One might wonder why, exactly, IFTA is so important. The money generated from fuel taxes—in most states, at least—goes toward maintaining, repairing, and building the highways themselves. What IFTA does, is make sure all member jurisdictions get their share of the money generated.
Let us say, for example, a driver purchases fuel as they are leaving one state, then they immediately drive across another, but do not have to refuel. That second state would not be directly receiving any tax money for their roads. This is why tracking your miles, fuel purchase and fuel mileage in each state is so vital. At the end of each fiscal quarter, the driver or the company figures up how many miles were driven in each state, how much fuel was purchased, and what the fuel mileage would be in each state so that the proper amount of fuel tax due each state can be passed around as is appropriate.
As a more precise example, let’s say a driver fuels up as he’s leaving California. He might not purchase fuel again until Arizona, New Mexico or even Texas, depending on the kind of fuel mileage his truck runs. The fuel tax paid in California will have to stretch across the miles he drove in the other states until he fuel again, and then the cycle repeats.
Obviously, some states have higher fuel taxes than others. Some drivers might attempt to purchase more of their fuel in the higher tax states to help even out fuel purchased in lower tax states. This is because if a driver purchase fuel in a lower tax state, such as Missouri who gets 17¢ for example, then drives across a state with higher a fuel tax, such as Illinois who gets 21¢, then he or she may have to pay in to IFTA. If he fuels in Illinois, however, then drives into Missouri, then he’s paid a higher fuel tax that can help cover the cost of Missouri’s share of the taxes.
The driver sends his IFTA information back to the state or jurisdiction that holds his license. If he’s a company driver or is an owner-operator leased to a company, then chances are, that company figures it all up. The home jurisdiction, then, makes sure all the appropriate states get their share of the fuel tax money. If the driver owes a little more, then he will send what money is needed. If a driver has his own authority, he is responsible for figuring everything up and making sure that home state has the necessary money.
The best IFTA tracking methods including recommended IFTA mileage trackers like the best apps, software, and GPS trackers.
A detailed look at the International Fuel Tax Agreement (IFTA), including who participates in the IFTA and how it started.