These are Taxing Times!

There have been TAX changes. In some parts of Canada, the changes seem more dramatic than those in the rest. The Carbon Tax… I mean Fuel Charge, is calculated nearly identically to the formula by the International Fuel Tax Association (IFTA) that has been in operation for decades. The idea for the Fuel Charge must have come directly from the federal department of redundancy department.

In my second book: Choosing a Trucking Company, I spent nearly a third of the book talking about fuel costs for operators. The section has a whole chapter on fuel taxes. Many drivers still misunderstand IFTA. Too many think that fueling up in many different locations will save them money. They just do not understand. It’s a fleet consumption rate per mile (flat) that is charged to Carriers for their fleet movements.

In my book, while discussing IFTA in the context of Carrier contracts, I introduced an option where Carriers could pay each operator (or credit) the entire fuel tax costs. It would be the best system to figure out actual operator running costs. Fuel tax is charged by the mile. It’s the same way Carriers charge shippers/receivers by the mile. It can be easily separated and calculated in all rates charged to shippers (usually not done) and to independent operators on the fleet (already done in many carriers). Fuel taxes shown on invoices probably wouldn’t be popular since government and people often don’t like to physically see taxes on their bills, but it could easily be done. Fuel tax should not even have to be seen by independent operators unless they also openly get reimbursed for it at the same time.

So also, the Carbon Tax… Fuel Charge (from the Greenhouse Gas Pollution Pricing Act) can be physically calculated and displayed on invoices (not that that would happen). Fuel Charge should therefore be a cost charged directly to shippers but NOT a net cost to the independent operator. It is a flat tax based on miles traveled in the process of moving freight from point A to point B. The Fuel charge is a direct tax (cost) to freight transportation in Canada. This cost must be absorbed by the customer (shipper/receiver). In no way should an operator be consuming it. If calculations and deductions are made off an independent operator’s statement, it should be accompanied by an equal to or greater than increase in the rate per mile on their contract. The best contracts will not even calculate them on independent operator’s settlement statements… it is a Carrier cost.

CRA (who administers the Fuel Charge and its Registration) has sent many letters to independent operators who work for Carriers asking them to register. It’s not that they are trying to double charge to both Carriers and Operators, but their database doesn’t know the difference between the two. On their system it just says “Trucking” (or some description like that). If you are an independent operator (running under someone else’s running rights), do NOT register for the Fuel Charge.

If you are an independent operator and received a letter from CRA requiring you to register, all you must do is contact the Excise Duties and Taxes department shown on the letter and clearly state that you are an inter-liner and not a Carrier. If you are unfortunate and get an uninformed officer, you must be firm with them and ask for their supervisor… keep going up until someone understands you are not a Carrier. Whatever you do, do NOT register. Once you register it will take considerable effort to “Un-Register”. 

Fortunately, our firm has a great reputation with CRA and stopping the registration process is very quick if they ask. However, different jurisdictions across Canada can have different people and different mindsets. Remember, Canada is a very large country and equal training, and having equal administering agents is not easy. It’s a new program and
clear pathways have not been established. Fuel tax is administered provincially, Fuel Charge is Federal. 

Being in the industry for over 30 years has taught me one thing… government departments rarely share information properly. Provinces rarely cooperate with each other, and the hand holding between Federal and Provincial government sometimes resembles the childhood hand clapping game (or sometimes knuckle wrapping).

Fuel Charge is a tax administered and collected by the Federal government (CRA). Carriers should be passing on the costs of the tax to their shippers/receivers (and not operators). It should and will increase the costs of products delivered to our doors and stores. It doesn’t matter what the politicians or media claims it will do – in the end it simply increases costs… ALL costs… sooner or later and sometimes multiple times in the process of stuff getting to our doors. This is the fate of our country, higher costs for products and services. 

About the Author:
Robert D. Scheper is a leading Accountant and Consultant to the Lease/Owner operator industry in Canada. His first book in the Making Your Miles Count series “taxes, taxes, taxes” was released in 2007. His firm exclusively serves Lease/Owner Operators across Canada. His second book “Choosing a Trucking company” is the most in-depth analysis of the operator industry available today. He has a Master degree (MBA) in financial management and has been serving the industry since he and his wife came off the road in 1993. His dedication, commitment and strong opinions can be read and heard in many articles and seminars.

You can find him and his books at www.makingyourmilescount.com or 1-877-987-9787. You can also e-mail him at robert@thrconsulting.ca.