What is IFTA? Things you need to know if running a Fleet Management Business
IFTA, a common term used in a fleet management business, stands for The International Fuel Tax Agreement. The agreement has 48 states in the US, excluding Alaska, Hawaii, the District of Columbia, and ten Canadian provinces, and the objective is to simplify the fuel taxation process further.
Thus, the commercial carriers need to carry an IFTA Calculator license if they operate in the states mentioned above, making them eligible for filing tax every quarter.
Back in the day, when IFTA was not in the picture, the commercial carriers were used to file tax reports in every state they had to operate to obtain state-wise fuel permits. This agreement lifted that burden off the fleet management companies.
Let’s read about the criteria a vehicle needs to fall under to qualify for the IFTA license.
- Transportation of persons or property.
- Gross vehicle weight of over 26000 pounds.
- Three or more axles in the power unit irrespective of the weight.
- The gross vehicle weight of this combination should exceed 26000 pounds.
Fleet management companies who operate their carriers in two or more IFTA applicable estates need to possess an IFTA license. These vehicles should have a record of total miles driven, fuel purchased, and fuels tax paid in each state during their trips.
This is crucial to proceed with accurate tax filing in every state in accordance with their tax rates.
IFTA Software Tools
There is no denying that IFTA has eased out the lives of people in business involved in logistics in America. However, the complex calculations and tax filing still require effort. It can be sometimes exhausting for fleet managers to keep a record of every mile and penny in every state. Assigning accountants for these complex tax calculations is also an expensive deal. That is why plenty of software and logistics companies have come up with ifta Calculator software packages that complement IFTA and make the life of these company owners easier.
These tools are of great help and simplify the work ahead for fleet management firms. Let’s discuss the perks of this software:
- Calculations
Remembering the distance covered in each state can be difficult at times, as accuracy is not guaranteed. It can also lead to a considerable amount of errors. This software helps you in recording the miles automatically. Not only this, but the ifta calculator software also records the idling time, number of breaks, duration of the journey, and other crucial details that help the fleet manager to prepare reports with accuracy for every trip.
2. Automated Tax filing
The quarterly tax has its deadline on the last of the quarter month, and if you fail to file the tax on time, you are penalized with a charge of $50 or 10% of the taxes, which can be quite high at times. The software automatically files the taxes on time and makes your journey hassle-free to save from such expenses.
What can be the common errors while filing IFTA?
Human errors are common, and that’s why software is built to minimize them. However, these tools do not eliminate the errors, and thus, one always has a space to make some mistakes. Filing taxes late can be fixed by tools, but a technological glitch can cause more mistakes such as:
3. Excluding personal miles
It’s not always that the truck is carrying loads. Sometimes the driver can go for lunch or dinner to a nearby motel. Now, as per the rules of IFTA, every mile drove, irrespective of the purpose, is counted. So, the company must take account of every mile.
4. GPS Systems error
The monthly or quarterly maintenance of the vehicle should also ensure that the installed systems are working efficiently. IFTA software works in sync with the odometer and GPS Sensors. The accuracy of these GPS devices can be close to 4–5 meters. But a faulty meter can entirely change the calculations, thus creating further complications in the calculation.
The process of taxation is anyway lengthy and complicated. The time-consuming burden was taken off with the introduction of IFTA as it helped the commercial enterprise keep a clean record of tax filing. IFTA has been a blessing for fleet management firms, making taxation very simple.
