1. Fuels
Federal excise taxes are imposed on certain fuels. This chapter defines the fuels and lists the nontaxable uses of each fuel.
The nontaxable uses
are defined in Chapter 2.
Type of use table.
The nontaxable uses listed under each fuel are from
Table 1–1. The first column of the table is the number you enter on Form 4136,
Form 8849, or Schedule C (Form 720) for that type of use. For type of use 2, the mobile machinery parenthetical applies only
to Form 8849 and Form
720.
Table 1–1. Type of Use Table
|
No.
|
Type of Use (See Chapter 2 for
definition of terms)
|
|
1
|
On a farm for farming purposes
|
|
2
|
Off-highway business use (for business use other than in a highway vehicle registered or required to be
registered for highway use) (other than use in mobile machinery)
|
|
3
|
Export
|
|
4
|
In a boat engaged in commercial fishing
|
|
5
|
In certain intercity and local buses
|
|
6
|
For diesel fuel or kerosene in a qualified local bus
|
|
7
|
In a bus transporting students and employees of schools (school buses)
|
|
8
|
For diesel fuel and kerosene (other than aviation-grade kerosene) used other than as a fuel in the propulsion engine
of a train or diesel-powered highway vehicle (but not off-highway business use)
|
|
9
|
In foreign trade
|
|
10
|
Certain helicopter and fixed-wing air ambulance uses
|
|
11
|
For aviation-grade kerosene used other than as a fuel in the propulsion engine of an aircraft
|
|
12
|
In a highway vehicle owned by the United States that is not used on a highway
|
|
13
|
Exclusive use by a nonprofit educational organization
|
|
14
|
Exclusive use by a state, political subdivision of a state, or the District of Columbia
|
|
15
|
In an aircraft or vehicle owned by an aircraft museum
|
|
16
|
In military aircraft
|
|
17
|
For use in the production of special fuels
|
Gasoline and Aviation Gasoline
Gasoline means all products commonly or commercially known or sold as gasoline with an octane rating of 75 or more that are
suitable for use as a
motor fuel. Gasoline includes any gasoline blend other than:
-
Qualified ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from coal, including peat),
-
Partially exempt ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from natural gas),
or
-
Denatured alcohol.
Gasoline also includes gasoline blendstocks, discussed in Publication 510, and any product commonly used as an additive in
gasoline (other than
alcohol).
Aviation gasoline 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.
The following are the uses of gasoline for which a credit or refund may be allowable to an ultimate purchaser.
-
On a farm for farming purposes (credit only).
-
Off-highway business use.
-
Export.
-
In a boat engaged in commercial fishing.
-
In certain intercity and local buses.
-
In a school bus.
-
In a highway vehicle owned by the United States that is not used on a highway.
-
Exclusive use by a nonprofit educational organization (see sales by registered ultimate vendors).
-
Exclusive use by a state, political subdivision of a state, or the District of Columbia (see sales by registered ultimate
vendors).
-
In an aircraft or vehicle owned by an aircraft museum.
The following are the uses of aviation gasoline for which a credit or refund may be allowable to an ultimate purchaser.
-
On a farm for farming purposes (credit only).
-
Export.
-
In foreign trade.
-
Certain helicopter and fixed-wing air ambulance uses.
-
In commercial aviation (other than foreign trade).
-
Exclusive use by a nonprofit educational organization (see sales by registered ultimate vendors).
-
Exclusive use by a state, political subdivision of a state, or the District of Columbia (see sales by registered ultimate
vendors).
-
In a aircraft owned by an aircraft museum.
-
In military aircraft.
Sales by Registered Ultimate Vendors
This is a new category of registered ultimate vendor. This is an ultimate vendor that sells gasoline or aviation gasoline
to any of the following.
The registered ultimate vendor may make the claim if the ultimate purchaser waives its right to the credit or refund by providing
the registered
ultimate vendor with a certificate. A sample certificate is included as Model Certificate D in the Appendix on page 18. The registered
ultimate vendor must have the certificate at the time the credit or refund is claimed.
The ultimate vendor must be registered by the IRS. See Publication 510 for a discussion of the registration requirements.
The credits and refunds for the nontaxable use of gasohol and, generally, the use of gasoline taxed at the full rate to produce
gasohol have been
eliminated. The new credits for alcohol fuel mixtures and biodiesel mixtures are discussed in Chapter 4, Alcohol Fuel Mixture Credit, and
Chapter 5, Biodiesel Mixture Credit.
Undyed Diesel Fuel and Undyed Kerosene (Other Than Aviation-Grade Kerosene)
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,
-
Transmix, and
-
Diesel fuel blendstocks (when identified by the IRS).
A liquid is suitable for this use if the liquid has practical and commercial fitness for use in the propulsion engine of
a diesel-powered
highway vehicle or diesel-powered train. A liquid may possess this practical and commercial fitness even though the specified
use is not the
predominant use of the liquid. However, a liquid does not possess this practical and commercial fitness solely by reason of
its possible or rare use
as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered 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.
-
A liquid that contains less than 4% normal paraffins.
-
A liquid with all the following properties.
-
Distillation range of 125 degrees Fahrenheit or less.
-
Sulfur content of 10 ppm or less.
-
Minimum color of +27 Saybolt.
Transmix
means a by-product of refined products created by the mixing of different specification products during pipeline
transportation.
Kerosene means any of the following liquids.
-
One of the two grades of kerosene (No. 1–K and No. 2–K) covered by ASTM specification D 3699.
-
Kerosene-type jet fuel covered by ASTM specification D 1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E
(Grade
JP-8). See Aviation-Grade Kerosene later.
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.
However, kerosene does not include an excluded liquid, discussed above.
The following are the uses of undyed diesel fuel and undyed kerosene for which a credit or refund may be allowable to an
ultimate purchaser.
-
Off-highway business use.
-
Export.
-
In certain intercity and local buses.
-
In a qualified local bus.
-
In a school bus.
-
Used other than as a fuel.
-
In a train (undyed diesel fuel only).
-
In a highway vehicle owned by the United States that is not used on a highway.
-
Exclusive use by a nonprofit educational organization.
-
In a vehicle owned by an aircraft museum.
No credit or refund is allowable for any use of dyed diesel fuel and dyed kerosene. You buy these fuels excise tax free. See
Publication 510 for more information about dyed fuels.
Sales by Registered Ultimate Vendors
The following are the sales for which a credit or refund may be allowable to the registered ultimate vendor only.
-
Undyed diesel fuel or undyed kerosene sold for use on a farm for farming purposes or for exclusive use by a state or local
government,
-
Undyed kerosene sold from a blocked pump (defined below),
-
Undyed kerosene sold for blending, or
-
Undyed diesel fuel or undyed kerosene used in certain intercity and local buses, only if the ultimate purchaser waives its
right to the
credit or refund by providing the registered ultimate vendor with a waiver.
Registered ultimate vendor (farming and state use).
This is a person that sells undyed diesel fuel or undyed kerosene to any of the following.
-
The owner, tenant, or operator of a farm for use by that person on a farm for farming purposes.
-
A person other than the owner, tenant, or operator of a farm for use by that person on a farm in connection with cultivating,
raising, or
harvesting.
-
A state or local government for its exclusive use (including essential government use by an Indian tribal government).
The ultimate vendor must be registered by the IRS. See Publication 510 for a discussion of the registration requirements.
Registered ultimate vendor (blocked pump).
This is an ultimate vendor that sells undyed kerosene from a blocked pump.
A credit or refund may be allowable to a registered ultimate vendor (blocked pump) if the vendor sold to a buyer undyed
kerosene from a blocked
pump for use other than as a fuel in a diesel-powered highway vehicle and the vendor had no reason to believe the kerosene
would not be used in that
manner.
Blocked pump.
A blocked pump is a fuel pump that meets all the following requirements.
-
It is used to make retail sales of undyed kerosene for use by the buyer in any nontaxable use.
-
It is at a fixed location.
-
It is identified with a legible and conspicuous notice stating, “UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY.”
-
It meets either of the following conditions.
-
It cannot reasonably be used to dispense fuel directly into the fuel supply tank of a diesel-powered highway vehicle or train.
-
It is locked by the vendor after each sale and unlocked by the vendor only in response to a buyer's request for undyed kerosene
for use
other than as a fuel in a diesel-powered highway vehicle or train.
The ultimate vendor (blocked pump) must be registered by the IRS. See Publication 510 for a discussion of the registration
requirements.
Registered ultimate vendor (blending for cold weather).
This is a taxable fuel registrant (discussed in Publication 510), a registered ultimate vendor, or a registered ultimate
vendor (blocked pump).
A credit or refund may be allowable to a registered ultimate vendor (blending) if the vendor sold undyed kerosene
in an area described in an IRS
declaration of extreme cold for the production of a cold weather blend.
Cold weather blend.
This is a blend of kerosene and diesel fuel produced in an area described in an IRS declaration of extreme cold and
sold for use or used for
heating purposes.
Registered ultimate vendor (certain intercity and local buses).
This is a new category of registered ultimate vendor. This is an ultimate vendor that sells undyed diesel fuel or
undyed kerosene to the ultimate
purchaser for use in certain intercity and local buses.
The registered ultimate vendor may make the claim if the ultimate purchaser waives its right to the credit or refund
by providing the registered
ultimate vendor with a waiver. A sample waiver is included as
Model Waiver E in the Appendix on page 19. The registered ultimate vendor
must have the waiver at the time the credit or payment is claimed.
Aviation-grade kerosene replaces aviation fuel. Aviation-grade kerosene means 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).
The following are the uses of aviation-grade kerosene taxed at the full rate for which a credit or refund of the full rate
may be allowable to an
ultimate purchaser.
-
Export.
-
In foreign trade.
-
Certain helicopter and fixed-wing air ambulance uses.
-
Used other than as a fuel in the propulsion engine of an aircraft.
-
Exclusive use by a nonprofit educational organization.
-
In a aircraft owned by an aircraft museum.
-
In military aircraft.
A credit or refund at a reduced rate may be allowable to an ultimate purchaser of aviation-grade kerosene taxed at the full
rate and used in
commercial aviation (other than foreign trade).
A credit or refund may be allowable to an ultimate purchaser of aviation-grade kerosene taxed at the commercial aviation rate
and used in foreign
trade.
Sales by Registered Ultimate Vendors
The registered ultimate vendor of aviation-grade kerosene may make a claim for a nontaxable use only if the ultimate purchaser
waives its right to
make a claim by providing the registered ultimate vendor with a waiver. A sample waiver is included as Model Waiver C in the Appendix on
page 17. The ultimate vendor must have the waiver at the time the credit or payment is claimed.
A nontaxable use for this purpose means any use that is exempt from the tax imposed under section 4041(c) (other than by reason
of a prior
imposition of tax) and any use in commercial aviation within the meaning of section 4083(b).
Registered ultimate vendor (farming and state use).
This is an ultimate vendor that sells aviation-grade kerosene to any of the following.
-
The owner, tenant, or operator of a farm for use by that person on a farm for farming purposes.
-
A person other than the owner, tenant, or operator of a farm for use by that person on a farm in connection with cultivating,
raising, or
harvesting.
-
A state or local government for its exclusive use (including essential government use by an Indian tribal government).
The claim for a credit or refund may be allowable to the registered ultimate vendor only. The ultimate vendor must be registered
by the IRS.
See Publication 510 for a discussion of the registration requirements.
Liquefied petroleum gas (LPG) includes propane, butane, and pentane, or mixtures of those gases.
The following are the uses of taxed LPG for which a credit or refund may be allowable to an ultimate purchaser.
-
On a farm for farming purposes.
-
Off-highway business use.
-
In a boat engaged in commercial fishing.
-
In certain intercity and local buses.
-
In a qualified local bus.
-
In a school bus.
-
Exclusive use by a nonprofit educational organization.
-
Exclusive use by a state, political subdivision of a state, or the District of Columbia.
-
In an aircraft or vehicle owned by an aircraft museum.
