A credit or refund may be allowed for the excise tax on fuel used
on a farm for farming purposes. Fuel is used on a farm for farming
purposes only if used in carrying on a trade or business of farming,
on a farm in the United States, and for farming purposes.
If undyed diesel fuel or undyed kerosene is used on a farm for
farming purposes, the fuel is not considered used for any other
nontaxable use.
Farm.
A farm includes livestock, dairy, fish, poultry, fruit, fur-bearing
animals, and truck farms, orchards, plantations, ranches, nurseries,
ranges, and feed yards for fattening cattle. It also includes
structures such as greenhouses used primarily for the raising of
agricultural or horticultural commodities. A fish farm is an area
where fish are grown or raised -- not merely caught or harvested.
Farming purposes.
As the owner, tenant, or operator, you use fuel on a farm for
farming purposes if you use it in any of the following ways.
- To cultivate the soil or to raise or harvest any
agricultural or horticultural commodity.
- To raise, shear, feed, care for, train, or manage livestock,
bees, poultry, fur-bearing animals, or wildlife.
- To operate, manage, conserve, improve, or maintain your farm
and its tools and equipment.
- To handle, dry, pack, grade, or store any raw agricultural
or horticultural commodity. For this use to qualify, you must have
produced more than half the commodity so treated during the tax year.
Commodity means a single raw product. For example, apples and peaches
are two separate commodities.
- To plant, cultivate, care for, or cut trees or to prepare
(other than sawing logs into lumber, chipping, or other milling) trees
for market, but only if the planting, etc., is incidental to your
farming operations. Your tree operations will be incidental only if
they are minor in nature when compared to the total farming
operations.
If any other person, such as a neighbor or custom operator,
performs a service for you on your farm for any of the purposes listed
in (1) or (2), you are considered to be the person that used the fuel
on a farm for farming purposes. However, see Custom application
of fertilizer and pesticide, later.
If doubt exists whether the owner, the tenant, or the operator of
the farm bought the fuel, determine who bore the cost of the fuel. For
example, if the owner of a farm and the tenant equally share the cost
of gasoline that is used on a farm for farming purposes, each can
claim a credit for the tax on one-half the fuel used.
Custom application of fertilizer and pesticide.
The use of fuel in the aerial or other application of fertilizer,
pesticides, or other substances is a use of fuel on a farm for farming
purposes. You, as the owner, tenant, or operator, are treated as the
ultimate purchaser of the fuel. However, in the case of gasoline, you
may waive your right to be treated as the ultimate purchaser. If you
waive your right, the applicator is treated as having used the
gasoline on a farm for farming purposes.
Waiver.
To waive your right to be treated as the ultimate purchaser, you
must take all the following actions.
- Before the applicator files his or her claim, execute in
writing an irrevocable agreement stating that you knowingly give up
your right to the credit or refund. You may authorize an agent, such
as a cooperative, to sign the waiver for you.
- Identify clearly the period the waiver covers. The effective
period of your waiver cannot extend beyond the last day of your tax
year.
The applicator must retain a copy of the waiver and give you a
copy. Do not send a copy to the Internal Revenue Service
unless requested to do so.
The waiver may be a separate document or it may appear on an
invoice or another document from the applicator. If the waiver appears
on an invoice or other document, it must be printed in a section
clearly set off from all other material, and it must be printed in
type sufficiently large to put you on notice that you are waiving your
right to the credit or refund. If the waiver appears as part of an
invoice or other document, it must be signed separately from any other
item that requires your signature.
The effective period of the waiver cannot extend beyond your tax
year. When the period covered by the waiver extends beyond the
applicator's tax year, the applicator must wait until the next tax
year to claim the portion for that period.
Fuel not used for farming.
You do not use fuel on a farm for farming purposes when you use it
in any of the following ways.
- Off the farm, such as on the highway or in noncommercial
aviation, even if the fuel is used in transporting livestock, feed,
crops, or equipment.
- For personal use, such as mowing the lawn.
- In processing, packaging, freezing, or canning operations.
- In processing crude gum into gum spirits of turpentine or
gum resin or in processing maple sap into maple syrup or maple
sugar.
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