Tracking taxes

By Todd Dills | November 01, 2009

Formerly leased owner-operator Ted Cekinovich wrote Overdrive about a similar problem he was having earlier this year. Cekinovich had averaged more than 8 mpg in his truck over several trips, but his fleet’s IFTA accounting software, apparently incapable of recognizing 8 mpg and above as valid, had defaulted to the fleet average, which was under 6 mpg. Essentially, Cekinovich on those trips was paying taxes on fuel as if he were running at the lower fleet average on those trips – amounting to several gallons extra, depending on the actual trip mileage.

 Per-trip, the difference isn’t much. But consider the case of an owner-operator getting 8 mpg on 24,000 miles in a quarter, paying taxes on 3,000 gallons burned. If a fleet average of 6 mpg is used to determine what that operator owes, he’s effectively paying the carrier for taxes on an extra 1,000 gallons. Depending on what states he runs, that could be a net loss of a few hundred bucks a quarter.

 Joel Baker, Clarksville, Tenn.-based independent owner-operator and co-creator of the TruckBytes software, which includes an IFTA accounting option, calls this the “most common abuse” of the IFTA system by carriers, though he acknowledges that one carrier’s approach may be different from another’s. “Unfortunately, many leased owner-operators come to realize it’s in their best interest to have their own IFTA accounts and their carriers don’t allow it,” he says.

 There’s a solid reason for that, too. “A lot of fleets would want to do it themselves to make sure the fuel actually gets reported,” says ATA’s Pitcher. If the owner-operator is running under the fleet’s authority, the fleet is ultimately responsible for any unpaid taxes, even if the operator has his or her own IFTA account, he says.

 Furthermore, Pitcher adds, a scenario opposite to the one described above is possible, too. “Sometimes the [leased] owner-operator might use the fleet average mpg” when reporting his own miles, particularly if it’s a higher rate. “But if they’re reporting their own, IFTA recognizes them as a separate fleet and they shouldn’t be using somebody else’s records.”

 In the end, IFTA payment should be addressed in the lease contract; if it’s not, ask about it. Keep your own records and you can easily check to make sure you’re not being charged for taxes on gallons you didn’t burn.

 High-tech options are available. “We have a lot of owner-operators who use TruckBytes’ IFTA function to monitor their own carrier,” says Baker. He notes the case of an operator who realized he was getting charged $200 a quarter as a sort of filing fee by his carrier.

 “We have noticed an increase in carriers who are changing the way they charge owner-operators for fuel taxes, getting creative … to reduce overall IFTA tax due or to increase their profit margin,” Baker says. “I look at every settlement I get – if I’m going to check my paycheck, wouldn’t I be validating my IFTA as well?” he asks. “Those fuel taxes are my money, too.”



Building your own IFTA spreadsheet

 This Microsoft Excel spreadsheet uses tax rates from the second quarter and mileage/fuel numbers from a hypothetical operator running between Fort Worth, Texas, and Charlotte, N.C., with a single trip between North Carolina and Indiana as well. The full spreadsheet would list all continental states and/or provinces.

 1 Enter tax rates, expressed in dollars, from IFTA Form 105. If you’re running in Canadian provinces, be sure you’re using gallons, not liters. Note Kentucky, Indiana and Virginia have “surcharge” rates, representing tax not included in the pump price (create separate “surcharge” rows for each of those states). Compute your average fuel mileage for the quarter and copy in column C; enter miles run in each state in D column, duplicating miles in surcharge states’ two rows (to automate duplication, for example, use formula “=D5” for cell D6).

 2 Enter formulas to add numbers in the columns, skipping surcharge rows [“=SUM(E3:E5, E7, E9:E14, E16)” for example]. Skip them in row-17 formulas in columns D, G and H, too. However, in F17 and I17 [“=SUM(I3:I17)” for example] include surcharge in total tax.

 3 Divide D column by C column [“=(D3/C3)”] to figure gallons burned.