Understanding Fuel Taxes

Photo of fuel pump

Fuel taxes are one of the most tedious parts of being a truck driver. Four times a year, drivers and carriers must file their fuel taxes. Since it’s such an important part of every trucker’s life, let’s dive deep into it and understand what fuel taxes are, why you need to file them, and what’s behind this requirement.  

To understand fuel taxes, we’ll have to start by understanding the IFTA, which stands for International Fuel Tax Agreement. IFTA is an agreement of 48 states, Canada, and Alaska, that simplifies the process of reporting fuel taxes, and fuel usage by carriers who drive interstate. Before IFTA existed, carriers and drivers had to physically get fuel permits when they entered each state they traveled to and report fuel taxes directly to each state they drove through on their routes. This proved inefficient, expensive, and hard to keep track of. 

Now, thanks to the creation of IFTA, carriers have to get an IFTA license when they register as a member in their home state. Then, the carrier pays fuel taxes at the pump and reports those taxes to the IFTA agency in their base state. IFTA takes care of distributing the taxes to the corresponding states that the driver went through. If there are any fuel taxes due or if the carrier is owed a refund, the carriers pay them or get a refund from the IFTA agency in their base state. IFTA licenses get renewed every year, and to do so you must have filed your fuel taxes. 

Though most states are members of IFTA, there are some that request fuel taxes to be reported directly to them like New Mexico, New York, and Oregon (which does not participate in the IFTA program and does not collect the taxes at the pump). Other states, in addition to the standard fuel tax, also require weight-mile taxes to be reported to them; these states are Kentucky, New Mexico, and New York. This also means that drivers need special permits to drive through those states specifically. 

Additionally, some states have a fuel “surcharge” which means that they can keep a portion of the money in the state, regardless of where the fuel was used. To keep things fair, the best advice is to purchase the amount of fuel you’re expecting to use within that state. 

Now let’s understand fuel taxes themselves. Fuel taxes exist to keep up with highway maintenance, infrastructure development, and general maintenance of our roads. Since trucks are constantly traveling through these roads, they must pay taxes according to how much fuel they used in each state they went through. Each state has different tax rates and parameters and keeping track of them all has proven draining, that’s why IFTA exists and takes on the task to track fuel taxes across states and distribute them accordingly. 

Filing fuel taxes can vary by state. Before filing them, check your IFTA state agency’s website to confirm all the documents you need. In general, you will need to provide the specific numbers of how many miles you traveled per state and how much fuel you purchased as well. 

We know fuel taxes are a hassle, and making a mistake can be costly and result in an audit… 

For help understanding and filing fuel taxes, contact us TODAY! 

We can take care of it all the nitty gritty of filing your fuel taxes so you can focus on what matters: your business!