For any company that does business carrying products between multiple state jurisdictions (or even countries), there are always a few issues that can complicate business matters. Fuel taxes have long been one such issue.
Back in the day, drivers of cargo-carrying vehicles (basically any vehicle with two axles weighing more than 26,000 pounds, or any vehicle with more than two axles) had to purchase separate fuel permits for every state that they would operate in. States even had established Ports of Entry where drivers would get their permits and pay their taxes, which would take drivers far off of the most efficient route.
How the IFTA Changed Things
Eventually, the International Fuel Tax Agreement (IFTA) was established to simplify the process of paying fuel taxes. With this agreement, drivers now only need one fuel tax license that covers the lower 48 states. The taxes a driver pays at one pump are now applied to every territory that driver passes through.
So, if your drivers buy fuel in Florida, then drive through Georgia on their way to South Carolina, the fuel taxes they paid in Florida will be applied to the taxes they would owe to Georgia and South Carolina.
This agreement has made it easier to plan efficient routes by eliminating the need to stop by the Port of Entry for each state a truck passes through. However, there have been some complications to the paperwork needed to run an efficient vehicle fleet because of it.
Now, drivers, or their companies, have to file detailed IFTA reports that details where they bought their fuel, how much tax they paid, and how many miles they traveled on the roads in each state.
Much like the annual tax return filed by millions of U.S. citizens each year, it’s possible to get a refund on the fuel taxes that were paid when you file your IFTA report. How is this possible?
Let’s look at the example from before, where a driver buys fuel in Florida to drive through Georgia on their way to South Carolina. According to statistics cited by taxfoundation.org, at the time of this writing, Florida currently has the seventh-highest gas tax in the U.S. at 36.42 cents per gallon. Georgia is at #16 with 32.62 cents per gallon, and South Carolina is at #48 with 16.75 cents per gallon.
If you bought 150 gallons of fuel in Florida right at the border, you’d have paid $54.63 in fuel tax. Let’s say for argument’s sake that you burn 100 gallons of that in Georgia, and the other 50 in South Carolina. You would owe GA $32.62 in gas tax, and SC $8.38 in taxes, for a total of $41 in fuel tax owed. The $13.63 that you overpaid in fuel taxes would be owed back to you as a refund.
This is a very simplistic example that leaves out a lot of details, but it helps highlight how the refund basically works.
In some cases, when you take fuel tax out of the price at the pump for fuel, a high-tax state’s gas might be cheaper than the gas in a low-tax state, helping you get more out of every dollar you spend on fuel.
With this in mind, how can you make sure that you maximize the refund that you get through the IFTA reports you file each quarter?
One way is to use GPS fleet tracking software.
How GPS Fleet Tracking Can Help Maximize IFTA Report Refunds
There are a couple of ways that GPS fleet management software and tracking equipment can help you maximize the refunds you get when you file your IFTA reports:
- Providing Verifiable Proof of Miles Traveled in Each State. By tracking your vehicles via GPS, and using fleet management software to create detailed use logs, you can provide ample evidence to support the fuel consumption data you submit in your IFTA report. Using this info can help you easily prove how much tax you owe for each state.
- Optimizing Routes for Best Fuel Cost Post Tax. In many cases, a simple detour to fuel at a gas station on one side of the state line versus one on the other side can mean a big difference in the taxes you pay on the fuel. By fueling up where you’ll get the best fuel cost after taxes, you may end up optimizing your IFTA refund for a larger return.
The mileage tracking and route optimizations provided by GPS fleet management software can have a significant impact on how much money your organization spends on fuel taxes. Even better, it can help you simplify collecting data for your IFTA report and even help prevent audits that take up a lot of time and effort to argue.
Fuel consumption is an enormous part of the operating costs of a vehicle fleet. By maximizing your IFTA refunds, you can help to control fleet management costs and make your fleet more effective per dollar spent.
GPS fleet tracking can be a major tool for making the most out of your IFTA refunds. Learn more about using GPS tracking for IFTA reporting today!
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