Best Available Information
Collaboration by: Mark Byrne, Rick LaRose, Audrey
Martel, Carmon Martorana, Charmin Tillman and
Richard Wagner
Define Adequate and Inadequate.


Adequate: Sufficient for a specific
requirement.
Inadequate: Lacking sufficient power,
capacity, or competence.
IFTA:

A540 Verification of Licensee Records
.200 The Audit will be completed using the best
information available to the base jurisdiction. The burden
of proof is on the licensee.
IFTA:

A550 Inadequate Licensee Records:
.100 Fuel Use Estimation
If the licensee’s records are lacking or inadequate to support any tax
return filed by the licensee or to determine the licensee’s tax liability,
the base jurisdiction shall have authority to estimate the fuel use upon
(but is not limited to) factors such as the following:
.005 Prior experience of the licensee;
.010 Licensees with similar operations;
.015 Industry averages;
.020 Records available from fuel distributors; and
.025 Other pertinent information the auditor may obtain or examine
Unless the auditor finds substantial evidence to the contrary by
reviewing the above, in absence of adequate records, a standard of 4.0
MPG/1.7KPL will be used.
IFTA:

A550 Inadequate Licensee Records/Assessment
.200 Tax Paid Fuel Credits
When tax paid fuel documentation is unavailable, all claims for tax
paid fuel will be disallowed.
IRP:

1502 (1010) Failure to Preserve and Maintain Records
If a registrant fails to maintain records, or after 30 days from receiving
written notice, fails to make records available to the member
jurisdiction, the member jurisdiction may impose an assessment. The
assessment must be based on the member jurisdiction’s estimate of true
liability established from:
1. information the registrant furnished;
2. information the member jurisdiction gathered;
3. information relative to other similar registrants based in
jurisdiction; or
4. any other information available to the member jurisdiction.
IRP:

1704 (1065) Netting of Audit Adjustments
…If the records are not made available, or if the records made
available are inadequate for an examination, any credits calculated for
jurisdictions which are caused by the inadequacy of records shall not
be included in the fees netted under Article XVI.

603 Request for Records
...Records must be adequate and complete for each fleet being audited.
If the records are not made available, or if the records made available
are inadequate for examination purposes, an assessment of liability
may be imposed in accordance with Article XV of the Plan. If an
estimate of the registrant’s true liability cannot be determined, the
registrant may be assessed 100% registration fees for the jurisdiction.
Any credits calculated for jurisdictions which are caused by the
inadequacy of records will not be reflected in the fees netted under
Article XVII of the Plan.
IRP:

802 Registrant Audit Report
802.2 …The audit report must contain a statement on whether the
registrant’s distance accounting system is adequate or inadequate and
reason why, as reflected by the consistency in which the registrant’s
distance accounting system meets acceptable criteria as established in
Section 400 and Article XV of the plan.

803 Interjurisdictional Audit Report and Distribution
of Audit Findings
803.3 …A statement on whether the registrant’s distance accounting
system is adequate or inadequate and reason why, as reflected by the
consistency in which the registrant’s distance accounting system meets
acceptable criteria as established in Section 400 and Article XV of the
plan.
Auditor Judgment
IMPORTANT?

Education
 Life Experience
 Work Experience
Group Exercises

Each Group will be divided into an Audit Team
and a Industry Team.
 There are three scenarios and each group
will be assigned one scenario to review.
Keep in mind each team within the group
needs to be prepared to defend their points
before an Appeals Board.
 The Appeals Board will have the following
members: Joel Foreman, Adrian Hughes,
Rick LaRose and Richard Wagner.
Audit Team





Read Scenario and choose a
spokesperson.
Determine your audit approach
keeping in mind what to do when
you have inadequate records.
Answer any questions associated
with the scenario.
Summarize your answer and
present your findings to the
Taxpayer Team. Use the IFTA and
IRP manuals to defend your
position.
Spokesperson should be prepared
to describe your scenario (available
records, missing records, etc.) and
tell how the audit was conducted
using the best available
information.
Industry Team

Read the scenario and
choose a spokesperson
to defend the audit
findings.
 Based on the audit
findings presented to
you, defend your
company’s position.
Use the IFTA and IRP
manuals to defend your
position.
 Present alternatives to
conducting the audit.
(What records did you
have available for the
auditor to use?)
Missy Miles – Audit Position
 What
was missing?
some driver logs
some OTR fuel receipts
some toll receipts
no bulk tank reconciliation
Missy Miles – Audit Position
What is causing the potential to use BEST
INFORMATION AVAILABLE?
a) Drivers take their trucks home
b) A lot of Mass Turnpike Travel
c) Owner drives trucks to inspection station
d) No bulk tank reconciliation
e) Some missing OTR fuel receipts
Missy Miles – Audit Position
UTILIZING OTHER SOURCES

FOR MILES
• Mileage Software Program – Determine how many miles to
inspection station.
• Odometer Readings – Determine GAP miles.
• Mass Toll Calculator – Determine miles on Mass Pike.
• Form ST-10 (MA Business Use Tax)
• Average Daily Miles – With available odometer readings.
• SAFESTAT – New Carrier – Form MCS-150 (nearest 10,000
miles for the past calendar year).
FORM ST-10

Massachusetts Turnpike Exemption
If you claim the Turnpike miles exemption on
your IFTA Quarterly Fuel Tax Schedule, IFTA
101, you are required to file an Annual
Massachusetts Business Use Tax Return (Form
ST-10) and remit the 5% use tax on the cost of
the fuel for which the exemption was taken.
Both the Annual Return and payment are due
on April 15 .
Toll / Mileage Calculator

Entry Interchange: Exit Interchange: Vehicle
Class/Type: Number of Axles:
Entry Interchange 04 - W. Springfield (I-91) Exit
Interchange 12 - Framingham Vehicle Class/Type
Class 6 - Any 3 Axle Vehicle w/Dual Tires
Number of Axles 3 Toll Mileage Est. Time
Eastbound: $6.10 65.7 1:01 Westbound: $6.10
65.7 1:01 Totals: $12.20
Vehicle Classifications
Trucks:




Class 2 - 3 to 5 axle vehicle
any Class 1 vehicle with a 1, 2 or 3 axle trailer
any Class 1 vehicle with a 1, 2 or 3 axle unit that
straddles the vehicle body
a 3 or 4 axle RV with single wheels
a 3 or 4 axle limousine
Class 3 - 5 to 9 axle truck
tractor-trailer, car carrier or truck with 5 to 9 axles
Class 4 - not used
Vehicle Classifications
Class 5
any 2 axle vehicle with dual rear tires, including
tow trucks
Class 6
tractor, tractor-trailer, truck or RV with dual
wheels and 3 axles
Class 7
car carrier, truck, tractor-trailer, RV or any vehicle
with dual wheels and 4 axles
Vehicle Classifications
Class 9
5 to 12 axle tandem-trailer (Double Bottom)
Bus:
Class 8
any two or three-axle bus used to carry 15 or more
passengers
FORM MCS-150



USDOT Number (definition): The
USDOT number is the number that the
FMCSA assigns to each motor carrier that
starts interstate operations.
Your USDOT number must be marked on
all of your vehicles.
To apply for a USDOT number, submit a
Form MCS-150.
Missy Miles – Audit Position

FOR FUEL
1) Point to point fill up test to display MPG – to
determine how much fuel is missing.
2) Utilize industry standards MPG to determine
total fuel.
3) Could create a reconciliation using invoice
purchases and weekly meter readings.
4) Could apply a reasonable MPG based on results
of other quarters.
Missy Miles – Audit Position
5) Could reconcile vehicles to see if they
have any non qualified diesel vehicles
and/or equipment fueling from bulk tank.
6) Could see if anybody else utilizes the
bulk fuel tank.
7) Similar operation.
8) Prior audit.
9) Fueling statements for OTR purchases.
Missy Miles – Industry Position
What Additional Records Could Be Presented?

For Mileage
• Inspection Station Logs
• Maintenance Records/Repair Orders
• Proof that one truck has driver logs that does the same
work as a truck that didn’t have all of its records.
• Proof of Driver’s Home Address (Where trucks are
housed)
• Toll Statements
Missy Miles – Industry Position
What Additional Records Could Be Presented?
• For OTR Fuel – More Receipts!!
• For Bulk Fuel
• Listing of Assigned Fuel Cards
• Third Party Fueling Statements
• Bulk Tank Capacity from Fueling Vendor
• Invoices
• Reconciliation Utilizing Additional Sources
Reconciliation Formula
Tank Capacity + Purchases – Withdrawals = Fuel
Available (Does this fuel exceed Tank Capacity???)
Missy Miles – Industry Position
If you were the auditor, what would you have done?
 Miles
• Projected the errors to all involved jurisdictions and
provinces? Yes – Missing Miles
OR
• Treated errors as isolated? Yes – Mass Turnpike and
NH Inspection Station Miles and Miles to Driver’s
Home
Missy Miles – Industry Position
Fuel Accountability
 Create Bulk Tank Reconciliation
 Get as Many Receipts as Possible
 Look for Consistent MPG Factors to Prove
That You Have All The Records
BritSpears Teeny Winy Fashions
Audit Facts

Does not maintain daily trip sheets or odometer readings.
 Total miles is determined by taking total gallons purchased
times 4.0 MPG
 AZ and NV miles are estimated based on standards
established by BritSpears. CA mileage is determined by
subtracting AZ and NV miles from Total Miles.
 All fuel is purchased OTR using corporate credit card.
 Credit cards are not used exclusively to purchase fuel.
 CPA prepares Corporate 1120 and Form 2290, Heavy
Highway Use Tax Return
BritSpears Teeny Winy Fashions
Audit Facts



Some charges on credit card statements did not have
corresponding receipt in box of records.
Total dollars spent instead of total gallons purchased was
recorded in the spreadsheet for some transactions.
Some fuel receipts recorded a truck number that did not
appear on summary spreadsheet.
BritSpears Teeny Winy Fashions
Audit Position
In general, how would you approach this audit?

Review records produced by other personnel, including
CPA firm to establish reliable data that can be used.
 Focus on establishing total miles using best available
information and then auditing the occasional trip to other
jurisdictions. The assumption would be that the difference
between total miles and the audited AZ and NV miles
would be CA miles.
BritSpears Teeny Winy Fashions
Audit Position
Is there some additional information you would
request?


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

AR Journal to establish number of trips and specific drop
off locations.
AP Journal to reconcile charge statements to establish that
all charge statements have been provided for the test
period.
GL/Federal 1120 cost of good sold can be utilized to
reconcile gas purchases.
GL Federal 1120 depreciation schedule can be utilized to
reconcile the number of vehicles reported.
Federal Form 2290 can also be used to reconcile the
number of vehicles.
BritSpears Teeny Winy Fashions
Audit Position

DOT Logs can be used as a basis for verification of trips,
number of vehicles and routing.
On what would you base total audit miles?




AR Journal
DOT Logs
Depreciation Schedules
Form 2290
BritSpears Teeny Winy Fashions
Audit Position
Are these considered inadequate records?
 R700 Records Requirement - Every licensee shall
maintain records to substantiate information
reported on the tax returns. Operational records
shall be maintained or be made available for audit
in the base jurisdiction. Recordkeeping
requirements shall be specified in the IFTA
Procedures Manual.
BritSpears Teeny Winy Fashions
Audit Position

R1000 Tax Paid Purchases
.100 To obtain credit for tax paid purchases, the licensee
must retain a receipt, invoice, credit card receipt, or
automated vendor generated invoice or transaction listing,
showing evidence of such purchases and taxes paid. These
records may be kept on microfilm, microfiche or other
computerized or condensed record storage system which
meets the legal requirement of the base jurisdiction.
Licensees are not required to submit proof of tax paid
purchases with their tax returns.
BritSpears Teeny Winy Fashions
Audit Position

A540 Verification of Licensee Records
.200 The audit will be completed using the best available
information available to the base jurisdiction. The burden
of proof is on the licensee.
.300 The auditor will make any reasonable attempt to
verify information reported on the tax returns.
.400 If the base jurisdiction utilizes a distance reporting
software program to verify the records of the licensee, that
software program shall be used as an audit tool. The
auditor must use discretion when verifying the licensee's
records. All documentation required to be maintained in
accordance with Section P540 of the IFTA Procedures
Manual, and any other records used by the licensee to
substantiate its distance traveled, must be considered by
the auditor(s) in determining an acceptable distance
reporting system and the accuracy of reported distance
traveled.
BritSpears Teeny Winy Fashions
Audit Position

1501 Adequacy of Records
A registrant’s distance accounting system must consistently
reflect information required under the Audit Procedures
Manual, Section 400, Registrant Responsibilities,
necessary to evaluate vehicle movement and therefore
substantiate the application filing. The source documents
must contain necessary details to trace vehicle movement.
Additionally, a distance accounting system should be
summarized by unit and by jurisdiction.
BritSpears Teeny Winy Fashions
Audit Position

401 Acceptable Source Documents
The registrant must maintain operational records that
support total distance traveled in each jurisdiction and total
distance traveled everywhere. Operational records include
source documents suitable for verification of fleet
mileage/kilometers as reported on registrant’s application
for apportionment. An acceptable source document for
verifying fleet distance traveled is an "Individual Vehicle
Distance Record" (IVDR). A standardized IVDR is
suggested and encouraged, but not required. While it is
desirable, the necessary information for a trip need not be
contained on a single source document. IVDR’s shall
contain the following information:
BritSpears Teeny Winy Fashions
Audit Position

401 Acceptable Source Documents (cont.)
1. Date of Trip (starting and ending);
2. Trip origin and destination;
3. Route of travel (may be waived by base jurisdiction);
4. Beginning and ending odometer or hubodometer
reading of trip (may be waived by base jurisdiction);
5. Total distance traveled;
6. Distance traveled by jurisdiction;
7. Unit number or vehicle identification number.
BritSpears Teeny Winy Fashions
Audit Position
What would you do about missing fuel receipts that
appear on the charge statement?

Per R1000 credit should be allowed if the licensee retains a
receipt, invoice, credit card receipt or automated vendor
generated invoice or transactional listing.
 Additional requirements are outlined in P560 and include
specific information that must be included on the receipt or
invoice.
 The credit card statement could constitute an invoice;
however, the invoice does not include the required detailed
information outlined in P560. Therefore, the tax paid
credit could be disallowed. The gallons would still be
included in total fuel for purposes of calculating MPG.
BritSpears Teeny Winy Fashions
Audit Position
What would you do about the charges on the credit
card statement from gas stations?


Add the charges as fuel by dividing the total dollar by the
average price per gallon for that location to arrive at
additional audited gallons to be added to total fuel for
purposes of calculating MPG.
Disregard additional charges because there is no way to tell
what was purchased.
BritSpears Teeny Winy Fashions
Audit Position
What are some alternative sources of information you may be
able to use to determine audited miles? Would you look
for further information? If not, why?


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Same information as above (AR, AP, GL, COGS account, depreciation
schedules, federal form 2290 and DOT Logs)
Original vehicle title to obtain odometer readings at purchase and
compare to current odometer readings to arrive at total miles at
inception. This can be used to estimate yearly/quarterly/monthly total.
Maintenance records may include odometer readings.
Third party request directly to credit card company.
Long term lease contracts.
Federal 1120 total reported revenue reconciliation to account for any
cash that may have not been included in accounts receivable.
BritSpears Teeny Winy Fashions
Audit Position
What about the errors made on the spreadsheet using dollars
instead of gallons?
 Convert to true gallons and calculate an error factor to
project over the audit period.
 Treat as an isolated error.
What errors would you project to other audit periods?
 Total miles, allocation of miles and fuel.
 Total miles, allocation of miles, spreadsheet error and fuel.
 Any other combination.
BritSpears Teeny Winy Fashions
Audit Position
What would you use to verify that all vehicles were reported?
 Form 2290
 Depreciation Schedules
 DOT Logs
 Lease Contracts
 Capital Lease Calculations
How would you be able to determine the correct registration allocation
percentages between jurisdictions?
Use the accounts receivable journal to establish actual deliveries to
locations outside of CA. These trips could be audited based on the
location of customers and assumed starting locations. The other
sources of information such as fuel purchases and DOT Logs should
be reconciled to the accounts receivable journal.
BritSpears Teeny Winy Fashions
Audit Position
Would you apply 100% base fees or would you calculate
another alternative?
If you select another alternative, what is it? Why did you
choose that method?
DOT Logs could be used as another alternative.
BritSpears Teeny Winy Fashions
Industry Position


The use of the 4.0 MPG is acceptable since the IFTA
Manual, A550, states that unless an auditor finds
substantial evidence to the contrary, a standard 4 MPG will
be used.
Auditor did not establish inadequate records because they
only asked for one quarter. Most court cases involving
assessments based on inadequate records have established
that the auditor must first look at all of the audit periods
records in order to make the determination that there is in
fact inadequate records.
BritSpears Teeny Winy Fashions
Industry Position



Could use accounts receivable, DOT logs, COGS, etc to
establish number of trips and location.
BritSpears established the standard mileage at it’s
inception. Since the locations have not changed, the
standards used based on number of trips to each location is
a reasonable method of determining jurisdictional miles
without having to maintain daily trip records.
Acceptable fuel records include invoices and the credit
card statements are invoices. Fuel purchase shown on the
credit card statement are tax paid purchases and should be
allowed. Furthermore, if you are going to include to
purchases in total fuel for MPG purposes, then BritSpears
should receive the corresponding tax credit.
Billy John Bob Trucking
Audit Facts





Truck is leased to Super Trucking in MO.
Truck is IFTA credentialed in MO. Truck is IRP
plated in KY.
Super Trucking is out of business.
All invoices, trip sheets and logs are sent to
Super Trucking. Billy John Bob has a notebook
listing trips he made for Super Trucking.
Hauls two loads a week from Louisville, KY to
St. Louis, MO.
Billy John Bob Trucking
Audit Facts

Tag calculated by using the round trip mileage per
jurisdiction multiplied by 104 (52 weeks x 2).
 Odometer mileage for eight years is 560,000.
Average per year is 70,000. IRP mileage per
return is 56,160.
Billy John Bob Trucking
Audit Position


Full Fee plate for KY.
Denying credits.
• Base total mileage on an average of the
odometer or accept total mileage as reported.
• How will you allocate the additional miles.
•
•
•
•
All to KY.
All to KY and MO.
Equally to all affected jurisdictions.
On a prorated basis to all affected jurisdictions.
Billy John Bob Trucking
Industry Position

Documentation proving travel outside base
jurisdiction.
 Records were sent to Super Trucking.
 Notebook shows two trips a week.
 Using an average mileage is not reflective of
current operations. Operation has not been
consistent throughout the life of the truck. Over
the years the operations have dwindled.
Hot Rocks Trucking
Audit Facts




Operates 5 units that haul coal from mines
in KY and WV to unloading points in KY,
WV and OH.
IFTA/IRP Based in KY.
Bulk Fuel Tank.
Records Destroyed.
Hot Rocks Trucking
Audit Position



Use 4.0MPG/1.7KPL and Deny Credits
Examine Information Gathered through
Opening Conference and/or Questionnaire
Third Party Information
• Bulk Fuel Suppliers
• Local Truck Stops
• Load Tickets
Hot Rocks Trucking
Industry Position



Contact Bulk Fuel Suppliers for Purchase
Invoices
Contact Customers for Copies of Invoices
or Load Tickets
Summarize the Information Received