Fuel Taxes

Excise taxes are imposed on all the following fuels.

• Gasoline.
• Gasohol.
• Diesel fuel.
• Kerosene.
• Aviation fuel.
• Special motor fuels (including LPG).
• Compressed natural gas.
• Fuels used in commercial transportation on inland waterways.

Measurement of taxable fuel.   Volumes of taxable fuel (gasoline, diesel fuel, and kerosene) can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit.

Information Returns

Form 720-TO, Terminal Operator Report, and Form 720-CS, Carrier Summary Report, are new information returns used by terminal operators and carriers to report their monthly receipts and disbursements of liquid products. The returns are due the last day of the month following the month in which the transaction occurs.

These returns can be filed on paper forms or electronically. For information on filing electronically, see Publication 3536, Motor Fuel Excise Tax EDI Guide.

Form 720-TO.   This information return is used by terminal operators to report receipts and disbursements of all liquid products to and from all approved terminals. Each terminal operator must file a separate form for each approved terminal.

Form 720-CS.   This information return must be filed by bulk transport carriers (barges, vessels, and pipelines) who receive liquid product from an approved terminal or deliver liquid product to an approved terminal.

Liquid product.   A liquid product is any liquid transported into storage at a terminal or delivered out of a terminal. For a list of products, see the product code table in the Instructions for Forms 720-TO and 720-CS.

Registration Requirements

The following discussion applies to excise tax registration requirements for activities relating to gasoline, diesel fuel, and kerosene. The terms used in this discussion are explained later. See Registration for Certain Activities, earlier, for more information about registration.

Persons that must register.   You must be registered if you are any of the following persons.

• A blender.
• An enterer.
• A pipeline operator.
• A position holder.
• A refiner.
• A terminal operator.
• A vessel operator.

In addition, bus and train operators must be registered if they use dyed diesel fuel in their buses or trains and they incur liability for tax at the bus or train rate.

Persons that may register.   You may, but are not required to, register if you are any of the following persons.

• A feedstock user.
• A gasohol blender.
• An industrial user.
• A throughputter that is not a position holder.
• An ultimate vendor.
• An ultimate vendor (blocked pump).

Ultimate vendors do not need to be registered to buy or sell diesel fuel or kerosene. However, they must be registered for filing certain claims for the excise tax on these fuels.

Taxable fuel registrant.   This is an enterer, an industrial user, a refiner, a terminal operator, or a throughputter who received a Letter of Registration under the excise tax registration provision and whose registration has not been revoked or suspended. The term taxable fuel means gasoline, diesel fuel, and kerosene. The term registrant as used in the discussions of these fuels means a taxable fuel registrant.

Additional information.   See the Form 637 instructions for the information you must submit when you apply for registration.

Refunds of Second Tax

If the tax is paid on more than one taxable event for a taxable fuel (gasoline, diesel fuel, and kerosene), the person paying the second tax may claim a refund (without interest) of that tax if certain conditions and reporting requirements are met. No credit against any tax is allowed for this tax. For information about taxable events, see the discussions under Gasoline and Diesel Fuel and Kerosene, later.

Conditions to allowance of refund.   A claim for refund of the tax is allowed only if all the following conditions are met.

1. A tax on the fuel was paid to the government and not credited or refunded (the first tax).
2. After the first tax was imposed, another tax was imposed on the same fuel and was paid to the government (the second tax).
3. The person that paid the second tax filed a timely claim for refund containing the information required (see Refund claim, later).
4. The person that paid the first tax has met the reporting requirements, discussed next.

Reporting requirements.   Generally, the person that paid the first tax must file a First Taxpayer's Report with its Form 720 for the quarter for which the report relates. A model first taxpayer's report is shown in Appendix C as Model Certificate A. Your report must contain all information needed to complete the model.

By the due date for filing the Form 720, you must send a separate copy of the report to the following address.

Internal Revenue Service
Cincinnati, OH 45999-0555

Write EXCISE - FIRST TAXPAYER'S REPORT across the top of that copy.

Optional reporting.   A first taxpayer's report is not required for the tax imposed on any of the following taxable events.

• Removal at a terminal rack.
• Nonbulk entries into the United States.
• Removals or sales by blenders.

However, if the person liable for the tax expects that another tax will be imposed on that fuel, that person should (but is not required to) file a first taxpayer's report.

Providing information.   The first taxpayer must give a copy of the report to the buyer of the fuel within the bulk transfer/terminal system or to the owner of the fuel immediately before the first tax was imposed, if the first taxpayer is not the owner at that time. If an optional report is filed, a copy should (but is not required to) be given to the buyer or owner.

A person that receives a copy of the first taxpayer's report and later sells the fuel within the bulk transfer/terminal system must give the copy and a Statement of Subsequent Seller to the buyer. If the later sale is outside the bulk transfer/terminal system and that person expects that another tax will be imposed, that person should (but is not required to) give the copy and the statement to the buyer. A model statement of subsequent seller is shown in Appendix C as Model Certificate B. The statement must contain all information necessary to complete the model.

If the first taxpayer's report relates to fuel sold to more than one buyer, copies of that report must be made when the fuel is divided. Each buyer must be given a copy of the report.

Refund claim.   You must make your claim for refund on Form 8849. Complete Schedule 5 (Form 8849) and attach it to your Form 8849. You must have filed Form 720 and paid the second tax before you file for a refund of that tax. Do not include this claim with a claim under another tax provision. You must not have included the second tax in the price of the fuel and must not have collected it from the purchaser. You must submit the following information with your claim.

• A copy of the first taxpayer's report (discussed earlier).
• A copy of the statement of subsequent seller if the fuel was bought from someone other than the first taxpayer.

Gasoline

The following discussion provides definitions and an explanation of events relating to the excise tax on gasoline.

Definitions

The following terms are used throughout the discussion of gasoline. Some of these terms are also used in the discussions of diesel fuel and kerosene. Other terms are defined in the discussion to which they pertain.

Gasoline.   This means finished gasoline and gasoline blendstocks. Finished gasoline means all products (including gasohol) that are commonly or commercially known or sold as gasoline and are suitable for use as a motor fuel. The product must have an octane rating of 75 or more. Gasoline blendstocks are discussed later.

Approved terminal or refinery.   This is a terminal operated by a registrant that is a terminal operator or a refinery operated by a registrant that is a refiner.

Aviation gasoline.   This means all special grades of gasoline suitable for use in aviation reciprocating engines and covered by ASTM specification D 910 or military specification MIL-G-5572.

Blended taxable fuel.   This means any taxable fuel produced outside the bulk transfer/terminal system by mixing taxable fuel on which excise tax has been imposed and any other liquid on which excise tax has not been imposed. This does not include a mixture removed or sold during the calendar quarter if all such mixtures removed or sold by the blender contain less than 400 gallons of a liquid on which the tax has not been imposed. Blended taxable fuel does not include gasohol that receives an excise tax benefit.

Blender.   This is the person that produces blended taxable fuel.

Bulk transfer.   This is the transfer of fuel by pipeline or vessel.

Bulk transfer/terminal system.   This is the fuel distribution system consisting of refineries, pipelines, vessels, and terminals. Fuel in the supply tank of any engine, or in any tank car, railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer/terminal system.

Enterer.   This is the importer of record for the fuel. However, if the importer of record is acting as an agent, the person for whom the agent is acting is the enterer. If there is no importer of record, the owner at the time of entry into the United States is the enterer.

Entry.   Fuel is entered into the United States when it is brought into the United States and applicable customs law requires that it be entered for consumption, use, or warehousing. This does not apply to fuel brought into Puerto Rico (which is part of the U.S. customs territory), but does apply to fuel brought into the United States from Puerto Rico.

Pipeline operator.   This is the person that operates a pipeline within the bulk transfer/terminal system.

Position holder.   This is the person that holds the inventory position in the fuel in the terminal, as reflected on the records of the terminal operator. You hold the inventory position when you have a contractual agreement with the terminal operator for the use of the storage facilities and terminaling services for the fuel. A terminal operator that owns the fuel in its terminal is a position holder.

Rack.   This is a mechanism capable of delivering fuel into a means of transport other than a pipeline or vessel.

Refiner.   This is any person that owns, operates, or otherwise controls a refinery.

Refinery.   This is a facility used to produce fuel from crude oil, unfinished oils, natural gas liquids, or other hydrocarbons and from which fuel may be removed by pipeline or vessel or at a rack. However, this term does not include a facility where only blended fuel or gasohol, and no other type of fuel, is produced. For this purpose, blended fuel is any mixture that would be blended taxable fuel if produced outside the bulk transfer/terminal system.

Registrant.   This is a taxable fuel registrant (see Registration Requirements, earlier).

Removal.   This is any physical transfer of fuel. It also means any use of fuel other than as a material in the production of taxable or special fuels. However, fuel is not removed when it evaporates or is otherwise lost or destroyed.

Sale.   For fuel not in a terminal, this is the transfer of title to, or substantial incidents of ownership in, fuel to the buyer for money, services, or other property. For fuel in a terminal, this is the transfer of the inventory position if the transferee becomes the position holder for that fuel.

State.   This includes any state, any of its political subdivisions, the District of Columbia, and the American Red Cross. Treat an Indian tribal government as a state only if transactions involve the exercise of an essential tribal government function.

Terminal.   This is a storage and distribution facility supplied by pipeline or vessel, and from which fuel may be removed at a rack. It does not include a facility at which gasoline blendstocks are used in the manufacture of products other than finished gasoline if no gasoline is removed from the facility. A terminal does not include any facility where finished gasoline, undyed diesel fuel, or undyed kerosene is stored if the facility is operated by a registrant and all such fuel stored at the facility has been previously taxed upon removal from a refinery or terminal.

Terminal operator.   This is any person that owns, operates, or otherwise controls a terminal.

Throughputter.   This is any person that is a position holder or that owns fuel within the bulk transfer/terminal system (other than in a terminal).

Vessel operator.   This is the person that operates a vessel within the bulk transfer/terminal system. However, vessel does not include a deep draft ocean-going vessel.

Taxable Events

The tax on gasoline is 18.4 cents a gallon. The tax on aviation gasoline is 19.4 cents per gallon. Tax is imposed on the removal, entry, or sale of gasoline. Each of these events is discussed later. However, see the special rules that apply to gasoline blendstocks, later. Also, see the discussion under Gasohol, if applicable.

If the tax is paid on the gasoline in more than one event, a refund may be allowed for the second tax paid. See Refunds of Second Tax, earlier.

Removal from terminal.   All removals of gasoline at a terminal rack are taxable. The position holder for that gasoline is liable for the tax.

Terminal operator's liability.   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant.

However, a terminal operator meeting all the following conditions at the time of the removal will not be liable for the tax.

• The terminal operator is a registrant.
• The terminal operator has an unexpired notification certificate (discussed later) from the position holder.
• The terminal operator has no reason to believe any information on the certificate is false.

Removal from refinery.   The removal of gasoline from a refinery is taxable if the removal meets either of the following conditions.

• It is made by bulk transfer and the refiner or the owner of the gasoline immediately before the removal is not a registrant.
• It is made at the refinery rack.

The refiner is liable for the tax.

Exception.   The tax does not apply to a removal of gasoline at the refinery rack if all the following requirements are met.

• The gasoline is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel.
• The gasoline is received at a facility operated by a registrant and located within the bulk transfer/terminal system.
• The removal from the refinery is by railcar.
• The same person operates the refinery and the facility at which the gasoline is received.

Entry into the United States.   The entry of gasoline into the United States is taxable if the entry meets either of the following conditions.

• It is made by bulk transfer and the enterer is not a registrant.
• It is not made by bulk transfer.

The enterer is liable for the tax.

Removal from a terminal by unregistered position holder.   The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline is not a registrant. The position holder is liable for the tax. The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. However, see Terminal operator's liability under Removal from terminal, earlier, for an exception.

Bulk transfers not received at approved terminal or refinery.   The removal by bulk transfer of gasoline from a terminal or refinery, or the entry of gasoline by bulk transfer into the United States, is taxable if the following conditions apply.

1. No tax was previously imposed (as discussed earlier) on any of the following events.
   1. The removal from the refinery.
   2. The entry into the United States.
   3. The removal from a terminal by an unregistered position holder.
2. Upon removal from the pipeline or vessel, the gasoline is not received at an approved terminal or refinery (or at another pipeline or vessel).

The owner of the gasoline when it is removed from the pipeline or vessel is liable for the tax. However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax.

• The owner is a registrant.
• The owner has an unexpired notification certificate (discussed later) from the operator of the terminal or refinery where the gasoline is received.
• The owner has no reason to believe any information on the certificate is false.

The operator of the facility where the gasoline is received is liable for the tax if the owner meets these conditions. The operator is jointly and severally liable if the owner does not meet these conditions.

Sales to unregistered person.   The sale of gasoline located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier.

The seller is liable for the tax. However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax.

• The seller is a registrant.
• The seller has an unexpired notification certificate (discussed later) from the buyer.
• The seller has no reason to believe any information on the certificate is false.

The buyer of the gasoline is liable for the tax if the seller meets these conditions. The buyer is jointly and severally liable if the seller does not meet these conditions.

Exception.   The tax does not apply to a sale if all of the following apply.

• The buyer's principal place of business is not in the United States.
• The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel.
• The seller is a registrant and the exporter of record.
• The fuel was exported.

Removal or sale of blended gasoline.   The removal or sale of blended gasoline by the blender is taxable. See Blended taxable fuel under Definitions, earlier.

The blender is liable for the tax. The tax is figured on the number of gallons not previously subject to the tax on gasoline.

Notification certificate.   The notification certificate is used to notify a person of the registration status of the registrant. A copy of the registrant's letter of registration cannot be used as a notification certificate. A model notification certificate is shown in Appendix C as Model Certificate C. Your notification certificate must contain all information necessary to complete the model.

The certificate may be included as part of any business records normally used for a sale. A certificate expires on the earlier of the date the registrant provides a new certificate, or the date the recipient of the certificate is notified that the registrant's registration has been revoked or suspended. The registrant must provide a new certificate if any information on a certificate has changed.

Additional persons liable.   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on:

• Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or
• Anyone who willfully causes the person to fail to pay the tax.

Gasoline Blendstocks

Gasoline includes gasoline blendstocks. The previous discussions apply to these blendstocks. However, if certain conditions are met, the removal, entry, or sale of gasoline blendstocks is not taxable. Generally, this applies if the gasoline blendstock is not used to produce finished gasoline or is received at an approved terminal or refinery.

Blendstocks.   The following are gasoline blendstocks.

• Alkylate.
• Butane.
• Butene.
• Catalytically cracked gasoline.
• Coker gasoline.
• Ethyl tertiary butyl ether (ETBE).
• Hexane.
• Hydrocrackate.
• Isomerate.
• Methyl tertiary butyl ether (MTBE).
• Mixed xylene (not including any separated isomer of xylene).
• Natural gasoline.
• Pentane.
• Pentane mixture.
• Polymer gasoline.
• Raffinate.
• Reformate.
• Straight-run gasoline.
• Straight-run naphtha.
• Tertiary amyl methyl ether (TAME).
• Tertiary butyl alcohol (gasoline grade) (TBA).
• Thermally cracked gasoline.
• Toluene.
• Transmix containing gasoline.

However, gasoline blendstocks do not include any product that cannot be used without further processing in the production of finished gasoline.

Not used to produce finished gasoline.   Gasoline blendstocks not used to produce finished gasoline are not taxable if the following conditions are met.

Removals and entries not connected to sale.   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant.

Removals and entries connected to sale.   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant, and at the time of the sale, meets the following requirements.

• The person has an unexpired certificate (discussed later) from the buyer.
• The person has no reason to believe any information in the certificate is false.

Sales after removal or entry.   The sale of a gasoline blendstock that was not subject to tax on its nonbulk removal or entry, as discussed earlier, is taxable. The seller is liable for the tax. However, the sale is not taxable if, at the time of the sale, the seller meets the following requirements.

• The seller has an unexpired certificate (discussed next) from the buyer.
• The seller has no reason to believe any information in the certificate is false.

Certificate of buyer.   The certificate from the buyer certifies the gasoline blendstocks will not be used to produce finished gasoline. The certificate may be included as part of any business records normally used for a sale. A model certificate is shown in Appendix C as Model Certificate D. Your certificate must contain all information necessary to complete the model.

A certificate expires on the earliest of the following dates.

• The date 1 year after the effective date (not earlier than the date signed) of the certificate.
• The date a new certificate is provided to the seller.
• The date the seller is notified the buyer's right to provide a certificate has been withdrawn.

The buyer must provide a new certificate if any information on a certificate has changed.

The IRS may withdraw the buyer's right to provide a certificate if that buyer uses the gasoline blendstocks in the production of finished gasoline or resells the blendstocks without getting a certificate from its buyer.

Received at approved terminal or refinery.   The nonbulk removal or entry of gasoline blendstocks received at an approved terminal or refinery is not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) meets all the following requirements.

• The person is a registrant.
• The person has an unexpired notification certificate (discussed earlier) from the operator of the terminal or refinery where the gasoline blendstocks are received.
• The person has no reason to believe any information on the certificate is false.

Bulk transfers to registered industrial user.   The removal of gasoline blendstocks from a pipeline or vessel is not taxable if the blendstocks are received by a registrant that is an industrial user. An industrial user is any person that receives gasoline blendstocks by bulk transfer for its own use in the manufacture of any product other than finished gasoline.

Credits or Refunds

A credit or refund of the gasoline tax (without interest) may be allowable if gasoline is, by any person:

• Exported,
• Used in a boat engaged in commercial fishing,
• Used in military aircraft,
• Used in foreign trade,
• Sold to a state for its exclusive use,
• Sold to a nonprofit educational organization for its exclusive use,
• Sold to the United Nations for its exclusive use, or
• Used or sold in the production of special motor fuels (defined later).

Claims by wholesale distributors.   A credit or refund is allowable to a gasoline wholesale distributor who buys gasoline at a price that includes the excise tax and then sells it to the ultimate purchaser (including an exporter) for a purpose listed in the previous list. A wholesale distributor is any person who makes retail sales of gasoline at 10 or more retail motor fuel outlets or sells gasoline to producers, retailers, or users who purchase in bulk quantities and accept delivery into bulk storage tanks. A wholesale distributor is not a producer or importer.

The wholesale distributor must have sold the gasoline at a tax-excluded price and obtained a certificate of ultimate purchaser or proof of exportation.

The wholesale distributor must complete Schedule 4 (Form 8849) and attach it to Form 8849 to make a claim for refund for gasoline sold to an ultimate purchaser for a purpose listed earlier.

By signing the Form 8849, the gasoline wholesale distributor certifies that it:

• Bought the gasoline at a price that included the excise tax,
• Qualifies as a wholesale distributor,
• Sold the fuel at a tax-excluded price, and
• Has obtained the certificate of the ultimate purchaser or proof of export from its buyer.

Claims by persons who paid the tax to the government.   A credit or refund is allowable to the person that paid the tax to the government if the gasoline was sold to the user (including an exporter) by either that person or by a retailer for a purpose listed earlier. A credit or refund also is allowable to that person if the gasoline was sold to the user by a wholesale distributor and either of the following is true.

• The distributor bought the gasoline at a price that did not include the tax.
• The sale to the user was charged on an oil company credit card.

By signing the claim, the person that paid the tax certifies that it:

1. Has obtained one of the three items below.
   1. Proof of exportation.
   2. A certificate of ultimate purchaser.
   3. A certificate of ultimate vendor.
2. Has met any of the following conditions.
   1. Has neither included the tax in the price of the gasoline nor collected the tax from the buyer.
   2. Has repaid, or agreed to repay, the tax to the ultimate vendor of the gasoline.
   3. Has gotten the written consent of the ultimate vendor to the allowance of the credit or refund.

Claims by the ultimate purchaser.   A credit or refund is allowable to the ultimate purchaser of taxed gasoline used for a nontaxable use. See Publication 378 for more information about these claims.

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