International Fuel Tax Agreement (IFTA)
IFTA is an agreement among U.S. states and provinces in Canada that simplifies the reporting of fuel use taxes by interstate motor carriers who operate in two or more member states or provinces.
The purpose of IFTA is to establish and maintain a single fuel tax license for all of your qualified motor vehicles, authorizing them to travel in all IFTA jurisdictions, requiring you to file only one tax return each quarter with your base jurisdiction to report your fuel usage and mileage for all IFTA member states and provinces.
You qualify for an IFTA license if all the following apply:
- You operate your qualified motor vehicle on California highways and in any other U.S. state or Canadian province that is a member of the International Fuel Tax Agreement.
- Your qualified motor vehicle(s) are based in California and registered with the California Department of Motor Vehicles (DMV).
- You perform operations from an established physical place of business in California (a post office box, mail drop address, or agent address box do not qualify).
- You maintain the operational control and operational records for your qualified motor vehicles in California, or you can make those records available in California.
If you operate a diesel-powered qualified motor vehicle whose interstate travel is restricted to Mexico and California, you do not qualify for an IFTA license. However, you would qualify for the Interstate User Diesel Fuel Tax License, see the Interstate User Diesel Fuel Tax pages.
If you operate a qualified motor vehicle whose travel is restricted to California only, you are not required to hold an IFTA or Interstate User Diesel Fuel Tax License.
Your International Fuel Tax Agreement credentials are valid in the following member jurisdictions:
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
- British Columbia
- New Brunswick
- Nova Scotia
- Prince Edward Island
Carriers traveling in non-IFTA jurisdictions must continue to follow any applicable procedures and file the fuel tax returns required by those jurisdictions.
Your credentials are not valid in the following non-IFTA jurisdictions:
- United States: Alaska, Hawaii, and the District of Columbia
- Canada: Northwest Territories, Nunavut, and Yukon Territory
- Mexico: All states, and the Federal District of Mexico City
Qualified Motor Vehicle
A vehicle used or designed to transport people or property is considered a qualified motor vehicle if it:
- Has three or more axles; or
- Has two axles and a gross vehicle or registered gross vehicle weight of more than 26,000 pounds or 11,797 kilograms; or
- Is used in a combination that has a combined or registered gross vehicle weight of more than 26,000 pounds or 11,797 kilograms.
A recreational vehicle, such as a motor home or a pickup with a camper, is not considered a qualified motor vehicle when an individual uses it exclusively for personal pleasure. Vehicles used in connection with a business operation are not considered recreational.
Annual IFTA License and Decals Renewal
Beginning December 1st of each year, you must renew your IFTA license. In addition to your license, you need one set of two decals for each qualified motor vehicle in your IFTA fleet.
You may renew and pay for your IFTA credentials and decals through our online services webpage.
You must file all required IFTA tax returns and be current on all your tax payments due to member jurisdictions for us to process your license renewal.
You have until the last day of February of each year before you must carry a current IFTA license and display the current year's decals on each of your vehicles, provided you applied on time to renew your IFTA license and your account is in good standing.
During January and February of each year, a valid IFTA license and decals from the previous year will be honored by IFTA member jurisdictions in lieu of valid, current-year IFTA credentials.
You must submit your renewal application online by December 31st of the current year to qualify for the grace period.
If you are adding a qualified motor vehicle to your current IFTA fleet that will be traveling interstate and need to request additional decals, log in to your online services account to order additional decals.
IFTA Filing Information
You must file a California IFTA tax return each quarter for your entire IFTA fleet through our online services webpage even if you do not travel outside of California or do not travel at all during the reporting period.
As you input your total miles and total gallons online, our system will calculate the tax you owe, or credit due to you for tax paid on fuel you used in each member jurisdiction. If you owe tax, you will make one online payment to us, rather than payments to individual jurisdictions. If you have paid more tax than is owed, the overpayment will be refunded.
Fuel Tax Surcharges
For some jurisdictions (currently Kentucky and Virginia), you must pay an additional fuel tax for fuel used in that jurisdiction, otherwise known as a surcharge.
Surcharges are not collected at the pump; and you cannot claim “Tax Paid Gallons” on a surcharge line. As a result, you will always have a tax due for a surcharge if you have any taxable miles in the jurisdiction.
Adjustment For Tax-Exempt Miles
Some IFTA jurisdictions define certain miles traveled by motor carriers as tax-exempt.
While the tax-exempt miles you travel must be included as “Total Miles” on your quarterly tax return, you may deduct them when you calculate “Taxable Miles” for a particular IFTA jurisdiction.
Each IFTA jurisdiction has its own definition of tax-exempt miles. It is your responsibility to know what are tax-exempt miles from each jurisdiction in which you operate.
All jurisdictions require you to retain documentation to support a claim of tax-exempt miles. For a list of jurisdictions and tax-exempt miles, please visit the IFTA, Inc. website at www.iftach.org.
California Tax-Exempt Miles
California considers only those miles traveled under a valid California Fuel Trip Permit (CFTP) to be tax-exempt miles for the purposes of the IFTA quarterly return. To recover the fuel tax you paid on fuel used in other non-taxable ways, you must file a claim for refund through our online services.
IFTA jurisdictions may issue more than one type of trip permit. A trip permit may be issued as a temporary vehicle license, for payment of fuel tax, or for another purpose. Under IFTA, you may report only the miles your IFTA vehicles traveled using a fuel trip permit. You must include the fuel trip permit miles in the “Total Miles” for the individual jurisdiction and deduct them when calculating your “Taxable Miles” on your IFTA schedule. You cannot adjust your miles for travel using any other type of trip permit.
Reporting Electric and Hydrogen IFTA Vehicles
You are required to report all IFTA decaled vehicles, including your electric and hydrogen vehicles on your IFTA quarterly tax return.
Although many jurisdictions don't have a tax rate established for these fuel types, carriers who utilize electricity or hydrogen in the power unit(s) of their vehicle(s) must report the purchases of these fuels on their IFTA returns using gallon equivalents. Please refer to the IFTA Tax Rate Matrix webpage for information on the conversion of electricity/hydrogen to gallons.
Currently, there is not an established California IFTA tax rate for either electricity or hydrogen fuel types.
Reporting Diesel Exhaust Fluid (DEF)
DEF gallons should not be included in the gallons reported on your IFTA tax return.
Refrigeration Units (Reefer) Gallons
Reefer gallons are not included in the gallons reported on your IFTA tax return.
IFTA Member Jurisdiction with a Zero-Tax Rate (Oregon)
The miles driven and gallons purchased in an IFTA member jurisdiction, such as Oregon, that has a zero-tax rate should be included on your tax return by jurisdiction and in the total miles and gallons.
Fleets with Vehicles Powered by Different Fuel Types (Liquified or Compressed Natural Gas)
The IFTA tax return is prepopulated with the corresponding fuel types from your vehicle inventory.
Personal Use of IFTA Qualified Vehicle
All vehicle miles traveled (personal and business) and gallons placed into the fuel tank should be reported on your quarterly IFTA tax return.
Bulk Fuel Storage
If you maintain a bulk fuel storage facility, you may obtain credit for tax paid on fuel withdrawn from that storage facility and used in your qualified motor vehicles, provided you maintain the following records:
- Date of withdrawal
- Number of gallons or liters withdrawn
- Fuel type
- Unit number of the vehicle into which the fuel was placed
- Purchase invoices and inventory records showing that tax was paid on your bulk fuel purchases
- Gallons withdrawn from your bulk storage and used in qualified vehicles should be listed under “Tax-paid gallons” on your quarterly IFTA tax return
Penalty and Interest
If you do not file your quarterly tax return by the due date, or if you fail to pay the tax you owe by the due date, you may be subject to penalty and interest charges. The penalty is $50 or 10 percent of the total net tax due with your return, whichever is more.
Interest on unpaid tax is charged at the established monthly interest rate per full or partial month. We will calculate interest beginning on the date after your tax return and tax payment were due, continuing through the month in which you pay the tax. Unlike penalty charges, interest is computed on the tax due to each member jurisdiction, rather than the net total due with your report.
Please visit our Online Filing Instructions webpage for information needed to file your IFTA tax return.
License Revocation and Reinstatement
It is important to comply with the provisions of the IFTA Agreement, to avoid any disruptions to your business due to license revocation.
We will revoke your license if you do not:
- Comply with all provisions of the IFTA Agreement and California fuel tax laws and regulations.
- File a quarterly IFTA fuel tax return.
- Pay all taxes due to all member jurisdictions.
- Pay the amount due to an audit billing or fail to petition for reconsideration within the established time period.
We will notify all IFTA jurisdictions if we revoke your license. If you operate a qualified motor vehicle in an IFTA jurisdiction after your license has been revoked, the jurisdiction may assess a penalty, fine or citation, depending on the jurisdiction's laws.
We may reinstate a revoked IFTA license after you file all required returns, pay all outstanding liabilities, and pay a reinstatement fee. You may be required to post a security deposit sufficient to satisfy potential liabilities for all member jurisdictions.
Traveling Interstate Without IFTA Credentials
If you travel in an IFTA jurisdiction without valid IFTA credentials or a fuel trip permit, you may be subject to a penalty, fine or citation, and possible seizure and sale of your vehicle depending on the jurisdiction's laws. In California, you may also be required to file any delinquent IFTA returns and pay any outstanding liabilities before continuing your travel.
If you operate a qualified motor vehicle without carrying a copy of your current, valid IFTA license, you may be subject to a citation, fine, penalty, and possible seizure and sale of your vehicle. In addition, you may be required to purchase fuel trip permits to travel into or through each member jurisdiction.
You must attach one decal to each side of each vehicle's cab, in the lower rear corner. For buses, please attach one decal on each side, no further back than the rear of the driver's seat, at eye level from the ground. If you do not display the identification decals in the required locations, you may be required to purchase a California Fuel Trip Permit, and be subject to a citation, penalty, fine, and possible seizure and sale of your vehicle.
Lease agreements vary, and your responsibility to apply for a license and report tax under IFTA depends on several factors.
While IFTA does not require that you travel with a copy of your lease agreement, we recommend that you do so. If we have any question about your fuel tax reporting requirements, having a copy of the lease agreement on hand may get you back on the road faster.
Independent contractors encompass long-term leases and short-term leases.
Long-term Leases (30 days or more)
When a carrier (lessee) leases, for 30 days or more, a vehicle owned by an independent contractor (lessor), the parties to the lease may determine who will report and pay the fuel use tax due. The written lease agreement should state which party is responsible for reporting and paying the fuel use tax. If it does not, the lessee will be held responsible for any fuel use tax due under IFTA.
When the written lease agreement specifies that the lessee has responsibility for paying the tax, the base jurisdiction for the vehicle should be established without consideration of the jurisdiction where the vehicle is registered.
For example, if you are a carrier who has leased a vehicle registered in Oregon from an independent contractor, and you keep your records in California, control your operations from California, and your vehicles accrue some travel miles in California, California would be considered your IFTA base jurisdiction, even though the vehicle you lease is registered in Oregon.
Short-term Leases (less than 30 days)
When a carrier (lessee) leases a vehicle from an independent contractor (lessor) under a short-term lease of less than 30 days, the lessor will generally be liable for reporting and paying the fuel use tax due under IFTA.
Vehicles Rented or Leased Without Drivers
Lessors regularly engaged in the business of leasing, or renting motor vehicles without drivers, are generally responsible for reporting and paying the fuel use tax.
Long-term Leases (30 days or more)
When a vehicle is leased or rented without a driver for a period of 30 days or more, the lessee is generally required to register and report fuel use tax under IFTA. However, the lessor may register and pay the fuel use tax if the lease agreement clearly states that the lessor is responsible.
Short-term Leases (less than 30 days)
When a vehicle is leased or rented without a driver on a short-term basis (less than 30 days), the lessor is generally responsible for registering and reporting the fuel use tax under IFTA. However, the lessee must report and pay the tax when:
- The written lease or rental contract specifies that the lessee is responsible for reporting and paying fuel use tax, and
- The lessee provides the lessor with a copy of the lessee's IFTA license, which must be valid for the term of the lease.
Carriers of Household Goods Fuel
For carriers of household goods using independent contractors, agents, or service representatives, IFTA fuel tax reporting and payment liability depends on whether the qualified motor vehicle is operated under the lessor or the lessee's operating authority.
Lessor Responsible for Tax (lessor's operating authority)
The vehicle is operated under the lessor's operating authority. In this case, the lessor—generally the independent contractor, agent, or service representative—is responsible for registering, reporting, and paying fuel tax under IFTA. The vehicle's registration jurisdiction should not be considered in determining the lessor's base jurisdiction.
Lessee Responsible for Tax (lessee's operating authority)
The vehicle is operated under the lessee's operating authority. In this case, the lessee—generally the carrier—is responsible for registering, reporting, and paying fuel tax under IFTA in their base state. The vehicle's registration jurisdiction should not be considered in determining the lessee's base jurisdiction.