How to properly calculate IFTA taxes owed per truck
IFTA Plus has established itself as the leader in online IFTA fuel tax preparation boasting thousands of customers and a growing number of features. One issue, however, has long confused customers and hopefully this will help clarify the matter.
When preparing a state IFTA fuel tax return, IFTA Plus combines all miles driven and fuel purchased across all trucks within the company. An overall company MPG is calculated and used to determine the amount of taxes a company owes. IFTA Plus offers a report showing the amount of taxes owed for each truck. Here lies the problem because there are two approaches to this calculation.
1) Use the company MPG when calculating truck taxes.
This approach uses the company MPG along with the truck mileage and fuel to determine the truck taxes. If a company has 5 trucks and this method is used, the sum of the taxes owed per truck will equal the amount of taxes owed by the company.
2) Use the truck MPG when calculating truck taxes.
This approach uses the truck MPG along with the truck mileage and fuel to determine the truck taxes. If a company has 5 trucks and this method is used, the sum of the taxes owed per truck will not equal the amount of taxes owed by the company. The total taxes owed equals the amount the truck would pay if it were to file on its own.
While the difference may seem slight, it method greatly alters the amount of taxes owed per truck. Take the following example of 2 trucks.
In this scenario, the overall company drove 20000 miles and bought 3500 gallons of fuel for a company MPG of 5.71. The company would have an IFTA credit of $6.29.
When calculating the amount owed per truck
If we use the company MPG, Truck 1 would owe $139.57 and Truck 2 would get a credit of $145.86. The total of these equals the overall company IFTA credit of $6.29. If we use the truck MPG, Truck 1 would get a credit of $20.00 and truck 2 would owe $31.25. The total of these does not equal the overall amount paid by the company.
Which approach is best for you?
This is hard to determine. You will be able to justify either approach. Using the company MPG penalizes drivers who get better gas mileage, but it better reflects their contribution to the amount of taxes your company paid. Using the truck MPG is more fair to the drivers, but in the end the sum of the trucks does not total the amount owed by your company.
No matter which choice you prefer, IFTA Plus lets you decide which method is best and provides you an easy way to switch between these methods. For current customers, to change this setting navigate to settings -> IFTA and check or uncheck the ‘use the company MPG as compared to the truck MPG’ setting.