Internet Fuels New Gas Tax System

New online service in Idaho simplifies interstate fuel-tax filing for truckers and state tax agencies.

by / December 30, 2002
The trucking industry is big business in the United States -- and that means big taxes. Truckers spend as much as $29,000 annually on diesel fuel, according to a report by ABC News. And states charge up to 39 cents per gallon of diesel, 24 cents of which is collected by the federal government.

To avoid paying top dollar for fuel, it's not unusual for interstate truck drivers to fill their tanks in one state where the tax on diesel fuel is low and drive right through the next state to avoid a higher tax.

That may keep costs down for drivers, but it leaves some states with disproportionately lower tax revenues, which translates into fewer dollars available to maintain the roads used by heavy trucks. To fix the problem, the United States and Canada created the International Fuel Tax Agreement (IFTA), an accord that allows an interstate trucker to report all the miles driven in 48 states and Canada by filing a single return with one state.

The base state, which receives the single return and payment, then shares the information and transfers fuel-tax revenues to other states and provinces based on the truck's mileage in each jurisdiction.

But as anyone can imagine, filling out and processing these forms isn't easy. "They are difficult to fill out, and the error rates are huge," said Gordon Alleman, tax automated systems manager for the Idaho Tax Commission. "As many as 70 percent of the forms have mistakes."

Moving Paperwork Mountains
With 3,000 truckers based in the state, Idaho doesn't have a huge trucking customer base. Nor does the Tax Commission have a lot of staff workers who can take time to correct the mountain of paperwork created by the IFTA's payment sharing program. Last year, the Commission received a grant from the federal government's Commercial Vehicle Information System Network to create some kind of solution.

A survey of truckers who use Idaho as their base found that 50 percent were interested in paying their taxes -- and submitting their forms -- online. Given such a strong response in favor of automation, the Commission then turned to Access Idaho, the state's official Web site, which is run by NIC Inc., to help develop an application.

Work started in April using Java application development software, and by July, Access Idaho had a prototype ready for pilot testing. Their goal was to have a fully functional payment system ready by October, when quarterly returns were due from the trucking industry.

When the service went live in the fall, nearly 11 percent of the state's filers opted to use the online system, an unusually high number for first time users, according to Jeff Walker, director of marketing for Access Idaho. The majority of filers are third party firms, which both firms and individual truckers contract to handle the arduous paperwork. With the new system, the users register once and log in to file returns for all clients.

Access Idaho bills the Tax Commission -- not the truckers -- $1.50 for every payment processed. "We invoice the Commission each month for the number of tax payments we process," Walker said. "However, the majority of filings are refunds and do not require a payment."

First and Only of Its Kind
The tax filing service is the first, and still the only one, of its kind in the country (New York state also has an electronic system, but uses a different filing format). Because calculations are done by the system, the error rate on IFTA payments filed electronically dropped significantly, according to Alleman, who credits the Commission's past experience with online payment systems for the smooth transition from paper to electronic forms. "Putting the application together didn't bite us because we have done similar projects in the past," he said.

The filing and payment service, which cost $42,000 to develop, has a number of features designed to make the process relatively painless. It's free to use, maintains account histories online so users can audit their past filings, allows one user to file several returns and has three different payment options.

Despite the newness of the online payment system, Alleman is confident it will be successful in the long term. "I'm hoping we'll get 20 percent of the truckers to use it during the next filing," he said.
Tod Newcombe Features Editor