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.
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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