IFTA & IRP | International Fuel Tax
IFTA & IRP | International Fuel Tax
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What is IFTA?
The International Fuel Tax Agreement (IFTA) is a system created to make it easier for different regions to manage and collect taxes on motor fuel. It works by requiring motor carriers to file a fuel use tax return every quarter with their home jurisdiction (called the base jurisdiction). In this tax return, they report the miles they’ve traveled, the fuel they’ve bought, and any taxes owed or credits due in each region they’ve operated. The base jurisdiction then collects the taxes and distributes the funds to all the other regions involved in the agreement.
IFTA stands for the International Fuel Tax Agreement, and it operates independently from the IRP. While both are based on the miles traveled in each state, the agencies that collect the fees differ, and the funds are allocated in distinct ways. IFTA aims to ensure that fuel taxes are paid according to the miles driven in each state and where fuel is purchased. It facilitates an equitable distribution of taxes collected by each state based on where the fuel is consumed, rather than solely where it is bought. For example:
If you buy fuel in Wyoming but spend more time driving through Idaho with that fuel, you will pay fuel taxes based on the miles traveled in Idaho, not just the amount paid in Wyoming. With IFTA, you will need to submit annual or quarterly fuel tax reports to reconcile the taxes you’ve already paid with any potential liabilities. Depending on your fuel purchases, you may owe additional taxes or be eligible for a refund on what you’ve already paid.
What is IRP?
The International Registration Plan (IRP) is an agreement for registering commercial vehicles across the 48 contiguous U.S. states, the District of Columbia, and 10 Canadian provinces. This agreement simplifies the registration process by allowing a registrant’s home jurisdiction, known as the base jurisdiction, to handle IRP license applications and collect fees on behalf of all participating regions. The fees are determined based on the proportion of miles that a registrant’s fleet travels in each member jurisdiction.
IRP is designed to assist states in managing their road infrastructure by collecting fees from registered trucking companies, as trucks contribute significantly to road wear and tear. Once you register under the IRP, your company will receive an apportioned license plate.
This apportioned license plate indicates that your registration fees will be determined by the jurisdictions in which your trucking company operates. IRP fees differ based on each jurisdiction’s rates and the mileage traveled in each state or country.
When you register your business, be aware that the cost of IRP can vary annually depending on the routes you plan to take. If you are required to register under IRP, you may also need to comply with additional regulations, such as obtaining the appropriate trucking insurance.
What are the consequences of not registering for IFTA / IRP?
Operating without an IRP/IFTA poses risks to your business. Your company may face being put Out of Service and is subject to fines. Ticket costs differ by state, but the fines can be quite hefty. State Highway Patrols maintain lists of fees and penalties for truckers who haven’t settled their dues, and they may even impound your load. If you fail to file your IFTA, your IFTA fuel tax license will be revoked, leaving you off the road until it’s reinstated.
Does IFTA / IRP Apply To Your Business?
The requirements for IRP and IFTA are quite similar, so if you register for one, you’ll likely need to register for the other as well. However, this may vary based on your company’s location and where you intend to haul loads.
You must register under IRP and IFTA if you operate a qualified motor vehicle based in a participating jurisdiction and plan to operate in two or more member jurisdictions. According to IFTA, a qualified motor vehicle is one that transports people or property and meets one of the following criteria:
When do I need to file my IFTA?
IFTA is an agreement among participating states (excluding Oregon) that allows for tax payments based on the miles traveled within each state rather than where the fuel was purchased. IFTA is filed with your state every quarter.
Reporting Period | Due Date |
---|---|
January – March | April 30 |
April – June | July 31 |
July – September | October 31 |
October – December | January 31 |