The IFTA quarterly return, explained for carriers

Who needs an IFTA licence

The International Fuel Tax Agreement is a deal among member jurisdictions in Canada and the United States. Instead of buying a fuel tax permit in every province and state you drive through, you hold one licence from your base jurisdiction and file one quarterly return there. The base jurisdiction then shares the tax out to the others.

The licence is needed for a qualified motor vehicle. The IFTA Articles of Agreement (section R245) define it as a motor vehicle used, designed or maintained to transport persons or property that meets any one of three tests:

• two axles and a gross vehicle weight or registered gross vehicle weight over 26,000 pounds (11,797 kilograms);
• three or more axles, whatever the weight; or
• used in combination, when the combination weighs more than 26,000 pounds (11,797 kilograms) gross or registered gross vehicle weight.

Recreational vehicles are excluded. A tractor-trailer that crosses a provincial or state line almost always qualifies; a light pickup pulling nothing usually does not.

Your base jurisdiction is where the vehicles are registered, where your operational records are kept or can be made available, and where the fleet travels at least some of the time (R212). For a carrier registered in Manitoba with its office in Winnipeg, that is Manitoba. If a truck only crosses a border now and then, the agreement lets you buy a trip permit for that travel instead of holding a licence (R310).

The licence and the decals

Once licensed, your base jurisdiction issues one licence and two decals for each qualified vehicle (R605). The licence runs for the calendar year to December 31, and decals are issued every year (R610).

• The licence must be carried in every qualified vehicle, as a paper copy or an electronic image the driver can show on request (R620).
• The decals go on the exterior of both sides of the cab (R625).
• Renewals: you may run with next year’s decals and licence up to two months before they take effect, but you still file the fourth-quarter return for the year that is ending (R630).

Quarterly reporting periods and due dates

Each return covers the previous calendar quarter, and a return is required even if no operations were conducted or no taxable fuel was used (R930). The tax return and full payment are due on the last day of the month after the quarter ends (R960). If that day is a Saturday, Sunday or legal holiday, the next business day is the due date.

A licensee whose travel outside the base jurisdiction totals less than 5,000 miles or 8,000 kilometres over 12 months may ask the base jurisdiction for permission to report once a year instead (R930.200). Most carriers that run regular cross-border lanes report quarterly.

Late returns cost money. The base jurisdiction may charge a penalty of the greater of a fixed minimum or 10 percent of the delinquent tax for not filing, filing late or underpaying (R1220), plus interest on late tax, calculated for each jurisdiction (R1230).

The records you must keep

IFTA is a self-assessed tax, so your records are the evidence. The IFTA Procedures Manual sets out what an auditor will accept.

Distance records

For distance recorded by hand or from trip sheets, a record that includes the following elements is accepted as adequate (P540):

• the start and end dates of the trip;
• the origin and destination;
• the route of travel;
• the start and end odometer, hubodometer or engine control module reading;
• the total distance of the trip;
• the distance travelled in each jurisdiction; and
• the vehicle identification number or unit number.

Distance from a vehicle tracking system has its own requirements, including a position reading at least every 10 minutes while the engine is on and data available in a spreadsheet format rather than as a PDF or image.

Fuel records

To claim credit for tax you paid at the pump, keep the receipt, invoice or transaction listing. A valid retail receipt shows the date, the seller’s name and address, the quantity and type of fuel, the price per volume or the total price, the vehicle it went into and the purchaser’s name (P550). Altered or illegible receipts are not accepted for credit unless you can show they are valid. Bulk fuel from your own tanks needs delivery receipts, tank reconciliations and withdrawal records by vehicle.

How long to keep them

Keep IFTA records for four years from the date the return was due or filed, whichever is later (P510). If records are judged inadequate in an audit, the base jurisdiction may assess extra tax by cutting your reported fleet average to 4.00 miles per gallon or 1.70 kilometres per litre, or by a fifth (P570).

How the return math works

The return does not tax the fuel you bought in each jurisdiction. It taxes the fuel you burned there, estimated from your fleet average. Every return carries the same core figures (P710, P720):

1. Total distance for all qualified vehicles in all jurisdictions, taxable or not.
2. Total fuel used by those vehicles.
3. Average fuel consumption: total distance divided by total fuel, to two decimal places (miles per gallon or kilometres per litre).
4. Taxable fuel per jurisdiction: the taxable distance in that jurisdiction divided by the fleet average.
5. Tax-paid fuel per jurisdiction: what you bought there with tax included in the price.
6. Net taxable fuel: taxable fuel minus tax-paid fuel. Positive means tax due at that jurisdiction’s rate; negative means a credit.

You receive full credit for tax-paid fuel used outside the jurisdiction where you bought it (R1100). A credit that is not refunded carries forward against future returns for up to eight calendar quarters (R1120).

Here the fleet drove 120,000 kilometres on 48,000 litres, an average of 2.50 kilometres per litre. Minnesota’s 15,000 kilometres therefore count as 6,000 litres burned there, and because none was bought there, all 6,000 litres are taxable at Minnesota’s rate. Manitoba is the reverse: more fuel bought than burned, so a credit. Notice that the net fuel balances to zero while the money does not, because each jurisdiction has its own rate.

Distance driven under a trip permit is included in total distance and in that jurisdiction’s total, but not as taxable distance there, according to commentary published with the Articles (R224). Fuel bought while on a trip permit still counts in total fuel.

Common mistakes

• Leaving fuel out of the total. Fuel bought with cash, a personal card or a card you forgot to import still went into the truck. Leaving it out raises your fleet average and understates taxable fuel in every jurisdiction.
• Fuel with no jurisdiction. A purchase you cannot place still counts in total fuel, but it earns no tax-paid credit anywhere until you assign it.
• Miles from dispatch estimates. Practical-route mileage from a rate quote is not a trip record. Use odometer readings and actual routes.
• Missing a quarter. A quarter with no cross-border travel still needs a return.
• Counting brokered loads. Report only the distance your own qualified vehicles drove. A load another carrier hauled belongs on their return.
• Different cut-offs. If you report distance on a slightly different schedule from the calendar quarter, distance and fuel must use the same cut-off dates (P540, P550).

IFTA audits

Your base jurisdiction audits you on behalf of every member jurisdiction (R1310). Another jurisdiction may also audit you, at its own expense. In an IFTA audit the burden of proof is on the licensee, and the audit is completed with the best information available (P520).

Auditors judge your records on two things: whether there are enough of them to document the fleet’s operations, and whether each one has the details an auditor needs (P530). Records can be kept in any format the base jurisdiction can audit. A monthly summary of distance and fuel by vehicle and jurisdiction makes the audit faster, and the base jurisdiction can ask for one (P560).

The best preparation is boring: record distance by jurisdiction on every trip as it happens, import fuel card data every week, chase missing receipts before the quarter closes, and keep everything for at least four years.

How TruckerPro Finance handles it

In TruckerPro Finance, you record each trip’s miles by jurisdiction, against a truck unit if you like. Finance plans do not read an ELD; the mileage comes from the trips you enter. Fuel comes from EFS/WEX, Comdata and BVD fuel card sync, from Petro-Pass, Pilot Flying J, Pride and SPOL statement imports, or from purchases you enter.

The quarterly report uses the official IFTA rates for that quarter. It works out the fleet average, taxable fuel and tax-paid fuel for each jurisdiction, and the tax due or credit. It warns you when a fuel purchase has no jurisdiction, and it will not produce taxable figures for a quarter with miles but no fuel. Once you finalise a quarter, its figures are locked. You review the report and file the return with your base jurisdiction yourself; TruckerPro does not file it.

The same fuel records become bills in payables and chargebacks on owner-operator settlements. IFTA and fuel cards are included from the Essentials plan; compare the plans.