2022-03-30
Should a Trucking Company Use TAX-Free fuel?

I normally get to see the trends come and go in the truck transportation industry, specifically from front line people like drivers and owner operators. For most people, the duty-free store is a place to pick up a cheap bottle of liquor or carton of smokes. For others, specifically, for truck operators crossing the border at the Ambassador Bridge in Detroit, it’s a place to fill up the fuel tanks.  Certainly, we are in a time of belt-tightening so owner operators and carriers alike are trying to find ways to save a buck.  Fuel being such a big expense tends to top the list on money-saving ideas.

This past quarter, I have seen carriers have started fueling at Native Reserves and at Duty Free Shops, to save taxes on fuel. You might wonder why is this news worthy, well it directly ties in with every carrier’s IFTA fuel tax liability at the end of the quarter.  

Why?

IFTA or the International Fuel Tax Agreement is charged on a few key items:

-In which Province or state you have travelled
-How Many KM`s you have travelled
-How much fuel you bought and in which Province or state 
-And finally your fuel efficiency or MPG/KPL.

Fuel is a key element as it does assume you purchased fuel with fuel taxes already charged.  This means for every litre of fuel you buy in a given jurisdiction you have already pre paid fuel taxes.  If you buy fuel where taxes are not paid at the pump, IFTA charges you back those very taxes at the end of the quarter.

But isn’t the price at the pump cheaper and therefore you save in the long run? Yes it certainly can be cheaper but not always. I looked at www.michigangasprices.com at the time of writing this and found Ammex duty free was 5th on the list of cheapest fuel in the Detroit area. This means 4 other stations are cheaper still and have taxes included in the price of their fuel. The others on the list were not that far apart.

Remember included in the price of fuel is fuel taxes, for Michigan $0.30/gallon is fuel taxes. So if fuel at the pump is $3.00/gallon you can take off the fuel tax for the end price of $2.70/gallon.   This is something important to remember when shopping for fuel.

So what does this all mean? Well it means we have to be smart consumers. The price at pump isn’t always the full story. You must consider, is the price at Ammex Duty Free really cheaper once you deduct fuel taxes from the fuel station next door? Is the difference enough to warrant a higher IFTA fuel tax bill at the end of the quarter?

What about Native Reserves?

In New York State, for example, there is a reserve quite close to the Ontario border and we have seen a significant increase in drivers buying fuel from there. While the receipt doesn’t state it, unlike those issued at Ammex Duty Free, we have confirmed, IFTA fuel taxes are not charged at the pump.

We at WeLocity Logistics & Solutions Inc are always available to answer any questions you may have on this or any other trucking related subject.  Please leave us a comment or question.

Let WeLocity take the burden of your IFTA fuel tax reporting

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