To stay in business, you have to be on the right side of the law. Also, your fleet must adhere to various rules and regulations that are implemented by the jurisdictions to govern the road.
To start with, compliance is said to be a responsibility that most carriers and corporate vehicles pass on to their fleet managers. The process includes licensing, material regulations, obedience to the hours of services, and ifta reporting system.
The fleet managers make sure that the company follows every rule as well as compliances, and are aware of the regulations to help the drivers in making better-informed decisions for the benefit of their fleet.Read More
However, one such compliance is IFTA- and it is generally a little confusing. Here, in this guide, we have covered everything to provide you with insights into how IFTA works. Let’s get started.
What is IFTA- International Fuel Tax Agreement?
IFTA pertains to the agreement between the 48 states in the US along with 10 Canadian provinces. This allows the corporate carriers to report as well as pay taxes in terms of fuel consumed across the states using a single fuel tax license.
To completely understand what IFTA is, it is quite important to know why this agreement was established in the first place. Before the International Fuel Tax Agreement, it was a compulsion for the truckers to obtain the fuel permit from every state they drive through. Every business owner operating a motor vehicle must file an IFTA reporting program, or have the bookkeeping or a third party to do the same on their behalf.
Well, apart from the advantages of IFTA related to trucking businesses, the agreement also ensures that the jurisdictions are properly reimbursed for utilizing the roads by carriers and heavy commercial vehicles.
Note, besides, that it is no more immoral to directly rob citizens than to slip indirect taxes into the price of goods that they cannot do without.” – Albert Camus
Under IFTA, only the corporate carriers need to report inter-jurisdictional fuel consumption to their base state. However, the state in return tends to collect the taxes on the total usage of fuel, tax returns, and allocate the funds to every state. The base jurisdiction is also responsible for enforcing compliance through the scheduled IFTA audits.
How does IFTA work?
Every business owner operating a motor vehicle must file an IFTA, or have the bookkeeping or a third party to do the same on their behalf. So, right after you submit your application, you need to obtain a license as well as an IFTA decal for every selected or registered vehicle you operate. So, whenever you buy fuel, the price is automatically added to the owner’s IFTA account.
Video Credit: YourAlberta
At the end of every quarter, you must submit the Fuel Tax Reporting Software that mentions the miles traveled along with gallons purchased. Such reports help you to identify either the sum in terms of tax outstanding you owe or the refund you are due. The office of the Tax submission in the trucking is the company’s home state which will grant your repayment and debts respectively.
When to File IFTA?
- For the month of January to March, with the due date April 30th.
- For the month of April to June, with the due date July 31st.
- For the month of July to September, with the due to date October 31st.
- For the month of October to December, with the due date January 31st.
How to file an IFTA report?
- Electronically/Digitally: The return of your tax is said to receive on the date it is submitted.
- Via Mail: The tax return is said to be received by the postmark date mentioned on the envelope.
- Physically/Walk-in: The tax return is said to be received the date it is sent to the office.
What happens in case you fail to pay a return?
If you fail to file a quarterly tax return within a month of the due date will suspend your license and may apply a Jeopardy assessment that can be applied. In case you file a quarterly return, but somehow fail to make the payment on the return, which may include things like late fees, interest, along with penalties within 90 days of the mentioned date- Then your license will be cancelled and you will be fined along with jeopardy assessment. Here, your license will not be valid until you have cleared your account in terms of taxes, outstanding fees, penalties, as well as the interest.