he International Fuel Tax Agreement , popularly known as IFTA, is a fuel tax collection and sharing agreement among the Canadian provinces and most American states to make it easier for interjurisdictional carriers to report and pay taxes on the motor fuels they use. The agreement allows registered interjurisdictional carriers to get one licence, issued by their base jurisdiction, to report and pay motor fuel taxes to a single jurisdiction. The carriers are required to pay fuel taxes proportionate to the miles driven in each state or province. Prior to IFTA each state had its own fuel tax system and a vehicle needed tax permits for each state in which it operated. Most states established Ports of Entry to issue permits and enforce tax collection, which was burdensome to the vehicle industry and the states. Pre-IFTA vehicles in interstate commerce carried special plates ("Bingo Plates") upon which each state's permit sticker was affixed, which was inefficient and proved to be costly for each state to manage.
Post-IFTA, all carriers have to submit quarterly tax return to their base jurisdiction that covers motor fuel usage and the distance traveled in IFTA member jurisdictions for all their qualified vehicles. In addition to submitting tax returns, license holders must also keep detailed records of distance traveled, motor fuel purchased and used, any trip permits, monthly/quarterly summaries, and Individual Vehicle Distance Records (IVDRs). Relying on paper records for IFTA can lead to a number of issues such as missing paperwork, entry error, late filings, overpayments, or audits.
Carriers can streamline the process of IFTA management by using a telematics solution to report on accurate GPS location and time in each location of fleet vehicles.
The solution includes a microprocessor connected to the truck that transmits GPS data continuously on a cloud based server, which then computes the applicable tax based on the state/province’s law, making it convenient and transparent to understand tax imposed.
Using telematics, or GPS fleet tracking, to track miles by state or province eliminates the manual process, improves the accuracy of distance, and saves time. The telematics device logs the vehicle odometer and GPS position, capturing the daily trips of each vehicle. Entry and exit odometers are calculated. The telematics solution can also help identify any vehicle or device issues to bring to attention of auditor. The solution also allows the fleet management to track their vehicles real-time and can generate an automated IFTA report, which can be integrated with third-party tools to generate the completed tax forms.