Trucking companies: Tools to assist with IFTA and HUT reporting, fuel tax prep, and frequent tax changes

As any fleet manager is aware, there are a variety of tax implications that come with overseeing a fleet of vehicles. Beyond the usual income tax and business taxes that your business pays annually, fleets have responsibilities in fuel tax reporting, particularly if your drivers are crossing state lines while on the job. When you partner with a fleet card company, the data provided to you can make this burdensome set of tasks feel a whole lot lighter.

How does fuel tax reporting work?

Most trucking businesses – those in class seven or eight – drive in multiple states. When your vehicles enter a new state your company is responsible for paying that state’s fuel tax. This is typically a usage type of tax: you are paying for the miles you drive on each state’s roads. Typically the tax is paid at the pump, but oftentimes drivers fuel in the state where they are based, and then travel across state lines and do a lot of driving in other states. This means your drivers aren’t buying enough fuel in a given state to offset the tax that was incurred based on the mileage driven in that state. At the end of the quarter you need to correct those discrepancies by paying for the travel in other states and being reimbursed for the fuel tax dollars paid in your drivers’ home states. A fuel card program, especially one that offers fuel tax reporting, can help you organize and prepare for these payments

What is IFTA and what do fleet managers need to report based on IFTA?

The 1996 International Fuel Tax Agreement (IFTA) is an agreement between the lower contiguous 48 states in the U.S. and Canada. It simplifies fuel tax reporting for fleet trucking companies, and takes what was once an onerous process and simplifies it for fleet managers. Here’s how it works: with IFTA, drivers are required to track how much fuel they use and how far they drive in each state. This information must be reported quarterly and the states/provinces all share the tax revenue based on IFTA reporting.

Do I have to file multiple reports for each state in which my drivers travel?

No, that’s the beauty of IFTA. Here’s an example: With a fleet that’s based in Utah, because of IFTA, they only have to file one report to the state of Utah and pay whatever tax balance they owe to the state of Utah. In the past, each fleet had to file different tax reports in every state in which they drove which made for a burdensome process. IFTA requires that companies report both mileage and fuel purchased in each state, but it can be recorded in a single report.

How does using a fuel card help me with IFTA reporting?

As long as you’re using a fuel card like WEX’s fleet card, all the necessary details to meet the individual state requirements for fuel tax reporting will be automatically reported to you. This happens in real time as your drivers fuel their vehicles. When you use a fleet card like WEX’s fuel cards, all the pertinent fueling data related to the transaction that is required by IFTA is captured: the number of gallons purchased, the type of fuel purchased, date, time, truck number, invoice number, and the location of the purchase.

How does using a fleet card differ from fueling up with a Mastercard or Visa?

When using a Mastercard or a Visa, the reporting is less robust, and will not provide you with the level of specific data you need for fuel tax reporting. You will only see a lump sum on your statement. If your driver buys fuel, oil and additives, a corn dog, a drink, and a bottle of washer fluid, on your credit card statement you’re simply going to see a transaction at Pilot, or Flying J, or any number of other truck stops for $437 with no line item detail. With Mastercard and Visa, drivers must hold on to detailed receipts, and the fleet manager must parse out the line items on each drivers’ receipts that are relevant to fuel tax reporting. Fuel cards simplify and streamline this time-consuming process.

How do you get that necessary fuel tax data from your fleet card provider?

With a fuel card like WEX’s, customers are provided with spending breakdowns to help assist with tax reporting. These reports include all the necessary details to easily see a state-by-state breakdown of the number of gallons of fuel purchased. Those reports can be generated on demand or they can be scheduled and pushed to fleet managers with whatever is the desired frequency: reports can be run on demand, daily, weekly, monthly, quarterly, or annually.

How can GPS tracking tools help with pulling fuel tax data?

GPS navigation tools like Geotab or Verizon Connect provide data that helps you track the roads your fleet has traveled. Most GPS providers can also provide a state-by-state breakdown of mileage. This would include a record of what routes were taken through each state, which would meet the reporting requirements of IFTA. The GPS systems typically have that road-tracking side of IFTA covered and fleet card providers typically have the fuel purchase side of the data.

Using a combination tool that aggregates GPS tracking data with fuel card spend data helps make tax reporting seamless and easy

A combination of GPS data and data from your fleet card company can provide the ideal scenario when you’re looking at IFTA fuel tax reporting. Third-party systems like the one WEX provides compile everything you need for IFTA reporting into one handy package. WEX’s reporting engine pulls all the necessary fuel data – even if your fleet is not not using WEX’s fuel card – WEX pulls GPS data from any provider, and generates a report that can be easily entered into your quarterly report.

Using three data points – dispatch data, fuel purchase data, and GPS data – to give your fleet managers the best combination of information for tax reporting

The third piece of information that’s useful for IFTA reporting is dispatch data. This data becomes critical in the event that a driver’s GPS device malfunctions. This is how the dispatch data can save the day for you: you know that Driver A was scheduled to leave Oklahoma City and pick up a load in Houston today, and that she is expected in Tampa on Saturday, at 10 AM. If her GPS malfunctions, a partner like WEX can use dispatch data to create a perfect breadcrumb path, showing her route. WEX’s FuelTax system finds instances where fuel was purchased and can piece together a trip fairly well based on timing and locations visited.

Why is it important to be accurate in your fuel tax reporting?

When IFTA or individual fuel tax reports are filed, states have the right to audit your reporting. If you report data exhibiting significant gaps, your trucking business can incur audit fees and penalties. To avoid these penalties, WEX will assign an individual representative to your fleet account who will scan your data for all anomalous data and work to make sure those exceptions get corrected prior to any reports being filed. On the offhand chance that your company faces an audit, that same WEX representative would support your business through that audit.

How do you stay on top of all the state moratoriums and tax reporting changes that happen?

Changes to fuel tax reporting requirements can happen frequently. There are also tax rate changes and moratoriums that happen occasionally. With a fuel card partner like WEX, WEX’s full service handles all of the different tax rate changes for you and provides support in the event that a state wants to do a tax moratorium. When we prepare your fuel tax reporting data all of the various requirements are accounted for.

WEX stays up-to-date on future developments in tax reporting. One example of this is how jurisdictions have started to tax EV units and other alternative fuels like liquid hydrogen. Pennsylvania was the first state to tax EV units and Indiana just passed a bill to tax EV units effective January 1, 2024.

What are some state-by-state outlier tax reporting requirements?

Some states have additional tax reporting requirements of which you’ll need to be aware. For example, the State of New York has a different mileage tax beyond the required reporting within IFTA. Other states with additional reporting requirements include New Mexico, Kentucky, Oregon, and Connecticut. This is again where partnering with a company like WEX will help you mitigate these complicated tax structures. Highway use tax (HUT) reports are one example of additional reporting you might need that WEX can provide.  Another example is a weight tax where you are taxed additional dollars for carrying heavier loads through Oregon. There is also a tax in Oregon based on the number of axles that are on the truck.

What about Canadian tax reporting?

WEX supports a Canadian carbon tax report, which is based on the fuel you purchase and use. This is an additional carbon tax to offset Canadian miles driven and the impact on the environment by those miles driven.

There are a lot of fuel tax nuances to be accounted for, and at a moment’s notice a lot of these requirements can change. Having a service that provides you with all that necessary legwork can save you time, and alleviate unnecessary money anxieties. Think of it as similar to relying on a tax professional to do your other business or personal taxes for you.

How sharing fuel card data will benefit the trucking industry as a whole

While WEX provides its customers with a tax reporting service that aggregates all the necessary data and removes any fuel tax reporting headache from your plate, WEX is also willing to share its data with other providers. If a GPS company like Geotab had a fuel tax service, they have half of the equation with the mileage data their tool collects and what they need is the fueling data to complete the picture. WEX will share its fuel data with Geotab, so they have all the information they need to provide that fuel reporting service to customers. WEX does this by providing its customers with tools that make it easy for them to share data with third parties.

With the mix of many different kinds of tax reporting required of fleet managers, it can be useful to find a fleet card partner who will help relieve some or all of that burden. WEX can provide that information to you as a package, or you can pull purely fuel purchasing data from WEX’s reporting to create your own full package of fuel tax reporting necessary to run your business.

WEX is a leading, global fintech solutions provider, simplifying payments and back-end business processes in the fleet management, benefits management, and corporate payments areas.  To learn more, please visit the company’s About WEX page.

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