The 3rd quarter of the year ended just a few days ago and trucking companies all over the country are reconciling fuel purchases and miles driven to ensure proper International Fuel Tax Agreement (IFTA) tax filings. If you are not in the trucking business, IFTA is just another acronym to be thrown around, but here is a quick run down so that you can look smart at social gatherings or answer a jeopardy question in the future.
Every year on July 1st, new state fuel excise taxes are ushered in and yesterday was no different. The chart below lists the increases sorted by highest to lowest. Keep in mind this is on top of the existing state tax. Federal tax is $0.1840 per gallon. This year’s winner is Illinois with a whopping $0.19 per gallon increase. Illinois is one of seven states where drivers pay layers of both general sales tax and special excise tax on gasoline at the state and local levels. Those multiple layers mean drivers filling up in Chicago, for example, will pay $0.96 in taxes and fees on a $2.46 gallon of gasoline which equal a tax burden of 39%. The new Illinois taxes are ear marked for an aggressive infrastructure plan. To be fair, Illinois hasn’t raised the gas tax since 1990.
The newly signed tax bill, Tax Cuts and Jobs Act, has gone into effect and has significantly limited itemized individual tax deductions that are available to trucking companies and their drivers.
Everyone involved in the world of commercial trucking is familiar with the term IFTA (International Fuel Tax Agreement), but not everyone knows why IFTA exists and what its intended functions are. IFTA is an agreement between the majority of U.S. states and the majority of Canadian provinces designed to simplify the way that commercial truck or bus drivers who travel through multiple tax jurisdictions report the taxes on the fuel they purchase.