| Pub. 378, Fuel Tax Credits and Refunds |
2005 Tax Year |
2. Definitions
This chapter provides definitions of the terms used in Table 1–1 for nontaxable uses. If applicable, the type of use number
from Table
1–1 is indicated in each heading.
On a Farm for Farming Purposes (No. 1)
On a farm for farming purposes means fuel 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 feed yards for fattening cattle. It also includes structures such as greenhouses used primarily for the raising of agricultural
or horticultural
commodities. A fish farm is an area where fish are grown or raised — not merely caught or harvested.
Farming purposes.
As an owner, tenant, or operator, you use fuel on a farm for farming purposes if you use it in any of the following
ways.
-
To cultivate the soil or to raise or harvest any agricultural or horticultural commodity.
-
To raise, shear, feed, care for, train, or manage livestock, bees, poultry, fur-bearing animals, or wildlife.
-
To operate, manage, conserve, improve, or maintain your farm and its tools and equipment.
-
To handle, dry, pack, grade, or store any raw agricultural or horticultural commodity. For this use to qualify, you must have
produced more
than half the commodity so treated during the tax year. Commodity means a single raw product. For example, apples and peaches
are two separate
commodities.
-
To plant, cultivate, care for, or cut trees or to prepare (other than sawing logs into lumber, chipping, or other milling)
trees for market,
but only if the planting, etc., is incidental to your farming operations. Your tree operations will be incidental only if
they are minor in nature
when compared to the total farming operations.
If any other person, such as a neighbor or custom operator, performs a service for you on your farm for any of the
purposes listed in (1) or (2),
you are considered to be the ultimate purchaser that used the fuel on a farm for farming purposes. However, see Custom application of fertilizer
and pesticide, next.
If doubt exists whether the owner, the tenant, or the operator of the farm bought the fuel, determine who bore the
cost of the fuel. For example,
if the owner of a farm and the tenant equally share the cost of gasoline that is used on a farm for farming purposes, each
can claim a credit for the
tax on one-half the fuel used.
Custom application of fertilizer and pesticide.
The use of fuel in the aerial or other application of fertilizer, pesticides, or other substances is a use of fuel
on a farm for farming purposes.
In the case of gasoline, you, as the owner, tenant, or operator, may waive your right to be treated as the ultimate purchaser.
If you waive your
right, the applicator is treated as having used the gasoline on a farm for farming purposes. See Chapter 14 of Pub. 225, Farmer's
Tax Guide, for a
sample waiver.
To waive your right to be treated as the ultimate purchaser, you must take all the following actions.
-
Before the applicator files his or her claim, execute in writing an irrevocable agreement stating that you knowingly give
up your right to
the credit or refund. You may authorize an agent, such as a cooperative, to sign the waiver for you.
-
Identify clearly the period the waiver covers.
The applicator must retain a copy of the waiver and give you a copy. Do not send a copy to the Internal Revenue Service unless requested
to do so.
The waiver may be a separate document or it may appear on an invoice or another document from the applicator. If the
waiver appears on an invoice
or other document, it must be printed in a section clearly set off from all other material, and it must be printed in type
sufficiently large to put
you on notice that you are waiving your right to the credit or refund. If the waiver appears as part of an invoice or other
document, it must be
signed separately from any other item that requires your signature.
The effective period of the waiver cannot extend beyond your tax year. When the period covered by the waiver extends
beyond the applicator's tax
year, the applicator can only claim a credit or refund for fuel used in the part of the waiver period included in the applicator's
tax year. The
applicator must wait until the next tax year to file a claim for fuel used in the rest of the waiver period.
Fuel not used for farming.
Fuel is not used on a farm for farming purposes if it is used in any of the following ways.
-
Off the farm, such as on the highway or in noncommercial aviation, even if the fuel is used in transporting livestock, feed,
crops, or
equipment.
-
For personal use, such as mowing the lawn.
-
In processing, packaging, freezing, or canning operations.
-
In processing crude gum into gum spirits of turpentine or gum resin or in processing maple sap into maple syrup or maple sugar.
Off-Highway Business Use (No. 2)
Off-highway business use means fuel used in a trade or business or in an income-producing activity other than as a fuel in
a highway vehicle
registered or required to be registered for use on public highways. The terms , “highway vehicle”, “public highway”, and “registered”
are defined below. Do not consider any use in a boat as an off-highway business use.
Off-highway business use includes fuels used in any of the following ways.
-
In stationary machines such as generators, compressors, power saws, and similar equipment.
-
For cleaning purposes.
-
In forklift trucks, bulldozers, and earthmovers.
-
For transmix (diesel fuel), the refining of tax paid transmix into gasoline, diesel fuel, or kerosene.
Generally, this use does not include nonbusiness use of fuel, such as use by minibikes, snowmobiles, power lawn mowers, chain
saws, and other yard
equipment.
Example.
Caroline owns a landscaping business. She uses power lawn mowers and chain saws in her business. The gasoline used in the
power lawn mowers and
chain saws qualifies as fuel used in an off-highway business use. The gasoline used in her personal lawn mower at home does
not qualify.
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. Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses,
and highway-type trucks
and truck tractors. A vehicle is a highway vehicle even though the vehicle's design allows it to perform a highway transportation
function for only
one of the following.
-
A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer).
-
A special kind of cargo, goods, supplies, or materials.
-
Some off-highway task unrelated to highway transportation, except as discussed next.
Vehicles not considered highway vehicles.
Generally, the following kinds of vehicles are not considered highway vehicles for purposes of the credit or refund
of fuel taxes.
-
Specially designed mobile machinery for nontransportation functions. A self-propelled vehicle is not a highway vehicle if all the
following apply.
-
The chassis has permanently mounted to it machinery or equipment used to perform certain operations (construction, manufacturing,
drilling,
mining, timbering, processing, farming, or similar operations) if the operation of the machinery or equipment is unrelated
to transportation on or off
the public highways.
-
The chassis has been specially designed to serve only as a mobile carriage and mount for the machinery or equipment, whether
or not the
machinery or equipment is in operation.
-
The chassis could not, because of its special design and without substantial structural modification, be used as part of a
vehicle designed
to carry any other load.
-
The vehicle must have traveled less than 7,500 miles on public highways during the owner's taxable year.
-
Vehicles specially designed for off-highway transportation. A vehicle is not treated as a highway vehicle if the vehicle is
specially designed for the primary function of transporting a particular type of load other than over the public highway and
because of this special
design, the vehicles's capability to transport a load over a public highway is substantially limited or impaired.
To make this determination, you can take into account the vehicle's size, whether the vehicle is subject to licensing, safety,
or other
requirements, and whether the vehicle can transport a load at a sustained speed of at least 25 miles per hour. It does not
matter that the vehicle can
carry heavier loads off highway than it is allowed to carry over the highway.
-
Nontransportation trailers and semitrailers. A trailer or semi-trailer is not treated as a highway vehicle if it is specially
designed to function only as an enclosed stationary shelter for carrying on a nontransportation function at an off-highway
site. For example, a
trailer that is capable only of functioning as an office for an off-highway construction operation is not a highway vehicle.
Public highway.
A public highway includes any road in the United States that is not a private roadway. This includes federal, state,
county, and city roads and
streets.
Registered.
A vehicle is considered registered when it is registered or required to be registered for highway use under the law
of any state, the District of
Columbia, or any foreign country in which it is operated or situated. Any highway vehicle operated under a dealer's tag, license,
or permit is
considered registered. A highway vehicle is not considered registered solely because a special permit allows the vehicle to
be operated at particular
times and under specified conditions.
Dual use of propulsion motor.
Off-highway business use does not include any fuel used in the propulsion motor of a registered highway vehicle even
though that motor also
operates special equipment by means of a power take-off or power transfer. It does not matter if the special equipment is
mounted on the vehicle.
Example.
The motor of a registered concrete-mixer truck operates both the engine and the mixing unit by means of a power take-off.
The fuel used in the
motor to run the mixer is not off-highway business use.
Use in separate motor.
Off-highway business use includes fuel used in a separate motor to operate special equipment, such as a refrigeration
unit, pump, generator, or
mixing unit. If you draw fuel from the same tank that supplies fuel to the propulsion motor, you must figure the quantity
used in the separate motor
operating the special equipment. You may make a reasonable estimate based on your operating experience and supported by your
records.
You can use devices that measure the miles the vehicle has traveled (such as hubometers) to figure the gallons of
fuel used to propel the vehicle.
Add to this amount the fuel consumed while idling or warming up the motor before propelling the vehicle. The difference between
your total fuel used
and the fuel used to propel the vehicle is the fuel used in the separate motor.
Example.
Hazel owns a refrigerated truck. It has a separate motor for the refrigeration unit. The same tank supplies both motors. Using
the truck's
hubometer, Hazel figures that 90% of the fuel was used to propel the truck. Therefore, 10% of the fuel is used in an off-highway
business use.
Fuel lost or destroyed.
You cannot treat fuel lost or destroyed through spillage, fire, or other casualty as fuel used in an off-highway business
use.
Export means fuel removed from the United States with the intention that the fuel remain in a foreign country or possession
of the United States.
Fuel is not exported if it is in the fuel supply tank of a vehicle or aircraft.
In a Boat Engaged in Commercial Fishing (No. 4)
In a boat engaged in commercial fishing means fuel used in taking, catching, processing, or transporting fish, shellfish,
or other aquatic life for
commercial purposes, such as selling or processing the catch, on a specific trip basis. They include boats used in both fresh
and salt water fishing.
They do not include boats used for both sport fishing and commercial fishing on the same trip.
In Certain Intercity and Local Buses (No. 5)
In certain intercity and local buses means fuel used in 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.
-
Scheduled transportation along regular routes.
-
Nonscheduled operations if the seating capacity of the bus is at least 20 adults, not including the driver. Vans and similar
vehicles used
for van-pooling or taxi service do not qualify.
Available to the general public.
This means you offer service to more than a limited number of persons or organizations. If a bus operator normally
provides charter operations
through travel agencies but has buses available for chartering by the general public, this service is available to the general
public. A bus does not
qualify when its operator uses it to provide exclusive services to only one person, group, or organization. Also, intercity
bus transportation does
not include transporting students and employees of schools or intercity transportation in a qualified local bus.
For Diesel Fuel or Kerosene in a Qualified Local Bus (No. 6)
In a qualified local bus means fuel used in a bus meeting all the following requirements.
-
It is engaged in furnishing (for compensation) intracity passenger land transportation available to the general public.
-
It operates along scheduled, regular routes.
-
It has a seating capacity of at least 20 adults (excluding the driver).
-
It is under contract with (or is receiving more than a nominal subsidy from) any state or local government to furnish the
transportation.
Intracity passenger land transportation.
This is the 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.
Under contract.
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.
More than a nominal subsidy.
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.
In a school bus means fuel used in a bus engaged in the transportation of students or 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.
For Diesel Fuel and Kerosene (Other Than Aviation-Grade Kerosene) Used Other Than as a Fuel (No. 8)
Diesel fuel and kerosene (other than aviation grade kerosene) used other than as a fuel in the propulsion engine of a diesel-powered
highway
vehicle or diesel-powered train (not including off-highway business use), means undyed diesel fuel and undyed kerosene used
in the following ways:
-
For home heating, lighting, and cooking.
-
In boats.
-
For any of the following nonbusiness uses.
-
In stationary machines, such as generators and compressors.
-
For cleaning purposes.
-
In minibikes and snowmobiles.
In foreign trade means fuel used in civil aircraft employed in foreign trade or trade between the United States and any of
its possessions. In the
case of aircraft registered in a foreign country, the country must allow reciprocal benefits for aircraft registered in the
United States.
Certain Helicopter and Fixed-Wing Air Ambulance Uses (No. 10)
Certain helicopter uses.
Certain helicopter uses means fuel used by a helicopter for any of the following purposes.
-
Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals,
oil, or
gas.
-
Planting, cultivating, cutting, transporting, or caring for trees (including logging operations).
-
Providing emergency medical services.
During a use described in items (1) and (2), the helicopter must 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. For item (1), treat each flight segment as a separate flight.
Fixed-wing air ambulance uses.
Fixed-wing air ambulance uses means fuel used by a fixed-wing aircraft providing emergency medical services. The aircraft
must be equipped for and
exclusively dedicated on that flight to acute care emergency medical services.
For Aviation-Grade Kerosene Used Other Than as a Fuel in the Propulsion Engine of an Aircraft (No. 11)
Aviation-grade kerosene used other than as a fuel in the propulsion engine of an aircraft means aviation-grade kerosene used
in the following ways.
In a Highway Vehicle Owned by the United States That is Not Used on a Highway (No. 12)
In a highway vehicle owned by the United States that is not used on a highway means fuel used in a vehicle was not used on
public highways during
the period covered by the claim. This use applies whether or not the vehicle is registered or required to be registered for
highway use.
Exclusive Use by a Nonprofit Educational Organization (No. 13)
Exclusive use by a nonprofit educational organization means fuel used by an organization exempt from income tax under section
501(a) of the
Internal Revenue Code that meets both of the following requirements.
A nonprofit educational organization also includes a school operated by a church or other organization described in section
501(c)(3) of the
Internal Revenue Code if the school meets the above requirements.
Exclusive Use by a State, Political Subdivision of a State, or the District of Columbia (No. 14)
Exclusive use by a state, political subdivision of a state, or the District of Columbia means fuel purchased by the state
or local government for
its exclusive use. A state or local government is any state, any political subdivision thereof, or the District of Columbia.
An Indian tribal
government is treated as a state only if the fuel is used in an activity that involves the exercise of an essential tribal government
function.
Gasoline, diesel fuel, and kerosene used by the American Red Cross is considered to be the use of these fuels by a state.
In an Aircraft or Vehicle Owned by an Aircraft Museum (No. 15)
In an aircraft or vehicle owned by an aircraft museum means fuel used in an aircraft or vehicle that is owned by an organization
that meets all the
following requirements.
-
It is exempt from income tax as an organization described in section 501(c)(3) of the Code.
-
It is operated as a museum under a state (or District of Columbia) charter.
-
It is operated exclusively for acquiring, exhibiting, and caring for aircraft of the type used for combat or transport in
World War II.
The aircraft or vehicle (such as a ground servicing vehicle for aircraft) must be used exclusively for the purposes described
in item (3).
In Military Aircraft (No. 16)
In a military aircraft means fuel used in an aircraft owned by the United States or any foreign nation and constituting a
part of its armed forces.
For Use in the Production of Special Fuels (No. 17)
For use in the production of special fuels means used to produce any liquid fuel (including LPG or liquefied natural gas)
that is not gas oil, fuel
oil, or a product taxable under section 4081.
In Commercial Aviation (Other Than Foreign Trade)
In commercial aviation (other than foreign trade) means fuel used in an aircraft in the business of transporting persons or
property by air for
compensation or hire. However, commercial aviation does not include any of the following.
-
Any use of an aircraft that has a maximum certificated takeoff weight of 6,000 pounds or less unless the aircraft is operated
on an
established line.
-
Any use exclusively for the purpose of skydiving.
-
Any use of an aircraft owned or leased by a member of an affiliated group and unavailable for hire by nonmembers of the group.
The
determination of whether an aircraft is available for hire by nonmembers is made on a flight-by-flight basis.
Use in a train means fuel used in the propulsion engine of equipment or machinery that rides on rails. This includes use in
a locomotive, work
train, switching engine, and track maintenance machine.
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