IFTA and Lease Operators

Okay, here we go. Let's see if I can explain this one at least reasonably clearly.

IFTA (International Fuel Tax Agreement) is more than just a piece of paper that New Mexico and Arizona want to see all the time. Each State and Canadian Province has its own fuel tax rate and, in some cases, method of collection. We'll get into special cases later, but here's the basic idea: You only buy fuel about every 700 to 1,000 miles if you are anything like me. You will cross as many as six States (or more, if you're tooling around the Northeast) before you stop to fuel again. You are not floating above the roads in the States you pass through between fuels, so each of those States wants to be paid for upkeep of the roads. (Substitute Province for your trips into the Nation to our north.) IFTA is the replacement for those old "Bingo Card" plates we used to see on trucks with all those little State stickers on them.

Here's how it works: You fuel in one State and pay a per-gallon fuel tax at the pump. That fuel tax does not automatically go into that State's coffers. It gets added into a pool with fuel taxes paid in all other States and Provinces who are members of IFTA. At the end of the quarter, it is divvied up among the States and Provinces based on how much fuel was burned in each member State. Your mileage through the State, divided by your MPG equals gallons burned while in that State. That number of gallons multiplied by that State's fuel tax is its cut of the taxes you paid at the pump. Clear as mud, right?

When looking at price-per-gallon in the truck stop fuel price indexes, subtract whatever the fuel tax is in that State from the pump price and you will have actual price-per-gallon. Consider your fuel tax as going into a "bank" to pay each State you pass through. Here's where it gets interesting: you can buy your fuel where it is least expensive pump price and still end up owing tax at the end of the quarter. Huh? But I paid it at the pump! Not so fast. If you fueled in Wyoming and paid 14cpg tax, then burned all your fuel in Nebraska, you will owe Nebraska the difference between its 26.4cpg and Wyoming's 14cpg, or 12.4cpg for each gallon burned while driving in Nebraska. Therefore, when buying your fuel, sometimes it might be a good idea to pay a higher tax at the pump and you won't owe later. Kind of like a with-holding allowance on a W-4 form. If you don't have any problem ponying up the deficit at the end of the quarter, then by all means, purchase where pump price is cheapest.

Here are some exceptions:
Oregon. That paper you have to show the scale guy and that you have to get the number off of before getting fuel is proof you (or your company) have the trip taxes up to date. You do not pay tax by gallon, but rather, by mile. That's why there are four prices listed for fuel at the truck stops: Credit with PUC, Credit without PUC, Cash with PUC and Cash without PUC. Your Tax Identifier permit is your PUC. You do not pay fuel tax at the pump in Oregon.

Indiana: While a member of IFTA, Indiana does not charge the full tax at the pump. Tax at the pump is 16cpg, but Indiana will get an additional 11cpg from the quarterly IFTA.

New Mexico at one time was not part of IFTA. I believe this changed a few years ago, so you no longer have to carry a separate permit for New Mexico.

The way I work it is I try to buy fuel for the lowest actual price while paying a higher tax. That way, I am actually spending less money overall between taxes and fuel. Example: Nebraska charges 26.4cpg for tax. Iowa charges 22.5cpg for tax. If both prices are the same, I will buy my fuel in Nebraska. Wyoming only charges 14cpg. If I can get fuel in Nebraska for $3.89/gal at the pump, but Wyoming is selling it for $3.81, on face value, it would seem Wyoming is a better deal. Well, it's actually not. $3.81 minus 14cpg tax = $3.67 (WY) $3.89 minus 26.4cpg tax = $3.626 (NE) I think I'll buy in Nebraska.

Hope this sort of make sense.

 

It's called a Qualcomm.

Or, in the case of people without, they write the mileage down coming in and leaving. That's what I did with Celtic. If you cross a scale, you have been recorded. If you don't pay your fuel tax, it will eventually catch up with you. Those States are pretty proactive about getting their tax money.

Montana does spot fuel checks on occasion. I was pulled to the side at the scale and the little gal put a clear plastic tube in my tank and lifted some fuel out (like we used to do with pop so we could shoot it at our siblings....oh....you didn't do that?) so she could look at the color of the fuel. Red fuel means it's offroad fuel that has not been taxed.