If you are new to the world of trucking, you might be trying to figure out the complicated IFTA requirements. You may have asked, “Why do I need IFTA and why do I pay taxes to other states?” The short answer is because…
It is because you are running heavy vehicles over different states and/or jurisdictions, which causes wear and tear to their roads. Someone has to pay for that.
International Fuel Tax Agreement
The International Fuel Tax Agreement (IFTA), is a tax collection agreement by and among the 48 contiguous states and Canadian provinces, bordering the United States, to simplify the reporting and collection of motor fuel use ifta fuel tax when a motor carrier operates in more than one jurisdiction. People who operate qualified motor vehicles are subject to IFTA licensing.
IFTA defines a “qualified motor vehicle” as:
- A vehicle having two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds or 11,797 kilograms;
- A vehicle having three or more axles regardless of weight;
- When the weight exceeds 26,000 pounds or 11,797 kilograms gross vehicle or registered gross vehicle weight;
- When the vehicle is not a recreational vehicle.
*** Fun Fact: A highway system began to take shape in order to accommodate the growing number of motor vehicles on the road, in the years before World War I. That is when states and/or jurisdictions started collecting fees for motor vehicle licenses to fund the construction and maintenance of these new highways. In 1986, IFTA, as we know it today was formed.
Do I need IFTA for Interstate?
In most cases, businesses will need an International Fuel Tax Agreement for Interstate if they operate in multiple states. The IFTA is a tax compliance program that allows commercial truckers to fuel their vehicles in the cheapest areas possible and avoid paying taxes on fuel more than once. If you operate a commercial vehicle in more than one state, then the answer to this question is yes. If your vehicle has a gross weight of 10,001 pounds or more, you’re required to register with the International Fuel Tax Agreement (IFTA). IFTA is an agreement between all 50 states and Canada that requires vehicles operating across state lines to file one tax return instead of registering in every jurisdiction they travel through.