The International Fuel Tax Agreement (IFTA) simplifies fuel tax reporting for interstate commercial carriers. Calculating the tax owed involves meticulous record-keeping of miles traveled and fuel consumed within each jurisdiction. For each jurisdiction, the total miles traveled are divided by the total gallons of fuel used to determine the fuel mileage. This fuel mileage is then used to calculate the taxable gallons for that jurisdiction by dividing the miles traveled within that jurisdiction by the fuel mileage. The taxable gallons are multiplied by the current fuel tax rate for that jurisdiction to arrive at the tax owed. For example, if a truck traveled 500 miles in a jurisdiction with a tax rate of $0.30/gallon and the vehicle’s fuel mileage was 6 miles per gallon, the tax owed would be (500 miles / 6 mpg) * $0.30/gallon = $25.00.
Accurate tax calculation is crucial for maintaining compliance and avoiding penalties. This streamlined system reduces the administrative burden on carriers by allowing them to file a single quarterly tax return, rather than filing separate returns for each jurisdiction. Prior to IFTA, interstate carriers faced a complex web of varying state regulations, leading to significant paperwork and potential compliance issues. The agreement, established decades ago, significantly simplified interstate trucking operations, facilitating commerce and reducing operational costs.