working with IFTA

I understand your frustration. I got killed last quarter in Illinois but I hate to buy fuel there when I can buy it in Missouri so much cheaper. And then there is Kentucky and Indiana that charge an additional excise tax on top of IFTA. The only thing I have figured out is I can't necessarily control where I run but I can control where I buy fuel. Still I owed $186 in IFTA for the last quarter.

 

There is no way to optimize for IFTA.
IFTA tax is calculated for each quarter of the year based on how many miles you ran in each state. You cannot change what will be owed other than by improving your fuel mileage.

To buy the cheapest fuel you need to take the fuel price and deduct the tax. That will give you the price of the fuel. If you're comparing price within one state then you can just look at the pump price. But to determine the price of fuel across state lines then you have to deduct the tax and that price will be what you pay for the fuel. At the end of the quarter you'll pay the same amount of fuel tax no matter where you buy the fuel.

So always buy the fuel at the cheapest price. And to compare prices always deduct the fuel tax from the pump price to know what that price is.

Here's a link to a list of fuel tax with state fuel price averages: http://www.truckmiles.com/fuelprices.asp

 

When I finished I saw that several states were negative by a lot but that I owed CA $700. I thought, that's okay... all the State's with negatives will "redistribute" to California. Well my IFTA office said "too bad that's not the case". So... I'm trying to figure out how to most efficiently purchase fuel. I know this is going to vary dependent on states traveled, but is there a general methodology out there that works?

When you buy fuel you pay the fuel tax that is charged at the pump. (Each state has a different tax rate per gallon.) Say you buy 100 gallons in PA; you will have paid $51 in fuel tax at the current tax rate of $0.51 per gallon. Now if you drive most of your miles in MD you will end up with a credit on your IFTA account because MD charges less fuel tax. Where you drive your miles is what matters for what you pay...not where you buy your fuel. If you do it the other way around and buy your fuel in MD but drive most of your miles in PA you will end up owing money at the end of the quarter because you would have only paid $27.75 in tax when you bought the fuel at the pump. But because you were driving on PA roads, PA is owed its fuel tax for all those miles you did in PA. And you can use any combinations of states for this...it's the same everywhere. Some states charge additional taxes based on your miles operated in their states, but that doesn't affect determining the fuel cost at the pump because all you want to do to determine where to buy the cheapest fuel is to take away the tax so you're left with only the price of the fuel.

But back to the point of redistributing the fuel tax... Yes it does get distributed. What I think probably happened on your return is that you ended up with a deficit instead of a credit so you had to pay more because there wasn't enough in your IFTA account to cover what you owed. But there is nothing wrong with that. It doesn't matter if you owe money or have a refund at the end of each quarter. You will pay the same amount no matter where you buy your fuel. Because it's based off the miles you run in each jurisdiction and your fuel mileage. Therefore pump prices can't change the IFTA tax owed.

Does everyone just fuel up a little in every state?

No. Do not buy a little fuel in every state. Buy your fuel where it's the cheapest. Pump price minus state fuel tax equals fuel price...then compare prices and buy.

Am I over-thinking this?
No, you're not over thinking it but you don't understand it yet.

Does it all just even out in the end when we file anyway?
Eh...yes and no. IFTA will be the same no matter where you buy your fuel. If you have 6 miles per gallon for a quarter and you run however many miles in each state your fuel tax will be X no matter where you bought your fuel. You could have bought a little fuel in each state or you could have bought it all in any one state and your quarterly IFTA tax owed will not be affected by it.

I dont want to be pre-calculating my fuel purchases and their effects on IFTA every trip. Or is that what I should be, should have been doing? Sheeesh, does an owner-operator ever get to drive a truck or do we just do paperwork all day? Does my question make any sense to anyone?

Fuel purchases do not affect IFTA.

 

The fuel price game is an interesting one. The short version is: you will pay the IFTA tax in the state that you "use" the fuel, no matter what. Miles is miles. Speaking only to IFTA, gaming the system only trades paying more tax at the pump versus paying it on your quarterly return. Some folks like paying a little at a time, others, like me prefer to just pay it quarterly.

Get the free smart phone app Fuelbook and you can sort a route on price minus IFTA to get the lowest actual fuel cost, regardless of the price on the pump. After a while, you'll figure out where on your usual lanes that the lowest cost fuel will be sold. Then it gets easier to plan your trips around that. A great example right now, is looking at the I-85 corridor in GA, SC, and NC, lowest pump prices are $3.71, $3.59, and $3.85 respectively. Take out IFTA and you're at $3.54, $3.43, and $3.48. SC is still the cheapest, but NC and GA are reversed. There's another sneaky reason for fuel in NC being a better overall deal than GA in that example (read on). So load up fuel in SC and do a lot of driving in NC and you will have a fatter balance due on your IFTA return, but overall have paid less on fuel alone by about a nickel a gallon. Over three months time, across many states, that adds up.

Oh yeah, don't forget that the big 3 are usually 10-15¢ higher than other places that don't have the same facilities. So when comparing take into account any discounts your carrier or fuel program may get at certain places, or at the very least the cost of stopping to fuel someplace then going to another truck stop for a shower or better parking or food choices. You'll burn an extra gallon or three, plus about 30 min minimum, making the second stop, taking almost $10 plus time off the top of any savings you got. but you have to check carefully. There was a couple months in the fall when PFJ was within a few pennies of the off-name places. I could spend a dollar or two to get the free shower and still save a few bucks. Then every so often I'd spend points on fast food and save even more. Last week that wasn't the case. Only Love's had pricing close to the lowest in a few spots, so that was where I got my showers. Otherwise I loaded up at the off-brand stops and just paid cash for one shower, and still around $60 ahead. Do that four weeks in a row and $240 is nothing to sneeze at.

Know that five states (AL, CA, GA, IL, NY, as far as I know) automatically add retail sales tax at the pump, even though in most states a motor carrier's fuel use is not considered a retail purchase. Typical government maneuver to shift money out of your pocket and hope that you won't jump through the flaming hoops to get it refunded.

The feds do the same with IFTA. It's charged automatically unless you use dyed fuel from a dedicated off-road pump. If you like the convenience of filling your reefer or other off-road power unit at the same pump without buying/storing bulk or finding a farm pump, you're paying IFTA on it.

 

I usually had a credit after filing IFTA. The first time I ever filed I was so pee'd at the fact I had to pay anything. Their is a trick to get IFTA to work in your favor and to the point you can almost pay for your plates every year. The trick is to never fill in states with little or no fuel tax. Fill in states that have higher taxes. For example I live in CT the fuel tax here is high for practical reasons lets say it's $0.40/gal. I pump 100 gallons & use 50 gallons in CT, the other 50 gallons I use in MA & lets say the tax is $0.20, I now get a credit for the 50 gallons used in MA for $0.20/gal. Now if you follow this model in every state you travel, and watch the price closely, you will always come out on top. In your case I would have filled as close to the boarder of CA within CA and got as many gallons as possible.

 

Isn't it better to hold your own money instead of making an advance at the pumps? This sounds like claiming zero exemptions on your W-4 so you can get money back on your fed taxes. Problem is, it's your own money you're getting back, not a windfall.