Taxes, Lawsuits & Telematics: Savings through Documentation

From fuel tax rebates to IFTA calculations and beyond, the proof is in the telematics data  

By Bud Sims
Director of Construction and Mining

Every contractor knows the value of telematics for squeezing waste out of fleet operations, but there’s more to the savings story than improving asset allocation, optimizing preventive maintenance scheduling, or identifying wasteful fuel and/or idling practices. In a series of benefits unrelated to fleet management, telematics systems can also help maximize off-road fuel tax reimbursements, streamline IFTA filings and other regulatory reporting, combat idling penalties, and even thwart lawsuits for breaching the boundaries of a job site. 

The reason is simple: data.

In a kill-two-birds-with-one-stone scenario, the same data collected to deliver core telematics functionality also supplies a complete audit trail of equipment utilization by location. Built-in telematics capabilities such as GPS asset tracking and geofencing that defines the perimeter of each job site or work zone combine to provide detailed documentation that is difficult or in some cases impossible to acquire from any other source.

That documentation problem recently cost one California contractor nearly $4,000 in quarterly off-road fuel tax credits for clear fuel used across its 200-machine fleet. The State Board of Equalization rejected the firm’s rebate request because it was based on a guesstimate of the fleet’s off-highway use. With no way to prove the amount of fuel qualifying for the 18-cent-per-gallon diesel rebate, the contractor came up empty-handed.

With telematics, that proof would have been available with a few clicks, and the firm would have added $4,000 to its bottom line.

Data needed for this and other non-operations-related purposes can be quickly retrieved from standard or custom telematics reports, or automatically exported to third-party services that specialize in various types of government claims filing. This saves time, eliminates guesswork, and provides irrefutable evidence of how equipment was used in the field for various tax, regulatory and legal applications.

1 – Off-road fuel tax rebates

As just mentioned, for example, telematics data facilitates tax refund or credit requests for undyed fuel that is used off-highway. Contractors are entitled to reimbursements of up to 35 cents per gallon, depending on the state, because off-road use does not contribute to the costs of planning, constructing and maintaining publicly funded roadways for which fuel taxes are earmarked. But many firms do not even try to recoup these costs because they lack easily accessible information on off-road use, the reporting is too onerous to justify the effort or both.

Telematics solves the problem with site utilization reports that show precisely where each asset is deployed and for how long, leveraging the geofencing feature of the telematics system. The total off-road time for any given quarter can be calculated by adding the hours of all construction equipment on all job sites. Third-party fuel management systems that quantify fuel burn can further validate the calculations.

In addition, advanced telematics systems that track both on-and off-road vehicle use in the same application can compute off-road use of on-road vehicles such as generators and telephone repair trucks by monitoring functions like PTO and hydraulics. With this capability, you can augment the size of your rebate by ensuring that every asset involved in off-road activities is included in the calculation.

2 – IFTA mileage tax reporting 

For contractors that cross state lines in moving equipment from job to job, another tax-related use for telematics involves the compilation of quarterly IFTA (International Fuel Tax Agreement) reports designed to ensure that each state receives its proper share of taxes for miles traveled on its roads. Since these reports require information on mileage driven in each jurisdiction, it is necessary to know that your low-beds traveled 500 miles in California and 250 miles in Arizona (or whatever) for the quarter.

This information can be easily determined from the data captured by the GPS-based telematics tracking devices installed in each asset. The raw telematics data can be delivered electronically to your firm’s third-party IFTA tax service for processing and report preparation, eliminating the need to maintain and share trip sheets. This reduces overhead for drivers as well as clerical staff, prevents manual recording or data entry errors, provides an auditable data trail, and streamlines IFTA reporting overall.

3 – Idling penalty avoidance 

In the more than 30 states with anti-idling policies on the books, telematics data can also help keep the idling ‘police’ at bay by monitoring equipment idle times. In California, for example, idling a diesel-powered machine for more than five minutes can cost $300 per occurrence or up to $10,000 for a machine with multiple violations. Having the data to nip the problem in the bud, or fight an undeserved penalty, can help avoid fines as well as trim fuel expenses.

One source of this information is the telematics dashboard. Typically, idling rates can be seen in real time across the entire fleet and flagged with visual indicators when levels exceed user-defined thresholds. Some dashboards also allow users to dynamically drill down to idle activity by vehicle. If there is a spotter enforcing anti-idling regulations on the job site, the job foreman or other personnel can use this information to intercede before excessive idle times lead to a fine.

Longer-term idling patterns can be seen in telematics idle reports that document idle start and end times, duration and location for each asset. This information can be used to modify operator behavior and avoid future penalties.

4 – Lawsuit protection 

Another area where telematics data can save contractors money above and beyond core fleet management functions involves averting fines and lawsuits associated with violations of leaseholder or government boundaries. In one recent case, for example, a mining operation was fined more than $2 million over a two-month period for inadvertently digging outside its leased property line. In other situations, contractors are subject to reprisals for infringing on environmentally sensitive areas like wetlands located adjacent to or even within a job site. 

Telematics-based geofencing can save the day by making it possible to issue an alert if a forbidden boundary is crossed. Geofences can be established around a job site, work zone or within a larger geofence if an off-limits area lies within the work site. Geofence reports can also defend a contractor against unjustified trespassing accusations by proving that equipment operators did not cross invisible boundary lines.   

Capabilities like these can substantially extend the value of a telematics investment by reducing tax and regulatory paperwork, lowering the risk of penalties and fines, and even creating revenue from off-road fuel tax rebates. It’s not the primary driver behind a telematics deployment, but it’s a major fringe benefit that can reduce the cost of doing business and – in some cases – keep contractors out of trouble.