What is an International Fuel Tax?

Jessica Reed

The term international fuel tax refers to the various fuel tax prices that differ by area. Certain states may have different taxes on fuel and their tax laws differ. This causes problems when commercial drivers attempt to log and file a tax report for a deduction on the fuel purchased for work purposes. While the driver typically receives a portion of his money back, this process is confusing when he had to purchase fuel in different states with different fuel tax prices. For this purpose the International Fuel Tax Agreement, abbreviated IFTA, was created.

There are various taxes that affect the price of gas and diesel at the pump.
There are various taxes that affect the price of gas and diesel at the pump.

The International Fuel Tax Agreement covers all states in the United States except Alaska and Hawaii. It also covers parts of Canada, excluding the Northwestern Territories, Yukon, and Nunavut. This agreement says that certain drivers must receive an IFTA license and follow the rules set out in this agreement when reporting their fuel use. This makes it much easier to report to tax companies when filing for a refund on taxes paid.

There are three main descriptions that cover those who need an IFTA license. If the driver's vehicle has a gross vehicle weight rating, or a registered gross vehicle weight, above 26,000 pounds (11,793 kg) then the driver must apply for an IFTA license. This also applies to drivers whose vehicles have three or more axles even if they do not meet the first requirement, and those whose combined vehicle weight is 26,000 pounds (11,793 kg) or more.

There is one exception to the IFTA license rule. If the driver is not driving the vehicle on public highways, or if the public highways he is driving on do not participate in the International Fuel Tax Agreement, he does not need an IFTA license. This rule typically only applies to commercial vehicles. Those used for recreation generally do not fall under this category because they are not applying for a refund on fuel taxes.

Need for an International Fuel Tax Agreement arose when commercial drivers traveled between areas with different fuel taxes. The driver was forced to carry a tax permit for every state he operated in commercially. The driver was then subject to the different fuel tax laws in each state. This was not only a hassle for the driver but also for the state who had to keep up with the various regulations and laws. Today drivers simply carry an IFTA license and all follow the same set of laws that govern all participating areas.

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