In Alberta, the thought of even suggesting a provincial sales tax is enough to get you tarred and feathered.
The absence of a PST is a great boon to Albertans. We can buy trucks and equipment, get them repaired, and continue down our proverbial yellow brick road PST-free, coins jingling in our pockets, laughing all the way to the bank.
That is until we take our trucks into our neighbours’ backyards. Every week I get a call from someone who doesn’t realize that if they take their commercial vehicles into British Columbia, Saskatchewan, or Manitoba, they are triggering a sales tax exposure.
Taxed for Temporary Use
Think about it.
Even though Alberta doesn’t charge PST, it’s a major source of revenue for other provinces. Why would these jurisdictions let Albertans use their roads and compete against their carriers without charging them an equivalent sales tax? It wouldn’t be a very fair system of commerce if that were allowed.
At the same time, carriers from neighbouring provinces would be practically stampeding into Alberta to buy equipment and get their vehicles repaired, tax-free. Good for Alberta business, but not so good for Mr. Truck Dealership or Mr. Mechanic in a province that charges their consumers sales tax.
Here’s where IFTA and IRP come in.
IFTA and IRP were created for the fair distribution of tax amongst jurisdictions are most often putting themselves at a disadvantage. Even though these programs are voluntary, in truth, they are mandatory if you want to run your business legitimately and pay the taxes you owe.
Private Carriers are Vulnerable.
Here is where I see a major disconnect.
Over-the-road for-hire transportation companies see IFTA and IRP as a necessity—another set of rules to follow as they go about the business of hauling freight. To them, these programs make sense.
The bigger issue is with private carriers like oilfield services companies. They have commercial vehicles but they don’t consider themselves to be a transportation company and aren’t aware of all the rules and how to comply. These types of service companies often travel into another province for a job that last weeks, staying put in single location.
This triggers a need to pay sales tax on their equipment. If you’re a service company, don’t count on Larry in accounting to make sure the taxes get paid. Conventional accountants are educated in tax law but not all of them have the expertise required when it comes to consumption taxes (fuel), license fees, and sales taxes charged for temporary use in another jurisdiction. They simply don’t work with it enough to really understand.
Or the guys in the field office are merrily going along buying up single trip permits without telling the people filing the sales tax returns what they’re doing. I recently had a call from a company who told me they stopped licensing under IFTA and IRP because they were “paying too much.” If they think they’re paying too much now, wait until they get a visit from a B.C. tax auditor.
Benefits of IFTA & IRP
IFTA and IRP help companies make sure they’re meeting their tax obligation. Did you know you’re required to pay sales tax for temporary use of any commercial vehicle? Yup, even pickup trucks used in commercial operations. If you already have a fleet established, in most cases, IRP is the easiest way to pay tax on these light-duty vehicles.
The best part about both IFTA and IRP is that you only pay for what you use! Without IFTA and IRP, chances are you are paying too much sales tax under temporary use rules. The biggest hurdle with the IFTA and IRP programs is that companies have a hard time getting the distance and fuel purchase information from their drivers.
With GPS, fuel cards, onboard data loggers, and fleet management software, that shouldn’t be a problem anymore. If you aren’t using IFTA and IRP to license your fleet and pay tax, you might want to take a second look.
If you are an Alberta carrier traveling to B.C., Saskatchewan, Manitoba for your job, you owe tax. If you haven’t paid, you won’t be laughing too much when the auditor shows up and asks you to cough up for the sales tax you should have been paying all along.
Make sure you have enough in the bank to cover the penalty and interest they’ll be charging you, too.
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.