An effective fuel-buying practice is to maximize fuel purchases in low-fuel-tax states and mileage run in those states. The International Fuel Tax Agreement between the United States and Canada facilitates the reporting, collection and distribution of taxes to states and provinces.
You pay taxes every time you fuel, but your ultimate fuel tax bill is calculated according to where you drive. If you purchase fuel in high-tax states and drive most of your miles in lower-tax states, you will get a refund when you file your IFTA report.
You cannot reduce your tax outlay unless you choose hauls that avoid high-tax states. What you have more control over is how much you pay strictly for fuel when the fuel tax is not considered.
PUMP PRICE MINUS TAXES = REAL COST. The key to finding the cheapest fuel is to know the current fuel tax rates, both federal and state, and any state surcharges. Subtract taxes to find the raw fuel cost in each state, then buy where fuel is cheapest. The strategy means that you buy without regard for whether you are paying more at the pump -- or in taxes.
IFTA also considers state surcharges, which complicates the fuel-buying strategy. Indiana, Kentucky and Virginia have per-gallon surcharges; Connecticut, Kentucky, New Mexico, New York and Oregon have per-mile surcharges. While some owner-operators buy only enough fuel to get through surcharge states, this practice can backfire, depending on the actual cost of the fuel in each state.
Generally speaking, if you run fairly regular routes, you’ll tend to pay about the same overall total amount of taxes quarter to quarter, given the fees are based on the miles you run and the states in which you run them. If your IFTA mpg (the number of miles you ran in the quarter divided by the number of gallons you purchased in the same time period) is 7 mpg, the average tax per mile may calculate to somewhere between 5 and 8 cents per mile, depending on the states you drive in. The bulk, if not all, required fuel taxes are paid at the pump or other point of purchase.
It’s possible to accumulate not only a debt but a credit, depending on just what states you purchase fuel in versus where you actually drive the bulk of your miles. Also, the higher your IFTA mpg, the lower your tax per mile, but the IFTA mpg will likely be different from what you are tracking in your truck day to day, given its quarterly calculation is based on actual purchases and miles driven over that specific time period.
Other fuel-buying costs depend on how your fuel taxes are managed. Many leased owner-operators depend on a carrier to collect and distribute fuel taxes.
If you’re leased and your carrier handles your fuel taxes for you, simply look for the cheapest pump prices. Some carriers charge a fee for this, and some pay simply by averaging the mileage of their entire fleet. If your carrier does that, and you average a better per-gallon average than the fleet, you could be paying more tax than you actually owe.
Whatever the case, a good lease will itemize all charges, including fuel taxes and how they are assessed. If your settlements do not reflect what is stated in your lease, you should ask for clarification and, if necessary, look for an alternate method of paying your tax.
You must get your own IFTA account to do your own fuel tax reporting, whether you do it yourself or through a third party. You do not have to have your own operating authority to get an IFTA account, but independent owner-operators must have such an account in their base plate state and be responsible for quarterly reporting.
Getting with the program
Owner-operators often can save a hefty amount of money when they are able to participate in discount fuel networks.
If your fleet has a fuel-optimizer program, use it. An optimizer program helps an owner-operator plan a trip based on fuel prices and locations in the carrier’s fuel network. Fees for using such networks have become rare thanks to competition for drivers.
Owner-operators are well advised, however, to pass up network fuel stops that are too costly, are too far off route, sell inferior fuel, are dangerous or poorly maintained, or are perceived as a profit center for the carrier at owner-operators’ expense. If you have concerns about a stop on the fleet network, respectfully bring them to the fleet’s attention.
The National Association of Small Trucking Companies offers members the opportunity to tap into the association’s network of fueling stops to find the lowest prices.
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