“Every year, just before April 15, millions of taxpayers use a standard deduction or itemize their deductions to claim more than $1 trillion dollars worth of tax reduction,” says John Vosters, vice president of Business Development for ITS Compliance. “Just as taxpayers use tax preparation software technology and expertise to maximize their deductions and refunds, more truck fleets can use telematics technology to maximize their claims to tens of thousands, even hundreds of thousands of dollars over years, in potential off-road fuel tax refunds.”
Dan Fehrenbacher, sales solution engineering manager, Zonar, says effective telematics platforms like those offered by Zonar can help truck fleets gain significant operational efficiencies. Fleets can track shipments and deliveries, monitor vehicle and driver performance and maintain accountability for the condition of vehicles and shipments through vehicle inspection reporting.
And by working with a fuel tax reporting partner such as ITS Compliance, Fehrenbacher says fleets can set up a fuel tax recovery program using some of the same data gathered to improve their fleet operations. Through this program, fleets maximize fuel tax reimbursements associated with the operations of off-highway vehicles or equipment, PTOs and trailer refrigeration units. For example, with a switch installed on the telematics platform, drivers or operators can track when the PTO is engaged. The telematics platform can also keep track of when the trailer’s off-road equipment is used and when it’s refueled.
“We can set up an RFID tag... on the off-road equipment next to the fuel tank,” Fehrenbacher says. “The operator scans the RFID tag with a Zonar 2020 tablet or Electronic Vehicle Inspection Reporting (EVIR) handheld immediately prior to refueling. The system automatically notes the date, time and location of refueling. The driver or operator can then enter in the fuel quantity.”
Vosters says fleets can use this telematics information to develop much more accurate fuel tax recovery recordkeeping and reporting integrity, which can provide the documentation required in application to attain state fuel tax reimbursements. Many states don’t require fuel taxes to be paid on fuel that’s burned by off-road vehicles or equipment. Many also offer fuel tax refunds or credits for PTO use in certain circumstances – to include stationary equipment and/or while the truck is in motion, such as agitators on bulk transportation trailers or spreaders on tank trucks.
Cutting Through the Complexity of Recovery
Because of all of the different statutes involving fuel taxes, developing a fuel tax recovery program takes a lot of preparatory work, expertise and follow-up, Vosters warns.
“A number of states have recently revised their guidelines on eligibility,” he points out. “They may require fleets to apply for a permit in order to secure fuel tax refunds. As part of this permit application process, fleets may have to provide 12 to 18 months of historical data that documents when and how long refrigeration units on trailers, PTOs or off-road equipment are used each day and where fuel is purchased – and most importantly – in which state(s) the fuel is actually consumed/burned.
“Telematics assists in gathering all the necessary information and data required for rock solid refund applications,” Vosters asserts. “Still, the process of gathering, validating, utilizing and archiving that information for a 5+ year retention period can be quite daunting – plus following use, this data is subject to potential future federal and state audits, which ITS Compliance also manages as part of its comprehensive service.”
For fleets that operate in multiple states, there’s also the added complexity of applying for off-road fuel tax refunds through the International Fuel Tax Agreement, or IFTA. “Sometimes, the process for fuel tax refunds through individual states and through IFTA is one and the same,” Vosters says. “But many times they are not.”
The complexity and difficulty lies in where fleets that operate in multiple states not only fuel their trucks, but most importantly, where they burn (consume) their fuel, he adds.
The off-road fuel tax refunds can also vary depending on how states allow them to be calculated. For example, when determining fuel tax reimbursements for PTO usage, states often allow fleets to calculate the state tax based on generalized assumptions such as a burn rate, which may not take into account high-capacity PTOs operating at higher RPMs. Some states may allow the fleet to use the equipment’s actual burn rate instead, but only if the fleet can provide substantiated documentation that their PTOs operate at higher RPMs and burn more fuel, he states.
Vosters offers three examples where ITS Compliance assisted fleets in recovering nearly $350,000 in fuel taxes from state and federal agencies using information gathered by telematics systems:
- A construction company recovered more than $90,000 in taxes paid on fuel burned by about 800 off-road units.
- A transportation fleet with 395 units, including refrigeration unit-equipped trailers, realized more than $207,000 in refunds for taxes paid on fuel that powered those reefers. That fleet transported refrigerated and frozen products to convenience stores.
- A dairy transportation company recovered more than $50,000 in refunds paid for fuel burned by agitators on its bulk transportation trailers. The PTO-powered agitators kept the dairy products stable by constantly churning them during transport.
“While telematics provides tremendous assistance in capturing the required data to help fleets recover fuel tax refunds, the actual off-road fuel tax recovery process cannot be accomplished without technical expertise in regulatory statutes and audit liability protection “best practices” management,” Vosters says. “Telematics provides the raw data necessary to undertake the process, but it still involves a lot of complicated analysis. Essentially, ITS Compliance helps fleets accomplish that analysis to determine if the catch is worth the chase in refunds potential, based on each specific jurisdiction’s eligibility guidelines and existing statutes.”