Use of ODCs.

You use an ODC if you put it into service in a trade or business or for the production of income. An ODC also is used if you use it in the making of an article, including incorporation into the article, chemical transformation, or release into the air. The loss, destruction, packaging, repackaging, or warehousing of ODCs is not a use of the ODC.

The creation of a mixture containing an ODC is treated as the use of that ODC. An ODC is contained in a mixture only if the chemical identity of the ODC is not changed. Generally, tax is imposed when the mixture is created and not on its sale or use. However, you can choose to have the tax imposed on its sale or use by checking the appropriate box in Part I of Form 6627. You can revoke this choice only with IRS consent.

The creation of a mixture for export or for use as a feedstock is not a taxable use of the ODCs contained in the mixture.

Exceptions.

The following may be exempt from the tax on ODCs.

Metered-dose inhalers.

There is no tax on ODCs used or sold for use as propellants in metered-dose inhalers. For a sale to be nontaxable, you must obtain from the purchaser an exemption certificate that you rely on in good faith. The certificate must be in substantially the form set forth in section 52.4682–2(d)(5) of the regulations. Keep the certificate with your records.

Recycled ODCs.

There is no tax on any ODC diverted or recovered in the United States as part of a recycling process (and not as part of the original manufacturing or production process). There is no tax on recycled Halon-1301 or recycled Halon-2402 imported from a country that has signed the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol).

The Montreal Protocol is administered by the United Nations (U.N.). To determine if a country has signed the Montreal Protocol, contact the U.N. The Internet address is http://untreaty.un.org/.

Exported ODCs.

Generally, there is no tax on ODCs sold for export if certain requirements are met. For a sale to be nontaxable, you and the purchaser must be registered. You must obtain from the purchaser an exemption certificate that you rely on in good faith. Keep the certificate with your records. The certificate must be in substantially the form set forth in section 52.4682–5(d)(3) of the regulations. The tax benefit of this exemption is limited. For more information, see section 52.4682–5 of the regulations.

ODCs used as feedstock.

There is no tax on ODCs sold for use or used as a feedstock. An ODC is used as a feedstock only if the ODC is entirely consumed in the manufacture of another chemical. The transformation of an ODC into one or more new compounds qualifies, but use of an ODC in a mixture does not qualify.

For a sale to be nontaxable, you must obtain from the purchaser an exemption certificate that you rely on in good faith. The certificate must be in substantially the form set forth in section 52.4682–2(d)(2) of the regulations. Keep the certificate with your records.

Conditions to allowance for ODCs exported.

To claim a credit or refund for ODCs that are exported, you must have repaid or agreed to repay the tax to the exporter, or obtained the exporter's written consent to allowance of the credit or refund. You must also have the evidence required by the Environmental Protection Agency as proof that the ODCs were exported.

Use of imported products.

You use an imported product if you put it into service in a trade or business or for the production of income or use it in the making of an article, including incorporation into the article. The loss, destruction, packaging, repackaging, warehousing, or repair of an imported product is not a use of that product.

Entry as use.

The importer may choose to treat the entry of a product into the United States as the use of the product. Tax is imposed on the date of entry instead of when the product is sold or used. The choice applies to all imported taxable products that you own and have not used when you make the choice and all later entries. Make the choice by checking the box in Part II of Form 6627. The choice is effective as of the beginning of the calendar quarter to which the Form 6627 applies. You can revoke this choice only with IRS consent.

Sale of article incorporating imported product.

The importer may treat the sale of an article manufactured or assembled in the United States as the first sale or use of an imported taxable product incorporated in that article if both the following apply.

Rules for listing products.

Products are listed in the table according to the following rules.

For example, floppy disk drive units are listed in Part III because they are not imported taxable products and would have been included in the Part II list for electronic items not specifically identified, but for their listing in Part III.

ODC weight.

The Table ODC weight of a product is the weight, determined by the Commissioner, of the ODCs used as materials in the manufacture of the product under the predominant method of manufacturing. The ODC weight is listed in Part II in pounds per single unit of product unless otherwise specified.

Modifying the table.

A manufacturer or importer of a product may request the IRS add a product and its ODC weight to the table. They also may request the IRS remove a product from the table, or change or specify the ODC weight of a product.

Include your name, address, taxpayer identification number, and principal place of business in your request. The request must include the following information for each product to be modified.

Send your request to the following address.

ODCs not subject to floor stocks tax.

The floor stocks tax is not imposed on any of the following ODCs.

Local telephone service.

This means access to a local telephone system and the privilege of telephonic quality communication with most people who are part of the system. Local telephone service also includes any facility or services provided in connection with this service. The tax applies to lease payments for certain customer premises equipment (CPE) even though the lessor does not also provide access to a local telecommunications system.

Private communication service.

Private communication service is not local telephone service. Private communication service includes accessory-type services provided in connection with a Centrex, PBX, or other similar system for dual use accessory equipment. However, the charge for the service must be stated separately from the charge for the basic system, and the accessory must function, in whole or in part, in connection with intercommunication among the subscriber's stations.

Toll telephone service.

This means a telephonic quality communication for which a toll is charged that varies with the distance and elapsed transmission time of each communication. The toll must be paid within the United States. It also includes a long distance service that entitles the subscriber to make unlimited calls (sometimes limited as to the maximum number of hours) within a certain area for a flat charge. Microwave relay service used for the transmission of television programs and not for telephonic communication is not a toll telephone service.

Teletypewriter exchange service.

This means access from a teletypewriter or other data station to a teletypewriter exchange system and the privilege of intercommunication by that station with most persons having teletypewriter or other data stations in the same exchange system.

Figuring the tax.

The tax is based on the sum of all charges for local or toll telephone service included in the bill. However, if the bill groups individual items for billing and tax purposes, the tax is based on the sum of the individual items within that group. The tax on the remaining items not included in any group is based on the charge for each item separately. Do not include in the tax base state or local sales or use taxes that are separately stated on the taxpayer's bill.

If the tax on toll telephone service is paid by inserting coins in coin-operated telephones, figure the tax to the nearest multiple of 5 cents. When the tax is midway between 5-cent multiples, the next higher multiple applies.

Prepaid telephone cards.

A prepaid telephone card is any card or any other similar arrangement that allows its holder to get local or toll telephone service and pay for those services in advance. The tax is imposed when the card is transferred by a telecommunications carrier to any person who is not a telecommunications carrier. The face amount of the card is the amount paid for communications services. If the face amount is not a dollar amount, see section 49.4251–4 of the regulations.

Installation charges.

The tax does not apply to payments received for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment. However, the tax does apply to payments for the repair or replacement of those items incidental to ordinary maintenance.

Answering services.

The tax does not apply to amounts paid for a private line, an answering service, and a one-way paging or message service if they do not provide access to a local telephone system and the privilege of telephonic communication as part of the local telephone system.

Mobile radio telephone service.

The tax does not apply to payments for a two-way radio service that does not provide access to a local telephone system.

Coin-operated telephones.

The tax for local telephone service does not apply to payments made for services by inserting coins in public coin-operated telephones. The tax for toll telephone service also does not apply if the charge is less than 25 cents. But the tax applies if the coin-operated telephone service is furnished for a guaranteed amount. Figure the tax on the amount paid under the guarantee plus any fixed monthly or other periodic charge.

Telephone-operated security systems.

The tax does not apply to amounts paid for telephones used only to originate calls to a limited number of telephone stations for security entry into a building. In addition, the tax does not apply to any amounts paid for rented communication equipment used in the security system.

News services.

The tax on toll telephone service and teletypewriter exchange service does not apply to charges for the following news services.

This exemption applies to payments received for messages from one member of the news media to another member (or to or from their bona fide correspondents). For the exemption to apply, the charge for these services must be billed in writing to the person paying for the service and that person must certify in writing that the services are used for an exempt purpose.

Services not exempted.

The tax applies to amounts paid by members of the news media for local telephone service. Toll telephone service in connection with celebrities or special guests on talk shows is subject to the tax.

Common carriers and communications companies.

The tax on toll telephone service does not apply to WATS (wide area telephone service) used by common carriers, telephone and telegraph companies, or radio broadcasting stations or networks in their business. A common carrier is one holding itself out to the public as engaged in the business of transportation of persons or property for compensation and offering its services to the public generally.

Military personnel serving in a combat zone.

The tax on toll telephone services does not apply to telephone calls originating in a combat zone that are made by members of the U.S. Armed Forces serving there if the person receiving payment for the call receives a properly executed exemption certificate. The signed and dated exemption certificate must contain all the following information.

This exemption also applies to members of the Armed Forces serving in a qualified hazardous duty area. A qualified hazardous duty area includes an area only while the special pay provision is in effect for that area.

For information about areas designated a combat zone or qualified hazardous duty area, see Publication 3, Armed Forces' Tax Guide.

International organizations and the American Red Cross.

The tax does not apply to communication services furnished to an international organization or to the American National Red Cross.

Nonprofit hospitals.

The tax does not apply to telephone services furnished to income tax-exempt nonprofit hospitals for their use. Also, the tax does not apply to amounts paid by these hospitals to provide local telephone service in the homes of their personnel who must be reached during their off-duty hours.

Nonprofit educational organizations.

The tax does not apply to payments received for services and facilities furnished to a nonprofit educational organization for its use. A nonprofit educational organization is one that satisfies all the following requirements.

This includes a school operated by an organization exempt under section 501(c)(3) of the Internal Revenue Code if the school meets the above qualifications.

Federal, state, and local government.

The tax does not apply to communication services provided to the government of the United States, the government of any state or its political subdivisions, the District of Columbia, or the United Nations. Treat an Indian tribal government as a state for the exemption from the communications tax only if the services involve the exercise of an essential tribal government function.

Exemption certificate.

Any form of exemption certificate will be acceptable if it includes all the information required by the Internal Revenue Code and Regulations. File the certificate with the provider of the communication services.

The following users that are exempt from the communications tax do not have to file an annual exemption certificate after they have filed the initial certificate to claim an exemption from the communications tax.

The federal government does not have to file any exemption certificate.

All other organizations must furnish exemption certificates when required.

Percentage tax.

A tax of 7.5% applies to amounts paid for taxable transportation of persons by air. Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service.

Mileage awards.

The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses.

Generally, the percentage tax does not apply to amounts paid for mileage awards where the mileage awards cannot, under any circumstances, be redeemed for air transportation that is subject to the tax. Until regulations are issued, the following rules apply to mileage awards.

Domestic-segment tax.

The domestic-segment tax is a flat dollar amount for each segment of taxable transportation for which an amount is paid. However, see Rural airports, later. A segment is a single takeoff and a single landing. The domestic-segment tax is $3.00 per segment that begins during 2003.

Charter flights.

If an aircraft is chartered, the domestic-segment tax for each segment of taxable transportation is figured by multiplying the tax by the number of passengers transported on the aircraft.

Rural airports.

The domestic-segment tax does not apply to a segment to or from a rural airport. An airport is a rural airport for a calendar year if it satisfies both the following requirements.

Revenue Procedure 98–18 in Cumulative Bulletin 1998–1 is the most recent list of rural airports published by the IRS. An updated list can be found on the Department of Transportation web site at www.bts.gov/oai/rural.html.

Taxable transportation.

Taxable transportation is transportation by air that meets either of the following tests.

Round trip.

A round trip is considered two separate trips. The first trip is from the point of departure to the destination. The second trip is the return trip from that destination.

Uninterrupted international air transportation.

This means transportation entirely by air that does not begin and end in the United States or in the 225-mile zone if there is not more than a 12-hour scheduled interval between arrival and departure at any station in the United States. For a special rule that applies to military personnel, see Exemptions from tax, later.

Transportation between the continental U.S. and Alaska or Hawaii.

This transportation is partially exempt from the tax on transportation of persons by air. The tax does not apply to the part of the trip between the point at which the route of transportation leaves or enters the continental United States (or a port or station in the 225-mile zone) and the point at which it enters or leaves Hawaii or Alaska. Leaving or entering occurs when the route of the transportation passes over either the United States border or a point 3 nautical miles (3.45 statute miles) from low tide on the coast line, or when it leaves a port or station in the 225-mile zone. Therefore, this transportation is subject to the percentage tax on the part of the trip in U.S. airspace, the domestic-segment tax for each domestic segment, and the tax on the use of international air travel facilities, discussed later.

Transportation within Alaska or Hawaii.

The tax on transportation of persons by air applies to the entire fare paid in the case of flights between any of the Hawaiian Islands, and between any ports or stations in the Aleutian Islands or other ports or stations elsewhere in Alaska. The tax applies even though parts of the flights may be over international waters or over Canada, if no point on the direct line of transportation between the ports or stations is more than 225 miles from the United States (Hawaii or Alaska).

Package tours.

The air transportation taxes apply to “complimentary” air transportation furnished solely to participants in package holiday tours. The amount paid for these package tours includes a charge for air transportation even though it may be advertised as “free.” This rule also applies to the tax on the use of international air travel facilities, discussed later.

Liability for tax.

The person paying for taxable transportation is liable for the tax and, ordinarily, the person receiving the payment collects the tax, files the returns, and pays the tax over to the government. However, if payment is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation provided for under that order must collect the tax.

A travel agency that is an independent broker and sells tours on aircraft that it charters must collect the transportation tax, file the returns, and pay the tax over to the government. However, a travel agency that sells tours as the agent of an airline must collect the tax and remit it to the airline for the filing of returns and for the payment of the tax over to the government.

The fact that the aircraft does not use public or commercial airports in taking off and landing has no effect on the tax. But see Certain helicopter uses, later.

For taxable transportation that begins and ends in the United States, the tax applies regardless of whether the payment is made in or outside the United States.

If the tax is not paid when payment for the transportation is made, the air carrier providing the initial segment of the transportation that begins or ends in the United States becomes liable for the tax.

Exemptions from tax.

The tax on transportation of persons by air does not apply in the following situations. See also Special Rules on Transportation Taxes, later.

Military personnel on international trips.

When traveling in uniform at their own expense, United States military personnel on authorized leave are deemed to be traveling in uninterrupted international air transportation (defined earlier) even if the scheduled interval between arrival and departure at any station in the United States is actually more than 12 hours. However, such personnel must buy their tickets within 12 hours after landing at the first domestic airport and accept the first available accommodation of the type called for by their tickets. The trip must begin or end outside the United States and the 225-mile zone.

Certain helicopter uses.

The tax does not apply to air transportation by helicopter if the helicopter is used for any of the following purposes.

However, during a use described in items (1) and (2), the tax applies if the helicopter takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. For item (1), treat each flight segment as a separate flight.

Fixed-wing air ambulance.

The tax does not apply to air transportation by fixed-wing aircraft if used for emergency medical services. The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services.

Skydiving.

The tax does not apply to any air transportation exclusively for the purpose of skydiving.

Bonus tickets.

The tax does not apply to free bonus tickets issued by an airline company to its customers who have satisfied all requirements to qualify for the bonus tickets. However, the tax applies to amounts paid by customers for advance bonus tickets when customers have traveled insufficient mileage to fully qualify for the free advance bonus tickets.

Exemptions from tax.

The tax on transportation of property by air does not apply in the following situations. See also Special Rules on Transportation Taxes, later.

Cropdusting and firefighting service.

The tax does not apply to amounts paid for cropdusting or aerial firefighting service.

Exportation.

The tax does not apply to payments for transportation of property by air in the course of exportation (including to United States possessions) by continuous movement, as evidenced by the execution of Form 1363, Export Exemption Certificate. See Form 1363 for more details.

Certain helicopter and fixed-wing air ambulance uses.

The tax does not apply to amounts paid for the use of helicopters in construction to set heating and air conditioning units on roofs of buildings, to dismantle tower cranes, and to aid in construction of power lines and ski lifts.

The tax also does not apply to air transportation by helicopter or fixed-wing aircraft for the purpose of providing emergency medical services. The fixed-wing aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services.

Skydiving.

The tax does not apply to any air transportation exclusively for the purpose of skydiving.

Excess baggage.

The tax does not apply to excess baggage accompanying a passenger on an aircraft operated on an established line.

Alaska and Hawaii.

For transportation of property to and from Alaska and Hawaii, the tax in general does not apply to the portion of the transportation that is entirely outside the continental United States (or the 225-mile zone if the aircraft departs from or arrives at an airport in the 225-mile zone). But the tax applies to flights between ports or stations in Alaska and the Aleutian Islands, as well as between ports or stations in Hawaii. The tax applies even though parts of the flights may be over international waters or over Canada, if no point on a line drawn from where the route of transportation leaves the United States (Alaska) to where it reenters the United States (Alaska) is more than 225 miles from the United States.

Liability for tax.

The person paying for taxable transportation is liable for the tax and, ordinarily, the person engaged in the business of transporting property by air for hire receives the payment, collects the tax, files the returns, and pays the tax over to the government.

If tax is not paid when a payment is made outside the United States, the person furnishing the last segment of taxable transportation collects the tax from the person to whom the property is delivered in the United States.

Aircraft used by affiliated corporations.

The taxes do not apply to payments received by one member of an affiliated group of corporations from another member for services furnished in connection with the use of an aircraft. However, the aircraft must be owned or leased by a member of the affiliated group and cannot be available for hire by a nonmember of the affiliated group. Determine whether an aircraft is available for hire by a nonmember of an affiliated group on a flight-by-flight basis.

An affiliated group of corporations, for this rule, is any group of corporations connected with a common parent corporation through 80% or more of stock ownership.

Small aircraft.

The taxes do not apply to transportation furnished by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less. However, the taxes do apply if the aircraft is operated on an established line. “Operated on an established line” means the aircraft operates with some degree of regularity between definite points.

Consider an aircraft to be operated on an established line if it is operated on a charter basis between two cities also served by that carrier on a regularly scheduled basis.

Mixed load of persons and property.

If a single amount is paid for air transportation of persons and property, the payment must be allocated between the amount subject to the tax on transportation of persons and the amount subject to the tax on transportation of property. The allocation must be reasonable and supported by adequate records.

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.

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.

Persons that must register.

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

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.

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 provisions 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.

Conditions to allowance of refund.

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

Reporting requirements.

Generally, the person that paid the first tax must file a “First Taxpayer's Report” with its Form 720 for the quarter to 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.

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.

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.

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.

Biodiesel.

This is a liquid composed of monoalkyl esters of long chain fatty acids derived from vegetable oils or animal fats that is covered by ASTM specification D 6751.
Biodiesel does not contain any paraffins.

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 in 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.

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.

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.

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.

Removal from refinery.

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

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.

Entry into the United States.

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

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.

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 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 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.

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:

Blendstocks.

The following are gasoline blendstocks.

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.

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.

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 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.

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.

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:

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.

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

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.

Gasohol.

Gasohol is a mixture of gasoline and alcohol that satisfies the alcohol-content requirements immediately after the mixture is produced. Alcohol includes ethanol and methanol. Generally, this includes ethanol used to produce ethyl tertiary butyl ether (ETBE) and methanol produced from methane gas formed in waste disposal sites. However, alcohol produced from petroleum, natural gas, coal (including peat), or any derivative or product of these items, and alcohol less than 190 proof do not qualify as alcohol for these rules.

Alcohol-content requirements.

To qualify as gasohol, a mixture must contain a specific amount of alcohol by volume, without rounding. Figure the alcohol content on a batch-by-batch basis. There are three types of gasohol.

Any mixture that contains less than 5.59% alcohol is not gasohol.

If the mixture is produced within the bulk transfer/terminal system, such as at a refinery, determine whether the mixture is gasohol when the taxable removal or entry of the mixture occurs.

If the mixture is produced outside the bulk transfer/terminal system, determine whether the mixture is gasohol immediately after the mixture is produced. If you splash blend a batch in an empty tank, figure the volume of alcohol (without adjustment for temperature) by dividing the metered gallons of alcohol by the total metered gallons of alcohol and gasoline as shown on each delivery ticket. However, if you add metered gallons of gasoline and alcohol to a tank already containing more than 0.5% of its capacity in a liquid, include the alcohol and non-alcohol fuel contained in that liquid in figuring the volume of alcohol in that batch.

Batches containing at least 9.8% alcohol.

If a mixture contains at least 9.8% but less than 10% alcohol, part of the mixture is considered to be 10% gasohol. To figure that part, multiply the number of gallons of alcohol in the mixture by 10. The other part of the mixture is excess liquid that is subject to the rules on failure to blend, discussed later.

Batches containing at least 7.55% alcohol.

If a mixture contains at least 7.55% but less than 7.7% alcohol, part of the mixture is considered to be 7.7% gasohol. To figure that part, multiply the number of gallons of alcohol in the mixture by 12.987. The other part of the mixture is excess liquid subject to the rules on failure to blend, discussed later.

Batches containing at least 5.59% alcohol.

If a mixture contains at least 5.59% but less than 5.7% alcohol, part of the mixture is considered to be 5.7% gasohol. To figure that part, multiply the number of gallons of alcohol in the mixture by 17.544. The other part of the mixture is excess liquid that is subject to the rules on failure to blend, discussed later.

Gasohol blender.

A gasohol blender is any person that regularly produces gasohol outside of the bulk transfer/terminal system for sale or use in its trade or business. A “registered gasohol blender” is a person that has been registered by the IRS as a gasohol blender. See Registration Requirements, earlier.

Tax on gasoline.

The tax on gasoline removed or entered for the production of gasohol depends on the type of gasohol that is to be produced. The rates apply to the tax imposed on the removal at the terminal rack or from the refinery, or on the nonbulk entry into the United States (as discussed under Gasoline, earlier). The rates for gasoline used to produce gasohol containing ethanol are shown on Form 720. The rates for gasoline used to produce gasohol containing methanol are shown in the instructions for Form 720.

Requirements.

The reduced rates apply if the person liable for the tax (position holder, refiner, or enterer) is a registrant and:

Certificate.

The certificate from the buyer certifies that the gasoline will be used to produce gasohol within 24 hours after purchase. The certificate may be included as part of any business records normally used for a sale. A copy of the registrant's letter of registration cannot be used as a gasohol blender's certificate. A model certificate is shown in Appendix C as Model Certificate E. Your certificate must contain all information necessary to complete the model.

A certificate expires on the earliest of the following dates.

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

Tax on gasohol.

The tax on the removal or entry of gasohol depends on the type of gasohol. The rates for gasohol containing ethanol are shown on Form 720. The rates for gasohol containing methanol are shown in the instructions for Form 720.

Later separation.

If a person separates gasoline from gasohol on which a reduced tax rate was imposed, that person is treated as the refiner of the gasoline. Tax is imposed on the removal or sale of the gasoline. This tax rate is the difference between the regular tax rate for gasoline and the tax rate imposed on the prior removal or entry of the gasohol. The person that owns the gasohol when the gasoline is separated is liable for the tax.

Failure to blend.

Tax is imposed on the removal, entry, or sale of gasoline on which a reduced rate of tax was imposed if the gasoline was not blended into gasohol, or was blended into gasohol taxable at a higher rate. This tax is the difference between the tax that should have applied and the tax actually imposed. If the gasoline was not sold, the person liable for this tax is the person that was liable for the tax on the entry or removal. If the gasoline was sold, the person that bought the gasoline in connection with the taxable removal or entry is liable for this tax.

Diesel fuel.

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.

Kerosene.

This means any of the following liquids.

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

Kerosene also includes any liquid that would be described above but for the presence of a dye of the type used to dye kerosene for a nontaxable use.

Aviation-grade kerosene.

This is kerosene-type jet fuel covered by ASTM specification D 1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL- 83133E (Grade JP-8).

Diesel-powered highway vehicle.

This is any self-propelled vehicle designed to carry a load over public highways (whether or not also designed to perform other functions) and propelled by a diesel-powered engine. Generally, do not consider as diesel-powered highway vehicles specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation. For more information about these vehicles and for information about vehicles not considered highway vehicles, see Publication 378.

Diesel-powered train.

This is any diesel-powered equipment or machinery that rides on rails. The term includes a locomotive, work train, switching engine, and track maintenance machine.

Removal from terminal.

All removals of undyed diesel fuel or undyed kerosene at a terminal rack are taxable. The position holder for that fuel is liable for the tax.

Terminal operator's liability.

The terminal operator is jointly and severally liable for the tax if the terminal operator provides any person with any bill of lading, shipping paper, or similar document indicating that undyed diesel fuel or undyed kerosene is dyed (discussed later).

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 will not be liable for the tax in this situation if, at the time of the removal, the following conditions are met.

Removal from refinery.

The removal of undyed diesel fuel or undyed kerosene from a refinery is taxable if the removal meets either of the following conditions.

The refiner is liable for the tax.

Exception.

The tax does not apply to a removal of undyed diesel fuel or undyed kerosene at the refinery rack if all the following conditions are met.

Entry into the United States.

The entry of undyed diesel fuel or undyed kerosene into the United States is taxable if the entry meets either of the following conditions.

The enterer is liable for the tax.

Removal from a terminal by unregistered position holder.

The removal by bulk transfer of undyed diesel fuel or undyed kerosene from a terminal is taxable if the position holder for that fuel 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 undyed diesel fuel or undyed kerosene from a terminal or refinery or the entry of undyed diesel fuel or undyed kerosene by bulk transfer into the United States is taxable if the following conditions apply.

The owner of the undyed diesel fuel or undyed kerosene 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 operator of the facility where the undyed diesel fuel or undyed kerosene 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 undyed diesel fuel or undyed kerosene 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 buyer of the undyed diesel fuel or undyed kerosene 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.

Removal or sale of blended diesel fuel or kerosene.

The removal or sale of blended diesel fuel or blended kerosene by the blender is taxable. Blended taxable fuel produced using biodiesel is subject to the tax. 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.

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:

Sale or use in Alaska.

The excise tax is not imposed on the removal, entry, or sale of diesel fuel or kerosene in Alaska for ultimate sale or use in an exempt area of Alaska. The removal or entry of any diesel fuel or kerosene is not taxable if all the following requirements are satisfied.

A qualified dealer is any person that holds a qualified dealer license from the state of Alaska or has been registered by the IRS as a qualified retailer. Satisfactory evidence may include copies of qualified dealer licenses or exemption certificates obtained for state tax purposes.

Later sales.

The excise tax applies to diesel fuel or kerosene sold by a qualified dealer after the removal or entry. The tax is imposed at the time of the sale and the qualified dealer is liable for the tax. However, the sale is not taxable if all the following requirements are met.

Aviation-grade kerosene.

The excise tax on kerosene is not imposed on the removal from the terminal or refinery rack or non-bulk entry of aviation-grade kerosene if all the following conditions are met.

Certain later sales.

The excise tax applies to kerosene sold for use as a fuel in an aircraft (item (3)(b)) if there is a later disqualifying sale. The tax is imposed at the time of the first later disqualifying sale. The seller in that sale is liable for the tax. However, a later sale is not a disqualifying sale if either of the following apply to that sale.

Certificate.

The certificate from the buyer certifies the kerosene will be used by the buyer as a fuel in an aircraft or resold for that use. 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 F. Your certificate must contain all information necessary to complete the model.

A certificate expires on the earliest of the following dates.

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 the buyer uses the aviation-grade kerosene other than as a fuel in an aircraft or sells the kerosene without first obtaining a certificate from its buyer.

Kerosene used for feedstock purposes.

The excise tax on kerosene is not imposed on the removal or entry of kerosene if all the following conditions are met.

Kerosene is used for a feedstock purpose when it is used for nonfuel purposes in the manufacture or production of any substance other than gasoline, diesel fuel, or special fuels. For example, kerosene is used for a feedstock purpose when it is used as an ingredient in the production of paint, but is not used for a feedstock purpose when it is used to power machinery at a factory where paint is produced. A feedstock user is a person that uses kerosene for a feedstock purpose. A registered feedstock user is a person that has been registered by the IRS as a feedstock user. See Registration Requirements, earlier.

Later sales.

The excise tax applies to kerosene sold for use by the buyer for a feedstock purpose (item (3)(b)) if the buyer in that sale later sells the kerosene. The tax is imposed at the time of the later sale and that seller is liable for the tax.

Certificate.

The certificate from the buyer certifies the buyer is a registered feedstock user and the kerosene will be used by the buyer for a feedstock purpose. 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 G. Your certificate must contain all information necessary to complete the model.

A certificate expires on the earliest of the following dates.

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

Dyeing requirements.

Diesel fuel or kerosene satisfies the dyeing requirements only if it satisfies one of the following requirements.

Notice required.

A legible and conspicuous notice stating either: DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE or DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE must be:

The notice under item (1) must be provided by the time of the removal and must appear on all shipping papers, bills of lading, and similar documents accompanying the removal of the fuel.

Any seller that fails to post the required notice under item (2) is presumed to know that the fuel will be used for a taxable use (a use other than a nontaxable use listed later). That seller is subject to the penalty described next.

Penalty.

A penalty is imposed on a person if any of the following situations apply.

The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. After the first violation, the $1,000 portion of the penalty increases depending on the number of violations.

This penalty is in addition to any tax imposed on the fuel.

If the penalty is imposed, each officer, employee, or agent of a business entity who willfully participated in any act giving rise to the penalty is jointly and severally liable with that entity for the penalty.

If you are liable for the penalty, you may also be liable for the back-up tax, discussed later. However, the penalty applies only to dyed diesel fuel and dyed kerosene, while the back-up tax may apply to other fuels. The penalty may apply if the fuel is held for sale or use for a taxable use while the back-up tax does not apply unless the fuel is delivered into a fuel supply tank.

Exception to penalty.

The penalty under item (3) will not apply in any of the following situations.

Liability for tax.

Generally, the operator of the vehicle, bus, or train into which the fuel is delivered is liable for the tax. In addition, the seller of the diesel fuel or kerosene is jointly and severally liable for the tax if the seller knows or has reason to know that the fuel will be used for other than a nontaxable use. Generally, a seller of diesel fuel or kerosene is not liable for tax on fuel delivered into the fuel supply tank of a bus or train. However, the person that delivers the fuel into the fuel supply tank of a train, rather than the train operator, is liable for the tax if, at the time of delivery, the deliverer and the train operator are both registered by the IRS as train operators and a written agreement between them requires the deliverer to pay the tax.

Exemptions from the back-up tax.

The back-up tax does not apply to a delivery of diesel fuel or kerosene for uses (1) through (8) listed under Nontaxable Uses, next.

In addition, since the back-up tax is imposed only on the delivery into the fuel supply tank of a diesel-powered vehicle, bus, or train, the tax does not apply to diesel fuel or kerosene used as heating oil or in stationary engines.

Used on a farm for farming purposes.

Diesel fuel or kerosene 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.

Farm.

A farm includes livestock, dairy, fish, poultry, fruit, fur-bearing animals, and truck farms, orchards, plantations, ranches, nurseries, ranges, and feedyards for fattening cattle. It also includes structures such as greenhouses used primarily for raising agricultural or horticultural commodities. A fish farm is an area where fish are grown or raised—not merely caught or harvested.

Farming purposes.

Diesel fuel or kerosene is used on a farm for farming purposes if it is bought by the owner, tenant, or operator of the farm and used for any of the following purposes.

Diesel fuel or kerosene is treated as used on a farm for farming purposes if it is bought by a person other than the owner, tenant, or operator of the farm and used on the farm for any of the purposes in item (1) or (2).

Item (4) applies only if more than one-half of the commodity so treated during the tax year was produced on the farm. Commodity refers to a single raw product. For example, apples would be one commodity and peaches another. The more-than-one-half test applies separately to each commodity.

Item (5) applies if the operations are minor in nature when compared to the total farming operations.

Not used for farming purposes.

Diesel fuel or kerosene is not used for farming purposes if it is used in any of the following ways.

Buses.

Diesel fuel or kerosene used in a school bus or in a qualified local bus is used for a nontaxable use and is not subject to excise tax. However, fuel used in an intercity or local bus is subject to a reduced rate of tax.

School bus.

A school bus is a bus engaged in the transportation of students and employees of schools. A school is an educational organization with a regular faculty and curriculum and a regularly enrolled body of students who attend the place where the educational activities occur.

Qualified local bus.

A qualified local bus is a bus meeting all the following tests.

Intracity passenger land transportation means land transportation of passengers between points located within the same metropolitan area. It includes transportation along routes that cross state, city, or county boundaries if the routes remain within the metropolitan area.

A bus is under contract with a state or local government only if the contract imposes a bona fide obligation on the bus operator to furnish the transportation. A subsidy is more than nominal if it is reasonably expected to exceed an amount equal to 3 cents multiplied by the number of gallons of fuel used in buses on subsidized routes.

A company that operates its buses along subsidized and unsubsidized intracity routes may consider its buses qualified local buses only when the buses are used on the subsidized intracity routes.

Intercity or local bus.

A reduced tax of 7.4 cents a gallon is imposed on dyed fuel delivered into the fuel supply tank of an intercity or local bus. (See Back-Up Tax, earlier.) This is a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. The bus must be engaged in one of the following activities.

A bus is available to the general public if the bus is available for hire to more than a limited number of persons, groups, or organizations.

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:

Producers.

Producers include refiners, blenders, and wholesale distributors of aviation fuel and dealers selling aviation fuel exclusively to producers of aviation fuel if these persons have been registered by the IRS. The term also includes the actual producer of aviation fuel. See Registration for Certain Activities, earlier.

Any person buying aviation fuel at a reduced rate is the producer of that fuel.

Wholesale distributors.

To qualify as a wholesale distributor, you must hold yourself out to the public as being engaged in the trade or business of either of the following.

Bulk storage tanks.

A bulk storage tank is a container that holds at least 50 gallons and is not the fuel supply tank of any engine mounted on, or attached to, an aircraft.

Conditions to allowance of refund.

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

Reporting requirements.

Generally, the first producer must file a report (the first producer's report). A model first producer's report is shown in Appendix C as Model Certificate H. The report must contain all information needed to complete the model.

Providing information.

The first producer must give a copy of the report to the person to whom the first producer sells the aviation fuel.

Each subsequent seller must give to its buyer a statement that provides all the information necessary to complete the “Statement of Subsequent Seller (Aviation Fuel)” shown in Appendix C as Model Certificate I. The statement can be at the bottom or on the back of the copy of the first producer's report (or in an attached document).

If the first producer's report relates to aviation fuel divided among more than one buyer, copies of that report should be made when the fuel is divided and a copy given to each buyer.

Refund claim.

You must make your claim for refund on Form 8849. Complete Schedule 6 (Form 8849) and attach it to Form 8849. Do not include this claim with a claim under another tax provision. See the form instructions for how and where to file the claim. You must attach all the following information to Schedule 6.

Sales to other producers.

Registered producers may sell aviation fuel tax free to other registered producers of aviation fuel. The buyer must give the seller a written statement containing the buyer's registration number.

Sales for nontaxable uses.

A registered producer may sell aviation fuel tax free for any of the following uses.

A buyer for these uses gives its supplier a signed exemption certificate stating the buyer's name, address, employer identification number, registration number (if applicable), and intended use. A buyer may give a separate exemption certificate for each purchase or may give one certificate to cover all purchases from a particular seller for up to 1 year.

Aircraft museums.

Aviation fuel may be sold tax free for use in an aircraft or vehicle (such as a ground servicing vehicle for aircraft) owned by an aircraft museum and used exclusively for purposes described in item (3) of the following definition.

An aircraft museum is an organization with all the following characteristics.

Certain helicopter uses.

Aviation fuel may be sold tax free for use in a helicopter used for one of the following purposes.

For items (1) and (2), this applies if the helicopter does not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code, during such use. For item (1), each flight segment is treated as a separate flight.

Fixed-wing air ambulance uses.

Aviation fuel may be sold tax free for use in a fixed-wing aircraft providing air transportation for emergency medical services. The exemption applies if the aircraft is equipped for, and exclusively dedicated on that flight to, acute care emergency medical services.

Sales to commercial airlines.

Registered producers may sell aviation fuel at the tax-reduced rate of 4.4 cents a gallon to a registered commercial aircraft operator for use as a fuel in commercial aviation (other than foreign trade). See Registration for Certain Activities, earlier.

Commercial aviation is any use of an aircraft in the business of transporting persons or property by air for pay. However, commercial aviation does not include any of the following uses.

To buy at a tax-reduced rate, the airline gives the seller a signed exemption certificate stating the buyer's name, address, employer identification number, registration number, and intended use of the fuel. An airline may give a separate exemption certificate for each purchase or may give one certificate to cover all purchases from a particular seller for up to 1 year.

Special motor fuels/alcohol mixture.

This is a blend of alcohol with special motor fuels. The blend must be at least 10% alcohol that is 190 proof or more. Figure the proof of any alcohol without regard to any added denaturants.

The alcohol includes methanol or ethanol. This includes methanol produced from methane gas formed in waste disposal sites. But it does not include alcohol produced from petroleum, natural gas, coal (including peat), or any derivative or product of these items.

Treat the separation of special motor fuel from an alcohol mixture on which tax has been imposed at a rate for special motor fuels/alcohol mixture as a sale of special motor fuel. The tax on the sale is imposed on the person who makes the separation. Reduce the tax on special motor fuel by the tax already paid on the alcohol mixture.

Qualified methanol and ethanol fuels.

A special rate applies to these fuels. These fuels consist of at least 85% methanol, ethanol, or other alcohol produced from a substance other than petroleum or natural gas.

Partially exempt methanol and ethanol fuels.

A special rate applies to these fuels. These fuels consist of at least 85% methanol, ethanol, or other alcohol produced from natural gas.

Motor vehicle.

For the purpose of applying the tax on the delivery of special motor fuels, motor vehicles include all types of vehicles, whether or not registered (or required to be registered) for highway use, that have both the following characteristics.

Motor vehicles do not include any vehicle that moves exclusively on rails, or any of the following items.

Liquefied petroleum gas (LPG).

Tax is imposed on the delivery of LPG into the fuel supply tank of certain intercity and local buses and qualified local and school buses and must be reported on Form 720 even though a credit or refund may be allowable for LPG used in those buses.

Bulk sales.

Tax is imposed on the sale of special motor fuels that is not in connection with delivery into the fuel supply tank of the propulsion engine of a motor vehicle or motorboat if the buyer furnishes a written statement to the seller stating the entire quantity of the fuel covered by the sale is for other than a nontaxable use, listed later. The seller is liable for this tax.

Tax rate.

The special motor fuels tax rate depends on the type of fuel involved. The tax rate for LPG is shown on Form 720 (IRS No. 61). The tax rates for all other special motor fuels are shown in the Form 720 instructions for other fuels (IRS No. 79).

Off-highway business use.

This is use in a highway vehicle that is not registered (or required to be registered) for highway use under the laws of any state or foreign country and is used in the operator's trade or business or for the production of income. It also includes use in a vehicle owned by the United States that is not used on a highway.

Bulk sales.

Tax is imposed on the sale of CNG that is not in connection with delivery into the fuel supply tank of the propulsion engine of a motor vehicle or motorboat if the buyer furnishes a written statement to the seller that the entire quantity of the CNG covered by the sale is for use as a fuel in a motor vehicle or motorboat and the seller has given the buyer a written acknowledgement of receipt of the statement. The seller of the CNG is liable for the tax.

Tax rate.

The rate is 48.54 cents per thousand cubic feet (determined at standard temperature and pressure).

Motor vehicle.

For this purpose, motor vehicle has the same meaning as given under Special Motor Fuels, earlier.

Certificate.

The certificate from the buyer certifies the CNG will be used in a nontaxable use (listed earlier). 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 J. Your certificate must contain all information necessary to complete the model.

A certificate expires on the earliest of the following dates.

Inland and intracoastal waterways.

Inland and intracoastal waterways on which fuel consumption is subject to tax are specified in section 206 of the Inland Waterways Revenue Act of 1978, as amended. See section 48.4042–1(g) of the regulations for a list of these waterways.

Commercial waterway transportation.

Commercial waterway transportation is the use of a vessel on inland or intracoastal waterways for either of the following purposes.

The operation of all vessels meeting either of these requirements is commercial waterway transportation regardless of whether the vessel is actually transporting property on a particular voyage. (However, see Exemptions, later.) The tax is imposed on fuel consumed in vessels while engaged in any of the following activities.

Liquid fuel.

Liquid fuel includes diesel fuel, Bunker C residual fuel oil, special motor fuel, and gasoline. The tax is imposed on liquid fuel actually consumed by a vessel's propulsion engine and not on the unconsumed fuel in a vessel's tank.

Dual use of liquid fuels.

The tax applies to all taxable liquid used as a fuel in the propulsion of the vessel, regardless of whether the engine (or other propulsion system) is used for another purpose. The tax applies to all liquid fuel consumed by the propulsion engine even if it operates special equipment by means of a power take-off or power transfer. For example, the fuel used in the engine both to operate an alternator, generator, or pumps and to propel the vessel is taxable.

The tax does not apply to fuel consumed in engines not used to propel the vessel.

If you draw liquid fuel from the same tank to operate both a propulsion engine and a nonpropulsion engine, determine the fuel used in the nonpropulsion engine and exclude that fuel from the tax. IRS will accept a reasonable estimate of the fuel based on your operating experience, but you must keep records to support your allocation.

Voyages crossing boundaries of the specified waterways.

The tax applies to fuel consumed by a vessel crossing the boundaries of the specified waterways only to the extent of fuel consumed for propulsion while on those waterways. Generally, the operator may figure the fuel so used during a particular voyage by multiplying total fuel consumed in the propulsion engine by a fraction. The numerator of the fraction is the time spent operating on the specified waterways and the denominator is the total time spent on the voyage. This calculation cannot be used where it is found to be unreasonable.

Taxable event.

Tax of 24.4 cents a gallon is imposed on liquid fuel used in the propulsion system of a vessel.

The person who operates (or whose employees operate) the vessel in which the fuel is consumed is liable for the tax. The tax is paid with Form 720. No tax deposits are required.

Exemptions.

Certain types of commercial waterway transportation are excluded from the tax.

Fishing vessels.

Fuel is not taxable when used by a fishing vessel while traveling to a fishing site, while engaged in fishing, or while returning from the fishing site with its catch. A vessel is not transporting property in the business of the owner, lessee, or operator by merely transporting fish or other aquatic animal life caught on the voyage.

However, the tax does apply to fuel used by a commercial vessel along the specified waterways while traveling to pick up aquatic animal life caught by another vessel and while transporting the catch of that other vessel.

Deep-draft ocean-going vessels.

Fuel is not taxable when used by a vessel designed primarily for use on the high seas if it has a draft of more than 12 feet on the voyage. For each voyage, figure the draft when the vessel has its greatest load of cargo and fuel. A voyage is a round trip. If a vessel has a draft of more than 12 feet on at least one way of the voyage, the vessel satisfies the 12-foot draft requirement for the entire voyage.

Passenger vessels.

Fuel is not taxable when used by vessels primarily for the transportation of persons. The tax does not apply to fuel used in commercial passenger vessels while transporting property in addition to transporting passengers. Nor does it apply to ferryboats carrying passengers and their cars.

Ocean-going barges.

Fuel is not taxable when used in tugs to move LASH and SEABEE ocean-going barges released by their ocean-going carriers solely to pick up or deliver international cargoes.

However, it is taxable when any of the following conditions apply.

State or local governments.

No tax is imposed on the fuel used in a vessel operated by a state or local government in transporting property on official business. The ultimate use of the cargo must be for a function ordinarily carried out by governmental units. An Indian tribal government is treated as a state only if the fuel is used in the exercise of an essential tribal government function.

Manufacturer.

The term “manufacturer” includes a producer or importer. A manufacturer is any person who produces a taxable article from new or raw material, or from scrap, salvage, or junk material, by processing or changing the form of an article or by combining or assembling two or more articles. If you furnish the materials and keep title to those materials and to the finished article, you are considered the manufacturer even though another person actually manufactures the taxable article.

A manufacturer who sells a taxable article in knockdown condition is liable for the tax. The person who buys these component parts and assembles a taxable article may also be liable for tax as a further manufacturer depending on the labor, material, and overhead required to assemble the completed article if the article is assembled for business use.

Importer.

An importer is a person who brings a taxable article into the United States, or withdraws a taxable article from a customs bonded warehouse for sale or use in the United States.

Sale.

A sale is the transfer of the title to, or the substantial incidents of ownership in, an article to a buyer for consideration which may consist of money, services, or other things.

Use considered sale.

A manufacturer who uses a taxable article is liable for the tax in the same manner as if it were sold.

Lease considered sale.

The lease of an article (including any renewal or extension of the lease) by the manufacturer is generally considered a taxable sale. However, for the gas guzzler tax, only the first lease (excluding any renewal or extension) of the automobile by the manufacturer is considered a sale.

Manufacturers taxes based on sales price.

The manufacturers taxes imposed on the sale of sport fishing equipment, electric outboard motors, sonar devices, bows, and arrow components are based on the sale price of the article. The taxes imposed on coal are based either on the sale price or the weight.

The price for which an article is sold includes the total consideration paid for the article, whether that consideration is in the form of money, services, or other things. However, you include certain charges made when a taxable article is sold and you exclude others. To figure the price on which you base the tax, use the following rules.

Bonus goods.

Allocate the sale price if you give free nontaxable goods with the purchase of taxable merchandise. Figure the tax only on the sale price attributable to the taxable articles.

Partial payments.

The tax applies to each partial payment received when taxable articles are:

To figure the tax, multiply the partial payment by the tax rate in effect at the time of the payment.

Registration requirements.

The manufacturer, first purchaser, and second purchaser in the case of resales must be registered. See the Form 637 instructions for more information.

Exceptions to registration requirements.

Registration is not required for any of the following.

Certification requirement.

If the purchaser is required to be registered, the purchaser must give the manufacturer its registration number and certify the exempt purpose for which the article will be used. The information must be in writing and may be noted on the purchase order or other document furnished by the purchaser to the seller in connection with the sale.

For a sale to a state or local government, an exemption certificate must be signed by an officer or employee authorized by the state or local government. See section 48.4221–5(c) of the regulations for the certificate requirements.

For sales for use as supplies for vessels, if the manufacturer and purchaser are not registered, the owner or agent of the vessel must provide an exemption certificate to the manufacturer before or at the time of sale. See section 48.4221–4(d) of the regulations for the certificate requirements.

Proof of export requirement.

Within 6 months of the date of sale or shipment by the manufacturer, whichever is earlier, the manufacturer must receive proof of exportation. See section 48.4221–3(d) of the regulations for evidence that qualifies as proof of exportation.

Proof of resale for further manufacture requirement.

Within 6 months of the date of sale or shipment by the manufacturer, whichever is earlier, the manufacturer must receive proof that the article has been resold for use in further manufacture. See section 48.4221–2(c) of the regulations for evidence that qualifies as proof of resale.

Information to be furnished to purchaser.

The manufacturer must indicate to the purchaser that the articles normally would be subject to tax and are being sold tax free for an exempt purpose because the purchaser has provided the required certificate.

Uses, sales, and exports.

A credit or refund (without interest) of the manufacturers taxes may be allowable if a tax-paid article is, by any person:

If a tax-paid article is exported, the exporter or shipper may claim a credit or refund if the manufacturer waives its right to claim the credit or refund. In the case of a tax-paid article used to make another taxable article, the subsequent manufacturer may claim the credit or refund.

Price readjustments.

In addition, a credit or refund (without interest) may be allowable for a tax-paid article for which the price is readjusted by reason of return or repossession of the article or a bona fide discount, rebate, or allowance for taxes based on price.

Conditions to allowance.

To claim a credit or refund in the case of export, supplies for vessels, or sales to a state or local government or nonprofit educational organization, the person who paid the tax certifies on the claim that one of the following applies and that the claimant has the required supporting information.

The ultimate vendor generally is the seller making the sale that gives rise to the overpayment of tax.

Electric outboard boat motors and sonar devices.

A tax of 3% of the sale price is imposed on the sale by the manufacturer of electric outboard motors and sonar devices suitable for finding fish. This includes any parts or accessories sold on or in connection with the sale of those articles. The tax on any sonar device, however, cannot exceed $30. A sonar device suitable for finding fish does not include any device that is a graph recorder, a digital type, a meter readout, a combination graph recorder, or a combination meter readout.

Certain equipment resale.

The tax on the sale of sport fishing equipment is imposed a second time under the following circumstances. If the manufacturer sells a taxable article to any person, the manufacturer is liable for the tax. If the purchaser or any other person then sells it to a person who is related (discussed next) to the manufacturer, that related person is liable for a second tax on any subsequent sale of the article. The second tax, however, is not imposed if the constructive sale price rules under section 4216(b) of the Internal Revenue Code apply to the sale by the manufacturer.

If the second tax is imposed, a credit for tax previously paid by the manufacturer is available provided the related person can document the tax paid. The documentation requirement is generally satisfied only through submission of copies of actual records of the person that previously paid the tax.

Related person.

For the tax on sport fishing equipment, a person is a related person of the manufacturer if that person and the manufacturer have a relationship described in section 465(b)(3)(C) of the Internal Revenue Code.

Tax rates.

The tax on underground-mined coal is the lower of:

The tax on surface-mined coal is the lower of:

Coal will be taxed at the 4.4% rate if the selling price is less than $25 a ton for underground-mined coal and less than $12.50 a ton for surface-mined coal. Apply the tax proportionately if a sale or use includes a portion of a ton.

Coal production.

Coal is produced from surface mines if all geological matter (trees, earth, rock) above the coal is removed before the coal is mined. Treat coal removed by auger and coal reclaimed from coal waste refuse piles as produced from a surface mine.

Treat coal as produced from an underground mine when the coal is not produced from a surface mine. In some cases, a single mine may yield coal from both surface mining and underground mining. Determine if the coal is from a surface mine or an underground mine for each ton of coal produced and not on a mine-by-mine basis.

Determining tonnage or selling price.

The producer pays the tax on coal at the time of sale or use. In figuring the selling price for applying the tax, the point of sale is f.o.b. (free on board) mine or f.o.b. cleaning plant if you clean the coal before selling it. This applies even if you sell the coal for a delivered price. The f.o.b. mine or f.o.b. cleaning plant is the point at which you figure the number of tons sold for applying the applicable tonnage rate, and the point at which you figure the sale price for applying the 4.4% rate.

The tax applies to the full amount of coal sold. However, the IRS allows a calculated reduction of the taxable weight of the coal for the weight of the moisture in excess of the coal's inherent moisture content. Include in the sale price any additional charge for a freeze-conditioning additive in figuring the tax.

Do not include in the sales price the excise tax imposed on coal.

Coal used by the producer.

The tax on coal applies if the coal is used by the producer in other than a mining process. A mining process means the same for this purpose as for percentage depletion. For example, the tax does not apply if, before selling the coal, you break it, clean it, size it, or apply any other process considered mining under the rules for depletion. In this case, the tax applies only when you sell the coal. The tax does not apply to coal used as fuel in the coal drying process since it is considered to be used in a mining process. However, the tax does apply when you use the coal as fuel or as an ingredient in making coke since the coal is not used in a mining process.

You must use a constructive sale price to figure the tax under the 4.4% rate if you use the coal in other than a mining process. Base your constructive sale price on sales of a like kind and grade of coal by you or other producers made f.o.b. mine or cleaning plant. Normally, you use the same constructive price used to figure your percentage depletion deduction.

Blending.

If you blend surface-mined coal with underground-mined coal during the cleaning process, you must figure the excise tax on the sale of the blended, cleaned coal. Figure the tax separately for each type of coal in the blend. Base the tax on the amount of each type in the blend if you can determine the proportion of each type of coal contained in the final blend. Base the tax on the ratio of each type originally put into the cleaning process if you cannot determine the proportion of each type of coal in the blend. However, the tax is limited to 4.4% of the sale price per ton of the blended coal.

Exemption from tax.

The tax does not apply to sales of lignite and imported coal. The only other exemption from the tax on the sale of coal is for coal exported as discussed next.

Exported.

The tax does not apply to the sale of coal if the coal is in the stream of export when sold by the producer and the coal is actually exported.

Coal is in the stream of export when sold by the producer if the sale is a step in the exportation of the coal to its ultimate destination in a foreign country. For example, coal is in the stream of export when:

Proof of export includes any of the following items.

Determination of weight.

Do not include metal rims or rim bases in figuring the total weight of a tire. But include in the total weight, the wire, staples, darts, clips, and other material or fastening devices that form a part of the tire or are required for its use.

Consider studs as part of a tire, and include them in the total weight. The total weight of a tubeless tire or inner tube includes the weight of the air valve and stem or any other mechanism that functions as a part of the tire or attaches to the inner tube and is used in connection with inflating the tire or tube or maintaining its air pressure.

When you sell tires with metal rims or rim bases attached, you must keep records establishing what portion of the total weight of the finished product represents the tire without the metal rim or rim base.

Alternative method of determining weight.

If you have received permission from the IRS, you may determine total weight of tires that you manufactured and sold using the average weight for each type, size, grade, and classification.

See Revenue Procedure 92–82 in Cumulative Bulletin 1992–2 for several alternative methods you can use to determine tire weight.

Manufacturer's retail stores.

The excise tax on tires is imposed at the time the tires are delivered to the manufacturer-owned retail stores, not at the time of sale.

Tires on imported articles.

The importer of an article equipped with taxable tires is treated as the manufacturer of the tires and is liable for the tire excise tax when the article is sold (except in the case of an automobile bus chassis or body with tires).

Tires exempt from tax.

The tax does not apply to the following items.

Qualifying intercity or local bus.

This is any bus used mainly (more than 50%) to transport the general public for a fee and that either operates on a schedule along regular routes or seats at least 20 adults (excluding the driver).

Qualifying school bus.

This is any bus substantially all the use (85% or more) of which is to transport students and employees of schools.

Credit or refund.

A credit or refund (without interest) is allowable if the tax on a tire has been paid on its sale by the manufacturer and the tire is sold by any person on, or in connection with, any other article that is:

The person who sold the article is eligible to make the claim.

Automobiles.

An automobile is any four-wheeled vehicle that is:

Limousines.

The tax generally applies to limousines (including stretch limousines) regardless of their weight.

Vehicles not subject to tax.

For the gas guzzler tax, the following vehicles are not considered automobiles.

The manufacturer can sell a vehicle described in item (2) tax free only when the sale is made directly to a purchaser for the described emergency use and the manufacturer and purchaser (other than a state or local government) are registered.

Treat an Indian tribal government as a state only if the police or other law enforcement purposes are an essential tribal government function.

Model type.

Model type is a particular class of automobile as determined by EPA regulations.

Fuel economy.

Fuel economy is the average number of miles an automobile travels on a gallon of gasoline (or diesel fuel) rounded to the nearest 0.1 mile as figured by the EPA.

Imported automobiles.

The tax applies to automobiles that do not have a prototype-based fuel economy rating assigned by the EPA. An automobile imported into the United States without a certificate of conformity to United States emission standards and which has no assigned fuel economy rating must be either:

An imported automobile that has been converted to conform to an automobile already certified for sale in the United States may use the fuel economy rating assigned to that certified automobile.

A fuel economy rating is not generally available for modified imported automobiles because the EPA does not require a highway fuel economy test on them. A separate highway fuel economy test would be required to devise a fuel economy rating (otherwise the automobile is presumed to fall within the lowest fuel economy rating).

For more information about fuel economy ratings for imported automobiles, see Revenue Ruling 86–20 and Revenue Procedure 86–9 in Cumulative Bulletin 1986–1, and Revenue Procedure 87–10 in Cumulative Bulletin 1987–1.

Exemptions.

No one is exempt from the gas guzzler tax, including the federal government, state and local governments, and nonprofit educational organizations. However, see Vehicles not subject to tax, earlier.

Form 6197.

Use Form 6197 to figure your tax liability for each quarter. Attach Form 6197 to your Form 720 for the quarter. See the instructions for Form 6197 for more information about filing and the special rules for filing if you import an automobile for personal use.

Credit or refund.

If the manufacturer paid the tax on a vehicle that is used or resold for an emergency use (see item (2) under Vehicles not subject to tax), the manufacturer can claim a credit or refund. See Credits and Refunds, later.

Credit or refund.

A credit or refund (without interest) is available if the vaccine is:

The claim for a credit or refund must be filed within 6 months after the vaccine is returned or destroyed.

Conditions to allowance.

To claim a credit or refund, the person who paid the tax must have repaid or agreed to repay the tax to the ultimate purchaser of the vaccine or obtained the consent of such purchaser to allowance of the credit or refund.

Chassis or body.

A chassis or body is taxable only if you sell it for use as a component part of a highway vehicle that is a truck, truck trailer or semitrailer, or a tractor of the kind chiefly used for highway transportation in combination with a trailer or semitrailer.

Highway vehicle.

A highway vehicle is any self-propelled vehicle designed to carry a load over public highways, whether or not it is also designed to perform other functions.

Vehicles not considered highway vehicles.

The following vehicles are not highway vehicles for purposes of the retail tax.

Gross vehicle weight.

The tax does not apply to truck chassis and bodies suitable for use with a vehicle that has a gross vehicle weight of 33,000 pounds or less. It also does not apply to truck trailer and semitrailer chassis and bodies suitable for use with a trailer or semitrailer that has a gross vehicle weight of 26,000 pounds or less. Tractors (and truck chassis completed as tractors) are subject to tax without regard to gross vehicle weight.

The gross vehicle weight means the maximum total weight of a loaded vehicle. Generally, this maximum total weight is the gross vehicle weight rating provided by the manufacturer or determined by the seller of the completed article. The seller's gross vehicle weight rating must take into account the strength of the chassis frame and the axle capacity and placement. See section 145.4051–1(e)(3) of the regulations for more information.

Parts or accessories.

The tax applies to parts or accessories sold on or in connection with, or with the sale of, a taxable article. For example, if at the time of the sale by the retailer, the part or accessory has been ordered from the retailer, the part or accessory will be considered as sold in connection with the sale of the vehicle. The tax applies in this case whether or not the retailer bills the parts or accessories separately.

If the retailer sells a taxable chassis, body, or tractor without parts or accessories considered essential for the operation or appearance of the taxable article, the sale of the parts or accessories by the retailer to the purchaser is considered made in connection with the sale of the taxable article even though they are shipped separately, at the same time, or on a different date. The tax applies unless there is evidence to the contrary. For example, if a retailer sells to any person a chassis and the bumpers for the chassis, or sells a taxable tractor and the fifth wheel and attachments, the tax applies to the parts or accessories regardless of the method of billing or the time at which the shipments were made. The tax does not apply to parts and accessories that are spares or replacements.

Separate purchase.

The tax generally applies to the price of a part or accessory and its installation if the following conditions are met.

The owners of the trade or business installing the parts or accessories are secondarily liable for the tax.

A vehicle is placed in service on the date the owner takes actual possession of the vehicle. This date is established by a signed delivery ticket or other comparable document indicating delivery to and acceptance by the owner.

The tax does not apply if the installed part or accessory is a replacement part or accessory. The tax also does not apply if the total price of the parts and accessories, including installation charges, during the 6-month period is $1,000 or less. However, if the total price is more than $1,000, the tax applies to the cost of all parts and accessories (and installation charges) during that period.

First retail sale defined.

The sale of an article is treated as the first retail sale, and the seller will be liable for the tax imposed on the sale unless one of the following exceptions applies.

Leases.

A long-term lease (a lease with a term of 1 year or more, taking into account options to renew) before a first retail sale is treated as a taxable sale. The tax is imposed on the lessor at the time of the lease.

A short-term lease (a lease with a term of less than 1 year, taking into account options to renew) before a first retail sale is treated as a taxable use. The tax is imposed on the lessor at the time of the lease.

Exported vehicle.

A vehicle exported before its first retail sale, used in a foreign country, and then returned to the United States, is subject to the retail tax on its first retail sale after importation.

Tax on resale of tax-paid trailers and semitrailers.

The tax applies to a trailer or semitrailer resold within 6 months after having been sold in a taxable sale. The seller liable for the tax on the resale can claim a credit equal to the tax paid on the prior taxable sale. The credit cannot exceed the tax on the resale. See section 145.4052–1(a)(4) of the regulations for information on the conditions to allowance for the credit.

Use treated as sale.

If any person uses a taxable article before the first retail sale of the article, that person is liable for the tax as if the article had been sold at retail by that person. Figure the tax on the price at which similar articles are sold in the ordinary course of trade by retailers. The tax attaches when the use begins.

If the seller of an article regularly sells the articles at retail in arm's-length transactions, figure the tax on its use on the lowest established retail price for the articles in effect at the time of the taxable use.

If the seller of an article does not regularly sell the articles at retail in arm's-length transactions, a constructive price on which the tax is figured will be determined by the IRS after considering the selling practices and price structures of sellers of similar articles.

If a seller of an article incurs liability for tax on the use of the article and later sells or leases the article in a transaction that otherwise would be taxable, liability for tax is not incurred on the later sale or lease.

Presumptive retail sales price.

There are rules to ensure that the tax base of transactions considered to be taxable sales includes either an actual or presumed markup percentage. If the person liable for tax is the vehicle's manufacturer, producer, or importer, the following discussions show how you figure the presumptive retail sales price depending on the type of transaction and the persons involved in the transaction. Table 1 outlines the appropriate tax base calculation for various transactions.

The presumed markup percentage to be used for trucks and truck-tractors is 4%. But for truck trailers and semitrailers and remanufactured trucks and tractors, the presumed markup percentage is zero.

Sale.

For a taxable sale by a manufacturer, producer, importer, or related person, you generally figure the tax on a tax base of the sales price plus an amount equal to the presumed markup percentage times that sales price.

Long-term lease.

In the case of a long-term lease by a manufacturer, producer, importer, or related person, figure the tax on a tax base of the constructive sales price plus an amount equal to the presumed markup percentage times the constructive sales price.

Short-term lease.

When a manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a constructive sales price at which those or similar articles generally are sold in the ordinary course of trade by retailers.

But if the lessor in this situation regularly sells articles at retail in arm's-length transactions, figure the tax on the lowest established retail price in effect at the time of the taxable use.

If a person other than the manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a tax base of the price for which the article was sold to the lessor plus the cost of parts and accessories installed by the lessor and a presumed markup percentage.

Related person.

A related person is any member of the same controlled group as the manufacturer, producer, or importer. Do not treat as a related person a person that sells the articles through a permanent retail establishment in the normal course of being a retailer if that person has records to prove the article was sold for a price that included a markup equal to or greater than the presumed markup percentage.

General rule for sales by dealers to the consumer.

For a taxable sale, other than a long-term lease, by a person other than a manufacturer, producer, importer, or related person, your tax base is the retail sales price as discussed next under Determination of tax base.

When you sell an article to the consumer, generally you do not add a presumed markup to the tax base. However, you do add a markup if all the following apply.

In these situations, your tax base is the sales price plus an amount equal to the presumed markup percentage times that selling price.

Determination of tax base.

These rules apply to both normal retail sales price and presumptive retail sales price computations. To arrive at the tax base, the price is the total consideration paid (including trade-in allowance) for the item and includes any charge incident to placing the article in a condition ready for use. However, see Presumptive retail sales price, earlier.

Exclusions from tax base.

Exclude from the tax base the retail excise tax imposed on the sale. Exclude any state or local retail sales tax if stated as a separate charge from the price whether the sales tax is imposed on the seller or purchaser. Also exclude the value of any used component of the article furnished by the first user of the article.

Exclude charges for transportation, delivery, insurance, and installation (other than installation charges for parts and accessories, discussed earlier) and other expenses incurred in connection with the delivery of an article to a purchaser. These expenses are those incurred in delivery from the retail dealer to the customer. In the case of delivery directly from the manufacturer to the dealer's customer, include the transportation and delivery charges to the extent the charges do not exceed what it would have cost to ship the article to the dealer.

Exclude amounts charged for machinery or equipment that does not contribute to the highway transportation function of the vehicle, provided those charges are supported by adequate records. For example, for an industrial vacuum loader vehicle, exclude amounts charged for the vacuum pump and hose, filter system, material separator, silencer or muffler, control cabinet, and ladder. Similarly, for a sewer cleaning vehicle, exclude amounts charged for the high pressure water pump, hose components, and the vacuum pipe.

Sales not at arm's length.

For any taxable article sold (not at arm's length) at less than the fair market price, figure the excise tax on the price for which similar articles are sold at retail in the ordinary course of trade.

A sale is not at arm's length if either of the following apply.

Installment sales.

If the first retail sale is an installment sale, or other form of sale in which the sales price is paid in installments, the tax arises at the time of the sale. The tax is figured on the entire sales price. No part of the tax is deferred because the sales price is paid in installments.

Restoration of worn vehicles.

The tax does not apply to the sale or use of a worn vehicle restored to a usable condition if the cost of the restoration is not more than 75% of the cost of a comparable new vehicle. If the restoration includes the use of a glider kit, the tax does not apply to the sale or use of the restored vehicle as long as the total cost of the repair is not more than the 75% limit.

Repairs and modifications.

The tax does not apply to the sale or use of an article that has been repaired or modified unless the cost of the repairs and modifications is more than 75% of the retail price of a comparable new article. This includes modifications that change the transportation function of an article or restore a wrecked article to a functional condition. However, this exception generally does not apply to an article that was not subject to the tax when it was new.

Further manufacture.

The tax does not apply to the use by a person of a taxable article as material in the manufacture or production of, or as a component part of, another article to be manufactured or produced by that person. Do not treat a person as engaged in the manufacture of any article merely because that person combines the article with any of the following items.

Combining an article with an item in this list does not give rise to taxability. However, see Parts or accessories, discussed earlier.

Articles exempt from tax.

The tax on heavy trucks, trailers, and tractors does not apply to sales of the articles described in the following discussions.

Rail trailers and rail vans.

This is any chassis or body of a trailer or semitrailer designed for use both as a highway vehicle and a railroad car (including any parts and accessories designed primarily for use on and in connection with it). Do not treat a piggyback trailer or semitrailer as designed for use as a railroad car.

Parts and accessories.

This is any part or accessory sold separately from the truck or trailer, except as described earlier under Parts or accessories and Separate purchase.

Trash containers.

This is any box, container, receptacle, bin, or similar article that meets all the following conditions.

House trailers.

This is any house trailer (regardless of size) suitable for use in connection with either passenger automobiles or trucks.

Camper coaches or bodies for self-propelled mobile homes.

This is any article designed to be mounted or placed on trucks, truck chassis, or automobile chassis and to be used primarily as living quarters or camping accommodations on and off the trucks. Further, the tax does not apply to chassis specifically designed and constructed to accommodate and transport self-propelled mobile home bodies.

Farm feed, seed, and fertilizer equipment.

This is any body primarily designed to process or prepare, haul, spread, load, or unload feed, seed, or fertilizer to or on farms. This exemption applies only to the farm equipment body (and parts and accessories) and not to the chassis upon which the farm equipment is mounted.

Ambulances and hearses.

This is any ambulance, hearse, or combination ambulance-hearse.

Truck-tractors.

This is any truck-tractor specifically designed for use in shifting semitrailers in and around freight yards and freight terminals.

Concrete mixers.

This is any article designed to be placed or mounted on a truck, truck trailer, or semitrailer chassis to be used to process or prepare concrete.

Sales exempt from tax.

The following sales are ordinarily exempt from tax.

Registration requirement.

In general, the seller and buyer must be registered for a sale to be tax free. See the Form 637 instructions for more information. Certain registration exceptions apply in the case of sales to state and local governments and to foreign purchasers for export.

Further manufacture.

If you buy articles tax free and resell or use them other than in the manufacture of another article, you are liable for the tax on their resale or use just as if you had manufactured and sold them.

Credits and refunds.

A credit or refund (without interest) of the tax on heavy vehicles may be allowable if the tax has been paid with respect to an article and, before any other use, such article is used by any person as a component part of another taxable article manufactured or produced. The person using the article as a component part is eligible for the credit or refund.

A credit or refund is allowable if, before any other use, an article is, by any person:

A credit or refund is also allowable if there is a price readjustment by reason of the return or repossession of an article or by reason of a bona fide discount, rebate, or allowance.

See also Conditions to allowance under Manufacturers Taxes, earlier.

Tire credit.

A credit is allowed against the tax on heavy vehicles if tires are sold on or in connection with the sale of the article. The credit is equal to the manufacturers excise tax imposed on the tires (discussed earlier). This is the section 4051(d) tire credit and is claimed on line 11a of Schedule C (Form 720) for the same quarter for which the tax on the heavy vehicle is reported.

Voyage.

A voyage is the vessel's journey that includes the outward and homeward trips or passages. The voyage starts when the vessel begins to load passengers and continues until the vessel has completed at least one outward and one homeward passage. The tax may be imposed even if a passenger does not make both an outward and a homeward passage as long as the voyage begins or ends in the United States.

Passenger.

A passenger is an individual carried on the vessel other than the Master or a crew member or other individual engaged in the business of the vessel or its owners.

Taxable situations.

There are two taxable situations. The first situation involves voyages on commercial passenger vessels extending over one or more nights. A voyage extends over one or more nights if it extends for more than 24 hours. A passenger vessel is any vessel with stateroom or berth accommodations for more than 16 passengers.

The second situation involves voyages on a commercial vessel transporting passengers engaged in gambling on the vessel beyond the territorial waters of the United States. Territorial waters of the United States are those waters within the international boundary line between the United States and any contiguous foreign country or within 3 nautical miles (3.45 statute miles) from low tide on the coastline. If passengers participate as players in any policy game or other lottery, or any other game of chance for money or other thing of value that the owner or operator of the vessel (or their employee, agent, or franchisee) conducts, sponsors, or operates, the voyage is subject to the ship passenger tax. The tax applies regardless of the duration of the voyage. A casual, friendly game of chance with other passengers that is not conducted, sponsored, or operated by the owner or operator is not gambling for determining if the voyage is subject to the ship passenger tax.

Exemptions.

The tax does not apply when a vessel is on a voyage of less than 12 hours between 2 points in the United States or if a vessel is owned or operated by a state or local government.

Premium.

Premium means the agreed price or consideration for assuming and carrying the risk or obligation. It includes any additional charge or assessment payable under the contract, whether in one sum or installments. If premiums are refunded, claim the tax paid on those premiums as an overpayment against tax due on other premiums paid or file a claim for refund.

When liability attaches.

The liability for this tax attaches when the premium payment is transferred to the foreign insurer or reinsurer (including transfers to any bank, trust fund, or similar recipient designated by the foreign insurer or reinsurer) or to any nonresident agent, solicitor, or broker. A person can pay the tax before the liability attaches if the person keeps records consistent with that practice.

The person who makes the payment of the premium to the foreign insurer or to any nonresident agent, solicitor, or broker must file the return and pay the tax. This is the resident person who actually transfers the money or its equivalent to the insurer or agent. If that person does not pay the tax, any person liable for the tax must file the return and pay the tax.

The person liable for this tax must keep accurate records that identify each policy or instrument subject to tax. These records must clearly establish the type of policy or instrument, the gross premium paid, the identity of the insured and insurer, and the total premium charged. If the premium is to be paid in installments, the records must also establish the amount and anniversary date of each installment.

The records must be kept at the place of business or other convenient location for at least 3 years after the later of the date any part of the tax became due, or the date any part of the tax was paid. During this period, the records must be readily accessible to the IRS.

The person having control or possession of a policy or instrument subject to this tax must keep the policy for at least 3 years after the date any part of the tax on it was paid.

Treaty-based positions under IRC 6114.

You may have to file an annual report disclosing the amount of premiums exempt from United States excise tax as a result of the application of a treaty with the United States that overrides (or otherwise modifies) any provision of the Internal Revenue Code.

Attach any disclosure statement to the first quarter Form 720. You may be able to use Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), as a disclosure statement. See the Form 720 instructions for how and where to file.

See Revenue Procedure 92–14 in Cumulative Bulletin 1992–1 for procedures you can use to claim a refund of this tax under certain U.S. treaties.

Form 720.

The form has various sections.

Attachments to Form 720.

You may have to attach the following forms.

Form 720X.

This form is used to make adjustments to liability reported on Forms 720 filed in previous quarters. You can file Form 720X by itself or, if it shows a decrease in tax, you can attach it to Form 720. See the form and its instructions for more information.

Conditions to allowance.

For tax decreases, the claimant must check the appropriate box on Form 720X stating that:

However, the conditions listed under (2) do not apply to environmental taxes, the ship passenger tax, obligations not in registered form, foreign insurance taxes, fuels used on inland waterways, alcohol sold as fuel but not used as fuel, and certain fuel taxes if the tax was based on use (for example, dyed diesel fuel used in trains or buses, LPG, and CNG).

Employer identification number.

If you file Form 720, you need an employer identification number (EIN), unless you are a one-time filer (discussed later). If you do not have an EIN, use Form SS–4, Application for Employer Identification Number, to apply for an EIN. You can get a Form SS–4 from the IRS or from the Social Security Administration. If you do not receive an EIN by the time a return is due, file your return anyway and write “Applied for” and the date you applied in the space for the EIN.

You can apply for an EIN by telephone, fax, or mail. See the Form SS–4 instructions for how to apply.

Third party designee.

You can check the “Yes” box in the third party designee area to authorize the IRS to discuss your Form 720 with an employee of your business or another person. This allows the IRS to call the designee to answer any questions that arise during the processing of your return. It also allows your designee to perform certain actions. See the form instructions for more information.

One-time filing.

If you import a vehicle, you may be eligible to make a one-time filing of Form 720 for the gas guzzler tax if you meet the following conditions.

File Form 720 for the quarter in which you incur the tax liability. Attach Form 6197 to report the gas guzzler tax. Pay the full tax with the return. No deposits are required. Check the one-time filing box on page 1, Form 720.

Final return.

File a final return if either of the following apply to you.

Due dates.

Form 720 must be filed by the following due dates.

If any due date falls on a Saturday, Sunday, or legal holiday, you can file the return on the next business day.

You must report the floor stocks tax imposed on ODCs held on January 1, as discussed earlier, on the return due by July 31 of the year that the tax is imposed.

Floor stocks tax on ODCs.

You must deposit the floor stocks tax imposed on ODCs held on January 1, as discussed earlier, by June 30 of the year that the tax is imposed.

Federal tax deposit coupons.

If you do not make your deposits electronically (discussed next), they must be accompanied by a Form 8109, Federal Tax Deposit Coupon. If you do not have a coupon book, contact your local IRS office or call 1–800–829–4933.

Electronic deposit requirement.

You must use the Electronic Federal Tax Payment System (EFTPS) to make electronic deposits of all depository tax liabilities (including employment taxes, corporate income tax, and excise taxes) you incur after 2002, if you meet either of the following conditions.

If you do not meet these conditions, electronic deposits are voluntary.

For information about EFTPS, access it on the Internet at www.eftps.gov, or see Publication 966, Now a Full Range of Electronic Choices to Pay ALL Your Federal Taxes.

You can enroll in EFTPS on-line or you can call:

Regular method taxes.

Deposits of taxes (other than alternative method taxes) for a semimonthly period are due by the 14th day following the semimonthly period. Therefore, the deposit for the first semimonthly period is due by the 29th of that month. The deposit for the second semimonthly period is due by the 14th of the following month.

If the 14th day is a Saturday, Sunday, or legal holiday in the District of Columbia, you must make the deposit by the immediately preceding day that is not a Saturday, Sunday, or legal holiday.

September rule.

For 2003, deposit by September 29 the taxes for the period beginning September 16 and ending September 25. If making electronic deposits, deposit by September 29 the taxes for the period beginning September 16 and ending September 26.

Alternative method taxes.

You can deposit communications and air transportation taxes based on amounts considered as collected (the alternative method) rather than on amounts actually collected.

If you use the alternative method, the tax included in amounts billed or tickets sold during a semimonthly period is considered as collected during the first 7 days of the second following semimonthly period. You must deposit these taxes by the third banking day after that seventh day.

To use the alternative method, you must keep a separate account of the tax included in the amounts billed or tickets sold during the month. Report on Form 720 the tax included in amounts billed or tickets sold and not the amount of tax that is actually collected.

September rule.

For 2003, deposit by September 29 the communications and air transportation taxes included in the amounts billed or tickets sold during the period beginning September 1 and ending September 10. If making electronic deposits, deposit by September 29 the air transportation and communications taxes included in the amounts billed or tickets sold during the period beginning September 1 and ending September 11.

Net tax liability.

Your net tax liability is your tax liability for the period minus any claims on Schedule C (Form 720) for the period. You may figure your net tax liability for a semimonthly period by dividing your net liability incurred during the calendar month by two. If you use this method, you must use it for all semimonthly periods in the calendar quarter.

September rule.

To figure your net tax liability under the September rule, see sections 40.6302(c)–2 and, for alternative method taxes, 40.6302(c)–3 of the regulations.

Tax rate increases.

You must modify the safe harbor rule if there has been an increase in the rate of tax. You must figure your tax liability in the look-back quarter as if the increased rate had been in effect. To qualify for the safe harbor rule, your deposits cannot be less than 1/6 of the refigured tax liability.

Exempt organizations.

Organizations exempt from income tax under section 501 or 521 of the Internal Revenue Code are not exempt from the tax on wagering or the occupational tax. However, see Lottery, later, for an exception.

Confidentiality.

No Treasury Department employee may disclose any information that you supply in relation to the wagering taxes, unless necessary to administer or enforce the Internal Revenue laws.

Principal.

A principal is a person who is in the business of accepting wagers for his or her own account. This is the person who makes a profit or risks loss depending on the outcome of the event or contest for which the wager is accepted.

Agent.

This is the agent of the principal who accepts wagers for the principal.

Wagers.

Wagers include any wager:

Sports event.

A sports event includes every type of amateur, scholastic, or professional sports competition, such as:

Contest.

A contest is any competition involving speed, skill, endurance, popularity, politics, strength, or appearance, such as the following.

Wagering pool.

A wagering pool conducted for profit includes any method or scheme for giving prizes to one or more winning bettors based on the outcome of a sports event, a contest, or a combination or series of these events or contests if the wagering pool is managed and conducted for the purpose of making a profit. A wagering pool or lottery may be conducted for profit even if a direct profit does not occur. If you operate the wagering pool or lottery with the expectation of a profit in the form of increased sales, attendance, or other indirect benefits, you conduct it for profit.

Lottery.

This includes the numbers game, policy, punch boards, and similar types of wagering. In general, a lottery conducted for profit includes any method or scheme for the distribution of prizes among persons who have paid or promised to pay for a chance to win the prizes. The winning prizes are usually determined by the drawing of numbers, symbols, or tickets from a wheel or other container or by the outcome of a given event.

It does not include either of the following kinds of events.

Card games, roulette games, dice games, bingo, keno, and gambling wheels usually fall within exception (1) above.

Who must file.

You must file Form 11–C if you are a principal or an agent, defined earlier.

When to file.

You must file your first Form 11–C before you begin accepting wagers. After that, file a renewal return by July 1 for each year that you accept wagers. You may also be required to file a first return for a new entity created when certain changes in ownership or control occur. In addition, you are required to file a supplemental registration when certain events occur. See the Form 11–C instructions.

Information required.

Follow the instructions on the back of the form. All filers must have an employer identification number (EIN). You cannot use your social security number. If you do not have an EIN, use Form SS–4, Application for Employer Identification Number, to apply for an EIN. You can get a Form SS–4 from the IRS or from the Social Security Administration. If you do not receive an EIN by the time a return is due, file your return anyway and write “Applied for” and the date you applied in the space for the EIN.

You can apply for an EIN by telephone, fax, or mail. See the Form SS–4 instructions for how to apply.

If you are a principal, you must show the number of agents that accept wagers for you and their names, addresses, and EINs. If you engage a new agent after filing Form 11–C, you must file a supplemental registration showing this information within 10 days after you engage the agent.

Agents must show the name, address, and EIN of each of their principals. If you are engaged by a new principal after having filed a Form 11–C, you must file a supplemental registration within 10 days after being engaged by the new principal. If you do not provide the required information about the principal, you will be liable for the excise tax on wagers you accept as if you were the principal.

Figuring the tax.

The following tax must be paid annually for every year in which taxable wagers are accepted.

The tax year begins on July 1. If you start accepting wagers after July 31, the tax is prorated for the first year. The prorated amounts are shown in the table in the Form 11–C instructions.

Refund.

A refund for an overpayment of the occupational tax may be claimed on Form 8849 using Schedule 6. See the Form 8849 instructions for details.

Laid-off wagers.

Persons accepting more wagers than they are willing to carry may lay off a portion of the wagers with another person to avoid the risk of loss. If you accept a wager taken initially by someone else (other than an agent acting for you) include the wager in your gross receipts. If you accept a wager and lay off all or part of it with a person who is liable for the tax, you may be entitled to a credit or refund, discussed later.

Excluded wagers.

Tax is not imposed on any of the following.

Figuring the tax.

The amount of the wager is the amount risked by the bettor, including any fee or charge incident to placing the wager. It is not the amount that the bettor stands to win.

The tax is 2% of the wager if it is not authorized under the laws of the state in which accepted. If the wager is authorized, the rate is 0.25% of the wager.

When to file.

Once you have filed Form 730 reporting tax, file a return for each subsequent month whether or not you have taxable wagers to report. File Form 730 for each month by the last day of the following month. If you have none to report, write “0” in the last box of the dollar amount column. If you stop accepting wagers permanently, check the final return box on the form.

Credit or refund.

A credit or refund may be claimed for an overpayment of the wagering tax or for the amount of tax imposed on a wager that is laid off with another person who is liable for the tax on the amount laid off. Claim a credit on line 5 of Form 730 or file a claim for refund on Form 8849 using Schedule 6. No credit or refund will be allowed unless the timely filed claim has the required statements, certificates, and consents attached. For more information, see the instructions for Form 730 and Form 8849.

Conditions to allowance.

One of the following statements must be attached to the claim for credit or refund.

If the claim is for a laid-off wager accepted by the claimant, the statement must be attached for both the person who placed the laid-off wager and the person who placed the original wager.

Trust fund recovery penalty.

If you provide taxable communications or air transportation services, you have to collect excise taxes (as discussed earlier) from those persons who pay you for those services. You must pay over these taxes to the U.S. Government.

If you willfully fail to collect or pay over these taxes, or if you evade or defeat them in any way, the trust fund recovery penalty may apply. Willfully means voluntarily, consciously, and intentionally. The trust fund recovery penalty equals 100% of the taxes not collected or not paid over to the U.S. Government.

The trust fund recovery penalty may be imposed on any person responsible for collecting, accounting for, and paying over these taxes. If this person knows that these required actions are not taking place for whatever reason, the person is acting willfully. Paying other expenses of the business instead of paying the taxes is willful behavior.

A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, or any other person who had responsibility for certain aspects of the business and financial affairs of the employer (or business). This may include accountants, trustees in bankruptcy, members of a board, banks, insurance companies, or sureties. The responsible person could even be another corporation—in other words, anyone who has the duty and the ability to direct, account for, or pay over the money. Having signature power on the business checking account could be a significant factor in determining responsibility.

Contacting your Taxpayer Advocate.

If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate.

The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.

To contact your Taxpayer Advocate:

For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS.

Free tax services.

To find out what services are available, get Publication 910, Guide to Free Tax Services. It contains a list of free tax publications and an index of tax topics. It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics.