Surcharge States: Why Kentucky, Virginia and Indiana Bill You Twice

Not tax advice. This article explains how IFTA surcharges work in general terms. Rates change quarterly. Verify current rates and your own figures with your base jurisdiction before filing.

You fuelled up in Kentucky. You paid Kentucky's tax at the pump. Your quarterly worksheet still shows money owed to Kentucky. That is not a mistake, and no credit has gone missing.

Three IFTA jurisdictions charge a surcharge — a second, separate tax line that works differently from the base rate. Understanding it takes about two minutes and saves a quarter of confusion.

The three

Based on the current quarterly rate tables, three jurisdictions carry a surcharge:

Jurisdiction	Surcharge applies to
Kentucky	All priced fuel types
Virginia	All priced fuel types
Indiana	Propane only

Indiana is the one that catches people out. It is the only jurisdiction whose surcharge applies to a single fuel type rather than across the board. If you run diesel through Indiana, no surcharge. If you run propane, it applies.

Rates move every quarter. Always work from the current table rather than last quarter's figure.

Why you cannot pre-pay it

Here is the mechanism, and it is the whole reason for the confusion.

A normal fuel tax is collected at the pump. You buy fuel in a state, you pay that state's tax there, and your IFTA worksheet credits you for it. Buy enough fuel in a state and you can owe nothing, or be owed a refund.

A surcharge is not collected at the pump. There is no mechanism at the fuel island to charge it. So it is collected entirely through your quarterly filing instead.

The consequence follows directly: you cannot reduce a surcharge by buying fuel in that state. There is nothing to pre-pay. Fuelling up in Kentucky does nothing to your Kentucky surcharge, because the surcharge was never part of the pump price.

The arithmetic is different too

This is the detail that matters on the worksheet.

Base tax is charged on your net taxable gallons — after credit for fuel purchased there:

(taxable gallons − tax-paid gallons) × base rate

Surcharge is charged on your taxable gallons, with no credit subtracted:

taxable gallons × surcharge rate

No tax-paid credit applies to the surcharge line. That is why a surcharge jurisdiction can show you a credit on one line and an amount owed on the other, in the same quarter, for the same state.

Both lines are correct. They are measuring different things.

What it looks like on a worksheet

A surcharge jurisdiction occupies two rows rather than one. Kentucky with a credit on the base line and an amount owing on the surcharge line is completely normal and not a sign of an error.

If your worksheet shows a surcharge jurisdiction on only one line, that is worth a second look — the surcharge may not have been applied.

Planning around it

You cannot avoid the surcharge by changing where you fuel. You can only reduce it by running fewer miles in that jurisdiction, which is usually not a real option.

What you can do is stop being surprised by it. If your route runs regularly through Kentucky or Virginia, there is a recurring quarterly cost that your fuel card statement will never show you, because it is not collected at the pump. Operators who budget from fuel receipts alone consistently under-provision for the quarter.

For propane operators, Indiana deserves the same treatment.

One thing to watch

Surcharge rates move independently of base rates, and not always in the same direction or on the same schedule. A quarter where the base rate falls and the surcharge rises is entirely possible.

Work from the current quarterly table. A figure you memorised last year is not reliable.

How WheelsAndAxle fits

Surcharge jurisdictions appear as their own line on the worksheet, computed on taxable gallons rather than net, so the two lines are visible separately rather than merged into a single confusing total. Rates are held per quarter and per fuel type, which is what keeps Indiana's propane-only surcharge from being applied to diesel.

We are not a tax advisor, CPA, or filing service. Verify current rates and your own figures with your base jurisdiction before filing.