As of 2018, the United States has been the highest operator of commercial fleets in the world. The infrastructure and the regulation make running fleets a very conducive business opportunity. With over 80,000 commercial vehicles on the roads, the network is massive and ever-growing.
Outside of running flawless operations, fleet management also needs to check on laws and regulations that ensure longevity. Like keeping a check on Hours Of Operation Compliance and weight & speed regulations, small steps ensure that the business stays on track. One such policy is the IFTA.
What Is IFTA?
IFTA or the International Fuel Tax Agreement is an agreement between forty-eight states in the USA and ten regions in Canada. The deal dictates that inter-jurisdictional movers can file and pay fuel taxes for their vehicles, across these states.
While this seems like a straightforward approach to fleet service, this was not the case before 1996. Fleet systems did not have the freedom and the resources to run operations across the country efficiently.
Prior to this law, fleets needed to obtain a fuel permit for every state they operated in. This process was very tedious for any company since they had to file their taxes across many states. Each of these states had their independent documentation and cost requirements.
In practice, this was discouraging companies from inter-jurisdictional travel, which goes against the point of owning a fleet network. In 1983, the first move towards fuel agreements happened between Arizona, Iowa, and Washington. The three states determined their own ways to reduce the burden of compliance without violating the tax laws.
Post-1996, all of these laws changed. The IFTA was a single fuel-tax law that works across all states (With the exception of Alaska, Hawaii, and District of Columbia). These uniform and efficient tax payments are given to the member states, which was the climbing-point for the USA’s fleet business.
How Does It Work?
Besides the fuels tax uniformity, the IFTA also ensures that the states are remunerated evenly for the use of their resources. This cost covers the cost of highways, expressways, etc. used by interstate carriers.
After the IFTA, the business owners can pay their taxes to a single location in their home state. This home state is dependent on the registration documents of the fleet business. The state collects these taxes on the overall fuel usage and processes the returns.
The department also processes the necessary allowances to the other states as recorded by the business. This record is kept with the help of the ELDs, which are also a government mandate. The job of each state IFTA unit is to enforce these laws and run regular audits. Each fleet company must ensure that it effectively calculate IFTA miles each time.
Does IFTA Apply To Everyone?
The IFTA license is a must if the business falls into any of the following categories.
They must run operations from one of the member states. And their carries must operate across two or more member states. For services within the same region, the feet will not have to register with IFTA.
The expectation also holds for yard trucks, intra-region shuttles like airports and malls, and personal use carries. Small scale fleets need not worry about this policy as they do not run across the state borders.
Additionally, vehicles with three or more axles and those exceeding 26,000 pounds of load capacity also qualify for the taxation. For two-axle vehicles grossing the same weight limit is also qualified.
How Are The Taxations Calculated?
The taxations are calculated based on a few parameters like fuel consumption pers state of operations, the taxes owed from each province, details of fuel purchase, and the miles traveled in each state. All these data points together will help determine the fuel tax owed to a state.
All of these data can be easily determined using an ELD unit. They automatically track the data using engine information. The position traveled is calculated using a GPS tracker. When you buy a GPS tracker for car or truck and set up an app to track fleets, the tracking on the fleet works the same way. It feeds real-time information to a central dashboard that computes this information.
Note that while your travel-miles are taxable, some states provide exceptions on the number of miles. This value will alter your calculations as the fuel consumption is now on the taxable miles, and not the overall-miles covered.
How To Register A Vehicle For IFTA?
To register at the IFTA, the carriers must have a designated and registered point of operations. They must hold the records of miles traveled in each state.
The application will also need a registered name, mailing address, USDOT number, and business ID. The process is simple, as the form is available online and can be sent by mail to the local authorities.
On completion of the registration, the authorities will issue an official IFTA ID for the year. It’s a simple, mandatory step to help propel your business forward.
The Use Of Telematics
To calculate the IFTA miles using paper logs is time-consuming, leaves room for error, and also illegal to some extent. The only way to gain accurate data of the miles is by using a top-of-the-line telematics service.
These applications are designed to register the data in usable formats. Apart from cutting the time of manual valuation, it also gives information on fuel usage, idling, and route management. These stats will ensure that your business runs better and faster, adding more value to your fleet.
The use of automation might seem like an investment at first. But doing it any other way could cost your organization a lot more.
There are many options to pick from when it comes to fleet telematics services. You must find the right service that helps you add value to your business. Some variables like surcharges and taxable gallons on your fuel are factors you will understand with time.
But owning a top-of-the-line feet system will ensure there are minimal errors and a glitch-free tax process. Since this whole process is overwhelming, it could use up many of your productive hours without the right partner.