Commonwealth Court to Consider Impact of Failure to Comply with IFTA Documentation Requirements

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The Commonwealth Court has tentatively scheduled oral argument for the week of November 14, 2011, in R & R Express v. Commonwealth, No. 533 F.R. 2007. The case deals with the tax impact of a motor carrier’s failure to comply with IFTA mileage and fuel documentation requirements.

R & R Express is a brokerage company that uses owner operators to haul steel and other commodities throughout the United States. All fuel used in the company’s motor carrier operations is purchased at retail locations. An IFTA audit conducted by the PA Department of Revenue resulted in a liability of over $300,000 in tax, plus interest. The company’s owner/operators did not consistently turn in trip reports and fuel receipts for their activity. Since the company did not maintain adequate mileage and fuel records, the auditor increased the company’s reported mileage, imposed the statutory 4.0 m.p.g. factor for at least some vehicles and disallowed credit claimed for reported tax-paid fuel purchases. ?

R & R Express contends that (1) the audit deficiency should be stricken because the methodology used by the Department of Revenue improperly allows the state to collect tax twice on the same gallons of fuel, first at the time of purchase and again at audit, and (2) in the alternative, the company should be permitted to have its tax for the audit period recomputed based on data from reporting periods subsequent to the audit period. In its brief, the company argues that, since its recordkeeping procedures improved after the audit, the data from later reporting periods represents the “best information available” to compute its additional tax due for the audit period.

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