Why Do We Pay IFTA

Why Do We Pay IFTA Taxes? Who Benefits From It?

You might have asked yourself at one point while running your motor carrier business, why do we pay IFTA taxes? As a motor carrier or trucking business, it seems like there are too many taxes and/or regulation to comply with.

When we look at taxes from a business perspective, some say taxes ensure that societies can build and maintain the necessary infrastructure for businesses to thrive. Others say that taxes help the marketplace function by regulating businesses, protecting property rights, enforcing fair business practices, and protecting consumers as well as business owners. Some have also argued that the right amount of taxes increase our standard of living, hence benefiting all citizens.

The correct tax rate is a balance that policy makers battle to find. However, this blog is shining light on IFTA taxes and who it benefits.

You may know that the notion of IFTA was introduced in the early 1980s by some government officials and some motor carrier industry representatives. They developed a tax collection system to simplify the reporting and payment of fuel taxes. The goal of it was to make it easier on motor carriers and trucking businesses to administer motor fuels use taxation. 

So, when we think about who benefits from IFTA:

The first group of individuals who come to mind are those who run motor carrier or trucking businesses. Why? The administration time on reporting and paying fuel taxes is drastically decreased. IFTA also provides a system for these businesses to pay fuel taxes now or later which will depend on how these businesses are ran. At the same time IFTA redistributes the tax revenue to all states and/or provinces instead of each individual motor carrier having to do that.

IFTA ensures that highways and roads in each state or province are maintained, so that roads are safe and reliable. This reduces the chance of vehicle damage for motor carriers.

Overall, IFTA helps motor carriers stay focused on their business operations so they can earn more money.

The second group that benefits from IFTA are the state and provinces, as they get their fair share of revenue from these fuel taxes that all motor carriers and trucking businesses pay. Road infrastructure gets enough revenue for it to be maintained and built.

The more motor carriers work or drive through states and provinces, the more revenue states and provinces collect from IFTA taxes. In return, more work is generated for those companies in road construction and all other companies that get work from this IFTA tax revenue – and more tax revenue is collected in the form of corporate tax and income tax.

The third group that benefits is the general public who also contributes through other taxes to maintenance of roads and highways. People use these roads to commute to work, buy groceries, bring kids to school, and more.

At the end of the day, everyone has safer roads to drive on and better infrastructure for today and tomorrow.

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