IFTA: Tax Holidays Can Cause Compliance Woes for Carriers

With some states implementing “tax holidays” to counter rising fuel costs, complications have started to surface when carriers report untaxed fuel. 

These issues stem from internal systems that may require a carrier’s total gallons to equal tax-paid gallons, according to a June 23 memo from the International Fuel Tax Association (IFTA). 

“A jurisdiction must provide a method in which a carrier can report the total fuel placed into a qualified motor vehicle regardless of whether the fuel was tax paid or can be supported by a receipt,” the memo from IFTA Executive Director Carmen Martorana Jr. read. 

Connecticut, Georgia, Maryland and New York are among the states which recently paused fuel tax collection. 

Some jurisdictions, according to the memo, have informed their carriers to report any untaxed fuel in the “other” jurisdiction line of the return.  

As an example, the memo calculates that a carrier purchasing 800 gallons of fuel in New York would be permitted a 59.5 percent tax paid credit. The carrier would multiply the 800 gallons by the 59.5 percent credit to get 476 gallons. 

The carrier would then report the total 800 gallons in the total gallons field and put 476 gallons in the tax-paid gallons field. The difference between the two numbers — 324 gallons — would then be put in the jurisdiction line labeled “other.” 

For jurisdictions that don’t require the total gallons to equal the tax-paid gallons, using the previous example, the carrier would include all 800 gallons purchased in the total gallons line and then report 476 gallons in the line for tax-paid gallons.