Mercedes Mullins
Paying fuel taxes is a tedious but necessary part of a trucker's life. Fuel taxes exist to maintain highways, develop infrastructure, and generally maintain roads. Truckers who constantly travel through these roads must pay taxes according to their fuel usage in each state they pass through. In the US, the International Fuel Tax Agreement (IFTA) simplifies the process of reporting fuel taxes and fuel usage for carriers who drive interstate. IFTA licenses must be renewed annually and require the payment of fuel taxes at the pump, which are then reported to the IFTA agency in the carrier's base state. While federal taxes are set at 18.3 cents per gallon on gasoline and 24.3 cents per gallon on diesel fuel, state taxes vary and may include excise, environmental, special, and inspection fees.
Fuel Tax for Truckers
| Characteristics | Values |
|---|---|
| Purpose | Highway maintenance, infrastructure development, and road maintenance |
| Frequency of Filing | Four times a year |
| Reporting | IFTA (International Fuel Tax Agreement) simplifies the process of reporting fuel taxes and fuel usage by carriers who drive interstate |
| IFTA Members | 48 states, Canada, and Alaska |
| IFTA License | Carriers must obtain an IFTA license when they register as a member in their home state |
| Fuel Taxes | Paid at the pump and reported to the IFTA agency in the carrier's base state |
| Tax Distribution | IFTA distributes taxes to the corresponding states that the carrier drove through |
| Fuel Tax Rates | Vary by state; include excise taxes, environmental taxes, special taxes, and inspection fees |
| Federal Excise Taxes | 18.3 cents per gallon on gasoline and 24.3 cents per gallon on diesel fuel |
| Leaking Underground Storage Tank Fee | 0.1 cents per gallon on both gasoline and diesel fuel |
| State-Specific Requirements | Some states require direct reporting of fuel taxes (e.g., New Mexico, New York, Oregon) or additional weight-mile taxes (Kentucky, New Mexico, New York) |
| Fuel Tax Credit | Available for nontaxable uses of certain fuels, such as off-highway business use, but not for personal use or commuting |
| Penalties | Late filing may result in a $50 penalty, 5% penalty if paid 1-30 days late, and a 10% penalty if paid over 30 days late |
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What You'll Learn
The International Fuel Tax Agreement (IFTA)
IFTA is an agreement between 48 states, Canada, and Alaska, with the aim to streamline fuel tax reporting for interstate carriers. To comply with IFTA, carriers must obtain an IFTA license when they register as a member in their home state. This license needs to be renewed annually and is dependent on the timely filing of fuel taxes.
Under the IFTA system, carriers pay fuel taxes at the pump and then report those taxes to the IFTA agency in their base state. The IFTA agency is responsible for distributing the taxes to the corresponding states that the carrier has travelled through. This is done through a "pay now or pay later" system, where fuel taxes paid are credited to the licensee's account, and at the end of the fiscal quarter, a fuel tax report is completed, detailing miles travelled and fuel purchased in all participating jurisdictions.
While most states are members of IFTA, there are a few exceptions. States like New Mexico, New York, and Oregon request fuel taxes to be reported directly to them, with Oregon not participating in the IFTA program and not collecting taxes at the pump. Additionally, Kentucky, New Mexico, and New York require weight-mile taxes to be reported separately to them.
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Fuel tax credits
The International Fuel Tax Agreement (IFTA) simplifies the process of reporting fuel taxes and fuel usage for carriers who drive interstate. Under IFTA, carriers must obtain an IFTA license in their home state and pay fuel taxes at the pump. The taxes are then reported to the IFTA agency in the carrier's base state, which distributes the taxes to the corresponding states that the carrier drove through. This system eliminates the need for carriers to obtain fuel permits and report fuel taxes directly to each state they travel through, making it more efficient and easier to keep track of fuel taxes.
The federal tax on fuel is based on the principle that those who buy more fuel should contribute more to the maintenance and repair of highways and support mass transit. The excise tax is included in the price of gas and diesel, and the government refunds it to qualifying businesses as a credit on their taxes. This credit is not available to most taxpayers or individuals and is specifically designed to benefit businesses using fuel for non-highway purposes.
In addition to the standard fuel tax, some states, such as Kentucky, New Mexico, and New York, also require weight-mile taxes to be reported. It is important to check the specific requirements and tax rates of each state when filing fuel taxes. States may have additional taxes, such as environmental taxes, special taxes, and inspection fees.
There are also alternative fuel excise tax credits available for the use of alternative fuels such as natural gas, propane, and liquefied gas derived from biomass. These credits were set to expire in 2021 but have been extended through December 31, 2024. Tax-exempt entities, such as state and local governments that dispense qualified fuel from an on-site fueling station, may also qualify for incentives if they are registered with the Internal Revenue Service (IRS).
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State and federal tax rates
Fuel taxes are an essential yet tedious aspect of a truck driver's life. Truckers are required to file their fuel taxes four times a year, reporting their fuel usage and taxes paid in each state they drove through. This process is simplified by the International Fuel Tax Agreement (IFTA), which includes 48 states, Canada, and Alaska as members.
State taxes can include excise taxes, environmental taxes, special taxes, and inspection fees, but they exclude taxes based on gross or net receipts. While most states are members of IFTA, some states like New Mexico, New York, and Oregon request direct reporting of fuel taxes. Additionally, Kentucky, New Mexico, and New York require weight-mile taxes to be reported separately.
Texas, for instance, imposes a tax of 15 cents per gallon on the delivery of compressed or liquefied natural gas for fleet users or dealers, unrelated to a sale. The due dates for quarterly filings are also specified, with penalties for late filings, ranging from a $50 fee to 5-10% penalties, depending on the delay.
It is worth noting that some states may have unique requirements, such as weight-mile taxes in Kentucky, New Mexico, and New York. Additionally, certain states like Oregon do not collect taxes at the pump, further emphasizing the importance of understanding state-specific regulations.
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Reporting and filing fuel taxes
To comply with IFTA, carriers must obtain an IFTA license when they register as a member in their home state. They can then pay fuel taxes at the pump and report those taxes to the IFTA agency in their base state. The IFTA agency takes care of distributing the taxes to the corresponding states that the driver travelled through. IFTA licenses must be renewed annually, and fuel taxes must be filed to renew the license.
Most states are members of IFTA, but some states require fuel taxes to be reported directly to them. These states include New Mexico, New York, and Oregon, which does not collect taxes at the pump. Kentucky, New Mexico, and New York also require weight-mile taxes to be reported to them.
IFTA reporting is required quarterly and must be submitted to the carrier's base state. Truckers must report their fuel usage to their base jurisdiction, and the base jurisdiction will collect and distribute taxes on net fuel consumption to other jurisdictions. The base jurisdiction is also responsible for enforcing compliance through frequent IFTA audits. IFTA records must be kept for four years after the filing or due date of the tax return, whichever comes first.
To file IFTA fuel tax returns, truckers must provide the specific numbers of how many miles they travelled per state and how much fuel they purchased. This information can be entered manually or imported using software such as TruckLogics, which can also automatically calculate fuel taxes and make tax rate adjustments for all jurisdictions.
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Tax penalties
The International Fuel Tax Agreement (IFTA) has simplified the process of reporting fuel taxes and usage for carriers and truckers who drive interstate. However, there are still penalties that truckers should be aware of to avoid fines and audits.
Firstly, it is important to note that not all states are members of IFTA. For example, New Mexico, New York, and Oregon do not participate in the IFTA program, and Oregon does not collect taxes at the pump. Truckers must be mindful of these exceptions and report fuel taxes directly to these states.
Secondly, truckers must obtain an IFTA license and decals from their base jurisdiction. Failure to display the IFTA decals can result in fines ranging from a few hundred to several thousand dollars, depending on the jurisdiction.
Thirdly, truckers must submit a fuel tax report every quarter, even if their fleet did not operate during that period. Late or missed IFTA reporting can result in a fine of up to $50 or 10% of the net tax due. Additionally, incorrect figures and miscalculations on these reports can lead to further fines and audits.
To avoid penalties, truckers should ensure they are aware of the specific requirements and exceptions of each state they operate in. They should also be diligent in displaying the necessary decals and submitting accurate and timely reports to comply with IFTA regulations.
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Frequently asked questions
IFTA stands for International Fuel Tax Agreement. It simplifies the process of reporting fuel taxes and fuel usage by carriers who drive interstate.
Truckers have to file their fuel taxes four times a year.
Fuel taxes are used to keep up with highway maintenance, infrastructure development, and general maintenance of roads.
The fuel tax rate varies by state. Federal taxes include excise taxes of 18.3 cents per gallon on gasoline and 24.3 cents per gallon on diesel fuel.
Yes, there is a fuel tax credit available for certain nontaxable uses of gasoline, aviation gasoline, undyed diesel, and undyed kerosene. This includes off-highway business use, such as for equipment and vehicles that operate on private property or construction sites.
