Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO:
KRS
131.110,
138.227,
138.655-138.7291,
186.050(4),
186.650,
49 C.F.R.
390.21, 49 U.S.C. 317
NECESSITY, FUNCTION, AND CONFORMITY:
49
U.S.C. 31705 and
KRS
138.227 authorize the department to enter
into the provisions of the International Fuel Tax Agreement (IFTA). This
administrative regulation establishes the recordkeeping and audit requirements
of IFTA and
KRS
138.655 through
138.7291
and provides for uniformity in the interstate and intrastate administration of
KRS
138.660(1) and (2) so as not
to violate the interstate commerce clause of the United States
Constitution.
Section 1. Definitions.
(1) "Base jurisdiction" means the member
jurisdiction where qualified motor vehicles are based for vehicle registration
purposes and:
(a) Where the operational
control and operational records of the fuel tax licensee's qualified motor
vehicles are maintained or available; and
(b) Where some travel is accrued by qualified
motor vehicles within the fleet.
(2) "Fuel tax license" means either an IFTA
license or a KIT license.
(3)
"IFTA" means the International Fuel Tax Agreement.
(4) "IFTA license" means a motor fuel tax
license issued in accordance with the IFTA Articles of Agreement and the IFTA
Procedures Manual.
(5) "IRP" means
the International Registration Plan.
(6) "Jurisdiction" means a state of the
United States, the District of Columbia, or a province or territory of Canada,
or a state of the United Mexican States.
(7) "KIT license" means the Kentucky
intrastate tax license issued by the Kentucky Transportation Cabinet to
intrastate motor carriers subject to the taxes imposed by
KRS
138.660(1) and
(2).
(8) "KYU license" means the Kentucky Highway
Use License issued by the Kentucky Transportation Cabinet to motor carriers
subject to the tax imposed by
KRS
138.660(3).
(9) "Motor carrier" is defined by
KRS
138.655(5).
(10) "Over-the-road fuel" means fuel
purchased from a retail distributor and placed directly into a qualified motor
vehicle.
(11)
(a) "Qualified motor vehicle" means a motor
vehicle operated by a motor carrier that is used, designed, or maintained for
the transportation of persons or property and that is a:
1. Single vehicle having two (2) axles and a
gross vehicle weight or a registered gross vehicle weight exceeding 26,000
pounds or 11,797 kilograms;
2.
Single vehicle having three (3) or more axles, regardless of weight;
or
3. Vehicle used in combination
if the weight of the combination exceeds 26,000 pounds or 11,797 kilograms
gross vehicle weight or registered gross vehicle weight.
(b) A qualified motor vehicle does not mean
a:
1. Recreational vehicle;
2. Motor vehicle registered pursuant to
KRS
186.050(4) or under another
jurisdiction's law as a farm vehicle; or
3. Motor vehicle used to transport persons
for hire.
(12) "Quarterly reporting period" means a
period of time consistent with the calendar quarterly periods of January 1
through March 31, April 1 through June 30, July 1 through September 30, or
October 1 through December 31.
(13)
"Tax-paid fuel" means motor fuel purchased either in bulk or over-the-road by a
motor carrier on which the motor fuel taxes imposed by a jurisdiction are paid
at purchase.
(14) "Taxpayer" means
a Motor Carrier operating on the roads of the Commonwealth subject to the taxes
in
KRS
138.660.
Section 2. Governing IFTA Documents. The
following IFTA documents prepared and adopted by the membership of the
International Fuel Tax Association shall govern the base jurisdiction
recordkeeping requirements and audit provisions of the taxes imposed by
KRS
138.660(1) and (2):
(1) International Fuel Tax Agreement Articles
of Agreement as incorporated by reference in
601
KAR 1:200;
(2) International Fuel Tax Agreement
Procedures Manual as incorporated by reference in
601
KAR 1:200; and
(3) International Fuel Tax Agreement Audit
Manual as incorporated by reference in
601
KAR 1:200.
Section 3. Tax Recordkeeping.
(1) Each taxpayer shall maintain a complete
record of all motor fuel purchased, received, or used in the conduct of
business. The fuel records shall contain the following information:
(a) The date of each receipt of
fuel;
(b) The name and address of
the person or business from whom the fuel was purchased or received;
(c) The name of the purchaser of the
fuel;
(d) The number of gallons of
fuel received;
(e) The type of
fuel;
(f) The vehicle or equipment
into which the fuel was placed; and
(g) If applicable, complete records on power
takeoff use of motor fuel established in subsection (14) of this
section.
(2) Except as
established in subsection (13) of this section, each taxpayer shall maintain
detailed distance records that show operations on an individual-vehicle basis.
The distance records for each qualified motor vehicle shall contain at least
the following information:
(a) Both taxable
and nontaxable usage of fuel;
(b)
Distance traveled for taxable and nontaxable use;
(c) Beginning and ending date of each
trip;
(d) Trip origination and
destination;
(e) Route traveled on
trip;
(f) Trip beginning and ending
odometer readings;
(g) Total
mileage of each trip; and
(h)
Distance recaps for each qualified motor vehicle for each jurisdiction in which
the qualified motor vehicle is operated.
(3) To obtain credit for a tax-paid fuel
purchase, a taxpayer shall maintain a receipt or invoice, a credit card receipt
or automated vendor-generated invoice, or transaction listing. An acceptable
receipt or invoice for tax-paid fuel purchased shall not have been altered or
indicate erasures and shall contain at least the following information:
(a) The date of purchase of fuel;
(b) The name and address of the person or
business from whom the fuel was purchased;
(c) The number of gallons
purchased;
(d) The type of
fuel;
(e) The price per gallon of
the fuel purchased or the total amount of the sale;
(f) Unit number of the motor vehicle into
which the motor fuel was placed; and
(g) Purchaser's name. In the case of a lease
agreement, a receipt shall be acceptable in either name, if the records and
lease agreement indicate the legal connection to the reporting party.
(4) A taxpayer shall not apply for
credit for withdrawal from licensee-owned, tax-paid bulk fuel storage unless
the following detailed records are kept:
(a)
Date of withdrawal;
(b) Number of
gallons withdrawn;
(c) Fuel
type;
(d) Unit number and type of
motor vehicle or equipment into which the fuel was placed; and
(e) Purchase and quarterly beginning and
ending inventory records to substantiate that tax was paid on the bulk
purchase.
(5)
(a) A taxpayer shall account separately for
tax-paid fuel purchased as storage or bulk from over-the-road fuel
purchased.
(b) The licensee shall
retain a copy of each delivery ticket and receipt for storage or bulk
fuel.
(c) Bulk fuel inventory
reconciliations shall be maintained. Records shall be maintained to distinguish
fuel placed in a qualified motor vehicle from fuel placed in a nonqualified
vehicle and other uses.
(d) Each
tax-paid purchase shall be supported by a receipt, invoice, credit card receipt
or automated vendor-generated invoice or transaction listing.
(e) Over-the-road fuel receipts shall
identify the vehicle by the registration plate number or unit number and type
of vehicle because only a vehicle identified with the fuel tax licensee's
operation shall be reported for mileage or fuel consumption.
(6) A separate total shall be
compiled for each of the following fuel types used by a fuel tax licensee:
(a) Gasoline;
(b) Diesel;
(c) Kerosene;
(d) Gasohol;
(e) Liquid petroleum gas; and
(f) Compressed natural gas.
(7) Each taxpayer shall retain the
information required by subsections (1) through (6) of this section for each
quarterly reporting period for a period of four (4) years from the date of
filing the tax report based on these records.
(8) Each taxpayer subject to a KYU license
shall maintain the following records on operations within Kentucky of each
motor vehicle that is subject to the tax imposed by
KRS
138.660(3):
(a) Type of motor vehicle;
(b) Declared gross weight of the motor
vehicle;
(c) Weigh bills showing
the actual weight of the loaded motor vehicle;
(d) Except as provided in subsection (13) of
this section, mileage operated by unit number in Kentucky as reported on trip
sheets and driver logs that shall include the following:
1. Beginning and ending odometer readings of
each trip;
2. Each route
driven;
3. Beginning and ending
date of each trip;
4. Trip origin
and destination; and
5. Total trip
miles;
(e) Bills of
lading;
(f) Off-highway mileage,
including settlement sheets and periodical logs showing entrance and exit of
public highways; and
(g) Manual or
computer-generated off-road mileage recaps for Kentucky.
(9)
(a) Each
taxpayer subject to a KYU license shall retain the information required by
subsection (8) of this section for each quarterly reporting period for a period
of five (5) years from the date of filing the tax report based on these
records.
(b) If the records
required to be maintained in subsection (8) of this section are insufficient,
incomplete, or unavailable for the auditor to complete an audit, the auditor
shall examine any other records of the taxpayer that may assist in establishing
the tax liability of the taxpayer.
(10) Both the lessor and lessee involved in
the short or long-term lease of motor vehicles shall maintain sufficient
records, including copies of the leases and supplemental agreements, to allow
determination of the entity responsible for reporting or payment of the
taxes.
(11) Records shall be
retained by the lessor and lessee on microfilm, microfiche, or other
computerized or condensed record storage system.
(12) If a taxpayer chooses to use an on-board
electronic data recording system in lieu of or in addition to trip reports for
tax reporting, the devices, recordkeeping, data collection, reporting and
taxpayer responsibility shall comply with Section P600 of the International
Fuel Tax Agreement Procedures Manual incorporated by reference in
601
KAR 1:200.
(13)
(a) A
taxpayer subject to an IFTA or KIT license who operates exclusively in
intrastate commerce and for whom all of the mileage traveled is taxable, may
choose to maintain quarterly odometer readings on an individual motor vehicle
basis rather than the more detailed records established in subsection (2) of
this section.
(b) A taxpayer
subject to a KYU license who operates exclusively in intrastate commerce and
for whom all of the mileage traveled is taxable, may choose to maintain
quarterly odometer readings on an individual motor vehicle basis rather than
the more detailed records established in subsection (8)(d) of this
section.
(c) A taxpayer claiming
off-road miles shall maintain records as established in subsection (8) of this
section.
(14) A taxpayer
subject to an IFTA or a KIT license applying for a refund pursuant to
601
KAR 1:200, Section 11 shall, in addition to the other
requirements of this section, maintain the following records:
(a) Proof of power-take-off exemption
percentage including how the percentage was calculated;
(b) Listing of bulk fuel storage that
includes:
1. Location of bulk fuel
storage;
2. Capacity of bulk fuel
storage; and
3. If tanks are
designated for on road highway use or off road highway use;
(c) Kentucky Revenue Cabinet Motor
Fuels Tax Refund Permit Number and Kentucky Revenue Cabinet Sales and Use Tax
Number, if applicable; and
(d)
Equipment listing for each motor vehicle on which the refund is being requested
including:
1. Vehicle type;
2. Use of power-take-off;
3. Vehicle unit number;
4. Vehicle identification number;
and
5. Type of fuel used in each
vehicle.
Section 4. Auditing.
(1) For an audit, the taxpayer shall have the
following information available if requested by the auditor:
(a) Records of all motor fuel purchased,
received, or used as identified in Section 3(1) of this administrative
regulation;
(b) Detailed distance
records that show operations on an individual vehicle basis as identified in
Section 3(2) of this administrative regulation;
(c) Credit for tax-paid fuel purchases
records as identified in Section 3(3) of this administrative
regulation;
(d) Credit for tax-paid
bulk fuel storage records as identified in Section 3(4) of this administrative
regulation;
(e) Copies of Kentucky
income tax returns for the periods under audit;
(f) Copies of IFTA or KIT returns, KYU
returns, and IRP returns that represents Kentucky operations, or the
documentation of another responsible party for the payment of the related
taxes;
(g) A general ledger
relating to each period under audit; and
(h) The related books of original
entry.
(2)
(a) The fuel tax audit of a taxpayer subject
to an IFTA or a KIT license shall be performed in accordance with the
provisions of the International Fuel Tax Agreement Audit Manual, as
incorporated by reference in
601
KAR 1:200.
(b) An audit of a taxpayer subject to a KYU
license shall be performed by verifying the following:
1. The combined license weight of each motor
vehicle operated by the motor carrier;
2. A correct odometer;
3. Reports of each trip that adequately
identify the truck, trip mileage, and route driven;
4. Weight reports;
5. Continuity of trips;
6. Off-highway mileage;
7. Seasonal variations in the motor carrier's
business;
8. Electronic data
processing; and
9. Sampling of
representative months of operation.
(3) At least thirty (30) days prior to
conducting a routine audit, the Transportation Cabinet shall contact the
taxpayer in writing advising of the approximate date that the audit is to be
conducted and the time period the audit shall cover.
(4)
(a) The
auditor shall conduct and document a preaudit conference with the taxpayer or
the taxpayer's designated representative outlining the carrier's operation, the
audit procedures, the records to be examined, the sample period, and the
sampling procedures.
(b) The
taxpayer and auditor shall determine at the preaudit conference who shall have
the responsibility for the final acceptance of audit findings and who shall be
involved in the closeout conference.
(5) The auditor shall conduct and document a
close-out conference with the taxpayer or the taxpayer's designated
representative outlining preliminary findings to include proposed assessment,
recommendations resulting from the review of the records and internal control,
rights of appeal, and to whom the audit report shall be addressed.
(6)
(a) The
Transportation Cabinet shall furnish the taxpayer a letter of audit findings
and recap schedules.
(b) If
requested, the cabinet shall supply other work papers to the
taxpayer.
(7)
(a) A taxpayer shall be notified of
additional tax assessments by mail.
(b) Payment, including interest from the
original due date, in the absence of protest, shall be made within forty-five
(45) days from the date of the notice of tax due.
(8) A penalty assessed under
KRS
138.715 shall be applied to audit assessments
based upon the percentage of the underpayment of the tax liability prior to the
deduction of fuel tax purchase credits, if applicable, to the
licensee.
Section 5.
Protest of Assessments.
(1)
(a) A written protest may be filed by the
taxpayer, or other persons representing the taxpayer, and shall include a
supporting statement and documents that identify the specific adjustments
requested or the portions of the audit being protested and shall establish the
reasons the protest is being made as established in
KRS
131.110(1).
(b) The protest shall be filed with the
Transportation Cabinet, Division of Road Fund Audits within forty-five (45)
days from the date of the notice of tax due.
(2) If an IFTA license taxpayer elects to
exercise the right under Section 1450.200 of the International Fuel Tax
Agreement Articles of Agreement for Further Requests for Appeal, the cabinet
shall consider this a protest of the assessment by the taxpayer and place the
taxpayer into protest status.
(3)
If an IFTA member jurisdiction elects to exercise the right under Section
1360.100 of the International Fuel Tax Agreement Articles of Agreement to
reaudit the taxpayer, the cabinet shall consider this a protest of the
assessment by the taxpayer.
(4) If
the supporting statements and documentation are not sufficient to change the
assessment results, the taxpayer may request an information gathering or
protest conference with the Division of Road Fund Audits.
(5) Within sixty (60) days of the taxpayer
submitting complete additional information or within sixty (60) days of a
protests conference being held, the Division of Road Fund Audits shall issue a
final ruling to the taxpayer that includes the final assessment and the
procedures to follow if the taxpayer chooses to appeal to the Kentucky Board of
Tax Appeals as established in
KRS
131.110.
(6) If the taxpayer does not request a
conference, the cabinet shall issue a final ruling to the taxpayer, stating the
final assessment results and detailing the procedures for an appeal to the
Kentucky Board of Tax Appeals as established in
KRS
131.110.
(7) Within thirty (30) days from the date of
the final ruling by the cabinet, a written protest may be filed by the
taxpayer, or other persons representing the taxpayer, with the Kentucky Board
of Tax Appeals as established in
KRS
131.110.
STATUTORY AUTHORITY:
KRS
138.725(1),
281.600,
49 U.S.C. 317