The IFTA stands for International Fuel Tax Agreement is a tax agreement that is implemented in the 48 states and 10 provinces in Canada. IFTA involves distributing taxes on the purchase of fuel. IFTA Quarterly Filing refunds your tax if the driver has IFTA license.
The tax system reconciles the taxes given on the purchase of fuel in one state including the other states where the vehicles covered by traveling with the same fuel tank.
To avail the tax system the drivers need an IFTA license, they need to file for an IFTA quarterly filing return. The IFTA license requires the driver to operate the state approved motor vehicle.
What is IFTA:
The motor vehicle needs to be weighed more than 26000 pounds and has to have three or more axels to meet the criteria of being a state-approved commercial vehicle.
The motor vehicles that cover the territories of Yukon, Northwest Territories, Nunavut, Alaska, and Hawaii. Do not come under the IFTA rules and regulation.
Another exception exists for non-commercial and recreational vehicles. For example, trucks with attached campers, motor homes, and buses that ate being used for personal pleasure and are used by the individual. The exemption widely varies from one state to other states.
How to Calculate IFTA?
The IFTA is the most vital tax paying system in the country that requires calculating, preparing and filing the tax report. The commercial vehicles are bound to come under the IFTA tax system and they need to use paper logs to track the records.
One needs to be careful at the time of reviewing the trip sheets of the previous quarter. The review sheet includes the track of the route that indicates how much the vehicle traveled under each jurisdiction.
Tracking the route is quite a task for the drivers. The IFTA system simplifies the calculation by using automation technology. The automation technology enables the drivers to remind that when they need to file the returns. Whether the IFTA return is due, and how to calculate the tax that is due to pay.
Must important in IFTA:
The commercial vehicles need to submit four reports every year that means the calculation has to be done on an IFTA quarterly filing basis. For the seasonal drivers whose vehicles do not work during every quarter, they also need to file the report.
In those cases, the drives require to submit zero as the report that is eventually considered as the not taxable on the basis of fuel consumption during the particular quarter.
The IFTA tax system helps to calculate the entire calculation the entire process of collecting taxes in every state on the basis of how much the vehicle traveled. The drivers need to track whether the vehicle is crossing the boundary of the nontaxable jurisdiction.
The drivers need to track the engine’s odometer to track the distance the vehicle traveled. The odometer helps to detect how much distance the vehicle traveled and through that one can track whether the vehicle went past the taxable boundary.
The process of tracking will help the driver to calculate the report and file the IFTA returns quarterly. The drivers can take help of the technological help externally to keep track of the traveling distance. For customers help we provide MC Number as well as the CA number for there convenience.
How does the IFTA Quarterly Filing System Work?
IFTA follows a system of ‘pay now or pay late’ that means the driver either choose an IFTA quarterly filing basis payment method or they need to pay a large amount of money as tax at the end of the year.
When a commercial vehicle purchase fuel, the tax is paid at the time of the purchase is credited to the licensee’s account.
The licensee completes the tax report regarding the fuel purchase by tracking all miles the vehicle traveled that also cover the participating jurisdiction.
The report must be submitted at the end of the fiscal quarter. The drivers need to list all the record of purchasing fuels with accurate measurement. After that, the average fuel is calculated as per the mileage the vehicle traveled.
Simple Working Step For IFTA:
The tax is determined by applying the average fuel consumption per mile in the participating jurisdiction. Kentucky, New York, and New Mexico are the three states implemented weight-mile taxes along with fuel tax.
The tax that is due is paid by following the rules of the particular jurisdiction who issued the license. The members work under the jurisdiction takes care of the fund transferring process. At the time audit, the drivers need not submit any bond before the legislation.
Prior to the IFTA system, every state has its own fuel tax system. The commercial vehicles needed to get the tax permit for each state they were traveling. The states used to establish ports of entry to issue the permit and enforce the fuel tax.
The previous system was burdensome and complex. The vehicle needed to stick a tag in order to show the commercial vehicle has got the permit. The process of affixing sticker was costly and complicated to manage.
The Significant Measure of the IFTA Quarterly Filing Tax System
The drivers who are qualified for IFTA license to operate the state approved vehicle in U.S. and Canadian states that come under the jurisdiction of IFTA tax are needed to keep all receipts. The receipts can be of hard copy or electronic.
The penalty of not filling the tax is 10% of the net tax liability is to be paid. The IFTA was created to simplify the process of paying fuel taxes.
The license authorizes the drivers to travel in all participating jurisdictions. A single tax return requires filing the report through the process is easier than the previous method of tax filing.
The IFTA can report the fuel reporting responsibilities; the process cut down the paperwork and keeps the drivers organized and the system helps to increase the profit.