My mom made the best roast beef on the planet. She would always cut it in half before putting it in the pan, and it was yummy and juicy and had a lot of flavour. When I started cooking on my own, I followed her lead and cut my roast in half, too.
I made a roast for my mom once, thinking she’d be delighted that I was using her secret cooking method. Instead, she looked puzzled when I sliced the roast in half and plunked both chucks of meat into my roasting pan. “I learned that trick from you,” I said. “The magic is in cutting the roast in half.”
“Sandy,” she replied, “I only cut the roast in half to make it fit my roasting pan.”
The moral of the story is that sometimes we do things a certain way because we believe them to be true without really understanding why we’re doing them or whether they’re the best approach for us today.
I come across this all the time in my line of work. People manage fleet tax compliance in ways that are outdated or plain wrong, and they’re doomed to repeat mistakes because they’re following a time-worn “system.”
Times change. No fleet runs the same routes and trucks year after year.
If you want to get up to speed with IFTA, IRP, and other fleet tax compliance matters, here are five myths you need to skim away and toss out now.
Myth 1: It’s bad to owe money on your IFTA return
The IFTA return is simply a method to net tax owing on fuel consumed less tax paid at the pump.
In order to know the true cost of fuel when you purchase it, you have to take out the provincial/state taxes and, in Canada, the GST. To keep things simple, let’s say that fuel costs $1.30 a litre in British Columbia and $1.20 in Alberta. Fuel looks cheaper in Alberta, but when you take out the tax – 22.67 cents in B.C. and 13 cents in Alberta – the price is the same: $1.07.
If you bought all of your fuel in Alberta but consumed it in B.C., you’ll probably owe tax at the end of the quarter. That doesn’t mean you paid too much fuel tax or mismanaged your return. How much tax you owe is based on where the fuel is consumed less the taxes paid on purchases.
Myth 2: Alberta-based carriers with trip permits don’t pay sales tax to other provinces
Wrong. B.C., Saskatchewan, and Manitoba collect sales tax on equipment based on temporary use. The rules vary by province and they periodically change. Learn how temporary-use rules apply to your fleet (if for no other reason than to recover these taxes from your customers).
Myth 3: It’s okay to not have every fuel receipt
Not true. If you take credit for tax paid on a fuel purchase and don’t have a receipt to back it up, you’ll not only lose the credit but you’ll have to pay the tax again plus a penalty and interest.
Worse, if that vehicle is part of the IFTA sample, your error can relate to all the other vehicles in your fleet going back four years. You need a valid receipt to support every fuel purchase on your IFTA return. Period.
Myth 4: Prorate is more expensive than single trip permits
See No. 2 above. Prorate fees are calculated by the weight fee multiplied by the prorate percentage for each jurisdiction. With prorate, you only pay for what you use.
Myth 5: I have to keep track of my distance and fuel only on trips where I leave my base jurisdiction
Once a vehicle has a prorate plate and/ or an IFTA sticker, 100% of the distance and fuel is reportable. You must track all distance and fuel on all reportable vehicles all the time. “All distance” means all distance, even personal travel.
Fleet tax compliance is a complex recipe and while there’s a lot you can learn from your boss and coworkers, there’s a difference between knowing how to follow procedures and truly understanding the rules and how they apply to your company.
Open your mind, get some help, and don’t leave yourself open to an audit. The rest is gravy.
A lot of this can seem hard to navigate. So many boxes to check and steps to take. We want to help.
Please take a moment to take a look at our Free Fleet Tax Compliance Toolkit.
This tool kit is made up of these invaluable resources and tools:
- Fleet Tax Compliance Guide (7 Critical things you need to know about Fleet Tax Compliance)
- [VIDEO] IFTA Fuel Tax 101
- Driver Trip Report (Excel Spreadsheet Template)
- How To Use the Driver Trip Report
- GPS Reporting & Checklist
If you have any questions regarding IFTA regulations or protocol, please reach out to us, we are here to help. Call us today or drop us a line via email. Here is our contact information:
Call us Toll Free: 1-877-860-8025
About the Author:
Sandy Johnson is the founder and managing partner at North Star Fleet Solutions in Calgary. The company provides vehicle tax and license compliance services for trucking operations ranging from single vehicles to large fleets. She can be reached at 877-860-8025 or northstarfleet.com.