Proper IFTA reporting key during tax holidays

June 28, 2022

SJ Munoz

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A break from taxes sounds great on paper and can even be a financial benefit in many cases. With the continued rise in fuel prices, several states have implemented tax holidays in an effort to lessen the costs for consumers.

However, for motor carriers, it’s not as simple as just paying less when you fill up.

Because of the International Fuel Tax Agreement, knowing exactly what to report and how to report it will prevent later fuel tax issues down the road.

Recent “tax holidays” have created IFTA compliance issues because of internal system requirements such as total gallons being equal to tax-paid gallons, according to a memo signed by IFTA executive director Carmen Martorana Jr.

The issue of a carrier reporting more total gallons than the tax-paid credit they are allowed in a jurisdiction is not new, said the memo. Yet, “a jurisdiction must provide a method in which a carrier can report the total fuel placed into a qualified motor vehicle regardless of whether the fuel was tax-paid or can be supported by a receipt.”

IFTA reporting varies by jurisdiction.

In some cases, carriers are to report any untaxed or unreceipted fuel on the “other” jurisdiction line of the return. This line is also used for nonmembership operations with a zero-tax rate.

A pause in the collection of fuel taxes will result in the total gallons being different than the tax-paid gallons reported by the carrier. If it’s required that the total fuel entered into the calculation of the mpg equal the tax-paid gallons, a carrier must be advised to report the untaxed fuel portion in the “other” (nonmembership) line so no credit is being calculated for those gallons.

Connecticut, Georgia, Maryland and New York are among the states to recently implement such a pause in fuel tax collection.

Example

A New York carrier purchased 800 gallons of fuel in New York

800 × 59.5% (using New York percentage table) = 476 gallons

 

The carrier would report 800 gallons in the total gallons field used to calculate the mpg and in the tax-paid gallons field for New York they would report 476 gallons. The difference between the two amounts, 324 gallons, would be entered on the “other” jurisdiction line with zero tax rate and no tax-paid credit.

If it’s not required that the total gallons used for mpg purposes equal tax-paid gallons, the carrier would include all gallons purchased from New York in the total gallons for the mpg calculation and in the New York line for tax-paid gallons enter 476 gallons.

“This issue of total gallons not equaling tax-paid gallons will apply anytime a carrier has untaxed or unreceipted fuel,” Martorana said. LL