No one likes taxes, but for a driver, taxes are everywhere! Each piece of equipment you buy, and even driving on the road, requires you to submit a Highway Use Tax form (https://www.irs.gov/forms-pubs/about-form-2290) each year. However, many overlook the expensive fines you can receive from an IFTA audit if your documents don’t match requirements.

What is an IFTA?
The IFTA organization is made up of the 48 contiguous states and ten Canadian provinces. It allows each sovereignty to create its own taxes, while maintaining the policies on licensing, reporting, paying, and auditing. These taxes are for Qualified Motor Vehicles (QMV), meaning vehicles grossing 26,000 pounds or more, three-axle vehicles regardless of weight, or a combination weight exceeding 26,000 pounds.

What is the base jurisdiction?
The base jurisdiction is where the QMV are registered, the operational records are maintained, and at least some travel is accrued. You can find information for your base jurisdiction at https://www.iftach.org/Carriers.

What should my records include?
When you are in your truck you must have a copy of your IFTA license as well as a decal on each side of your truck. The numbers must match each other as well as the set given on your license. Your distance and fuel reporting must meet the following criteria¹:

• Without a Tracking System
  1. Beginning/end date of trip
  2. Origin/destination of trail
  3. Route of travel
  4. Beginning/end reading of odometer, ECM, or similar device
  5. Total distance
  6. Distance traveled in each jurisdiction
  7. VIN or vehicle unit number
• With a Tracking System
  1. Original GPS data for the vehicle
  2. Date and time of each reading at intervals sufficient to validate total distance in each jurisdiction
  3. Location of each GPS reading
  4. Beginning/end reading of odometer or ECM
  5. Calculated distance between each reading
  6. Route of vehicle’s travel
  7. Total distance traveled
  8. Distance in each jurisdiction
  9. VIN or vehicle unit number
• Fuel Records
  1. Receipts cannot be altered or illegible without proof that they are legitimate
  2. Must be for retail purchases from a retailer that the organization does not own, lease, or control
  3. Must be dispensed into a QMV
  4. Can be receipts, transaction records, or other electronic records. If you have questions, speak to a representative in your base jurisdiction.
• Receipt Details
  1. Date of fuel purchase
  2. Name and address of seller
  3. Quantity purchased
  4. Type of fuel
  5. Price per gallon or total price
  6. ID of truck
  7. Name of purchaser (can be carrier or driver as long as a legal connection can be made)

Filing Taxes
Taxes are due on the last day of the month after the quarter ends, unless you are a very low-mileage carrier and receive an exception to file annually:

Q1 is due April 30
Q2 is due July 31
Q3 is due October 31
Q4 is due January 31

Become familiar with your jurisdiction’s website and filing requirements so you are able to complete your filing on time without errors. While amendments can be made, they are also a red flag that your filing was not accurate or complete when due.

How can I lower my quarterly taxes?
Taxes are determined by the base jurisdiction, and the tax filings are calculated based on how many miles you drove in a jurisdiction versus how much fuel was purchased in that jurisdiction. If a vehicle drove 100 miles in a jurisdiction and has a calculated mpg of 5, it would be expected that the vehicle would need to purchase 20 gallons of fuel in that state for usage to “even out.” Some will be tempted to purchase the bulk of their fuel in one state while the bulk of miles are run in others. That may seem like a money-saving opportunity while at the pump, but usually results in very high tax bills. If you use a service like Oak Management for your records and reporting, ask for tips on lowering your amount due.

Extra Fees
New Mexico, Kentucky, and New York have additional charges and requirements for traveling through their states. Check well before traveling to have time to apply for and receive any necessary licenses and be aware of reporting information.

Why does the IFTA conduct audits?
The organization requires a 3% average audit amount. Of that 3%, 25% must be high-distance accounts and 15% must be low-distance accounts. Be prepared before it happens. Knowing that your records are correct, organized, and accessible can alleviate the anxiety of the audit. When you become licensed with the organization or enter a position of responsibility, get to know your base jurisdiction and its practices, procedures, documents, and website. Becoming comfortable with the information and organization will help take the fear out of an IFTA audit.

What can I expect during an audit?
Prior to your audit, the auditor will have already performed their preliminary procedures to become familiar with your business, vehicles, and reporting history. They will be reviewing your records for any changes, noting your procedures, and reviewing/testing the reliability of your business’s internal controls. They select a sample time frame, which may vary depending on your type of business’s operations. Samples found to be inaccurate (under- or over-reported) will be adjusted and recalculated by the auditor, and this is where the money comes into play. There will be a new audited tax adjusted for the period, penalties, and interest.

Looking to take these responsibilities off your plate? Oak Management can handle all of your IFTA records and audits for you. Just send us a message to get started.

 

1 P540.100 – Distance records as reported in the Procedures Manual