IFTA and IRP: What Owner-Operators Need to Know

If you are starting a new trucking company in the United States, you are probably overwhelmed with the number of registrations you have to file and the number of permits you have to get just to run your business. You may also have a hard time making heads or tails of all the different acronyms you have to know when you work in the trucking industry. You may have heard of the IFTA and IRP and wondered what the initials stand for. According to the information at commercial truck insurance – Simplex Group, they are two of the most important acronyms in the trucking industry.

What is the IFTA, and why is it important?

The International Fuel Tax Agreement simplifies the way that trucking companies that operate in more than one jurisdiction pay taxes. The law applies to the lower 48 states and some provinces in Canada. Although Alaska is not legally required to participate in the IFTA, it does.

You will be required to participate in the IFTA if you are an interstate truck driver who crosses state lines. You will be issued two decals to put on each interstate vehicle when you register for this program.

How it Works

When truckers buy fuel, the amount of money they pay for taxes is credited to their company account with the IFTA. When the fiscal quarter ends, the trucking company will complete a report stating the number of miles that their driver has traveled through each state and the amount of fuel they have purchased in each state.

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The trucking company will then figure out the fuel mileage average for the jurisdictions through which its drivers have traveled. This will determine how much tax revenue a trucking company owes to each jurisdiction. The trucking company will then pay the local office the tax money that they owe, and the IFTA office will distribute that money to the appropriate jurisdiction. If there is ever a problem with tax reporting, the local office would be responsible for investigating the problem.

Although this agreement takes care of your basic fuel taxes, it is important to know that some states have additional weight and fuel taxes for truckers.

If you do not pay your taxes on time, or if they are in an incorrect amount, it can result in major fines. It is important to hire a trucking compliance company that can help you store your records properly and stay on track when it comes to paying taxes.

What is the IRP?

The International Registration Plan for trucking is an agreement that requires truck drivers to report the mileage they drive in each state. All interstate truckers must participate in this agreement. It was put in place to make sure that jurisdictions across the country get the appropriate amount of revenue from licensing fees in their state.

When a truck drives through any state, the trucking company is required to pay fees based on its weight and the distance that it travels. It would be very time-consuming for a trucking company to pay each state a separate fee. The IRP lets trucking companies pay one fee to a local office. The office then distributes the money to each of the states that the trucking company has traveled through.

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As with the IFTA, It is extremely important to pay these fees on time. If you do not, you will be subject to fees and audits.

It may seem like a lot of trouble to comply with these rules. However, both of these plans benefit trucking companies in the long run.

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