Six Things You Need To Know About The IFTA Fuel Tax System

Understanding the International Fuel Tax Agreement and how it applies to your Canadian commercial operation is essential to minimizing your tax liability and fuel tax costs.

The following are six things you need to know about the IFTA fuel tax system to properly handle your business's IFTA fuel tax calculation needs.

The International Fuel Tax Agreement (IFTA) was designed to simplify fuel usage reporting for carriers operating across multiple jurisdictions.

The IFTA was designed to make things easier for any commercial operation that relies upon fuel consumption to transport cargo or to power vehicle fleets.

The IFTA simplified things because, prior to its existence, every truck or truck fleet operation needed to acquire a tax permit for each individual province or state in which it was operating. 

The IFTA requires you to report your company's fuel usage.

One of the basic requirements of companies complying with the IFTA and licensed according to IFTA terms is that they report all fuel usage on a quarterly basis.

By filing quarterly returns, carriers and companies can track their fuel tax liabilities throughout the course of the year.  

The IFTA only applies to certain types of vehicle.

There are numerous requirements a vehicle needs to meet in order to qualify to pay taxes according to the IFTA fuel tax system.

Vehicles that qualify with only two axles must reach certain weight minimum requirements. Vehicles with three or more axles automatically qualify regardless of how much they weigh.

It may be possible for carriers to receive a refund based on fuel tax payments made throughout the year.

One of the most significant aspects of the IFTA fuel tax system is that it makes it possible for carriers to receive refunds on tax payments at the end of the year. This means that the system helps carriers to keep up with their tax liabilities throughout the year.

It's necessary to apply for a license to take advantage of IFTA tax benefits.

Carriers and companies operating commercial vehicles need to qualify for the IFTA tax system by applying for a license. After applying, companies are supplied with a license number for each individual carrier they operate to track individual fuel consumption per vehicle.

Canadian operations do not have to participate in the agreement but may do so if they choose.

It's important for Canadian companies to make note of the fact that they are not required to acquire an IFTA license under the agreement. However, generally carriers operating in the Canadian territories do acquire an IFTA license because of the convenience the system offers. 

Consider looking into IFTA fuel tax calculation software for more help with understanding this important tax system.