Undyed Diesel Fuel & Undyed Kerosene

The term diesel fuel means any liquid that, without further processing or blending, is suitable for use as a fuel in a diesel-powered highway vehicle or train. Diesel fuel does not include gasoline, kerosene, excluded liquid, No. 5 and No. 6 fuel oils covered by ASTM specification D 396, or F-76 (Fuel Naval Distillate) covered by military specification MIL-F-16884.

An excluded liquid is either of the following.

1. A liquid that contains less than 4% normal paraffins.
2. A liquid with all the following properties.
   1. Distillation range of 125 degrees Fahrenheit or less.
   2. Sulfur content of 10 ppm or less.
   3. Minimum color of +27 Saybolt.

The term kerosene is any of the following liquids.

• One of the two grades of kerosene (No. 1-K and No. 2-K) covered by ASTM specification D 3699.
• Kerosene-type jet fuel (aviation-grade kerosene) covered by ASTM specification D 1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8).

Kerosene also includes any liquid that would meet these specifications but for the presence of a dye of the type used to dye kerosene for a nontaxable use.

However, kerosene does not include excluded liquid, discussed earlier.

Aviation-grade kerosene that is to be used as fuel in an aircraft is treated as aviation fuel, discussed later.

Nontaxable Uses

The following are the uses of undyed diesel fuel and undyed kerosene for which a credit or refund may be allowable to an ultimate purchaser.

• Off-highway business use.
• Export.
• In an intercity or local bus.
• In a qualified local bus.
• In a school bus.
• Used other than as a fuel.
• In a vehicle owned by the United States.
• By a nonprofit educational organization.
• By an aircraft museum.
• In a train.

Only a registered ultimate vendor (blocked pump), discussed later, can claim a credit or refund for the nontaxable use of undyed kerosene if the kerosene is sold from a blocked pump.

Note: Only a registered ultimate vendor (farming and state use) can claim a credit or refund for undyed diesel fuel or undyed kerosene used on a farm for farming purposes or used by a state or local government. Fuels used for these purposes cannot be considered as being used for any other nontaxable use.

No credit or refund is allowable for any use of dyed diesel fuel and dyed kerosene. You buy these fuels excise tax free. See Publication 510 for more information about these dyed fuels.

Registered Ultimate Vendors

A registered ultimate vendor (farming and state use) may be allowed a credit or refund of the excise tax imposed on undyed diesel fuel and undyed kerosene. A registered ultimate vendor (blocked pump) and a registered ultimate vendor (blending) may be allowed a credit or refund of the excise tax imposed on undyed kerosene.

Registered ultimate vendor (farming and state use). This is a person that sells undyed diesel fuel or undyed kerosene to any of the following.

• The owner, tenant, or operator of a farm for use by that person on a farm for farming purposes.
• A person other than the owner, tenant, or operator of a farm for use by that person on a farm in connection with cultivating, raising, or harvesting.
• A state or local government.

The person must be registered by the IRS as an ultimate vendor.

A credit or refund may be allowable to the registered ultimate vendor if the vendor sold undyed diesel fuel or undyed kerosene to any of the users listed.

Registered ultimate vendor (blocked pump). This is a person that sells undyed kerosene from a blocked pump. The person must be registered by the IRS as an ultimate vendor (blocked pump).

A credit or refund may be allowable to a registered ultimate vendor (blocked pump) if the vendor sold undyed kerosene from a blocked pump for its buyer's use other than as a fuel in a diesel-powered highway vehicle or train and the vendor had no reason to believe the kerosene would not be used in that manner.

Blocked pump. A blocked pump is a fuel pump that meets all the following requirements.

1. It is used to make retail sales of undyed kerosene for use by the buyer in any nontaxable use.
2. It is at a fixed location.
3. It is identified with a legible and conspicuous notice stating, "UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY."
4. It meets either of the following conditions.
   1. It cannot reasonably be used to dispense fuel directly into the fuel supply tank of a diesel-powered highway vehicle or train.
   2. It is locked by the vendor after each sale and unlocked by the vendor only in response to a buyer's request for undyed kerosene for use other than as a fuel in a diesel-powered highway vehicle or train.