Permits and taxes are just part of the cost of doing business as a trucker. You pay one tax and then the next moment there’s another permit you need to get. It can get a little confusing at times and daunting if you forget to pay one of them. Late fees and penalties can stack up, and who really knows what all that money goes to at the end of the day? The two most common tax permits are the IFTA and the IRP. If you’re a commercial trucker, it’s important to know what these are all about. Not only does it give you peace of mind knowing where your tax dollars go, but it’s also important to make sure that you’re straight with the authorities. Often times, penalties and fees can be more expensive than the original taxes. Let’s get a better understanding of the differences between the IFTA and the IRP.
The IFTA stands for the International Fuel Tax Agreement. Before the IFTA, states and jurisdictions had different laws and regulations for carriers. Carriers would have to pay permits and taxes for each individual jurisdiction. This could be every time they drive into a new state in America or a new territory in Canada. It’s important for jurisdictions to tax fuel to offset the damage of using the energy source. This could be anywhere between road maintenance and carbon emissions. Once the IFTA was formed, it made it easier for carriers to pay the tax. The Fuel Tax Agreement collects the taxes and distributes them amongst the participating members of the agreement.
The IRP is the International Registration Plan. This was created to help promote interstate commerce by allowing reciprocity. Reciprocity essentially allows carriers to drive across jurisdictions and still allow all jurisdictions to receive their fair revenue. This revenue is based on how much the carrier traveled in other jurisdictions.
The Difference between the IRP and the IFTA
The IRP and the IFTA feel like the same thing. They are both tax permits that you pay quarterly. They both depend on the miles driven in a jurisdiction, and they all have specialty decals. However, the IFTA deals with fuel taxes and the IRP deals with commerce. To the layman, it feels like they could combine the two. However, that would be very dangerous. The government has a nasty habit of spending money that’s not theirs. The taxes collected by the IRP and the IFTA go to support different things within the state. If the taxes were collected by only one agency, the benefits of each program may have been negated.
If your company needs to file for one or both of the IFTA and the IRP tax permits, give Trips and Fuel a call today. Their knowledgeable tax experts can walk you through the process and even let you know how much you are required to pay. Additionally, they can tell you if your vehicle is eligible for the IFTA, the IRP, or both!