an IFTA license and one decal for each qualifying vehicle it operates. The carrier files a quarterly (or monthly, in some states) fuel tax report. This report is used to determine the net tax or refund due and to redistribute taxes from collecting states to states that it is due. This tax is required for motor vehicles used, designed, or maintained for transportation of persons or property and:
- Having two axles and a gross vehicle weight rating or registered gross vehicle weight of more than 26,000
- Having three or more axles regardless of weight, and/or
- Is used in combination, in which the weight of the combination exceeds 26,000 pounds gross vehicle or }
registered gross vehicle weight.
Exceptions (for Recreational Vehicles)
- Motor homes, pickup trucks with attached campers, and buses when used exclusively for personal pleasure
by an individual
- Some states have their own exemptions that often apply to farm vehicles or government vehicles
Prior to IFTA each state had its own fuel tax system. A truck needs tax permits for each state in which it operated. Most states established Ports of Entry to issue permits and enforce tax collection. Pre-IFTA trucks in interstate commerce carried a special plate ("Bingo Plates") upon which each state's permit sticker was affixed.
How IFTA Works
IFTA is considered as a "pay now or pay later" system. As Commercial Motor Vehicles buy fuel, any fuel taxes paid to the states is credited to that licensee's account. At the end of the fiscal quarter, the licensee completes their fuel tax report, listing all miles traveled in all participating jurisdictions and lists all gallons purchased in the same. Then the average fuel mileage is applied to the miles traveled to determine the tax liability to each jurisdiction.
Three states: Kentucky, New Mexico, and New York—have "weight-mile" taxes in addition to the standard fuel tax. Oregon has just a weight-mile tax. Any amount of fuel taxes due (or refund due) is then paid to (or 'by' if refund) the base jurisdiction who issued the license. The member jurisdictions then transfer the funds accordingly. Audits are conducted only by the base state and fuel bonds are sometimes required.