Presented by

IFTA Managers’ and Law Enforcement Seminar

September 12-14, 2007

Ron HesterRon HesterOntarioOntario

Ministry of RevenueMinistry of Revenue

WHAT YOU’LL LEARNWHAT YOU’LL LEARN The Basics – core principles and benefitsThe Basics – core principles and benefits How IFTA Works – from A to ZHow IFTA Works – from A to Z The Amendment Process – how IFTA The Amendment Process – how IFTA

changeschanges Compliance – jurisdiction and carrier – Compliance – jurisdiction and carrier –

administrative and roadside enforcementadministrative and roadside enforcement Some Issues – What’s on the horizonSome Issues – What’s on the horizon IFTA, Inc. – Who they are and the services IFTA, Inc. – Who they are and the services

they providethey provide

WHAT IS IFTA?WHAT IS IFTA?

The International Fuel Tax AgreementThe International Fuel Tax Agreement A tax collection agreement by and among A tax collection agreement by and among

the 48 contiguous States and the 10 the 48 contiguous States and the 10 Canadian Provinces bordering the USCanadian Provinces bordering the US

Uniform administration of motor fuels use Uniform administration of motor fuels use taxation laws with respect to qualified taxation laws with respect to qualified motor vehicles operated in more than one motor vehicles operated in more than one member jurisdictionmember jurisdiction

IFTA’S CORE IFTA’S CORE PRINCIPLESPRINCIPLES

Base JurisdictionBase JurisdictionRetention of Sovereign Authority to Retention of Sovereign Authority to determine tax rates, exemptions determine tax rates, exemptions and exercise other substantive tax and exercise other substantive tax authorityauthorityUniform Definition of Qualified Uniform Definition of Qualified Motor VehicleMotor Vehicle

BASE JURISDICTIONBASE JURISDICTION

Where qualified motor vehicles are Where qualified motor vehicles are registered (IRP)registered (IRP)Where operational control and Where operational control and operational records are maintained operational records are maintained or can be made availableor can be made availableWhere some travel is accruedWhere some travel is accrued

TAX COLLECTED TAX COLLECTED THROUGH IFTATHROUGH IFTA

Motor fuel use taxes that are Motor fuel use taxes that are imposed by each jurisdiction on imposed by each jurisdiction on the consumption of motor fuel in the consumption of motor fuel in qualified motor vehicles.qualified motor vehicles.

QUALIFIED MOTOR QUALIFIED MOTOR VEHICLEVEHICLE

Motor vehicle used, designed or Motor vehicle used, designed or maintained for the transportation of maintained for the transportation of persons or property andpersons or property andGross vehicle or registered gross vehicle Gross vehicle or registered gross vehicle weight over 26,000 lbs. or 11,797 kgs.weight over 26,000 lbs. or 11,797 kgs.Three-axles regardless of weightThree-axles regardless of weightUsed in combination when the weight of Used in combination when the weight of the combination exceeds 26,000 lbs. or the combination exceeds 26,000 lbs. or 11,797 kgs.11,797 kgs.

WHO MAY LICENSE?WHO MAY LICENSE?

Any person based in a member Any person based in a member jurisdiction operating a qualified jurisdiction operating a qualified motor vehicle in two or more motor vehicle in two or more member jurisdictionsmember jurisdictions

BENEFITS TO THE BENEFITS TO THE LICENSEELICENSEE

One license and one set of decals for One license and one set of decals for each qualified motor vehicle to operate each qualified motor vehicle to operate through all member jurisdictionsthrough all member jurisdictionsOne tax return filed each quarter with One tax return filed each quarter with the base jurisdictionthe base jurisdictionOne tax payment or refundOne tax payment or refundOne audit by the base jurisdictionOne audit by the base jurisdictionReduced administrative costsReduced administrative costs

BENEFITS TO THE BENEFITS TO THE JURISDICTIONJURISDICTION

Increased enforcementIncreased enforcement Increased audit coverageIncreased audit coverage Lower administrative costsLower administrative costs

GETTING STARTEDGETTING STARTED

Carrier submits licenseapplication

to base jurisdiction1Base jurisdiction

reviews and processeslicense application

of qualifiedcandidate

2

Base jurisdiction issuesone IFTA license to

carrier and 2 decals foreach QMV operated

3Licensee operates

and prepares quarterlyIFTA tax return with

base jurisdiction4

Base Jurisdiction (BJ) is a US jurisdiction

THE IFTA TAX THE IFTA TAX RETURNRETURN

Total Miles Total Fuel MPG

10000 2000 5.00

Jurisdiction Total Miles Tax. Miles Tax. Fuel Tax-Pd Fuel Net Tax. Fuel Tax Rate Tax Int. TotalBJ 2500 2500 500 1000 -500 0.15 (75.00)$ 0 (75.00)$ AA 2500 2500 500 500 0 0.09 -$ 0 0.00BB 2500 2500 500 300 200 0.25 50.00$ 0 50.00CC 2500 2500 500 200 300 0.23 69.00$ 0 69.00

Total 44.00$

WHAT HAPPENS NEXTWHAT HAPPENS NEXT

Licensee files tax returnwith base jurisdiction

and remits $44.005Base jurisdiction

reviews and processestax return and

remittance6

Base jurisdiction processes all other tax

returns received7

At the end of each monthbase jurisdiction sendstransmittal reports to all

other memberjurisdictions.

8

TRANSMITTAL TRANSMITTAL REPORTREPORT

License # Total Miles Tax. Miles MPG Tax. Fuel Tax-Pd Fuel Net Tax. Fuel TaxBJ123456789 2500 2500 5.00 500 1000 -500 (125.00)$ BJ234567891 2500 2500 5.00 500 500 0 -$ BJ345678911 2500 2500 5.00 500 300 200 50.00$ BJ456789111 2500 2500 5.00 500 200 300 75.00$ BJ567891111 2500 2500 5.00 500 2000 -1500 (375.00)$

Totals 12500 12500 25 2500 4000 -1500 (375.00)$

Transmittal from Base Jurisdiction to Jurisdiction AA

05/2200

WHAT HAPPENS WHAT HAPPENS NEXTNEXT

Base jurisdiction sendsthe transmittal report

to Jurisdiction AA andall other member

jurisdictions

9Base jurisdiction

processes all transmittalreports and payments

received fromother jurisdictions

(including $375 fromJurisdiction AA)

10

Base jurisdiction sendsrefunds to licensees and

issues assessmentsfor any taxes due

11

WHAT HAPPENS NEXTWHAT HAPPENS NEXTBase jurisdiction

conducts audits on licensees

for itself and allmember

jurisdictions

12Enforcement activities

during process: i.e. Roadside &

Inspections13

AUDITSAUDITS

The base jurisdiction will conduct audits The base jurisdiction will conduct audits for itself and all member jurisdictionsfor itself and all member jurisdictionsJurisdictions must complete audits on an Jurisdictions must complete audits on an average of 3% of its licensees each yearaverage of 3% of its licensees each yearOf the 3%, 25% of the audits must involve Of the 3%, 25% of the audits must involve high-distance accountshigh-distance accountsOf the 3%, 15% of the audits must involve Of the 3%, 15% of the audits must involve low-distance accountslow-distance accountsAudit monies are transmitted with the Audit monies are transmitted with the monthly transmittal reports; audit reports monthly transmittal reports; audit reports are sent upon completionare sent upon completion

COMMITTEE INFOCOMMITTEE INFO Agreement Procedures Committee (APC) Agreement Procedures Committee (APC) Alternative Fuels Committee Alternative Fuels Committee Attorneys Section Steering CommitteeAttorneys Section Steering Committee Audit CommitteeAudit Committee Clearinghouse Advisory CommitteeClearinghouse Advisory Committee Dispute Resolution Committee (DRC)Dispute Resolution Committee (DRC) Industry Advisory Committee (IAC)Industry Advisory Committee (IAC) Information Technology Advisory Committee Information Technology Advisory Committee

(ITAC)(ITAC) Law Enforcement Committee (LEC)Law Enforcement Committee (LEC) Program Compliance Review Committee Program Compliance Review Committee

(PCRC)(PCRC)

The IFTA Articles of Agreement, R1600 provides that the following may propose amendments to the IFTA Articles of Agreement Procedures Manual or Audit Manual:

Committees: Agreement Procedures/Audit/ Law Enforcement/Program Compliance Review

The IFTA, Inc. Board of Trustees

Any Member Jurisdiction

WHO CAN SUBMIT A PROPOSAL?

How Ballots WorkHow Ballots Work

1.1. Sponsors submit Sponsors submit ProposalsProposals

2.2. Proposals distributed for Proposals distributed for comment periodcomment period

3.3. Proposals discussed at Proposals discussed at Annual Business MeetingAnnual Business Meeting

4.4. Sponsors review Sponsors review proposals and may proposals and may submit revisionssubmit revisions

5.5. Proposals distributed for Proposals distributed for second comment periodsecond comment period

6.6. Sponsors review and Sponsors review and may submit revisionsmay submit revisions

7.7. Ballots distributed for Ballots distributed for votevote

8.8. All comments and votes All comments and votes are submitted through are submitted through IFTA, Inc. websiteIFTA, Inc. website

Ballot Time FramesBallot Time FramesFull TrackFull Track

45 days – 45 days – comment periodcomment period45 days – 45 days – sponsor review sponsor review after ABMafter ABM45 days – 45 days – comment periodcomment period60 days - vote60 days - vote

Short TrackShort Track30 days – 30 days – comment periodcomment period30 days – sponsor 30 days – sponsor review after ABMreview after ABM30 days – 30 days – comment periodcomment period30 days - vote30 days - vote

Annual Business MeetingAnnual Business Meeting Short track ballot proposals must Short track ballot proposals must

receive an affirmative vote of ¾ of receive an affirmative vote of ¾ of member jurisdictions to continue on the member jurisdictions to continue on the short track – if not, ballot proposal dies short track – if not, ballot proposal dies

Full track ballot proposals may be moved Full track ballot proposals may be moved to short track – must receive an to short track – must receive an affirmative vote of ¾ of member affirmative vote of ¾ of member jurisdictions to move to short track – if jurisdictions to move to short track – if not, ballot stays on full track and moves not, ballot stays on full track and moves forwardforward

2007 BALLOT PROCESS2007 BALLOT PROCESS

Short Track:Short Track:Second 30-day comment period Second 30-day comment period ending September 14, 2007ending September 14, 2007

Full Track:Full Track:Second 45-day comment period Second 45-day comment period ending October 1, 2007ending October 1, 2007

2008 BALLOT 2008 BALLOT PROCESSPROCESS

Deadline for Submitting Ballot Deadline for Submitting Ballot Proposals:Proposals:

COMPLIANCECOMPLIANCE

Enforcement (field/roadside)Enforcement (field/roadside)Program Compliance ReviewsProgram Compliance ReviewsConsensus Board InterpretationsConsensus Board InterpretationsDispute ResolutionDispute ResolutionIFTA, Inc. ClearinghouseIFTA, Inc. Clearinghouse

ENFORCEMENT OF IFTAENFORCEMENT OF IFTACredentials:Credentials:

A jurisdiction issues one license to the carrierA jurisdiction issues one license to the carrierThe carrier must copy the license and place The carrier must copy the license and place a copy in each qualified motor vehiclea copy in each qualified motor vehicle

A Jurisdiction issues two decals to the carrier A Jurisdiction issues two decals to the carrier for each qualified motor vehiclefor each qualified motor vehicle

The carrier must display a decal on each The carrier must display a decal on each side (driver and passenger) of each side (driver and passenger) of each qualified motor vehiclequalified motor vehicle

ENFORCEMENT OF IFTAENFORCEMENT OF IFTAIFTA Temporary Decal Permit:IFTA Temporary Decal Permit:

May be carried ONLY in place of decalsMay be carried ONLY in place of decalsIs valid for only 30 daysIs valid for only 30 daysIs vehicle specific (VIN must be included)Is vehicle specific (VIN must be included)It’s main purpose is to allow a carrier to It’s main purpose is to allow a carrier to add a qualified motor vehicle immediately add a qualified motor vehicle immediately – places a copy of the license in the – places a copy of the license in the vehicle and the jurisdiction faxes the vehicle and the jurisdiction faxes the temporary permit until permanent decals temporary permit until permanent decals reach the carrierreach the carrier

ENFORCEMENT OF IFTAENFORCEMENT OF IFTA

Trip Permit:Trip Permit:Is issued by a jurisdiction to a carrierIs issued by a jurisdiction to a carrierIs in lieu of an IFTA licenseIs in lieu of an IFTA licenseIs limited by time (in most jurisdictions Is limited by time (in most jurisdictions i.e. days, hours, etc.)i.e. days, hours, etc.)Is NOT an IFTA trip permit – it allows Is NOT an IFTA trip permit – it allows the carrier to travel through the the carrier to travel through the jurisdiction that issued it and no otherjurisdiction that issued it and no otherMust be obtained for each jurisdiction Must be obtained for each jurisdiction separatelyseparately

ENFORCEMENT OF IFTAENFORCEMENT OF IFTAJurisdictions exchange quarterly a Jurisdictions exchange quarterly a listing of new and cancelled listing of new and cancelled accountsaccountsJurisdictions exchange, at least Jurisdictions exchange, at least every 10 days, the following:every 10 days, the following:

Listing of suspended licensesListing of suspended licensesListing of revoked licensesListing of revoked licensesListing of reinstated licensesListing of reinstated licenses

USES OF INFORMATIONUSES OF INFORMATIONAdministrativeAdministrative

To ensure that a carrier in a revoked To ensure that a carrier in a revoked status in one jurisdiction does not status in one jurisdiction does not receive a license from anotherreceive a license from another

RoadsideRoadsideTo ensure that a carrier in a revoked, To ensure that a carrier in a revoked, suspended, or cancelled status is not suspended, or cancelled status is not continuing operationscontinuing operations

WHY ENFORCE?WHY ENFORCE?If a carrier is operating on a suspended or If a carrier is operating on a suspended or revoked license, this indicates that the carrier is revoked license, this indicates that the carrier is not complying with the terms of IFTAnot complying with the terms of IFTA

Includes: failure to file tax returns; failure to pay a Includes: failure to file tax returns; failure to pay a tax return; failure to pay an audit assessmenttax return; failure to pay an audit assessment

If a carrier is operating on a cancelled license, If a carrier is operating on a cancelled license, the carrier has indicated to the jurisdiction that the carrier has indicated to the jurisdiction that he or she is no longer operatinghe or she is no longer operating

Stopping the carrier from operating in your Stopping the carrier from operating in your jurisdiction stops the carrier from operating in all jurisdiction stops the carrier from operating in all jurisdictions – payment by this carrier pays your jurisdictions – payment by this carrier pays your taxes tootaxes too

PROGRAM COMPLIANCEPROGRAM COMPLIANCEEach IFTA jurisdiction has a Each IFTA jurisdiction has a Program Compliance Review (PCR) Program Compliance Review (PCR) once every four yearsonce every four years

The purpose of the review is to The purpose of the review is to determine if the jurisdiction is in determine if the jurisdiction is in compliance with the Agreementcompliance with the Agreement

CONSENSUS BOARD CONSENSUS BOARD INTERPRETATIONSINTERPRETATIONS

A process through which A process through which provisions of the IFTA governing provisions of the IFTA governing documents may be interpreted documents may be interpreted and commentary added to the and commentary added to the affected provisions.affected provisions.

CONSENSUS BOARD CONSENSUS BOARD INTERPRETATIONSINTERPRETATIONS

A jurisdiction, committee or Board A jurisdiction, committee or Board member requests an interpretationmember requests an interpretationThe Board may issue a proposed The Board may issue a proposed interpretationinterpretationA proposed interpretation must be A proposed interpretation must be ratified by ¾ affirmative vote of the ratified by ¾ affirmative vote of the membership at the Annual Business membership at the Annual Business MeetingMeetingIf ratified, commentary is added to the If ratified, commentary is added to the affected IFTA governing documentaffected IFTA governing document

DISPUTE RESOLUTIONDISPUTE RESOLUTION Dispute Resolution Committee (DRC) set up to:

Facilitate dispute resolution in a fair & impartial manner;

Review dispute resolution process & procedures & recommend changes to the Board

DRC holds quarterly conference calls unless a dispute is filed.

During the last year the following forms were developed and approved by the DRC: Compliant Content Guidelines Complaint Content Review Form Answer Content Guidelines Answer Timeliness and Content Review Form

In order to test the forms and procedures the DRC is currently in the process of conducting mock disputes.

Alternate FuelsAlternate FuelsNAFTANAFTANative IssuesNative Issues

INTERNATIONALFUEL TAX

ASSOCIATION, INC.Manages

The International Fuel Tax Agreement

What is IFTA, Inc.?What is IFTA, Inc.?

A not-for-profit association incorporated A not-for-profit association incorporated under laws of the State of Arizonaunder laws of the State of ArizonaMembership in IFTA constitutes Membership in IFTA constitutes membership in IFTA, Inc.membership in IFTA, Inc.Association is funded by membership Association is funded by membership duesduesIncorporated to conduct business Incorporated to conduct business activitiesactivitiesMembership elects a 9-member Board Membership elects a 9-member Board of Trusteesof Trustees

THE PEOPLETHE PEOPLELONETTE L. TURNER – EXECUTIVE DIRECTOR

DEBORA K. MEISE – PROGRAM DIRECTOR

JASON DEGRAF – INFORMATION SERVICES ADMINISTRATOR

TAMMY TRINKER – EVENTS COORDINATOR

TOM KING - WEBMASTER

JESSICA EUBANKS – EXECUTIVE ASSISTANT

RICHARD O. BECKNER – PROGRAM COMPLIANCE ADMINISTRATOR

Services ProvidedServices Provided

Administering the ballot process and the Administering the ballot process and the IFTA governing documentsIFTA governing documentsGathering and distribution of the Gathering and distribution of the quarterly tax ratesquarterly tax ratesProviding technical assistance to the Providing technical assistance to the member jurisdictions and licenseesmember jurisdictions and licenseesGathering and distribution of the Gathering and distribution of the jurisdiction annual reportsjurisdiction annual reportsLeading and participating in the Leading and participating in the requiredrequired program compliance reviews program compliance reviews

Other ServicesOther Services

Planning and preparation of an annual Planning and preparation of an annual audit workshop (along with IRP), an audit workshop (along with IRP), an attorneys’ meeting, an annual business attorneys’ meeting, an annual business meeting, a managers’ and law meeting, a managers’ and law enforcement seminarenforcement seminarParticipating in other related association Participating in other related association and government meetingsand government meetingsMonitoring activities such as NAFTAMonitoring activities such as NAFTA

IFTA/IRP AUDIT WORKSHOPIFTA/IRP AUDIT WORKSHOPJANUARY 4-7, 2008JANUARY 4-7, 2008

Tempe Mission Palms HotelTempe Mission Palms HotelTempe, ArizonaTempe, Arizona

IFTA Attorneys' Section MeetingIFTA Attorneys' Section MeetingApril 18-19, 2008April 18-19, 2008Tempe, Arizona Tempe, Arizona

QuestionsQuestions