Purpose: The IFTA or International Fuel Tax Agreement is an alliance between The Lower 48 States and Canadian Provinces (Alaska, Hawaii, Washington DC and the Canadian Territories are exempt) regarding the taxation of fuel. Before the IFTA each state and province had its own regulations regarding taxing trucking companies purchasing fuel in their jurisdictions.

Practice: A Trucking Company must first apply for an IFTA license from their local jurisdiction, and will receive two stickers for each truck it operates. As the truck operates over multiple jurisdictions, the company must keep track of its fuel consumption and files a tax report every quarter. At the end of the year the reports determine if a company payed to little in fuel taxes and has tax due or if they paid too much in taxes and are owed a refund.

The stickers themselves are displayed on the sides of trucks which carry and IFTA permit. Because the IFTA operates on a "Pay Now or Pay Later" system, Trucks with an IFTA permit can purchase fuel with no tax because they will pay the tax at a later time.

After the end of each year and tax reports are filed the IFTA license must be renewed and each time it is renewed the trucks are issued a new set of stickers for the year, leading to the "Fuel Rainbow" row of stickers found on trucks complying in the agreement for extended time periods

The uniformity of the system allows for fair taxation and allows businesses to pay fuel taxes later if they cannot afford the higher taxes in a neighboring jurisdiction.