The
International Fuel Tax Agreement (IFTA) is an agreement among
states and Canadian provinces to simplify the reporting of fuel
used by interstate/interjurisdictional motor carriers. Upon
application, the carrier’s base jurisdiction will issue credentials
which will allow the IFTA license to travel in all IFTA member
jurisdictions.
As
of July 1, 1996, the IFTA member jurisdictions will include
all states and Canadian provinces, except Alaska, District of
Columbia, Maine, New Hampshire, Vermont, and Ontario. Kentucky
carriers traveling in non-IFTA jurisdictions must continue to
follow the procedures and file the reports required by the statutes
and regulations of those non-IFTA jurisdictions. Carriers from
non-IFTA juris-dictions must likewise comply with Kentucky statutes
and regulations.
Kentucky
is your base jurisdiction for IFTA licensing and reporting if
you:
-
have
an established place of business in Kentucky from which
motor carriers operations are conducted;
-
maintain
operational control and operational records for qualified
motor vehicles in Kentucky or can make records available
to Kentucky;
-
have
one or more qualified motor vehicle which actually travels
on Kentucky highways; and,
-
operate
in at least one other IFTA jurisdiction.
The
IFTA license offers several benefits to the interstate/interjurisdictional
motor carrier. These benefits include one license, one set of
decals, one quarterly fuel tax report which reflects the net
tax or refund due, and one audit in most circumstances. These
advantages lead to cost and time savings for the carrier.
This manual
will explain in further detail the application, licensing, reporting,
record keeping requirements, and audit procedures for IFTA.
Applicant
- person in whose name the application for licensing is filed
with a base jurisdiction for motor fuel tax reporting under
the provisions of IFTA.
Audit
- a physical examination of records and source documents supporting
the licensee’s quarterly tax reports.
Base
Jurisdiction - the member jurisdiction where qualified motor
vehicles are based for vehicle registration purposes and:
1) where
operational control and records of the licensee’s qualified
motor vehicles are maintained or can be made available; and,
2) where
some travel is accrued by qualified motor vehicles within
the fleet.
The
commissioners of two or more affected jurisdictions may allow
the consolidation of several fleets which would otherwise be
based in two or more jurisdictions.
Cancellation
- the annulment of a license by either the licensing jurisdiction
or the licensee.
Carrier
- a person who operates or causes to be operated a qualified
motor vehicle on any highway in Kentucky.
Commissioner
- the official designated by the jurisdiction to be responsible
for the administration of IFTA.
Division
- the Division of Motor Carriers.
Inter-Jurisdictional
Distance - total number of miles or kilometers operated
by a registrant’s/licensee’s qualified motor vehicles within
a jurisdiction. Inter-jurisdictional miles or kilometers does
not include those operated on fuel tax trip permits or those
exempted from fuel taxation by a jurisdiction.
Jurisdiction
- a state of the United States, the District of Columbia, or
a province or territory of Canada.
Lessee
- party acquiring the use of equip-ment, with or without a driver,
from another.
Lessor
- party granting the use of equipment with or without a driver,
to another.
Licensee
- person who holds an uncancelled IFTA license issued by the
base jurisdiction.
Member
Jurisdiction - a jurisdiction which is a member of the International
Fuel Tax Agreement (IFTA).
Motor
Fuels - all fuels used for the generation of power for propulsion
of qualified motor vehicle.
Person
- an individual, trust, partnership, association, corporation,
government or other entity.
Qualified
Motor Vehicle - any motor vehicle used, designed, or maintained
for the transportation of persons or property and:
1) has
two axles and a gross vehicle weight or registered gross vehicle
weight exceeding 26,000 pounds or 11,797 kilograms; or
2) has
three or more axles regardless of weight; or
3) is
used in combination when the weight of such combination exceeds
26,000 pounds or 11,797 kilograms gross vehicle weight, or
registered gross vehicle weight.
Qualified
motor vehicle does not include recreational vehicles, farm plated
vehicles, buses and government vehicles.
Recreational
Vehicles - vehicles such as motor homes, pickup trucks with
attached campers, and buses when used exclusively for personal
pleasure by an individual. To qualify as a recreational vehicle,
the vehicle shall not be used in connection with any business
endeavor.
Registration
- qualification of motor vehicles normally associated with prepayment
of licensing fees for the privilege of using the highway and
the issuance of a license plate and registration card or temporary
registration containing owner and vehicle data.
Reporting
Period - period consistent with the calendar quarterly periods
of January 1 through March 31; April 1 through June 30; July
1 through September 30; and October 1 through December 31.
Revocation
- removal of privileges granted to the licensee by the licensing
jurisdiction.
Suspension
- temporary removal of privileges granted to the licensee by
the licensing jurisdiction.
Total
Distance - all miles or kilometers traveled during the reporting
period by every qualified motor vehicle in the licensee’s fleet,
regardless or whether the miles or kilometers are considered
taxable or nontaxable by a jurisdiction.
Weight
- the maximum weight of the loaded vehicle or combination of
vehicles during the registration period.
IFTA
License Application Procedures
Any motor carrier based in Kentucky and operating
one or more qualified motor vehicles in at least one other
IFTA member jurisdiction must file an IFTA license application
in Kentucky.
Carriers
that qualify as IFTA licensees but do not wish to participate
in the IFTA program, must obtain trip permits to travel through
member jurisdictions, according to the regulations and fees
of each member jurisdiction. However, the potential cost of
trip permits could make this an undesirable option. You are
also required to obtain Kentucky motor carrier decals and
file quarterly Kentucky Intrastate Surtax returns.
A
carrier can request an IFTA license application by going to
our Forms and Applications
page or contacting:
The
Department of Transportation
Division of Motor Carriers
PO Box 2007
Frankfort, Kentucky 40602-2007
(502) 564-4127
The
IFTA license application requests basic information about
the carrier and/or operations.
After
completing the license application, a carrier must submit
the application to the Division of Motor Carriers.
Once the application is processed, the Division will issue
proper IFTA credentials. A carrier will not be issued IFTA
credentials if the carrier was previously licensed in another
IFTA member jurisdiction and the carrier’s license is under
suspension or has been revoked by that member jurisdiction.
The Division will not issue a license if the license application
submitted contains misrepresentations or misstatements or
omits required information.
Annual
license fee
Kentucky does NOT charge an annual renewal processing fee
for an IFTA license or decals.
Account
Identification
IFTA account identification numbers are created
by using the prefix designated for Kentucky (KY) followed
by the licensee’s nine digit Federal Employer Identification
Number (FEIN) issued by the Internal Revenue Service (IRS).
If a FEIN is not available, a licensee will submit a Social
Security Number (SSN) which will be used as the licensee’s
account number. When a licensee receives a FEIN, the licensee
should notify the Division in writing. Individuals who do
not have a FEIN, their SSN will be used as the account number.
Bonding
The Division may require an IFTA licensee to
post a bond when a licensee has failed to file timely reports,
when tax has not been remitted, or when an audit indicates
problems severe enough that a bond is required to protect
the interests of all member jurisdictions.
IFTA
license
The Division will issue an IFTA license card
to the licensee. A photocopy of a license card must be maintained
in the cab of each qualified motor vehicle. If a carrier is
found operating a qualified motor vehicle without an IFTA
license card, the licensee may be subject to citations and/or
fines and the licensee may be required to purchase a trip
permit. The IFTA license is valid for the calendar year January
1 thru December 31.
IFTA
decals and fee
When the decal order information on the IFTA
license application is completed, the Division will issue
IFTA decals. Two decals will be issued to each qualified motor
vehicle operated by the IFTA licensee. The decals must be
placed on the rear exterior portion of both sides of the power
unit. Failure to display the IFTA decals properly may subject
the licensee to citations and/or fines, and the licensee may
be required to purchase a trip permit. Licensees may acquire
additional decals throughout the license year from the Division.
Displaying
IFTA credentials (grace periods)
Every qualified motor vehicle must carry an
IFTA license and display two decals as described above. Such
credentials may be displayed one month before their effective
date (i.e., 1997 decals may be displayed effective December
1, 1996) except for the first year of a new member jurisdiction
participation (1996 decals may be displayed effective June
1, 1996).
In
subsequent years, carriers shall be allowed a two month grace
period to display the ensuing year’s credentials provided
the immediate prior year’s credentials are displayed. New
member jurisdiction carriers shall have this same grace period,
provided non-IFTA credentials (when applicable) issued by
the carrier’s IFTA member jurisdiction are displayed.
Kentucky
IFTA carriers will have this two month grace period in 1996,
provided they display a 1996 non-IFTA decal issued by each
IFTA jurisdiction in which they travel during July and August
1996.
Each
year the Division will issue preprinted IFTA license renewal
applications to all licensees. IFTA decals are issued after
the decal order information on the renewal application is completed
and processed.
Renewal
of the IFTA license may be denied if the Division determines
that the licensee has failed to file any report or has failed
to remit any amounts due any member jurisdiction.
Quarterly
returns
All licensees must file an IFTA quarterly tax
report and schedule(s) with the Division. The quarterly tax
report indicates the tax or refund due for each member jurisdiction.
Only one check is written to the Kentucky State Treasurer
for the net tax due all member jurisdictions, or the licensee
will receive one refund check for the net refund. The due
date for the quarterly tax report is the last day of the month
immediately following the quarter for which the report is
being filed as follows:
The
quarterly tax report with schedule(s) must be postmarked by
the due date. If the due date is Saturday, Sunday, or a legal
holiday, the next business day is considered the filing date.
The licensee will be subject to the IFTA penalty and interest
provisions if the report is not filed/paid by the due date.
Information required to compile the IFTA quarterly tax report
is as follows:
1)
total miles (taxable and nontaxable) traveled by licensee’s
qualified motor vehicles in all jurisdictions (include IFTA
and non-IFTA miles and trip permit miles);
2) total
gallons of fuel used (placed into licensee’s qualified motor
vehicles) in all jurisdictions, IFTA and non-IFTA;
3) total
miles and taxable miles traveled in each member jurisdiction;
4) taxable
gallons consumed in each member jurisdiction (calculated
on report);
5) tax-paid
gallons purchased and placed into qualified motor vehicles
in each member jurisdiction.
The
IFTA quarterly tax report and schedule(s) will be sent to
all IFTA licensees at least 30 days before the due date. Failure
to receive the quarterly tax report does not relieve the licensee
from reporting obligations. Quarterly tax reports and schedules
may be obtained by calling the Division. A quarterly tax report
must be filed by every licensee even if the licensee does
not operate in any IFTA member jurisdiction or use any taxable
fuel in a particular quarter.
Tax
rates provided with the IFTA quarterly tax report will be
current for all member jurisdictions. As tax rates and procedures
change, the base jurisdiction will inform all licensees.
Penalty
and interest provisions
When a licensee fails to file a tax report,
files a late tax report, or fails to remit any tax due, the
licensee is subject to penalty and interest. The penalty is
$50.00 or 10 percent, whichever is greater, of the net tax
due to all member jurisdictions for each late occurrence.
Interest accrues at the rate of one percent per month or fractional
part thereof. Unlike penalty, interest is computed on the
tax due each member jurisdiction. Penalty may be waived if
the licensee can show reasonable cause for failure to comply.
Interest must be paid to each member jurisdiction where tax
was due and may not be waived for any other jurisdiction by
Kentucky.
Measurement
conversion table
Kentucky IFTA licensees are required to report
based upon United States measurements. Conversion rates are:
1 gallon
= 3.785 liters
1 liter = .2642 gallons
1 mile = 1.6093 kilometers
1 kilometer = .62137 miles
Gallons
and miles entered on each quarterly report must be rounded
to the nearest whole gallon or mile.
Tax
exempt vehicles
IFTA recognizes that some jurisdictions have
unique economic and geographic characteristics which have
given rise to various definitions of tax exempt vehicles.
If further questions arise, contact the individual member
jurisdictions. All jurisdictions require documentation to
support a claim of tax exempt vehicles.
A
refund may be claimed on the IFTA quarterly tax report for
any overpayment of tax in a reporting quarter. A refund will
be issued once the Division determines that all tax liabilities,
including any outstanding audit assessments, have been satisfied
to all member jurisdictions. A refund may be denied if the
licensee is delinquent in filing any quarterly tax report(s).
A refund determined to be properly due will be paid within
90 days for receipt of the request for payment from the licensee.
If a refund is not requested, the credit will be carried forward
to the next quarter. Unused credits will expire after eight
quarters. Credits may be used to offset tax, penalty or
interest due.
Refunds
of tax exempt fuel use, such as reefer fuel, concrete mixers,
etc., may3 not be claimed on the IFTA tax report. Claims must
be filed directly with each jurisdiction under the terms of
their statutes. All fuel placed into the supply tank of the
qualified motor vehicle must be reported as taxable on the
IFTA report and included in the MPG calculation.
For information
regarding refunds for power take off consumed in Kentucky
contact:
Division
of Audit Review
200 Mero Street
Frankfort, Kentucky 40622
(502) 564-6760
http://transportation.ky.gov/audits
Information
regarding refunds for non-power take off (reefers, mixers,
etc., using their own separate fuel tank) should be directed
to:
Revenue
Cabinet
200 Fair Oaks
Frankfort, Kentucky 40602
(502) 564-4581
Individuals: http://revenue.ky.gov/motorvehicle_info.htm
Businesses: http://revenue.ky.gov/motor_info.htm
When
the licensee fails, neglects, or refuses to file an IFTA quarterly
tax report, the Division may assess the licensee for tax delinquency,
including penalty and interest. This assessment is based on
the best information available, including the licensee’s filing
history. In the absence of adequate records, a standard of
four miles per gallon may be used to determine fuel consumption
and miles or kilometers traveled in each jurisdiction. The
burden of proof is on the licensee to show that the calculated
assessment is incorrect.
General
Lease Provisions
A.
Leases of Less than 30 Days.
For
motor vehicle leases of less than 30 days, the lessor will
be deemed to be the responsible party for IFTA tax reporting.
This does not apply if the qualified motor vehicle is leased
to the same person under two or more consecutive leases. If
both the lessor and the lessee are IFTA licensees, the party
whose IFTA credentials are in and on the vehicle is responsible
for reporting and paying this tax.
B.
Leases of 30 Days or More.
For
motor vehicle leases of 30 days or more, the lessor and lessee
will be given the option of designating which party is to
obtain the IFTA license. Therefore, if an agreement is executed,
the Division will require the party named in the agreement
to report and pay the tax. No member jurisdiction shall require
the filing of such leases, but such leases shall be made available
upon request to any member jurisdiction.
Specific
Lease Provisions:
Every
qualified motor vehicle leased to a carrier is subject to
IFTA requirements to the same extent and in the same manner
as a qualified motor vehicle owned by that carrier.
In
the case of lessors, lessees, independent contractors, and
household goods agents the following will apply:
1)
A lessor who regularly leases or rents motor vehicles without
drivers to licensees or other lessees may be deemed to be
the licensee. Such lessor may be issued a license if an application
has been properly filed and approved by the base jurisdiction.
2)
In the case of a carrier using independent contractors under
long-term leases (30 days or more), the lessor and lessee
may designate which party will report and pay fuel use tax.
If the lessee (the carrier to whom the vehicle is leased)
assumes responsibility for reporting and paying motor fuel
taxes, the base jurisdiction for purposes of this agreement
shall be the base jurisdiction in which the qualified motor
vehicle is registered for vehicle registration purposes by
the lessor.
3)
In the case of a short-term motor vehicle rental by a lessor
regularly engaged in the business of leasing or renting motor
vehicles without drivers for compensation for 29 days or less,
the lessor will report and pay the fuel use tax unless the
following two conditions are met:
a.
The lessor has a written rental contract which designates
the lessee as the party responsible for reporting and paying
the fuel use tax; and
b.
The lessor has a copy of the lessee’s IFTA fuel tax license
which is valid for the term of the rental.
4)
In the case of a household goods carrier using independent
contractors, agents, or service representatives under intermittent
leases, the party liable for motor fuel tax shall be the party
under whose operating authority the vehicle is being moved.
5)
In the case of a carrier using independent contractors under
short-term/trip leases of 29 days or less, the trip lessor
will report and pay all fuel taxes.
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An
IFTA license may be cancelled at the request of any licensee
provided all reporting requirements and tax liabilities to
all member jurisdictions have been satisfied. Check the cancellation
box and the final IFTA quarterly tax report to indicate the
end of operations under IFTA. The license may also be cancelled
by submitting a written request. Upon cancellation, the licensee
must destroy the original IFTA license and all unused IFTA
decals. A final audit may be conducted by any IFTA member
jurisdiction upon cancellation. Records must be retained for
four years from the due date of the final quarterly tax report.
An IFTA
license may be suspended and/or revoked for failure to:
1. File
an IFTA quarterly tax report;
2. Remit
all taxes due; and
3. Pay
and/or protest an audit assessment or other assessment within
the established time period.
4. Maintain
a bond if the base jurisdiction has required a bond be posted.
When
the license is revoked or suspended, the Division of Motor
Carriers will notify the Division of Vehicle Enforcement and
the Kentucky State Police. All member jurisdictions will also
be notified when a suspension or revocation has occurred or
has been released. DO NOT OPERATE VEHICLES WHEN A LICENSE
HAS BEEN REVOKED OR SUSPENDED.
The
Division may reinstate an IFTA license if the licensee files
all required reports and remits all outstanding liabilities
due all member jurisdictions. The Division may require the
licensee to post a bond in an amount sufficient to satisfy
any potential liabilities of all member jurisdictions.
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It
is the licensee’s responsibility to maintain records of ALL
interjurisdictional and intrastate operations of qualified
motor vehicles. The licensee’s records must support the information
reported on the quarterly tax report. Mileage must be kept
by fuel type. An acceptable source document is a trip report
which must include:
- date
of trip (starting and ending);
- trip
origin and destination (including city & state);
- routes
of travel;
- beginning
and ending odometer readings;
- total
trip miles or kilometers;
- mileage
by jurisdiction;
- vehicle
unit number;
- vehicle
fleet number; and
- licensee’s
name
The
licensee must maintain complete records of all fuel purchases.
Separate totals must be compiled for each fuel type and reported
separately on your quarterly tax report. Fuel types include
diesel/kero, gasoline, gasohol, liquefied petroleum gas (LPG),
and compressed natural gas (CNG/LNG). The fuel records must
contain:
- the
date of purchase;
- the
name and address of seller;
- the
number of gallons purchased;
- the
type of fuel purchased;
- the
price per gallon or liter, or total amount of sale;
- the
unit number of the vehicle into which the fuel was placed;
and
- the
purchaser’s name (in the case of a lessee/lessor agreement,
receipts will be accepted in either name, provided a legal
connection can be made to the reporting party).
Acceptable
fuel receipts include an invoice, a credit card receipt, automated
vendor generated invoice or transaction listing, or verifiable
microfilm/microfiche. Receipts which contain alterations or
erasures will not be accepted.
A
licensee who maintains a bulk motor fuel storage facility
may obtain credit for tax paid on fuel withdrawn from that
storage facility if the following records are maintained:
- date
of withdrawal;
- number
of gallons or liters withdrawn;
- fuel
type;
- unit
number of the vehicle into which the fuel was placed;
and
- purchase
and inventory records to substantiate that tax was paid
on all taxable fuel disbursements.
Adequate
record keeping is vital for documenting your compliance and
your claim for a refund or credit for tax-paid fuel. Every
licensee must maintain records to substantiate information
reported on the quarterly tax report. These records must be
maintained for a period of four years form the due date of
the report or the date that the report was filed, whichever
is later. Records must be made available upon request by any
member jurisdiction. Failure to provide records demanded for
the purpose of audit extends the statute of limitations until
the records are provided.
Licensees
shall retain the previously described records for a period
of four years from the date of filing the quarterly tax report.
Non-compliance with any record keeping requirement may be
cause for revoking the license, and the Division may construct
a fuel tax report based on the best information available
to the Division.
A
licensee’s records should be maintained at a location in Kentucky.
If these records are not maintained in Kentucky or are not
made available in Kentucky, the auditor’s travel expenses
will be billed to the licensee when the audit is complete.
An
IFTA audit verifies fuel and mileage data reported on the
IFTA quarterly tax reports. The Division of Audit Review will
audit IFTA licensees on behalf of all member jurisdictions.
The
Division of Audit Review will audit at least 15 percent of
its IFTA licensees at least once every five years. Any Kentucky
IFTA licensee may be selected for audit, but at least 15 percent
must be low mileage accounts and at least 25 percent must
be high mileage accounts.
Before
conducting an IFTA audit, an auditor will contact the licensee
by telephone and/or letter to arrange a date. The auditor
will state the time period to be audited and the records to
be reviewed. The auditor will send a letter confirming the
audit date, time periods to be audited, and record requirements.
When operational records are not located or are not made available
in Kentucky, the auditor’s travel expenses will be billed
to the licensee when the audit is completed.
At
the beginning of the audit, the auditor will confer with the
licensee to determine background information, reporting methods,
and records to be reviewed. As the audit progresses, the auditor
and the licensee will discuss the sample periods, sampling
techniques, and any problem areas. A final conference will
be held with the licensee to explain audit findings and future
reporting practices.
The
licensee will receive a written audit schedule of difference
with recommendations and instructions from the auditor when
the audit is complete. An audit assessment notice will be
sent to the licensee after the written copy of the audit is
processed. The licensee has 45 days from receipt of the assessment
to remit payment or file an appeal. A refund will be issued
after any outstanding tax liabilities have been satisfied.
The Division of Audit Review will submit audit reports to
all member jurisdictions. The licensee may be subject to reexamination
of the audit findings by any member jurisdiction. A member
jurisdiction may reaudit a licensee, at its own expense, after
notifying the base jurisdiction and the licensee of reasonable
cause for the reaudit.
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A
licensee may appeal any assessment within 45 days of receipt
of the assessment. Also, a licensee may appeal an audit finding
issued by any member jurisdiction by submitting a petition
(written appeal) for a hearing within 45 days of receipt of
the original audit assessment.
The
Division of Audit Review will send written notice of the date,
time and place of the hearing at least 20 days before the
hearing. The hearing shall be held in a timely manner, but
may be rescheduled for reasonable cause shown by either party.
The Division of Audit Review will participate in the appeal
process on behalf of all member jurisdictions. The licensee
may appear in person and/or be represented at the hearing.
A person may not represent the licensee unless the licensee
is present at all times or the person representing the licensee
has a properly executed power of attorney to represent the
licensee.
The
Division of Audit Review will notify the licensee in writing
of the findings and rulings on the appeal. Licensees who object
to the Division of Audit Review’s findings may request a supplemental
audit from any member jurisdiction. The requested member jurisdiction
may accept or deny the request.
If
all administrative remedies have been exhausted and the licensee
is not satisfied with the Division of Audit Review’s final
determination from the hearing, an appeal may be filed with
the Kentucky Board of Tax Appeal within 30 days of the determination.
The Kentucky Board of Tax Appeal will hear the case to review
the action taken by the Division of Audit Review. If the Kentucky
Tax Court upholds the determination of the Hearing Officer,
you have the right to appeal to the appropriate circuit court.
The
International Registration Plan,
based on mileage, is an apportioned tag registration program
for commercial motor vehicles operating in interstate commerce.
The IRP should not be confused with the IFTA program. The
IRP in Kentucky is administered by the Division of Motor Carriers.
For IRP assistance contact the Division of Motor Carriers
at the address and phone number listed below:
Kentucky
Transportation Cabinet
Division of Motor Carriers
IRP Section
P.O. Box 2014
Frankfort, Kentucky 40602-2014
Phone (502) 564-4120
E-mail: 
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Division
of Motor Carriers Home Page
Page
date: 10/21/2005
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