An IFTA audit is a review by your base jurisdiction that verifies you reported the right distance and fuel in every state and province your qualified trucks operated in, and that you paid the correct fuel tax to each one. Every member jurisdiction is required to audit an average of 3% of its IFTA accounts each year, so most interstate carriers will sit through one eventually. The outcome turns almost entirely on your records: clean logs and receipts usually mean a quick review, while gaps and missing documentation open the door to interest, penalties, and a default MPG assessment that can dwarf the underlying tax.
How Carriers Get Selected
The 3% audit quota is not applied evenly across fleet sizes. At least 15% of a jurisdiction’s audits have to target low-distance accounts, at least 25% have to target high-distance accounts, and the remaining 60% can come from anywhere in between.1IFTA, Inc. Best Practices Audit Guide Small owner-operators and large fleets both sit inside the pool.
Random selection is only part of it. Jurisdictions also flag returns whose numbers look off. Quarterly filings that report the same MPG quarter after quarter, large swings in distance or fuel from one period to the next, and fuel-to-mileage ratios that do not make sense for the type of equipment being run all draw attention.1IFTA, Inc. Best Practices Audit Guide There is no published numerical threshold; these are the patterns an auditor screens for when deciding which accounts to pull.
What Auditors Actually Look For
Odometer Gap Miles
Gap miles are the most common finding. A gap exists any time the starting odometer reading on one trip does not match the ending reading of the previous trip. Those missing miles were driven somewhere, but they were not reported to any jurisdiction. When the auditor cannot reasonably assign them, the default is to allocate the missing distance across all jurisdictions based on each one’s audited percentage of your total distance and fuel.1IFTA, Inc. Best Practices Audit Guide That allocation almost never favors the carrier, because missing miles get pushed into high-rate states along with the low.
Bulk Fuel Documentation
Carriers who fuel from their own tanks face a heavier record-keeping load. Every withdrawal needs the date, gallons, fuel type, and the unit number of the vehicle receiving the fuel. On the input side, you need purchase invoices and inventory records proving tax was paid on the bulk fuel, plus delivery tickets and receipts for every purchase.1IFTA, Inc. Best Practices Audit Guide If the same tank feeds both IFTA-qualified vehicles and other equipment, records have to separate the two. Your base jurisdiction can waive the unit-number requirement, but only on application and only if your records are otherwise detailed enough to distinguish qualified from non-qualified usage.
MPG That Doesn’t Match the Equipment
Reported fuel economy gets compared against what is physically reasonable for the truck. A loaded sleeper cab reporting 9 MPG raises the same eyebrows as one reporting 2.5 MPG. Either number points to a problem in the distance data, the fuel data, or both. A borderline MPG figure will not by itself cause a return to be rejected, but it will push the auditor to test a larger sample of your records than the minimum.
Records You Have to Produce
IFTA records fall into two buckets: distance and fuel. Both have to be retained for at least four years from the date the return was due or the date it was filed, whichever is later.2IFTA, Inc. IFTA Procedures Manual Audits typically cover the previous eight quarters, so four years leaves the auditor room to work.
Distance Records
Each qualified vehicle needs Individual Vehicle Mileage Records capturing the start and end dates of each trip, origin and destination, route, and distance in each jurisdiction. Monthly and quarterly summaries should aggregate those trips into per-jurisdiction totals that tie back to the quarterly return.
If distance is generated by GPS or another vehicle-tracking system, the underlying data has to include the original GPS location data, the date and time of each reading at intervals frequent enough to validate jurisdictional distances, the calculated distance between readings, and beginning and ending odometer or ECM readings for the period.2IFTA, Inc. IFTA Procedures Manual Pings every 200 miles will not tell an auditor which side of a state line the miles happened on. Frequent readings create a traceable path.
Fuel Records
Every retail fuel receipt needs the date, the seller’s name and address, the number of gallons, the fuel type, the price per gallon or total sale, and the unit number of the vehicle fueled.3IFTA, Inc. IFTA Procedures Manual P500-P600 Consolidation Vendor codes are acceptable if you keep a separate list matching each code to a name and location. The seller’s address is what tells the auditor which jurisdiction gets credit for the tax-paid gallons on your return.
How the Audit Runs
Notice and Preparation
The process starts with an official notice from your base jurisdiction, usually by mail, listing the audit period and the documents you need to have ready. Most audits cover eight quarters.4IFTA, Inc. IFTA Audit Manual The notice sets a deadline and identifies whether the audit will run as a desk audit, where you send records to the agency, or a field audit, where the auditor works on-site for days at a time. Do not ignore the notice. Non-response can lead to license suspension, which puts your trucks in the position of buying trip permits at every state line.
The Examination
An opening conference sets the scope and the periods under review. From there the auditor pulls a sample and cross-references trip logs against fuel receipts, walks odometer sequences looking for gaps, tests reported MPG against what the equipment should produce, and confirms that jurisdictional mileage splits add up to what you filed each quarter.
Sample size responds to what the auditor finds. Problems in the initial sample push the auditor to expand testing. Clean and consistent records keep the sample small. A well-organized carrier can be done in a day or two; a disorganized one may see every quarter picked apart.
Exit Interview
A closing conference walks through the findings before the report is finalized. This is your best chance to explain discrepancies, hand over additional documentation, or point out arithmetic errors. Record-keeping problems that did not affect the tax number get noted here too, so you can fix them before the next cycle. Issues are far easier to resolve at this stage than through a formal appeal.
Assessments, Interest, and Penalties
If the audit finds you underpaid in one or more jurisdictions, you get an assessment. Because IFTA redistributes tax based on where miles were actually driven, an adjustment that moves miles from one state to another can create a liability in one place and a credit in another; the assessment reflects the net across every jurisdiction involved.
Interest
Interest runs on delinquent taxes from the original due date. For U.S.-based carriers the IFTA annual rate is set each January at two percentage points above the IRS underpayment rate under Internal Revenue Code Section 6621(a)(2) and accrues monthly at one-twelfth of that annual rate. The 2026 annual rate is 9%, or 0.75% per month.5IFTA, Inc. IFTA Annual Interest Rate Since audits reach back two years, interest can pile up on the older quarters well before you ever see the notice.
Penalties
The base jurisdiction can assess a penalty of $50 or 10% of the delinquent tax, whichever is greater, for failing to file, filing late, or underpaying.6IFTA, Inc. IFTA Articles of Agreement The penalty stays with the base jurisdiction and is not redistributed. Individual jurisdictions can add their own penalties under their own laws, so the IFTA figure is a floor.
The 4.0 MPG Default
This is the assessment carriers fear most. If your base jurisdiction determines that fleet records are inadequate, it can adjust your reported MPG down to 4.0, or reduce your reported MPG by 20%, whichever produces the larger tax liability.7IFTA, Inc. Inadequate Records Under IFTA For a fleet that actually averages 6.5 MPG, being reset to 4.0 means the auditor is calculating fuel burn as though the trucks used roughly 63% more fuel than they did. The tax figure that comes out can be many times the interest and penalty combined. Complete records are the only real defense against it.
Appealing the Findings
You have the right to challenge an audit report. IFTA requires base jurisdictions to provide appropriate notice and due process, but the actual appeal procedures and deadlines live in each jurisdiction’s own law.6IFTA, Inc. IFTA Articles of Agreement Deadlines for a written protest commonly fall around 30 days after the assessment notice, though some jurisdictions allow longer. Miss the deadline and the assessment generally becomes final, so read the notice carefully.
Appeals usually start informally: a written statement explaining what you disagree with, backed by additional records. If that does not resolve the dispute, most jurisdictions provide a formal administrative hearing where you can appear, bring counsel, and present documents or witnesses.
If Your License Is Suspended
Non-response to an audit, unresolved assessments, or delinquent returns can all lead to suspension or revocation of your IFTA license. A suspended carrier still holds physical credentials and decals, so the trucks look normal from the outside. Law enforcement can check license status through the IFTA Clearinghouse, and a truck running on a suspended license faces citations and mandatory trip permit purchases at each jurisdiction boundary.8IFTA, Inc. IFTA Law Enforcement Committee Best Practices Guide Involuntary trip permits at every state line get expensive fast, and repeated violations can escalate to full revocation. Carriers with a revoked, suspended, or cancelled license also lose the grace period that normally bridges license renewal and receipt of new decals.
Collection of unpaid tax, penalty, and interest is the base jurisdiction’s job. Balances that stay delinquent more than 30 days can be secured through lien provisions.6IFTA, Inc. IFTA Articles of Agreement The specific collection tools available depend on that jurisdiction’s laws, but liens on business assets are standard. Even if you plan to appeal, resolving the assessment quickly keeps monthly interest from stacking on a balance that is already growing.