January 29, 2015

UPDATING IFTA IN 2015

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When searching for information on the IFTA, you may come across IFTA Inc. This is a non-profit corporation that manages and administers the International Fuel Tax Agreement. It is what helps make sure that the 48 states and 10 provinces that signed up for the IFTA are working together.

There are 58 jurisdictions total that collect fuel taxes and each one collects on behalf of themselves and the other jurisdictions. Each jurisdiction retains a sovereign authority to set their own tax rates, exemptions and rules. Because there are so many jurisdictions involved along with the industry side, someone needs to make sure that everyone is on the same page. That job falls to IFTA Inc.

There are two items that are causing major debates between state and provincial fuel tax administrators, which are on the IFTA agenda for this year.

Taxing CNG and LNG

Compressed natural gas (CNG) and liquefied natural gas (LNG) are not being taxed at the same rate. With CNG, it’s difficult to calculate the tax rate because it’s a gas. That means you have to convert the gas into liquid and each conversion rate varies with each jurisdiction. You also have to deal with evaporation rates (liquid vs. gas).

Currently IFTA members are reviewing a proposal that would adopt the IRS conversion factor in July 2016. This would make every 126.67 cubic feet of natural gas convert to a gallon of gasoline.

LNG has two different ways to convert the fuel from weight measures to volume measures. This includes straight weight, where one gallon weighs 3.5 pounds as well as energy equivalent weight, where one diesel equivalent weighs (DGE) 6.06 pounds. Currently, 17 states in the U.S. have adopted using the DGE energy equivalent weight.

However, in Canada, the federal government determines the units of measure and they are opposed to energy equivalents. This means that all provinces will be required to sell LNG in mass units of measure.

GPS-Based Distance Records

The cooperation of both the jurisdictions and the government and industry is needed to make the IFTA successful, but when it comes to compliance audits, this cooperation is often stressed. The IFTA Compliance Audit Working Group (I-CAWG) have been working on a long list of proposed rule changes. These changes will range from retention and availability of records to the adequacy of records to conduct an audit. A main focus for the IFTA is to involve records that are provided by vehicle-tracking systems, including distance records based on a GPS.

Make sure that you do comply with rules as they are today. To be in compliance, you must collect the data you use to calculate the distance and satisfy all jurisdictions that you will be audited in. You should also monitor the issues. IFTA Inc. is has presentation materials, meeting minutes, anything you need to keep updated.

You are required to submit a quarterly IFTA Fuel Tax report and filing out your report can be time consuming. At Progressive Reporting, we have a simple, cost effective system to quickly and easily complete your filings. To learn more about our filing system and our pre-paid IFTA starter kit, click here.

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