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Internal
Revenue
Service
Publication 510
(Rev. July 2021)
Contents
Cat. No. 15014I
What's New
Excise Taxes
Reminders . . . . . . . . . . . . . . . . . . . 2
(Including Fuel Tax
Credits and Refunds)
Excise Taxes Not Covered . . . . . . . . . 3
Section references are to the Internal Revenue Code unless otherwise
noted.
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Introduction . . . . . . . . . . . . . . . . . . 2
Chapter 1. Fuel Taxes . . . . . . .
Definitions . . . . . . . . . . . . .
Information Returns . . . . . . .
Registration Requirements . . .
Gasoline and Aviation Gasoline
Diesel Fuel and Kerosene . . . .
Diesel-Water Fuel Emulsion . . .
Kerosene for Use in Aviation . .
Surtax on Any Liquid Used in a
Fractional Ownership
Program Aircraft as Fuel . . .
Certificate for Commercial
Aviation and Exempt Uses .
Other Fuels (Including
Alternative Fuels) . . . . . . .
Compressed Natural Gas (CNG)
Fuels Used on Inland Waterways
Second Generation Biofuel Not
Used as Fuel . . . . . . . . .
Biodiesel Sold as But Not Used
as Fuel . . . . . . . . . . . . .
Chapter 2. Fuel Tax Credits
and Refunds . . . . . . . . . .
Gasoline and Aviation Gasoline
Undyed Diesel Fuel and
Undyed Kerosene (Other
Than Kerosene Used in
Aviation) . . . . . . . . . . .
Diesel-Water Fuel Emulsion . .
Kerosene for Use in Aviation .
Other Fuels (Including
Alternative Fuels) . . . . . .
Refunds of Second Tax . . . .
Definitions of Nontaxable Uses
Filing Claims . . . . . . . . . .
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Chapter 3. Environmental Taxes . . . . 23
Oil Spill Liability Tax . . . . . . . . . . 23
Ozone-Depleting Chemicals
(ODCs) . . . . . . . . . . . . . . . 23
Chapter 4. Communications and
Air Transportation Taxes . .
Uncollected Tax Report . . . .
Communications Tax . . . . .
Air Transportation Taxes . . .
Get forms and other information faster and easier at:
• IRS.gov (English)
• IRS.gov/Spanish (Español)
• IRS.gov/Chinese (中文)
Jul 21, 2021
• IRS.gov/Korean (한국어)
• IRS.gov/Russian (Pусский)
• IRS.gov/Vietnamese (Tiếng Việt)
Chapter 5. Manufacturers Taxes
Taxable Event . . . . . . . . .
Exemptions . . . . . . . . . . .
Sport Fishing Equipment . . .
Bows, Quivers, Broadheads,
and Points . . . . . . . . . .
Arrow Shafts . . . . . . . . . .
Coal . . . . . . . . . . . . . . .
Taxable Tires . . . . . . . . . .
Gas Guzzler Tax . . . . . . . .
Vaccines . . . . . . . . . . . .
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Chapter 6. Retail Tax on Heavy
Trucks, Trailers, and Tractors . . . 33
Chapter 7. Ship Passenger Tax . . . . . 36
Chapter 8. Foreign
Insurance Taxes
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Chapter 9. Obligations Not in
Registered Form . . . . . . . . . . . 37
Chapter 10. Indoor Tanning
Services Tax . . . . . . . . . . . . . . 37
Chapter 11. Patient-Centered
Outcomes Research Fee . . . . . . 38
Chapter 12. Filing Form 720 . . . . . . . 39
Chapter 13. Payment of Taxes
How To Make Deposits . . .
When To Make Deposits . .
Amount of Deposits . . . . .
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Chapter 14. Penalties and Interest . . . 40
Chapter 15. Examination and
Appeal Procedures . . . . . . . . . . 41
Chapter 16. Rulings Program . . . . . . 41
Chapter 17. How To Get Tax Help . . . 41
Chapter 18. Appendix
Index
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What's New
Notes. References to “credit” below are for
credits or any applicable allowable payments.
Don’t claim the credits or payments for fuel sold
or used after the year they expire unless they’re
extended again.
Section 6426 credits and section 6427 payments extensions:
• Biodiesel or renewable diesel mixtures. The biodiesel or renewable diesel
mixture credit is retroactively extended for
fuel sold or used in 2018 through 2022.
• Alternative fuel. The alternative fuel credit
is retroactively extended for fuel sold or
used in 2018 through 2021.
Alternative fuel mixtures. The section 6426
credits and section 6427 payments for alternative fuel mixtures are retroactively extended for
fuels sold or used in 2018 through 2021.
For claims made on or after January 8,
2018, “alternative fuel mixture” means
CAUTION a mixture of taxable fuel and alternative
fuel other than liquefied petroleum gas (LPG),
compressed natural gas (CNG), liquefied natural gas (LNG), liquefied gas derived from biomass, and compressed gas derived from biomass. To make a claim for the alternative fuel
mixture credit for 2018 or 2019, you must file
Form 720-X, Amended Quarterly Federal Excise Tax Return.
!
Page 2
Retroactive extension of income tax credits:
• Section 40A biodiesel and renewable
diesel fuels credit. The section 40A biodiesel and renewable diesel fuels credit is
retroactively extended for fuel sold or used
in calendar years 2018 through 2022.
• Section 40 biofuel producer credit. The
section 40 biofuel producer credit is retroactively extended for fuel sold or used in
calendar years 2018 through 2021.
Extension of oil spill liability tax. The section 4611 tax on crude oil received (domestic
petroleum oil spill tax), or petroleum products
entered (imported petroleum oil spill tax), is extended through 2025.
Inflation adjustments for 2021. For information about inflation adjustments for 2021, such
as the inflation-adjusted section 4161 tax on arrow shafts, see Revenue Procedure 2020-45, at
IRS.gov//RP2020-45.
Future Developments
The IRS has created a page on IRS.gov that
includes information about Pub. 510, at
IRS.gov/Pub510. Information about any future
developments will be posted on that page.
Reminders
Pub. 510 updates. Pub. 510 isn't updated annually. Instead, it will be updated only when
there are major changes in the tax law.
Reducing your excise tax liability. For federal income tax purposes, reduce your section
4081 excise tax liability by the amount of excise
tax credit allowable under section 6426(c) or (e)
and your section 4041 excise tax liability by the
amount of your excise tax credit allowable under section 6426(d), in determining your deduction for those excise taxes or your cost of goods
sold deduction attributable to those excise
taxes.
Butane mixture doesn’t qualify for a credit.
A mixture of butane (or other gasoline blendstock) and gasoline is a mixture of two taxable
fuels. Therefore, it isn’t an alternative fuel mixture and doesn’t qualify for the section 6426 alternative fuel mixture credit. See Revenue Ruling 2018-02 at IRS.gov/IRB#RR2018-02.
Aviation fuels for use in foreign trade. Aviation gasoline and kerosene for use in aviation
are exempt from the leaking underground storage tank (LUST) tax.
Disregarded entities and qualified subchapter S subsidiaries. Qualified subchapter S
subsidiaries (QSubs) and eligible single-owner
disregarded entities are treated as separate entities for excise tax and reporting purposes.
QSubs and eligible single-owner disregarded
entities must pay and report excise taxes (other
than IRS Nos. 31, 51, and 117), register for
most excise tax activities, and claim any refunds, credits, and payments under the entity's
employer identification number (EIN). These
actions can't take place under the owner's taxpayer identification number (TIN). Some QSubs
and disregarded entities may already have an
EIN. However, if you are unsure, please call the
IRS Business and Specialty Tax line at
800-829-4933.
Generally, QSubs and eligible single-owner
disregarded entities will continue to be treated
as disregarded entities for other federal tax purposes (other than employment taxes).
For more information on these regulations,
see Treasury Decision (T.D.) 9356, T.D. 9462,
and T.D. 9596. You can find T.D. 9356 on
page 675 of Internal Revenue Bulletin (I.R.B.)
2007-39, at
IRS.gov/Pub/IRB/2007-39_IRB#TD9356;
T.D. 9462 on page 504 of I.R.B. 2009-42, at
IRS.gov/Pub/IRB/2009-42_IRB#TD9462;
and T.D. 9596 on page 84 of I.R.B. 2012-30, at
IRS.gov/Pub/IRB/2012-30_IRB#TD9596.
Registration for certain activities. You are
required to be registered for certain excise tax
activities, such as blending of gasoline, diesel
fuel, or kerosene outside the bulk transfer/terminal system. See the instructions for Form 637
for the list of activities for which you must register. Also see Registration Requirements under
Fuel Taxes in chapter 1 for information on registration for activities related to fuel. Each business unit that has, or is required to have, a separate EIN must be registered.
To apply for registration, complete Form 637
and provide the information requested in its instructions. If your application is approved, you
will receive a Letter of Registration showing the
activities for which you are registered, the effective date of the registration, and your registration number. A copy of Form 637 isn't a Letter of
Registration.
Photographs of missing children. The Internal Revenue Service is a proud partner with the
National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this
publication on pages that would otherwise be
blank. You can help bring these children home
by looking at the photographs and calling
1-800-THE-LOST
(1-800-843-5678)
or
www.missingkids.com/home if you recognize a
child.
Introduction
This publication covers the excise taxes for
which you may be liable and which are reported
on Form 720 and other forms. It also covers fuel
tax credits and refunds. For information on fuel
credits against income tax see the instructions
for Form 4136, Credit for Federal Tax Paid on
Fuels, Form 6478, Biofuel Producer Credit, and
Form 8864, Biodiesel and Renewable Diesel
Fuels Credit.
Comments and suggestions. We welcome
your comments about this publication and your
suggestions for future editions.
You can send us comments from IRS.gov/
FormsPubs. Click on “More Information,” then
on “Give Us Feedback.”
Or you can write to:
Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
Publication 510 (July 2021)
Although we can't respond individually to
each comment received, we do appreciate your
feedback and will consider your comments as
we revise our tax products.
Useful Items
You may want to see:
Publication
509 Tax Calendars
509
Form (and Instructions)
11-C Occupational Tax and Registration
Return for Wagering
11-C
637 Application for Registration (For
Certain Excise Tax Activities)
637
720 Quarterly Federal Excise Tax Return
720
720-X Amended Quarterly Federal Excise
Tax Return
720-X
730 Monthly Tax Return for Wagers
730
1363 Export Exemption Certificate
1363
2290 Heavy Highway Vehicle Use Tax
Return
2290
2290(SP) Declaración del Impuesto
sobre el Uso de Vehículos Pesados
en las Carreteras
2290(SP)
4136 Credit for Federal Tax Paid on Fuels
4136
6197 Gas Guzzler Tax
6197
6478 Biofuel Producer Credit
6478
6627 Environmental Taxes
6627
8849 Claim for Refund of Excise Taxes,
and Schedules 1–3, 5, 6, and 8
See How To Get Tax Help in chapter 17 for
information about ordering forms and publications.
For tax forms relating to alcohol, firearms,
and tobacco, visit the Alcohol and Tobacco Tax
and Trade Bureau website at www.ttb.gov.
Guidance
• Notice 2005-4 (fuel tax) on page 289 of
I.R.B. 2005-2, at IRS.gov/Pub/IRB/
IRB2005-2#NOT2005-4
• Notice 2005-62 (biodiesel and aviation-grade kerosene) on page 443 of I.R.B.
2005-35, at IRS.gov/Pub/IRB/
IRB2005-35#NOT2005-62.
• Notice 2005-80 (LUST, kerosene, credit
card issuers, mechanical dye injection) on
page 953 of I.R.B. 2005-46, at
IRS.gov/PUB/IRB/
IRB2005-46#NOT2005-80.
• Notice 2006-92 (alternative fuels mixtures)
on page 774 of I.R.B. 2006-43, at
IRS.gov/PUB/IRB/
IRB2006-43#NOT2006-92.
• Notice 2008-110 (biodiesel, cellulosic biofuel) on page 1298 of I.R.B. 2008-51, at
IRS.gov/PUB/IRB/
IRB2008-51#NOT2008-110
• Notice 2010-68 (Alaska dyed diesel exemption) on page 576 of I.R.B. 2010-44, at
IRS.gov/PUB/IRB/
IRB2010-44#NOT2010-68.
• Notice 2012-27 (fractional aircraft fuel surtax) on page 849 of I.R.B. 2012-17, at
IRS.gov/PUB/IRB/
IRB2012-17#NOT2012-27.
• Revenue Ruling 2016-03 (foreign reinsurance), 2016-3 I.R.B. 282, at IRS.gov/PUB/
IRS-Drop#RR2016-02
• T.D. 9621 (indoor tanning) on page 49 of
I.R.B. 2013-28, at IRS.gov/PUB/IRB/
IRB2013-28#TD9621.
• Rev. Proc. 2020-45 (inflation adjustments),
at IRS.gov//RP2020-45
• Revenue Ruling 2018-02 (butane mixture),
at IRS.govIRB#RR2018.02.
Heavy highway vehicle use tax. You report
the federal excise tax on the use of certain
trucks, truck tractors, and buses used on public
highways on Form 2290, Heavy Highway Vehicle Use Tax Return. The tax applies to highway
motor vehicles with a taxable gross weight of
55,000 pounds or more. Vans, pickup trucks,
panel trucks, and similar trucks generally aren’t
subject to this tax.
Note.
A Spanish version (Formulario
2290(SP)) is also available.
Registration of vehicles. Generally, you must
prove that you paid your heavy highway vehicle
use tax to register your taxable vehicle with your
state motor vehicle department or to enter the
United States in a Canadian or Mexican registered taxable vehicle. Generally, a copy of
Schedule 1 (Form 2290) is stamped by the IRS
and returned to you as proof of payment.
If you have questions on Form 2290,
TIP see its separate instructions, or you
can call the Form 2290 call site at
1-866-699-4096 (toll free) from the United
States, and 1-859-669-5733 (not toll free) from
Canada and Mexico. The hours of service are
8:00 a.m. to 6:00 p.m. Eastern time.
Wagering tax and occupational tax. The information on wagering tax can be found in the
instructions for Form 730, Tax on Wagering,
and Form 11-C, Occupational Tax and Registration Return for Wagering.
8849
8864 Biodiesel and Renewable Diesel
Fuels Credit
8864
Information Returns
• Form 720-TO, Terminal Operator Report
• Form 720-CS, Carrier Summary Report
Publication 510 (July 2021)
Excise Taxes
Not Covered
In addition to the taxes discussed in this publication, you may have to report certain other excise taxes.
Page 3
Part One.
Fuel Taxes and
Fuel Tax Credits
and Refunds
Chapter 1 defines the types of fuel, taxable events, and exemptions or
exceptions to the fuel taxes. Chapter 2 provides information on, and
definitions of, the nontaxable uses and explains how to make a claim.
1.
This doesn't 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
hasn’t been imposed.
Fuel Taxes
Blender. This is the person that produces
blended taxable fuel.
Bulk transfer. This is the transfer of taxable
fuel by pipeline or vessel.
Definitions
Excise taxes are imposed on all the following
fuels.
• Gasoline, including aviation gasoline and
gasoline blendstocks.
• Diesel fuel, including dyed diesel fuel.
• Diesel-water fuel emulsion.
• Kerosene, including dyed kerosene and
kerosene used in aviation.
• Other Fuels (including alternative fuels).
• Compressed natural gas (CNG).
• Fuels used in commercial transportation
on inland waterways.
• Any liquid used in a fractional ownership
program aircraft as fuel.
The following terms are used throughout the
discussion of fuel taxes. Other terms are defined in the discussion of the specific fuels to
which they pertain.
Agri-biodiesel. Agri-biodiesel means biodiesel
derived solely from virgin oils, including esters
derived from virgin vegetable oils from corn,
soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds,
rice bran, mustard seeds, and camelina, and
from animal fats.
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. Biodiesel means the monoalkyl esters of long chain fatty acids derived from plant
or animal matter that meet the registration requirements for fuels and fuel additives established by the Environmental Protection Agency
(EPA) under section 211 of the Clean Air Act,
and the requirements of the American Society
of Testing Materials (ASTM) D6751.
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 hasn’t been imposed.
Page 4
Chapter 1
Fuel Taxes
Bulk transfer/terminal system. This is the
taxable 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 isn't in the
bulk transfer/terminal system.
Diesel-water fuel emulsion. A diesel-water
fuel emulsion means an emulsion at least 14%
of which is water. The emulsion additive used to
produce the fuel must be registered by a United
States manufacturer with the EPA under section
211 of the Clean Air Act as in effect on March
31, 2003.
Dry lease aircraft exchange. See later, under
Surtax on any liquid used in a fractional ownership program aircraft as fuel.
Enterer. This is the importer of record (under
customs law) for the taxable fuel. However, if
the importer of record is acting as an agent,
such as a customs broker, 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. Taxable fuel is entered into the United
States when it's brought into the United States
and applicable customs law requires that it be
entered for consumption, use, or warehousing.
This doesn't 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.
Fractional ownership aircraft program and
fractional program aircraft. See later, under
Surtax on any liquid used in a fractional ownership program aircraft as fuel.
Measurement of taxable fuel. Volumes of
taxable fuel can be measured on the basis of
actual volumetric gallons or gallons adjusted to
60 degrees Fahrenheit.
Other fuels. See Other Fuels (Including Alternative Fuels), later, and Alternative Fuel Credit
and Alternative Fuel Mixture Credit in chapter 2.
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 taxable 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 taxable
fuel. A terminal operator that owns taxable 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 taxable fuel and from which taxable fuel may be removed by pipeline, by vessel, or at a rack. However, this term doesn't include a facility where
only blended fuel, 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, later).
Removal. This is any physical transfer of taxable fuel. It also means any use of taxable fuel
other than as a material in the production of taxable fuel or Other Fuels. However, taxable fuel
isn't removed when it evaporates or is otherwise lost or destroyed.
Renewable diesel. See Renewable Diesel
Credits in chapter 2.
Sale. For taxable fuel not in a terminal, this is
the transfer of title to, or substantial incidents of
ownership in, taxable fuel to the buyer for
money, services, or other property. For taxable
fuel in a terminal, this is the transfer of the inventory position if the transferee becomes the
position holder for that taxable fuel.
Second generation biofuel. This is any liquid
fuel derived by, or from, qualified feedstocks,
and meets the registration requirements for
fuels and fuel additives established by the EPA
under section 211 of the Clean Air Act (42
U.S.C. 7545). It also includes certain liquid fuel
which is derived by, or from, any cultivated algae, cyanobacteria, or lemna. It isn't alcohol of
less than 150 proof (disregard any added denaturants). See Form 6478 for more information.
State. This includes any state, any of its political subdivisions, the District of Columbia, and
the American Red Cross. An Indian tribal government is treated as a state only if transactions
involve the exercise of an essential tribal government function.
Taxable fuel. This means gasoline, diesel fuel,
and kerosene.
Terminal. This is a storage and distribution facility supplied by pipeline or vessel, and from
which taxable fuel may be removed at a rack. It
doesn't 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
doesn't include any facility where finished gasoline, diesel fuel, or kerosene is stored if the facility is operated by a registrant and all such taxable 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 taxable 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 doesn't include a
deep-draft ocean-going vessel.
Information Returns
Form 720-TO and Form 720-CS are information
returns used to report monthly receipts and disbursements of liquid products. 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.
The returns are due the last day of the
month following the month in which the transaction occurs. Generally, these returns can be
filed on paper or electronically. For information
on filing electronically, see Publication 3536,
Motor Fuel Excise Tax EDI Guide. Publication
3536 is only available on the IRS website.
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.
Registration
Requirements
The following discussion applies to excise tax
registration requirements for activities relating
to fuels only. See Form 637 for other persons
who must register and for more information
about registration.
Persons that are required to be registered.
You are required to be registered if you are a:
• Blender;
• Enterer;
• Pipeline operator;
• Position holder;
• Refiner;
• Terminal operator;
• Vessel operator;
• Producer or importer of alcohol, biodiesel,
agri-biodiesel, and renewable diesel; or
• Producer of cellulosic or second generation biofuel.
Persons that may register. You may, but
aren’t required to, register if you are a:
• Feedstock user,
• Industrial user,
• Throughputter that isn't a position holder,
• Ultimate vendor,
• Diesel-water fuel emulsion producer,
• Credit card issuer, or
• Alternative fuel claimant.
Ultimate vendors, credit card issuers, and alternative fuel claimants don’t need to be registered
to buy or sell fuel. However, they must be registered to file claims for certain sales and uses of
fuel. See Form 637 for more information.
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 hasn’t been revoked or suspended. 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.
Failure to register. The penalty for failure to
register if you must register, unless due to reasonable cause, is $10,000 for the initial failure,
and then $1,000 each day thereafter you fail to
register.
Gasoline and Aviation
Gasoline
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% of the blend consists of alcohol
produced from coal, including peat),
• Partially exempt ethanol and methanol fuel
(at least 85% of the blend consists of alcohol produced from natural gas), or
• Denatured alcohol.
Gasoline also includes gasoline blendstocks,
discussed later.
Aviation gasoline. This means all special
grades of gasoline suitable for use in aviation
reciprocating engines and covered by ASTM
specification D910 or military specification
MIL-G-5572.
Taxable Events
The tax on gasoline is $.184 per gallon. The tax
on aviation gasoline is $.194 per gallon. When
used in a fractional ownership program aircraft,
gasoline also is subject to a surtax of $.141 per
gallon. See Surtax on any liquid used in a fractional ownership program aircraft as fuel, later.
Tax is imposed on the removal, entry, or
sale of gasoline. Each of these events is discussed later. Also, see the special rules that apply to gasoline blendstocks, later.
If the tax is paid on the gasoline in more than
one event, a refund may be allowed for the
“second” tax paid. See Refunds of Second Tax
in chapter 2.
Removal from terminal. All removals of gasoline at a terminal rack are taxable. The position
holder for that gasoline is liable for the tax.
Two-party exchanges. In a two-party exchange, the receiving person, not the delivering
person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the
terminal rack. A two-party exchange means a
transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply.
• The transaction includes a transfer from
the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator.
• The exchange transaction occurs before or
at the same time as removal across the
rack by the receiving person.
• The terminal operator in its records treats
the receiving person as the person that removes the product across the terminal
rack for purposes of reporting the transaction on Form 720-TO.
• The transaction is subject to a written contract.
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 isn't a registrant.
However, a terminal operator meeting all the
following conditions at the time of the removal
won’t be liable for the tax.
• The terminal operator is a registrant.
Chapter 1
Fuel Taxes
Page 5
• The terminal operator has an unexpired
notification certificate (discussed later)
from the position holder.
• The terminal operator has no reason to believe any information on the certificate is
false.
Removal from refinery. The removal of gasoline from a refinery is taxable if the removal
meets either of the following conditions.
• it's made by bulk transfer and the refiner,
the owner of the gasoline immediately before the removal, or the operator of the
pipeline or vessel isn't a registrant.
• it's made at the refinery rack.
The refiner is liable for the tax.
Exception. The tax doesn't apply to a removal of gasoline at the refinery rack if all the
following requirements are met.
• The gasoline is removed from an approved
refinery not served by pipeline (other than
for receiving crude oil) or vessel.
• The gasoline is received at a facility operated by a registrant and located within the
bulk transfer/terminal system.
• The removal from the refinery is by railcar.
• The same person operates the refinery
and the facility at which the gasoline is received.
Entry into the United States. The entry of
gasoline into the United States is taxable if the
entry meets either of the following conditions.
• it's made by bulk transfer and the enterer
or the operator of the pipeline or vessel
isn't a registrant.
• it'sn't made by bulk transfer.
The enterer is liable for the tax.
Importer of record's liability. The importer of record is jointly and severally liable for
the tax with the enterer if the importer of record
isn't the enterer of the taxable fuel and the enterer isn't a taxable fuel registrant.
However, an importer of record meeting
both of the following conditions at the time of
the entry won’t be liable for the tax.
• The importer of record has an unexpired
notification certificate (discussed later)
from the enterer.
• The importer of record has no reason to
believe any information in the certificate is
false.
Customs bond. The customs bond won’t
be charged for the tax imposed on the entry of
the gasoline if at the time of entry the surety has
an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false.
Removal from a terminal by unregistered
position holder or unregistered pipeline or
vessel operator. The removal by bulk transfer
of gasoline from a terminal is taxable if the position holder for the gasoline or the operator of
the pipeline or vessel isn't 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.
Page 6
Chapter 1
Fuel Taxes
Bulk transfers not received at approved terminal or refinery. Tax is imposed if:
1. Gasoline is removed by bulk transfer from
a terminal or refinery, or entered by bulk
transfer into the United States.
2. No tax was previously imposed (as discussed earlier).
3. Upon removal from the pipeline or vessel,
the gasoline isn't received at an approved
terminal or refinery (or at another pipeline
or vessel).
The owner of the gasoline when it's 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
won’t be liable for the tax.
• The owner is a registrant.
• The owner has an unexpired notification
certificate (discussed later) from the operator of the terminal or refinery where the
gasoline is received.
• The owner has no reason to believe any information on the certificate is false.
The operator of the facility where the gasoline is
received is liable for the tax if the owner meets
these conditions. The operator is jointly and
severally liable if the owner doesn't meet these
conditions.
Sales to unregistered person. The sale of
gasoline located within the bulk transfer/terminal system to a person that isn't a registrant is
taxable if tax wasn't 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 won’t be liable for the tax.
• The seller is a registrant.
• The seller has an unexpired notification
certificate (discussed later) from the buyer.
• The seller has no reason to believe any information on the certificate is false.
The buyer of the gasoline is liable for the tax if
the seller meets these conditions. The buyer is
jointly and severally liable if the seller doesn't
meet these conditions.
Exception. The tax doesn't apply to a sale
if all of the following apply.
• The buyer's principal place of business
isn't in the United States.
• The sale occurs as the fuel is delivered into
a transport vessel with a capacity of at
least 20,000 barrels of fuel.
• The seller is a registrant and the exporter
of record.
• The fuel was exported.
Removal or sale of blended gasoline. The
removal or sale of blended gasoline by the blender is taxable. See Blended taxable fuel under
Definitions, earlier.
The blender is liable for the tax. The tax is
figured on the number of gallons not previously
subject to the tax on gasoline.
Persons who blend alcohol with gasoline to
produce an alcohol fuel mixture outside the bulk
transfer/terminal system must pay the gasoline
tax on the volume of alcohol in the mixture. See
Form 720 to report this tax. You also must be
registered with the IRS as a blender. See Form
637.
However, if an untaxed liquid is sold as
taxed taxable fuel and that untaxed liquid is
used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and
severally liable for the tax imposed on the
blender's sale or removal of the blended taxable fuel.
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 can't be used as a
notification certificate. A model notification certificate is shown in the Appendix as Model Certificate C. A notification certificate must contain
all information necessary to complete the
model.
The certificate may be included as part of
any business records normally used for a sale.
A certificate expires on the earlier of the date
the registrant provides a new certificate, or the
date the recipient of the certificate is notified
that the registrant's registration has been revoked or suspended. The registrant must provide a new certificate if any information on a
certificate has changed.
Additional persons liable. When the person
liable for the tax willfully fails to pay the tax, joint
and several liability for the tax is imposed on:
• Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to
perform that duty, or
• Anyone who willfully causes the person to
fail to pay the tax.
Gasoline Blendstocks
!
CAUTION
Gasoline blendstocks may be subject
to $.001 per gallon LUST tax as discussed below.
Gasoline includes gasoline blendstocks. The
previous discussions apply to these blendstocks. However, if certain conditions are met,
the removal, entry, or sale of gasoline blendstocks are taxed at $.001 per gallon or aren’t
subject to the excise tax.
Blendstocks. Gasoline blendstocks are:
• Alkylate,
• Butane,
• Butene,
• Catalytically cracked gasoline,
• Coker gasoline,
• Ethyl tertiary butyl ether (ETBE),
• Hexane,
• Hydrocrackate,
• Isomerate,
• Methyl tertiary butyl ether (MTBE),
• Mixed xylene (not including any separated
isomer of xylene),
• Natural gasoline,
• Pentane,
• Pentane mixture,
• Polymer gasoline,
• Raffinate,
• Reformate,
• Straight-run gasoline,
• Straight-run naphtha,
• Tertiary amyl methyl ether (TAME),
• Tertiary butyl alcohol (gasoline grade)
(TBA),
• Thermally cracked gasoline,
• Toluene, and
• Transmix containing gasoline.
However, gasoline blendstocks don't include any product that can't 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 aren’t taxable (other than LUST)
if the following conditions are met.
Removals and entries not connected to
sale. Nonbulk removals and entries aren’t 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 aren’t taxable if
the person otherwise liable for the tax (position
holder, refiner, or enterer) is a registrant, and at
the time of the sale, meets the following requirements.
• The person has an unexpired certificate
(discussed later) from the buyer.
• The person has no reason to believe any
information in the certificate is false.
Sales after removal or entry. The sale of
a gasoline blendstock that wasn't subject to tax
on its nonbulk removal or entry, as discussed
earlier, is taxable. The seller is liable for the tax.
However, the sale isn't taxable if, at the time of
the sale, the seller meets the following requirements.
• The seller has an unexpired certificate
(discussed next) from the buyer.
• The seller has no reason to believe any information in the certificate is false.
Certificate of buyer. The certificate from the
buyer certifies the gasoline blendstocks won’t
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 the Appendix as Model Certificate D. The certificate must contain all information necessary to complete the model.
A certificate expires on the earliest of the following dates.
• The date 1 year after the effective date (not
earlier than the date signed) of the certificate.
• The date a new certificate is provided to
the seller.
• The date the seller is notified that the buyer's right to provide a certificate has been
withdrawn.
The buyer must provide a new certificate if any
information on a certificate has changed.
The IRS may withdraw the buyer's right to
provide a certificate if that buyer uses the gasoline blendstocks in the production of finished
gasoline or resells the blendstocks without getting a certificate from its buyer.
Received at approved terminal or refinery.
The nonbulk removal or entry of gasoline blendstocks received at an approved terminal or re-
finery isn't taxable if the person otherwise liable
for the tax (position holder, refiner, or enterer)
meets all the following requirements.
• The person is a registrant.
• The person has an unexpired notification
certificate (discussed earlier) from the operator of the terminal or refinery where the
gasoline blendstocks are received.
• The person has no reason to believe any
information on the certificate is false.
Bulk transfers to registered industrial user.
The removal of gasoline blendstocks from a
pipeline or vessel isn't taxable (other than
LUST) if the blendstocks are received by a registrant that is an industrial user. An industrial
user is any person that receives gasoline blendstocks by bulk transfer for its own use in the
manufacture of any product other than finished
gasoline.
Credits or refunds. A credit or refund of the
gasoline tax may be allowable if gasoline is
used for a nontaxable purpose or exempt use.
For more information, see chapter 2.
Diesel Fuel and
Kerosene
Generally, diesel fuel and kerosene are taxed in
the same manner as gasoline (discussed earlier). However, special rules (discussed later)
apply to dyed diesel fuel and dyed kerosene,
and to undyed diesel fuel and undyed kerosene
sold or used in Alaska for certain nontaxable
uses and undyed kerosene used for a feedstock purpose.
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,
and
• Transmix.
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 isn't the predominant use of the liquid. However, a liquid doesn't
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 doesn't include gasoline, kerosene,
excluded liquid, No. 5 and No. 6 fuel oils covered by ASTM specification D396, or F-76 (Fuel
Naval Distillate) covered by military specification MIL-F-16884.
An excluded liquid is either of the following.
1. A liquid that contains less than 4% normal
paraffins.
2. A liquid with all the following properties.
a. Distillation range of 125 degrees Fahrenheit or less.
b. Sulfur content of 10 ppm or less.
c. 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. This means any of the following liquids.
• One of the two grades of kerosene (No.
1-K and No. 2-K) covered by ASTM specification D3699.
• Kerosene-type jet fuel covered by ASTM
specification D1655 or military specification MIL-DTL-5624T (Grade JP-5) or
MIL-DTL-83133E (Grade JP-8). See Kerosene for Use in Aviation, later.
However, kerosene doesn't 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.
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. Specially designed mobile machinery for nontransportation
functions and vehicles specially designed for
off-highway transportation are generally not
considered diesel-powered highway vehicles.
For more information about these vehicles and
for information about vehicles not considered
highway vehicles, see Off-Highway Business
Use (No. 2) in chapter 2.
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.
Taxable Events
The tax on diesel fuel and kerosene is $.244
per gallon. it's imposed on the removal, entry, or
sale of diesel fuel and kerosene. Each of these
events is discussed later. Only the $.001 LUST
tax applies to dyed diesel fuel and dyed kerosene, discussed later.
If the tax is paid on the diesel fuel or kerosene in more than one event, a refund may be
allowed for the “second” tax paid. See Refunds
of Second Tax in chapter 2.
Use in certain intercity and local buses.
Dyed diesel fuel and dyed kerosene can't be
used in certain intercity and local buses. A claim
for $.17 per gallon may be made by the registered ultimate vendor (under certain conditions)
or the ultimate purchaser for undyed diesel fuel
or undyed kerosene sold for use in certain intercity or local buses. An intercity or local bus 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.
• Scheduled transportation along regular
routes regardless of the size of the bus.
• Nonscheduled transportation if the seating
capacity of the bus is at least 20 adults (not
including the driver).
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Fuel Taxes
Page 7
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.
located within the bulk transfer/terminal
system.
3. The removal from the refinery is by:
Removal from terminal. All removals of diesel
fuel and kerosene at a terminal rack are taxable. The position holder for that fuel is liable for
the tax.
a. Railcar and the same person operates
the refinery and the facility at which
the diesel fuel or kerosene is received, or
Two-party exchanges. In a two-party exchange, the receiving person, not the delivering
person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the
terminal rack. A two-party exchange means a
transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply.
• The transaction includes a transfer from
the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator.
• The exchange transaction occurs before or
at the same time as completion of removal
across the rack by the receiving person.
• The terminal operator in its records treats
the receiving person as the person that removes the product across the terminal
rack for purposes of reporting the transaction on Form 720-TO.
• The transaction is subject to a written contract.
b. For diesel fuel only, a trailer or semitrailer used exclusively to transport
the diesel fuel from a refinery (described in (1)) to a facility (described in
(2)) less than 20 miles from the refinery.
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 diesel fuel or 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 isn't a
registrant. However, a terminal operator won’t
be liable for the tax in this situation if, at the time
of the removal, the following conditions are met.
• The terminal operator is a registrant.
• The terminal operator has an unexpired
notification certificate (discussed under
Gasoline) from the position holder.
• The terminal operator has no reason to believe any information on the certificate is
false.
Removal from refinery. The removal of diesel
fuel or kerosene from a refinery is taxable if the
removal meets either of the following conditions.
• it's made by bulk transfer and the refiner,
the owner of the fuel immediately before
the removal, or the operator of the pipeline
or vessel isn't a registrant.
• it's made at the refinery rack.
The refiner is liable for the tax.
Exception. The tax doesn't apply to a removal of diesel fuel or kerosene at the refinery
rack if all the following conditions are met.
1. The diesel fuel or kerosene is removed
from an approved refinery not served by
pipeline (other than for receiving crude oil)
or vessel.
2. The diesel fuel or kerosene is received at
a facility operated by a registrant and
Page 8
Chapter 1
Fuel Taxes
Entry into the United States. The entry of
diesel fuel or kerosene into the United States is
taxable if the entry meets either of the following
conditions.
• it's made by bulk transfer and the enterer
or the operator of the pipeline or vessel
isn't a registrant.
• It isn't made by bulk transfer.
The enterer is liable for the tax.
Importer of record's liability. The importer of record is jointly and severally liable for
the tax with the enterer if the importer of record
isn't the enterer of the taxable fuel and the enterer isn't a taxable fuel registrant.
However, an importer of record meeting
both of the following conditions at the time of
the entry won’t be liable for the tax.
1. The importer of record has an unexpired
notification certificate (discussed under
Gasoline) from the enterer.
2. The importer of record has no reason to
believe any information in the certificate is
false.
Customs bond. The customs bond won’t
be charged for the tax imposed on the entry of
the diesel fuel or kerosene if at the time of entry
the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false.
Removal from a terminal by unregistered
position holder or unregistered pipeline or
vessel operator. The removal by bulk transfer
of diesel fuel or kerosene from a terminal is taxable if the position holder for that fuel or the operator of the pipeline or vessel isn't 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 diesel fuel or kerosene from a terminal or
refinery or the entry of diesel fuel or kerosene
by bulk transfer into the United States is taxable
if the following conditions apply.
1. No tax was previously imposed (as discussed earlier) on any of the following
events.
a. The removal from the refinery.
b. The entry into the United States.
c. The removal from a terminal by an unregistered position holder.
2. Upon removal from the pipeline or vessel,
the diesel fuel or kerosene isn't received at
an approved terminal or refinery (or at another pipeline or vessel).
The owner of the diesel fuel or kerosene
when it's 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 won’t be liable for the tax.
• The owner is a registrant.
• The owner has an unexpired notification
certificate (discussed under Gasoline) from
the operator of the terminal or refinery
where the diesel fuel or kerosene is received.
• The owner has no reason to believe any information on the certificate is false.
The operator of the facility where the diesel fuel
or kerosene is received is liable for the tax if the
owner meets these conditions. The operator is
jointly and severally liable if the owner doesn't
meet these conditions.
Sales to unregistered person. The sale of
diesel fuel or kerosene located within the bulk
transfer/terminal system to a person that isn't a
registrant is taxable if tax wasn't 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 won’t be liable for the tax.
• The seller is a registrant.
• The seller has an unexpired notification
certificate (discussed under Gasoline) from
the buyer.
• The seller has no reason to believe any information on the certificate is false.
The buyer of the diesel fuel or kerosene is liable
for the tax if the seller meets these conditions.
The buyer is jointly and severally liable if the
seller doesn't meet these conditions.
Exception. The tax doesn't apply to a sale
if all of the following apply.
• The buyer's principal place of business
isn't in the United States.
• The sale occurs as the fuel is delivered into
a transport vessel with a capacity of at
least 20,000 barrels of fuel.
• The seller is a registrant and the exporter
of record.
• The fuel was exported.
Removal or sale of blended 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.
Persons who blend biodiesel with undyed
diesel fuel to produce and sell or use a biodiesel mixture outside the bulk transfer/terminal
system must pay the diesel fuel tax on the volume of biodiesel in the mixture. Generally, the
biodiesel mixture must be diesel fuel (defined
earlier). See Form 720 to report this tax. You
also must be registered by the IRS as a blender. See Form 637 for more information.
However, if an untaxed liquid is sold as taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold
the untaxed liquid is jointly and severally liable
for the tax imposed on the blender's sale or removal of the blended taxable fuel.
Additional persons liable. When the person
liable for the tax willfully fails to pay the tax, joint
and several liability for the tax applies to:
• Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to
perform that duty; or
• Anyone who willfully causes the person to
fail to pay the tax.
Credits or refunds. A credit or refund is allowable for the tax on undyed diesel fuel or undyed
kerosene used for a nontaxable use. For more
information, see chapter 2.
Dyed Diesel Fuel and Dyed
Kerosene
Dyed diesel fuel and dyed kerosene
are subject to $.001 per gallon LUST
CAUTION tax as discussed below, unless the fuel
is for export.
!
The excise tax isn't imposed on the removal,
entry, or sale of diesel fuel or kerosene (other
than the LUST tax) if all the following tests are
met.
• The person otherwise liable for tax (for example, the position holder) is a registrant.
• In the case of a removal from a terminal,
the terminal is an approved terminal.
• The diesel fuel or kerosene satisfies the
dyeing requirements (described next).
Dyeing requirements. Diesel fuel or kerosene
satisfies the dyeing requirements only if it satisfies the following requirements.
• It contains the dye Solvent Red 164 (and
no other dye) at a concentration spectrally
equivalent to at least 3.9 pounds of the
solid dye standard Solvent Red 26 per
thousand barrels of fuel or any dye of a
type and in a concentration that has been
approved by the Commissioner.
• Is indelibly dyed by mechanical injection.
See section 6 of Notice 2005-80 for transition rules that apply until final regulations
are issued by the IRS.
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:
1. Provided by the terminal operator to any
person that receives dyed diesel fuel or
dyed kerosene at a terminal rack of that
operator, and
2. Posted by a seller on any retail pump or
other delivery facility where it sells dyed
diesel fuel or dyed kerosene for use by its
buyer.
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.
1. Any dyed fuel is sold or held for sale by
the person for a use the person knows or
has reason to know isn't a nontaxable use
of the fuel.
2. Any dyed fuel is held for use or used by
the person for a use other than a nontaxable use and the person knew, or had reason to know, that the fuel was dyed.
3. The person willfully alters, chemically or
otherwise, or attempts to so alter, the
strength or composition of any dye in dyed
fuel.
4. The person has knowledge that a dyed
fuel that has been altered, as described in
(3) above, sells or holds for sale such fuel
for any use for which the person knows or
has reason to know isn't a nontaxable use
of the fuel.
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.
There is no administrative appeal or review
allowed for the third and subsequent penalty
imposed by section 6715 on any person except
for:
• Fraud or a mistake in the chemical analysis, or
• Mathematical calculation of 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 doesn't apply unless the fuel is delivered into a fuel supply tank.
Exception to penalty. The penalty under
item (3) won’t apply in any of the following situations.
• Diesel fuel or kerosene meeting the dyeing
requirements (described earlier) is blended
with any undyed liquid and the resulting
product meets the dyeing requirements.
• Diesel fuel or kerosene meeting the dyeing
requirements (described earlier) is blended
with any other liquid (other than diesel fuel
or kerosene) that contains the type and
amount of dye required to meet the dyeing
requirements.
• The alteration or attempted alteration occurs in an exempt area of Alaska. See Removal for sale or use in Alaska, later.
• Diesel fuel or kerosene meeting the dyeing
requirements (described earlier) is blended
with diesel fuel or kerosene not meeting
the dyeing requirements and the blending
occurs as part of a nontaxable use (other
than export), discussed later.
Alaska and Feedstocks
Tax of $.001 per gallon is imposed on:
• Undyed diesel fuel or undyed kerosene
sold or used in Alaska for certain nontaxable uses (see Later sales on page 10).
• Undyed kerosene used for feedstock purposes.
Removal for sale or use in Alaska. No tax is
imposed on the removal, entry, or sale of diesel
fuel or kerosene in Alaska for ultimate sale or
use in certain areas of Alaska for certain nontaxable uses. The removal or entry of any diesel
fuel or kerosene isn't taxed if all the following requirements are satisfied.
1. The person otherwise liable for the tax
(position holder, refiner, or enterer):
a. Is a registrant,
b. Can show satisfactory evidence of the
nontaxable nature of the transaction,
and
c. Has no reason to believe the evidence is false.
2. In the case of a removal from a terminal,
the terminal is an approved terminal.
3. The owner of the fuel immediately after the
removal or entry holds the fuel for its own
use in a nontaxable use (discussed later)
or is a qualified dealer.
If all three of the requirements above aren’t
met, then tax is imposed at $.244 per gallon.
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 isn't taxable
(other than the LUST tax at $.001 per gallon) if
all the following requirements are met.
• The fuel is sold in Alaska for certain nontaxable uses.
• The buyer buys the fuel for its own use in a
nontaxable use or is a qualified dealer.
• The seller can show satisfactory evidence
of the nontaxable nature of the transaction
and has no reason to believe the evidence
is false.
Feedstock purposes. The $.001 per gallon
LUST tax is imposed on the removal or entry of
Chapter 1
Fuel Taxes
Page 9
undyed kerosene if all the following conditions
are met.
1. The person otherwise liable for tax (position holder, refiner, or enterer) is a registrant.
2. In the case of a removal from a terminal,
the terminal is an approved terminal.
3. Either:
a. The person otherwise liable for tax
uses the kerosene for a feedstock
purpose, or
b. The kerosene is sold for use by the
buyer for a feedstock purpose and, at
the time of the sale, the person otherwise liable for tax has an unexpired
certificate (described later) from the
buyer and has no reason to believe
any information on the certificate is
false.
If all of the requirements above aren’t met,
then tax is imposed at $.244 per gallon.
Kerosene is used for a feedstock purpose
when it's used for nonfuel purposes in the manufacture or production of any substance other
than gasoline, diesel fuel, or Other Fuels. For
example, kerosene is used for a feedstock purpose when it's used as an ingredient in the production of paint, but isn't used for a feedstock
purpose when it's used to power machinery at a
factory where paint is produced. A feedstock
user is a person that uses kerosene for a feedstock purpose. A registered feedstock user is a
person that has been registered by the IRS as a
feedstock user. See Registration Requirements, earlier.
Later sales. The excise tax ($.244 per gallon) applies to kerosene sold for use by the
buyer for a feedstock purpose (item (3)(b)
above) 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
the Appendix 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 date 1 year after the effective date (not
earlier than the date signed) of the certificate.
• The date the seller is provided a new certificate or notice that the current certificate is
invalid.
• The date the seller is notified the buyer's
registration has been revoked or suspended.
The buyer must provide a new certificate if
any information on a certificate has changed.
Back-up Tax
Tax is imposed on the delivery of any of the following into the fuel supply tank of a diesel-powered highway vehicle.
• Any dyed diesel fuel or dyed kerosene for
other than a nontaxable use.
• Any undyed diesel fuel or undyed kerosene on which a credit or refund (for fuel
used for a nontaxable purpose) has been
allowed.
• Any liquid other than gasoline, diesel fuel,
or kerosene.
Generally, this back-up tax is imposed at a
rate of $.244 per gallon.
Liability for tax. Generally, the operator of the
vehicle 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.
Exemptions from the back-up tax. The
back-up tax doesn't apply to a delivery of diesel
fuel or kerosene for uses 1, 2, 6, 7, 12, 13, 14,
and 15 listed under Definitions of Nontaxable
Uses in chapter 2.
In addition, since the back-up tax is imposed
only on the delivery into the fuel supply tank of a
diesel-powered vehicle or train, the tax doesn't
apply to diesel fuel or kerosene used as heating
oil or in stationary engines.
Diesel-Water Fuel
Emulsion
Diesel-water fuel emulsion means diesel fuel at
least 14% of which is water and for which the
emulsion additive is registered by a United
States manufacturer with the EPA under section
211 of the Clean Air Act as in effect on March
31, 2003.
A reduced tax rate of $.198 per gallon is imposed on a diesel-water fuel emulsion. To be eligible for the reduced rate, the person who
sells, removes, or uses the diesel-water fuel
emulsion must be registered by the IRS. If the
diesel-water fuel emulsion doesn't meet the requirements above, or if the person who sells,
removes, or uses the fuel isn't registered, the
diesel-water fuel emulsion is taxed at $.244 per
gallon.
Credits or refunds. The allowance for a credit
or refund on a diesel-water fuel emulsion is discussed in chapter 2.
Kerosene for Use in
Aviation
Taxable Events
Generally, kerosene is taxed at $.244 per gallon
unless a reduced rate applies (see Diesel Fuel
and Kerosene, earlier).
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Chapter 1
Fuel Taxes
For kerosene removed directly from a terminal into the fuel tank of an aircraft for use in noncommercial aviation, the tax rate is $.219. The
rate of $.219 also applies if kerosene is removed into any aircraft from a qualified refueler
truck, tanker, or tank wagon that is loaded with
the kerosene from a terminal that is located
within an airport. The airport terminal doesn't
need to be a secured airport terminal for this
rate to apply. However, the refueler truck,
tanker, or tank wagon must meet the requirements discussed under Certain refueler trucks,
tankers, and tank wagons, treated as terminals,
later.
For kerosene removed directly into the fuel
tank of an aircraft for use in commercial aviation, the rate of tax is $.044 per gallon. For kerosene removed into an aircraft from a qualified
refueler truck, tanker, or tank wagon, the $.044
rate applies only if the truck, tanker, or tank
wagon is loaded at a terminal that is located in a
secured area of the airport. See Terminal located within a secured area of an airport, later. In
addition, the operator must provide the position
holder with a certificate similar to Model Certificate K in the Appendix.
For kerosene removed directly into the fuel
tank of an aircraft for a use exempt from tax under section 4041(c) (such as use in an aircraft
for the exclusive use of a state or local government), the rate of tax is $.001. There is no tax
on kerosene removed directly into the fuel tank
of an aircraft for use in foreign trade. The kerosene must be removed from a qualifying refueler truck, tanker, or tank wagon loaded at a terminal located within a secured area of an
airport. See Terminal located within a secured
area of an airport, later. In addition, the operator
must provide the position holder with a certificate similar to Model Certificate K in the Appendix. The position holder is liable for the $.001
per gallon tax.
For kerosene removed directly from a terminal into the fuel tank of a fractional ownership
program aircraft, a surtax of $.141 per gallon
applies.
Certain refueler trucks, tankers, and tank
wagons treated as terminals. For purposes
of the tax imposed on kerosene for use in aviation removed directly into the fuel tank of an aircraft for use in commercial aviation, certain refueler trucks, tankers, and tank wagons are
treated as part of a terminal if the following conditions are met.
1. Such terminal is located within an area of
an airport.
2. Any kerosene for use in aviation that is
loaded in a refueler truck, tanker, or tank
wagon at a terminal is for delivery into aircraft at the airport in which the terminal is
located.
3. Except in exigent circumstances, such as
those identified in Notice 2005-80, no vehicle registered for highway use is loaded
with kerosene for use in aviation at the terminal.
4. The refueler truck, tanker, or tank wagon
meets the following requirements:
a. Has storage tanks, hose, and coupling equipment designed and used
for fueling aircraft,
b. Isn’t registered for highway use, and
c. Is operated by the terminal operator or
a person that makes a daily accounting to the terminal operator of each
delivery of fuel from the refueler truck,
tanker, or tank wagon. Information reporting will be required by terminal operators regarding this provision. Until
the format of this information reporting
is issued, taxpayers are required to
retain records regarding the daily accounting, but aren’t required to report
such information.
Terminal located within a secured area of
an airport. See Notice 2005-4 and Notice
2005-80 for the list of terminals located within a
secured area of an airport. This list refers to fueling operations at airport terminals as it applies
to the federal excise tax on kerosene for use in
aviation, and has nothing to do with the general
security of airports either included or not included in the list.
Liability For Tax
If the kerosene is removed directly into the fuel
tank of an aircraft for use in commercial aviation, the operator of the aircraft in commercial
aviation is liable for the tax on the removal at
the rate of $.044 per gallon. However, the position holder is liable for the LUST tax for kerosene for use in aviation removed directly into
the fuel tank of an aircraft for use exempt from
tax under section 4041(c) (except foreign
trade). For example, for kerosene removed directly into the aircraft for use in military aircraft,
the position holder is liable for the tax.
For the aircraft operator to be liable for the
tax $.044 rate, the position holder must meet
the following requirements:
• Is a taxable fuel registrant,
• Has an unexpired certificate (a model certificate is shown in the Appendix as Model
Certificate K) from the operator of the aircraft, and
• Has no reason to believe any of the information in the certificate is false.
Commercial aviation. Commercial aviation is
any use of an aircraft in the business of transporting persons or property by air for pay. However, commercial aviation doesn't include any
of the following uses.
• Any use exclusively for the purpose of skydiving.
• Certain air transportation by seaplane. See
Seaplanes under Transportation of Persons by Air in chapter 4.
• Any use of an aircraft owned or leased by
a member of an affiliated group and unavailable for hire by nonmembers. For
more information, see Aircraft used by affiliated corporations under Special Rules
on Transportation Taxes in chapter 4.
• 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. For more information,
see Small aircraft under Special Rules on
Transportation Taxes in chapter 4.
• Any use where the surtax on fuel used in a
fractional ownership program aircraft is imposed. See Surtax on any liquid used in a
fractional ownership program aircraft as
fuel below.
Surtax on Any Liquid
Used in a Fractional
Ownership Program
Aircraft as Fuel
Fuel used in a fractional ownership program aircraft (as defined below), is subject to a surtax of
$.141 per gallon. The fractional ownership program manager is liable for the tax. The surtax
applies in addition to any other taxes imposed
on the removal, entry, use, or sale of the fuel. If
the surtax is imposed, the following air transportation taxes don't apply.
• Transportation of persons by air.
• Transportation of property by air.
• Use of international air travel facilities.
These taxes are described under Air Transportation Taxes, later.
A fractional ownership program aircraft flight
is considered noncommercial aviation; for the
rules for kerosene used in noncommercial aviation, see Kerosene for Use in Aviation above.
A fractional ownership program is one under
which:
• A single fractional ownership program
manager provides fractional ownership
program management services on behalf
of the fractional owners;
• There are one or more fractional owners
per fractional program aircraft, with at least
one fractional program aircraft having
more than one owner;
• For at least two fractional program aircraft,
none of the ownership interests in the aircraft are less than the minimum fractional
ownership interest or held by the program
manager;
• There exists a dry-lease aircraft exchange
arrangement among all of the fractional
owners; and
• There are multi-year program agreements
covering the fractional ownership, fractional ownership program management
services, and dry-lease aircraft exchange
aspects of the program.
Fractional program aircraft. Any aircraft that,
in any fractional ownership aircraft program, is
listed as a fractional program aircraft in the
management specifications issued to the manager of such program by the Federal Aviation
Administration under subpart K of part 91, title
14, Code of Federal Regulations, and is registered in the United States.
Fractional program aircraft aren’t considered
used for transportation of a qualified fractional
owner, or on account of such qualified fractional
owner when they are used for flight demonstration, maintenance or crew training. In such situations, the flight isn't commercial aviation. Instead, the tax on the fuel used in the flight is
imposed at the non-commercial aviation rate.
Fractional owner. Any person owning any interest (including the entire interest) in a fractional program aircraft.
Dry lease aircraft exchange. An agreement,
documented by the written program agreements, under which the fractional program aircraft are available, on an as-needed basis without crew, to each fractional owner.
Special rule relating to deadhead service.
A fractional program aircraft won’t be considered to be used on account of a qualified fractional owner when it's used in deadhead service
and a person other than a qualified fractional
owner is separately charged for such service.
More information. See section 4043 for more
information on the surtax.
Certificate for
Commercial Aviation
and Exempt Uses
A certificate is required from the aircraft operator:
• To support aircraft operator liability for tax
on removal of kerosene for use in aviation
directly into the fuel tank of an aircraft in
commercial aviation, or
• For exempt uses.
Certificate. The certificate may be included as
part of any business records normally used for
a sale. See Model Certificate K in the Appendix.
A certificate expires on the earliest of the following dates.
• The date 1 year after the effective date (not
earlier than the date signed) of the certificate.
• The date the buyer provides the seller a
new certificate or notice that the current
certificate is invalid.
• The date the IRS or the buyer notifies the
seller that the buyer's right to provide a
certificate has been withdrawn.
The buyer must provide a new certificate if
any information on a certificate has changed.
The IRS may withdraw the buyer's right to
provide a certificate if the buyer uses the kerosene for use in aviation to which a certificate relates other than as stated in the certificate.
Exempt use. The rate on kerosene for use
in aviation is $.001 (LUST tax) if it's removed
from any refinery or terminal directly into the
fuel tank of an aircraft for an exempt use. An exempt use includes kerosene for the exclusive
use of a state or local government. There is no
tax on kerosene removed directly into the fuel
tank of an aircraft for use in foreign trade.
Flash title transaction. A position holder isn't
liable for tax if, among other conditions, it obtains a certificate (described above) from the
operator of the aircraft into which the kerosene
is delivered. In a “flash title transaction” the position holder sells the kerosene to a wholesale
distributor (reseller) that in turn sells the kerosene to the aircraft operator as the kerosene is
being removed from a terminal into the fuel tank
Chapter 1
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Page 11
of an aircraft. In this case, the position holder
will be treated as having a certificate from the
operator of the aircraft if:
• The aircraft operator puts the reseller's
name, address, and EIN on the certificate
in place of the position holder's information; and
• The reseller provides the position holder
with a statement of the kerosene reseller.
Reseller statement. This is a statement
that is signed under penalties of perjury by a
person with authority to bind the reseller; is provided at the bottom or on the back of the certificate (or in an attached document); and contains:
• The reseller's name, address, and EIN;
• The position holder's name, address, and
EIN; and
• A statement that the reseller has no reason
to believe that any information in the accompanying aircraft operator's certificate is
false.
Credits or refunds. A claim may be made by
the ultimate purchaser (the operator) for taxed
kerosene for use in aviation used in commercial
aviation (other than foreign trade) and noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a
state, political subdivision of a state, or the District of Columbia). A claim may be made by a
registered ultimate vendor for certain sales. For
more information, see chapter 2.
Other Fuels (Including
Alternative Fuels)
Other Fuels means any liquid except gas oil,
fuel oil, or any product taxable under section
4081. Other Fuels include alternative fuels. Alternative fuels are:
• Liquefied petroleum gas (LPG),
• “P Series” fuels,
• Compressed natural gas (CNG) (discussed later),
• Liquefied hydrogen,
• Any liquid fuel derived from coal (including
peat) through the Fischer-Tropsch process,
• Liquid fuel derived from biomass,
• Liquefied natural gas (LNG), and
• Liquefied gas derived from biomass.
Liquefied petroleum gas includes propane, pentane, or mixtures of those products.
Qualified methanol and ethanol fuels.
Qualified ethanol and methanol means any liquid at least 85% of which consists of alcohol
produced from coal, including peat. The tax
rates are listed in the Instructions for Form 720.
Partially exempt methanol and ethanol
fuels. A reduced tax rate applies to these
fuels. Partially exempt ethanol and methanol
means any liquid at least 85% of which consists
of alcohol produced from natural gas. The tax
rates are listed in the Instructions for Form 720.
Motor vehicles. Motor vehicles include all
types of vehicles, whether or not registered (or
Page 12
Chapter 1
Fuel Taxes
required to be registered) for highway use, that
have both the following characteristics.
• They are propelled by a motor.
• They are designed for carrying or towing
loads from one place to another, regardless of the type of material or load carried
or towed.
Taxable Events
Certificate. The certificate from the buyer certifies the CNG will be used in a nontaxable use.
The certificate may be included as part of any
business records normally used for a sale. A
model certificate is shown in the Appendix as
Model Certificate J.
A certificate expires on the earliest of the following dates.
• The date 1 year after the effective date
(which may be no earlier than the date
signed) of the certificate.
• The date a new certificate is provided to
the seller.
• The date the seller is notified the buyer's
right to provide a certificate has been withdrawn.
Tax is imposed on the delivery of Other Fuels
into the fuel supply tank of the propulsion engine of a motor vehicle or motorboat. However,
there is no tax on the delivery if tax was imposed under the bulk sales rule, discussed
next, or the delivery is for a nontaxable use. If
the delivery is in connection with a sale, the
seller is liable for the tax. If it isn't in connection
with a sale, the operator of the vehicle or boat is
liable for the tax.
Bulk sales. Tax is imposed on the sale of CNG
that isn't 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 acknowledgment of receipt of the statement. The
seller of the CNG is liable for the tax.
Bulk sales. Tax is imposed on the sale of
Other Fuels that isn't 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 in
chapter 2. The seller is liable for this tax.
Motor vehicle. For this purpose, motor vehicle
has the same meaning as given under Other
Fuels (Including Alternative Fuels), earlier.
Motor vehicles don’t include any vehicle that
moves exclusively on rails, or any of the following items: farm tractors, trench diggers, power
shovels, bulldozers, road graders, road rollers,
and similar equipment that doesn't carry or tow
a load.
Tax rate. See Form 720 and the Instructions
for Form 720 for the tax rates.
Nontaxable uses. The nontaxable uses of
Other Fuels (including alternative fuels) are discussed in chapter 2.
Compressed Natural
Gas (CNG)
Taxable Events
Tax is imposed on the delivery of compressed
natural gas (CNG) into the fuel supply tank of
the propulsion engine of a motor vehicle or motorboat. The tax is based on the gasoline gallon
equivalent of CNG. See Form 720 for the tax
rate.
However, there is no tax on the delivery if
tax was imposed under the bulk sales rule discussed next, or the delivery is for a nontaxable
use, listed in chapter 2. If the delivery is in connection with a sale, the seller is liable for the
tax. If it isn't in connection with a sale, the operator of the boat or vehicle is liable for the tax.
If CNG is delivered into the fuel supply tank
by the seller in connection with the sale of CNG
for a nontaxable use, the seller is liable for the
tax unless, at the time of the sale, the seller has
an exemption certificate from the buyer. The
seller must have no reason to believe any information in the certificate is false.
Nontaxable uses. The nontaxable uses of
CNG are discussed under Other Fuels (Including Alternative Fuels) in chapter 2.
Fuels Used on Inland
Waterways
The tax on inland waterways fuel use
applies at the rate listed on Form 720.
CAUTION This is in addition to all other taxes imposed on the sale or use of the fuel.
!
Tax applies to liquid fuel used in the propulsion system of commercial transportation vessels while traveling on certain inland and intracoastal waterways. The tax generally applies to
all types of vessels, including ships, barges,
and tugboats. The LUST tax must be paid on
any liquid fuel used on inland waterways that
isn't subject to LUST tax under section 4041(d)
or 4081. For example, Bunker C residual fuel oil
is subject to the LUST tax.
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 Regulations section
48.4042-1(g) 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 use is in the business of transporting
property for compensation or hire.
• The use is in transporting property in the
business of the owner, lessee, or operator
of the vessel, whether or not a fee is
charged.
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.
• Moving without cargo.
• Awaiting passage through locks.
• Moving to or from a repair facility.
• Dislodging vessels grounded on a sand
bar.
• Fleeting barges into a single tow.
• Maneuvering around loading and unloading docks.
Liquid fuel. Liquid fuel includes diesel fuel,
Bunker C residual fuel oil, Other Fuels, 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 doesn't 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 can't
be used where it's found to be unreasonable.
Taxable event. Tax is imposed on liquid fuel
used in the propulsion system of a vessel. See
Form 720 for the tax rate.
The person who operates (or whose employees operate) the vessel in which the fuel is
consumed is liable for the tax. If a vessel owner
(or lessee) contracts with an independent contractor to operate the vessel, the independent
contractor is the person liable for tax, regardless of who purchases the fuel. 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 isn't 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 isn't 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
isn't 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 isn't taxable
when used by vessels primarily for the transportation of persons. The tax doesn't apply to fuel
used in commercial passenger vessels while
being operated as passenger vessels, even if
such vessels also transport property. Nor does
it apply to ferryboats carrying passengers and
their cars.
Ocean-going barges. Fuel isn't taxable
when used in tugs to move LASH and SEABED
ocean-going barges released by their
ocean-going carriers solely to pick up or deliver
international cargoes.
However, it's taxable when any of the following conditions apply.
• One or more of the barges in the tow isn't a
LASH barge, SEABED barge, or other
ocean-going barge carried aboard an
ocean-going vessel.
• One or more of the barges isn't on an international voyage.
• Part of the cargo carried isn't being transported internationally.
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.
All operators of vessels used in commercial waterway transportation who
RECORDS acquire liquid fuel must keep adequate
records of all fuel used for taxable purposes.
Operators who are seeking an exclusion from
the tax must keep records that will support any
exclusion claimed.
Your records should include all of the following information.
• The acquisition date and quantity of fuel
delivered into storage tanks or the tanks on
your vessel.
• The identification number or name of each
vessel using the fuel.
• The departure time, departure point, route
traveled, destination, and arrival time for
each vessel.
If you claim an exemption from the tax, include in your records the following additional information as it pertains to you.
• The draft of the vessel on each voyage.
• The type of vessel in which you used the
fuel.
• The ultimate use of the cargo (for vessels
operated by state or local governments).
Second Generation
Biofuel Not Used as Fuel
If you claimed the section 40 second generation
biofuel producer credit, you are liable for an excise tax on each gallon of second generation biofuel if you don't use the fuel for the purposes
described under Qualified Second Generation
Biofuel Production next.
Qualified second generation biofuel production. This is second generation biofuel
which during the tax year:
1. Is sold by the producer to another person–
a. For use by the buyer in the buyer’s
trade or business to produce a qualified second generation biofuel mixture
(other than casual off-farm production),
b. For use by the buyer as a fuel in a
trade or business, or
c. Who sells the second generation biofuel at retail to another person and
puts the second generation biofuel in
the retail buyer’s fuel tank; or
2. Is used or sold by the producer for any
purpose described in (1) above.
Qualified second generation biofuel production
doesn't include purchasing alcohol and increasing the proof of the alcohol through additional
distillation. Nor does it include second generation biofuel that isn't both produced in the United States or a U.S. possession and used as a
fuel in the United States or a U.S. possession. A
qualified second generation biofuel mixture
combines second generation biofuel with gasoline or a special fuel. The producer of the mixture either:
• Used it as a fuel, or
• Sold it as fuel to another person.
Report the tax on Form 720. The rate of tax
depends on the applicable rate used to figure
the credit. No deposits are required.
Biodiesel Sold as But
Not Used as Fuel
If the credit was claimed (either as an excise tax
credit or income tax credit) or a refund was
claimed, you are liable for an excise tax if you
used the mixture or biodiesel other than as a
fuel, separated the biodiesel from a mixture, or
mixed the biodiesel.
Chapter 1
Fuel Taxes
Page 13
Report the tax on Form 720. The rate of tax
depends on the applicable rate used to figure
the credit. No deposits are required.
2.
Fuel Tax Credits
and Refunds
Federal excise taxes are imposed on certain
fuels as discussed in chapter 1. This chapter
lists the nontaxable uses of each fuel and defines the nontaxable uses. Information on the
refund of second tax is included. This chapter
also explains credits and refunds for the biodiesel or renewable diesel mixture credits, and the
alternative fuel mixture and alternative fuel
credits.
Information on how to make a claim for credit or
refund is included in this chapter and in the instructions for:
• Form 720,
• Form 4136, and
• Form 8849.
Exported taxable fuel. The claim rates for exported taxable fuel are listed on Schedule C
(Form 720), Schedule 1 (Form 8849), and Form
4136. Taxpayers making a claim for exported
taxable fuel must include with their records
proof of exportation. Proof of exportation includes:
• A copy of the export bill of lading issued by
the delivering carrier,
• A certificate by the agent or representative
of the export carrier showing actual exportation of the fuel,
• A certificate of lading signed by a customs
officer of the foreign country to which the
fuel is exported, or
• A statement of the foreign consignee
showing receipt of the fuel.
Gasoline and Aviation
Gasoline
Ultimate purchasers. The following are the
uses of gasoline (defined earlier) 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.
• Exclusive use by a qualified blood collector
organization.
• In a highway vehicle owned by the United
States that isn't used on a highway.
• Exclusive use by a nonprofit educational
organization (see Sales by registered ultiPage 14
Chapter 2
mate vendors and Credit Card Purchases,
later).
• Exclusive use by a state, political subdivision of a state, or the District of Columbia
(see Sales by registered ultimate vendors
and Credit Card Purchases, later).
• 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 qualified blood collector
organization.
• Exclusive use by a nonprofit education organization (see Sales by registered ultimate vendors and Credit card purchases,
later).
• Exclusive use by a state, political subdivision of a state, or the District of Columbia
(see Sales by registered ultimate vendors
and Credit and purchases, later).
• In an aircraft owned by an aircraft museum.
• In military aircraft.
Claims by persons who paid the tax to the
government. Except for sales to nonprofit educational organizations and states and local
governments, a credit or refund is allowable to
the person that paid the tax to the government if
the gasoline was sold to the ultimate purchaser
(including an exporter) by either that person or
by a retailer and the fuel was exported; used or
sold for use as a supply for vessels or aircraft,
including military aircraft, commercial fishing,
and foreign trade; sold to a qualified blood collector organization; or used or sold for use in
the production of Other Fuels. See Filing
Claims, later.
Sales by registered ultimate vendors. This
is an ultimate vendor that sells gasoline or aviation gasoline to any of the following and that is
purchased without the use of a credit card.
• A state or local government for its exclusive use (including essential government
use by an Indian tribal government).
• A nonprofit educational organization for its
exclusive use.
The registered ultimate vendor may make
the claim if the ultimate purchaser didn’t use a
credit card and 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 M in the Appendix.
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 Registration Requirements, earlier.
Credit card purchases. If gasoline and aviation gasoline are purchased with a credit card
issued to a state or local government for its ex-
Fuel Tax Credits and Refunds
clusive use (including essential government use
by an Indian tribal government), or a nonprofit
educational organization for its exclusive use,
the person who extended credit to the ultimate
purchaser (the credit card issuer) is treated as
the person that paid the tax and makes the
claim if the credit card issuer:
• Is registered by the IRS,
• Has established that the amount of tax
hasn’t been collected from the person who
purchased the gasoline or has obtained
written consent from the ultimate purchaser to the allowance of the credit or refund, and
• Has repaid or agreed to repay the amount
of the tax to the ultimate vendor, has obtained the written consent of the ultimate
vendor to the allowance of the credit or refund, or has made arrangements that provide the ultimate vendor with reimbursement of the tax.
If the requirements above aren’t met by the
credit card issuer, the credit card issuer must
collect the tax from the ultimate purchaser and
only the ultimate purchaser may make the
claim.
How to make the claim. If the claim is made
by the credit card issuer, see Schedule C
(Form 720) or Schedule 8 (Form 8849).
Undyed Diesel Fuel and
Undyed Kerosene (Other
Than Kerosene Used in
Aviation)
For conditions to an allowance of a credit or refund on exported dyed diesel fuel and dyed kerosene, see Exported taxable fuel, earlier.
Ultimate purchasers. The following are nontaxable uses of diesel fuel and kerosene (defined earlier) for which a credit or refund may be
allowable to an ultimate purchaser.
• On a farm for farming purposes.
• Off-highway business use.
• Export.
• In a qualified local bus.
• In a school bus.
• Other than as a fuel in a propulsion engine
of a diesel-powered highway vehicle (such
as home heating oil).
• Exclusive use by a qualified blood collector
organization.
• In a highway vehicle owned by the United
States that isn't used on a highway.
• Exclusive use by a nonprofit educational
organization (see Sales by Registered Ultimate Vendors and Credit Card Purchases,
later).
• Exclusive use by a state, political subdivision of a state, or the District of Columbia
(see Sales by Registered Ultimate Vendors and Credit Card Purchases, later).
• In a vehicle owned by an aircraft museum.
• As a fuel in a propulsion engine of a diesel-powered train.
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 the exclusive use by a state or local government (if credit card rules (defined later) don't apply),
• Undyed kerosene sold from a blocked
pump (defined below), 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 (state use).
This is a person that sells undyed diesel fuel or
undyed kerosene to a state or local government
for its exclusive use (including essential government use by an Indian tribal government). The
diesel fuel or kerosene must be purchased by
the state without the use of a credit card, issued
to the state by the credit card issuer, in order for
the ultimate vendor to make the claim. The ultimate vendor must be registered by the IRS.
See Registration Requirements, earlier.
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 wouldn’t
be used in that manner.
Blocked pump. A blocked pump is a fuel
pump that meets all the following requirements.
1. it's used to make retail sales of undyed
kerosene for use by the buyer in any nontaxable use.
2. it's at a fixed location.
3. it's identified with a legible and conspicuous notice stating, “UNDYED UNTAXED
KEROSENE, NONTAXABLE USE ONLY.”
4. It meets either of the following conditions.
a. It can't reasonably be used to dispense fuel directly into the fuel supply
tank of a diesel-powered highway vehicle or train.
b. it's 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.
Registered ultimate vendor (certain intercity and local buses). 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 N in the Appendix. The registered ultimate vendor must
have the waiver at the time the credit or payment is claimed.
Credit card purchases. If undyed diesel fuel
or kerosene is purchased with a credit card issued to a state, the person who extended credit
to the state (the credit card issuer) is treated as
the person that paid the tax and makes the
claim if the credit card issuer:
• Is registered by the IRS,
• Has established that the amount of tax
hasn’t been collected from the person who
purchased the diesel fuel or kerosene, or
has obtained written consent from the ultimate purchaser to the allowance of the
credit or refund, and
• Has repaid or agreed to repay the amount
of the tax to the ultimate vendor, has obtained the written consent of the ultimate
vendor to the allowance of the credit or refund, or has made arrangements that provide the ultimate vendor with reimbursement of the tax.
If the requirements above aren’t met by the
credit card issuer, the credit card issuer must
collect the tax from the ultimate purchaser and
only the ultimate purchaser may make the
claim.
Diesel-Water Fuel
Emulsion
A claim for credit or refund may be made for the
nontaxable use of a diesel-water fuel emulsion
and for undyed diesel fuel used to produce a
diesel-water fuel emulsion. The claim rate for
nontaxable use of a diesel-water fuel emulsion
taxed at $.198 per gallon is $.197 (if exported,
the claim rate is $.198). The following are the
nontaxable uses for a diesel-water fuel emulsion for which a credit or refund may be allowable to an ultimate purchaser.
• On a farm for farming purposes.
• Off-highway business use.
• Export.
• In a qualified local bus.
• In a school bus.
• Other than as fuel in the propulsion engine
of a train or diesel-powered highway vehicle (but not off-highway use).
• Exclusive use by a qualified blood collector
organization.
• In a highway vehicle owned by the United
States that isn't used on a highway.
• 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.
Blender claims. The claim rate for undyed
diesel fuel taxed at $.244 and used to produce
a diesel-water fuel emulsion is $.046 per gallon
of diesel fuel so used. The blender must be registered by the IRS in order to make the claim.
The blender must attach a statement to the
claim certifying that:
• The diesel-water fuel emulsion contains at
least 14% water,
Chapter 2
• The emulsion additive is registered by a
U.S. manufacturer with the EPA under section 211 of the Clean Air Act as in effect on
March 31, 2003,
• Undyed diesel fuel taxed at $.244 was
used to produce the diesel-water fuel
emulsion, and
• The diesel-water fuel emulsion was used
or sold for use in the blender's trade or
business.
Kerosene for Use in
Aviation
Ultimate purchasers. Ultimate purchasers of
kerosene used in certain aviation uses may
make a claim if the rate of tax on their use is
less than the rate of tax that was charged on the
kerosene.
The ultimate purchaser of the kerosene
used in commercial aviation (other than foreign
trade) and noncommercial aviation (other than
nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a
state, or the District of Columbia) is eligible to
make a claim if the ultimate purchaser certifies
that the right to make the claim hasn’t been
waived. Generally, the ultimate purchaser is the
aircraft operator.
The following are the nontaxable uses of
kerosene used in noncommercial aviation for
which a credit or refund may be allowable to the
ultimate purchaser.
• On a farm for farming purposes.
• Certain helicopter and fixed-wing aircraft
uses.
• Exclusive use by a qualified blood collector
organization.
• Exclusive use by a nonprofit educational
organization.
• In an aircraft owned by an aircraft museum.
• In military aircraft.
Kerosene for use partly in commercial aviation and partly in nonexempt, noncommercial aviation. If the fuel is used partly for use in
commercial aviation and partly for use in nonexempt, noncommercial aviation, the operator
may identify, either at the time of purchase or
after the kerosene has been used, the amount
that will be (or has been) used in commercial
aviation. At the same time, the operator would
either make the claim or waive the right to make
the claim for credit or refund of the kerosene for
use in commercial and nonexempt, noncommercial aviation.
If the operator doesn't identify the amount of
kerosene that will be (or has been) used in
commercial aviation, the operator may provide
a certificate to the ultimate vendor similar to
Model Certificate Q in the Appendix. For kerosene purchased with the certificate, used in
commercial aviation, and taxed at $.244 per
gallon, use of the certificate will be treated as a
waiver of the right to claim a credit or refund for
the $.025 per gallon part of the tax. The ultimate
vendor may make this claim. The operator may
make a claim for the $.175 tax per gallon of the
kerosene, but can't waive the right to make the
claim for the $.175 tax per gallon.
Fuel Tax Credits and Refunds
Page 15
Sales by Registered Ultimate
Vendors
Kerosene for use in commercial aviation or
noncommercial aviation. The registered ultimate vendor of kerosene for use in commercial
aviation (other than foreign trade) or noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a
state, political subdivision of a state, or the District of Columbia) may make this claim if the ultimate purchaser waives its right to the credit or
payment by providing the registered ultimate
vendor with a waiver. A sample waiver is included as Model Waiver L in the Appendix. The
registered ultimate vendor must have the waiver
at the time the credit or payment is claimed.
Noncommercial aviation means any use of
an aircraft not described as commercial aviation. For the definition of commercial aviation,
see Commercial aviation on page 11.
Kerosene for use in nonexempt, noncommercial aviation. Only the registered ultimate
vendor may claim a credit or payment for sales
of kerosene for use in nonexempt, noncommercial aviation. The ultimate vendor must be registered by the IRS (activity letter UA) and have
the required certificate from the ultimate purchaser. A sample certificate is included as
Model Certificate Q in the Appendix. The registered ultimate vendor must have the certificate
at the time the credit or payment is claimed.
Kerosene for use in aviation by a state or
local government. Only the registered ultimate vendor may claim a credit or payment for
sales of kerosene for use in aviation to a state
or local government for its exclusive use (including essential government use by an Indian
tribal government). The kerosene for use in aviation must be purchased by the state without
the use of a credit card in order for the ultimate
vendor to make the claim. The ultimate vendor
must be registered by the IRS (activity letter
UV) and have the required certificate from the
ultimate purchaser. A sample certificate is included as Model Certificate P in the Appendix. The
registered ultimate vendor must have the certificate at the time the credit or payment is
claimed.
Credit card purchases. If taxed kerosene for
use in aviation is purchased with a credit card
issued to a state, the person who extended
credit to the state (the credit card issuer) is treated as the person that paid the tax and makes
the claim if the credit card issuer:
• Is registered by the IRS,
• Has established that the amount of tax
hasn’t been collected from the person who
purchased the kerosene, or has obtained
written consent from the ultimate purchaser to the allowance of the credit or refund, and
• Has repaid or agreed to repay the amount
of the tax to the ultimate vendor, has obtained the written consent of the ultimate
vendor to the allowance of the credit or refund, or has made arrangements that provide the ultimate vendor with reimbursement of the tax.
Page 16
Chapter 2
If the requirements above aren’t met by the
credit card issuer, the credit card issuer must
collect the tax from the ultimate purchaser and
only the ultimate purchaser may make the
claim.
Other Fuels (Including
Alternative Fuels)
Credit or refund for nontaxable use of taxed
Other Fuels may be allowable to an ultimate
purchaser. While tax is generally imposed on
delivery, Other Fuels are taxed prior to delivery
in the case of certain bulk sales described in
chapter 1. The following are the nontaxable
uses of Other Fuels for which a credit or refund
may be allowable to the 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 school bus.
• In a qualified local bus.
• Exclusive use by a qualified blood collector
organization.
• 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.
• In any boat operated by the United States
for its exclusive use or any vessel of war of
any foreign nation.
See Biodiesel or Renewable Diesel Mixture
Credit, Alternative Fuel Credit, and Alternative
Fuel Mixture Credit, later.
Refunds of Second Tax
The tax on dyed diesel fuel for inland
waterways fuel use applies at the rate
CAUTION listed on Form 720. This is in addition
to all other taxes imposed on the sale or use of
the fuel. The section 4081(e) refund (discussed
below) can't be claimed.
!
If the tax is paid and reported to the government on more than one taxable event for a taxable fuel under section 4081, the person paying
the “second tax” may claim a refund (without interest) of that tax if certain conditions and reporting requirements are met. No credit against
any tax is allowed for this tax. For information
about taxable events, see the discussions under Gasoline, Diesel Fuel and Kerosene and
Kerosene for Use in Aviation in chapter 1.
Conditions to allowance of refund. A claim
for refund of the tax is allowed only if all the following conditions are met.
1. A tax on the fuel was paid to the government and not credited or refunded (the
“first tax”).
2. After the first tax was imposed, another tax
was imposed on the same fuel and was
paid to the government (the “second tax”).
Fuel Tax Credits and Refunds
3. The person that paid the second tax filed a
timely claim for refund containing the information required (see Refund claim, later).
4. The person that paid the first tax has met
the reporting requirements, discussed
next.
Reporting requirements. Generally, the person that paid the first tax must file a “First Taxpayer's Report” with its Form 720 for the quarter
to which the report relates. A model first taxpayer's report is shown in the Appendix as Model
Certificate B. The report must contain all information needed to complete the model.
By the due date for filing the Form 720, you
must also send a separate copy of the report to
the following address.
Department of the Treasury
Internal Revenue Service
Cincinnati, OH 45999-0555
Write “EXCISE – FIRST TAXPAYER'S REPORT” across the top of that copy.
Optional reporting. A first taxpayer's report isn't required for the tax imposed on:
• Removal at a terminal rack,
• Nonbulk entries into the United States, and
• Removals or sales by blenders.
However, if the person liable for the tax expects
that another tax will be imposed on that fuel,
that person should (but isn't 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
isn't the owner at that time. If an optional report
is filed, a copy should (but isn't 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 isn't required to) give the copy
and the statement to the buyer. A model statement of subsequent seller is shown in the Appendix as Model Certificate A. 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 have filed Form 720
and paid the second tax before you file for a refund of that tax. You must make your claim for
refund on Form 8849. Complete Schedule 5
(Form 8849) and attach it to your Form 8849.
Don't include this claim with a claim under another tax provision. You must not have included
the second tax in the price of the fuel and must
not have collected it from the purchaser. You
must submit the following information with your
claim.
• A copy of the first taxpayer's report (discussed earlier).
• A copy of the statement of subsequent
seller if the fuel was bought from someone
other than the first taxpayer.
Definitions of
Nontaxable Uses
This section provides definitions of the terms
used in Table 2-1 for nontaxable uses. If applicable, the type of use number from Table 2-1 is
indicated in each heading.
Type of use table. 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.
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.
1. To cultivate the soil or to raise or harvest
any agricultural or horticultural commodity.
2. To raise, shear, feed, care for, train, or
manage livestock, bees, poultry, fur-bearing animals, or wildlife.
3. To operate, manage, conserve, improve,
or maintain your farm and its tools and
equipment.
4. 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.
5. 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 of the fuel used.
Custom application of fertilizer and pesticide. Fuel used on a farm for farming purposes includes fuel used in the application of fertilizer, pesticides, or other substances, including
aerial applications. Generally, the applicator is
treated as having used the fuel on a farm for
farming purposes. For aviation gasoline, the
aerial applicator makes the claim as the ultimate purchaser. For kerosene used in aviation,
the ultimate purchaser may make the claim or
waive their right to make the claim to the registered ultimate vendor.
Table 2-1. Type of Use Table
No.
Type of Use
1
2
On a farm for farming purposes
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)
Export
In a boat engaged in commercial fishing
In certain intercity and local buses
In a qualified local bus
In a bus transporting students and employees of schools (school buses)
For diesel fuel and kerosene (other than kerosene used in aviation) used other
than as a fuel in the propulsion engine of a train or diesel-powered highway
vehicle (but not off-highway business use)
In foreign trade
Certain helicopter and fixed-wing aircraft uses
Exclusive use by a qualified blood collector organization
In a highway vehicle owned by the United States that isn't used on a highway
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
In military aircraft
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Chapter 2
Fuel used between airfield and farm.
Fuel used by an aerial applicator for the direct
flight between the airfield and one or more
farms is treated as a farming purpose.
Fuel not used for farming. Fuel isn't used
on a farm for farming purposes if it's used in any
of the following ways.
• Off the farm, such as on the highway or in
noncommercial aviation, other than fuel
used between the airfield and farm described above, 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. Don't 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.
Generally, this use doesn't 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 doesn't qualify.
Highway vehicle. A highway vehicle is any
self-propelled vehicle designed to carry a load
over public highways, whether or not it's 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.
Fuel Tax Credits and Refunds
Page 17
Vehicles not considered highway vehicles. Generally, the following kinds of vehicles
aren’t considered highway vehicles for purposes of the credit or refund of fuel taxes.
1. Specially designed mobile machinery
for nontransportation functions. A
self-propelled vehicle isn't a highway vehicle if all the following apply.
a. 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.
b. The chassis has been specially designed to serve only as a mobile carriage and mount (and power source, if
applicable) for the machinery or
equipment, whether or not the machinery or equipment is in operation.
c. The chassis couldn’t, because of its
special design and without substantial
structural modification, be used as
part of a vehicle designed to carry any
other load.
d. The vehicle must have traveled less
than 7,500 miles on public highways
during the taxable year.
2. Vehicles specially designed for
off-highway transportation. A vehicle
isn't 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 vehicle'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 doesn't matter that the vehicle can carry
heavier loads off highway than it's allowed
to carry over the highway.
3. Nontransportation trailers and semitrailers. A trailer or semitrailer isn't treated
as a highway vehicle if it's 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 isn't a highway
vehicle.
Public highway. A public highway includes
any road in the United States that isn't a private
roadway. This includes federal, state, county,
and city roads and streets.
Registered. A vehicle is considered registered
when it's 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's operated or situated. Any highway vePage 18
Chapter 2
hicle operated under a dealer's tag, license, or
permit's considered registered. A highway vehicle isn't 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 doesn't 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 doesn't 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 isn't
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 can't treat fuel
lost or destroyed through spillage, fire, or other
casualty as fuel used in an off-highway business use.
Export (No. 3). Export means fuel transported
from the United States with the intention that the
fuel remain in a foreign country or possession of
the United States. Fuel isn't exported if it's in the
fuel supply tank of a vehicle or aircraft.
able 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
don't 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 doesn't
qualify when its operator uses it to provide exclusive services to only one person, group, or
organization. Also, intercity bus transportation
doesn't include transporting students and employees of schools or intercity transportation in
a qualified local bus.
In a qualified local bus (No. 6). In a qualified
local bus means fuel used in a bus meeting all
the following requirements.
• it's 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's 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's 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 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 don't include boats
used for both sport fishing and commercial fishing on the same trip.
In a school bus (No. 7). 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.
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 avail-
For diesel fuel and kerosene (other than
kerosene used in aviation) used other than
as a fuel (No. 8). Diesel fuel and kerosene
(other than kerosene used in aviation) used
Fuel Tax Credits and Refunds
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:
• For home heating, lighting, and cooking;
• In boats;
• In stationary machines, such as generators
and compressors;
• For cleaning purposes; or
• In minibikes and snowmobiles.
In foreign trade (No. 9). In foreign trade
means fuel used in civil aircraft employed in foreign trade or trade between the United States
and any of its possessions. The term trade includes the transportation of persons or property
for hire and the making of the necessary preparations for such transportation. 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 aircraft
uses (No. 10). Includes:
Certain helicopter uses. Certain helicopter uses means fuel used by a helicopter for any
of the following purposes.
1. Transporting individuals, equipment, or
supplies in the exploration for, or the development or removal of, hard minerals,
oil, or gas.
2. Planting, cultivating, cutting, transporting,
or caring for trees (including logging operations).
3. Providing emergency medical transportation.
During a use described in items (1) and (2),
the helicopter must not takeoff 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 aircraft uses. Fixed-wing aircraft uses means fuel used by a fixed-wing aircraft for any of the following purposes.
1. Planting, cultivating, cutting, transporting,
or caring for trees (including logging operations).
2. Providing emergency medical transportation. The aircraft must be equipped for,
and exclusively dedicated on that flight to,
acute care emergency medical services.
During a use described in item (1), the aircraft
must not takeoff 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.
Exclusive use by a qualified blood collector
organization (No. 11). Exclusive use by a
qualified blood collector organization means
fuel used by the qualified blood collector organi-
zation for its exclusive use in the collection,
storage, or transportation of blood.
Qualified blood collector organization.
A qualified blood collector organization is one
that is:
• Described in section 501(c)(3) and exempt
from tax under section 501(a),
• Primarily engaged in the activity of collecting human blood,
• Registered by the IRS, and
• Registered by the Food and Drug Administration to collect blood.
In a highway vehicle owned by the United
States that isn't used on a highway (No.
12). In a highway vehicle owned by the United
States that isn't used on a highway means fuel
used in a vehicle that wasn't 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) that meets both of the
following requirements.
• It has a regular faculty and curriculum.
• It has a regularly enrolled body of students
who attend the place where the instruction
normally occurs.
A nonprofit educational organization also includes a school operated by a church or other
organization described in section 501(c)(3) 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.
1. It's exempt from income tax as an organization described in section 501(c)(3).
2. It's operated as a museum under a state
(or District of Columbia) charter.
3. It's 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).
Chapter 2
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.
In commercial aviation (other than foreign
trade). See Commercial aviation, earlier, for
the definition.
Use in a train. 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.
Biodiesel or Renewable
Diesel Mixture Credit,
Alternative Fuel Credit,
and Alternative Fuel
Mixture Credit
The section 6426 credit for biodiesel and alternative fuel consists of the biodiesel or renewable diesel mixture credit, alternative fuel credit,
and alternative fuel mixture credit.
Coordination with income tax credit. Only
one credit may be claimed for any amount of biodiesel or renewable diesel. If any amount is
claimed (or will be claimed) for any amount of
biodiesel or renewable diesel on Form 720,
Form 8849, or Form 4136, then a claim can't be
made on Form 8864 for that amount of biodiesel or renewable diesel.
Biodiesel or renewable diesel mixture
credit claimant. Claimant produced a biodiesel mixture by mixing biodiesel with diesel fuel.
Claimant produced a renewable diesel mixture
by mixing renewable diesel with diesel fuel
(other than renewable diesel).
The person that produced and sold or used
the mixture in their trade or business is the only
person eligible to make this claim. The credit is
based on the gallons of biodiesel or renewable
diesel in the mixture.
Renewable diesel doesn't include any
fuel derived from coprocessing bioCAUTION mass (as defined in section 45K(c)(3))
with a feedstock that isn't biomass.
!
Claim requirements. See the Instructions for
Form 720 for the biodiesel or renewable diesel
mixture claim requirements.
Alternative fuel credit claimant. For the alternative fuel credit, the registered alternative
fueler who (1) sold an alternative fuel at retail
and delivered it into the fuel supply tank of a
motor vehicle or motorboat; (2) sold an alternative fuel, delivered it in bulk for taxable use in a
motor vehicle or motorboat, and received required statement from the buyer; (3) used an alternative fuel (not sold at retail or in bulk as previously described) motor vehicle or motorboat;
or (4) sold an alternative fuel used as a fuel in
aviation is the only person eligible to make this
claim.
Fuel Tax Credits and Refunds
Page 19
Carbon capture requirement. A credit for
Fischer-Tropsch process liquid fuel derived
from coal (including peat) can be claimed only if
the fuel is derived from coal produced at a gasification facility that separates and sequesters at
least 75% of the facility's total carbon dioxide
emissions.
Alternative fuel credit. The registered alternative fueler is the person eligible to make the
claim. An alternative fueler is the person liable
for tax on alternative fuel under the rules for taxable events for Other Fuels (discussed in chapter 1) or would be liable but for an exemption for
nontaxable uses. An alternative fueler includes
a person who sells for use or uses an alternative fuel in aviation.
Alternative fuel mixture credit claimant.
For the alternative fuel mixture credit, the registered alternative fueler that produced and sold
or used the mixture as a fuel in their trade or
business is the only person eligible to make this
claim. The credit is based on the gallons of alternative fuel in the mixture. An alternative fuel
mixture is a mixture of alternative fuel and section 4081 taxable fuel (gasoline, diesel fuel, or
kerosene).
For claims made on or after January 8,
2018, “alternative fuel mixture” means
CAUTION a mixture of taxable fuel and alternative
fuel other than liquefied petroleum gas (LPG),
compressed natural gas (CNG), liquefied natural gas (LNG), liquefied gas derived from biomass, or compressed gas derived from biomass.
!
Registration. You must be registered by the
IRS to be eligible to claim the section 6426 fuel
credit. See Registration Requirements in chapter 1.
Credits for fuel provide incentive for United
States production. The section 6426 fuel
credit may not be claimed for biodiesel or alternative fuel that is produced outside the United
States for use as a fuel outside the United
States. The United States includes any possession of the United States.
No credit for fuels derived from paper or
pulp production. Credit for alternative fuels
and alternative fuel mixtures isn't available for
any fuel derived from the production of paper or
pulp.
Filing Claims
This section tells you how to make a claim for a
credit or refund of excise taxes on fuels. This
section also covers recordkeeping requirements and when to include the credit or refund
in your income.
Generally, you will provide all the information needed to claim a credit or refund when
you properly complete Form 8849, Form 4136,
Schedule C (Form 720), Form 6478, or Form
8864. In some cases, you will have to attach additional information. You need to keep records
that support your claim for a credit or refund.
Page 20
Chapter 2
Keep at your principal place of business all records needed to enable the
RECORDS IRS to verify that you are the person
entitled to claim a credit or refund and the
amount you claimed.
Ultimate purchaser. Ultimate purchasers may
make claims for the nontaxable use of fuels on
Form 4136, Schedule 1 (Form 8849), and
Schedule C (Form 720) if reporting excise tax liability on that return. If you are an ultimate purchaser, you must keep the following records.
• The number of gallons purchased and
used during the period covered by your
claim.
• The dates of the purchases.
• The names and addresses of suppliers
and amounts purchased from each in the
period covered by your claim.
• The nontaxable use for which you used the
fuel.
• The number of gallons used for each nontaxable use.
it's important that your records show separately
the number of gallons used for each nontaxable
use that qualifies as a claim. If the fuel is exported, you must have proof of exportation.
For more information about keeping records, see Publication 583, Starting a Business
and Keeping Records, or chapter 1 of Publication 17, Your Federal Income Tax for Individuals.
Exceptions.
1. Generally, the ultimate purchaser may not
claim a credit or refund for undyed diesel
fuel, undyed kerosene, or kerosene for
use in aviation sold for the exclusive use of
a state or local government. However, see
Claims by credit card issuers, later, for an
exception.
2. The ultimate purchaser may not claim a
credit or refund as follows.
a. The ultimate purchaser of gasoline or
aviation gasoline used by a state or
local government for its exclusive use
or by a nonprofit educational organization for its exclusive use may waive
its right to make a claim by providing a
certificate that is signed under penalties of perjury by a person authorized
to bind the ultimate purchaser and is
in the same format as the Model Certificate M. A new certificate is required
each year or when any information in
the current certificate expires.
b. The ultimate purchaser of kerosene
for use in commercial aviation or noncommercial aviation (other than nonexempt, noncommercial aviation and
exclusive use by a state, political subdivision of a state, or the District of
Columbia) may waive its right to make
a claim by providing a waiver that is
signed under penalties of perjury by a
person authorized to bind the ultimate
purchaser and is in the same format
as the Model Waiver L. A new waiver
is required each year or when any information in the current waiver expires.
Fuel Tax Credits and Refunds
c. The ultimate purchaser of undyed diesel fuel or undyed kerosene used in
certain intercity and local buses may
waive its right to make a claim by providing a waiver that is signed under
penalties of perjury by a person authorized to bind the ultimate purchaser and is in the same format as
the Model Waiver N. A new waiver is
required each year or when any information in the current waiver expires.
d. The ultimate purchaser of kerosene
for use in nonexempt, noncommercial
aviation must provide a certificate that
is signed under penalties of perjury by
a person authorized to bind the ultimate purchaser and is in the same
format as the Model Certificate Q. A
new certificate is required each year
or when any information in the current
certificate expires.
Registered ultimate vendor. Registered ultimate vendors may make claims for certain
sales of fuels on Form 4136, Schedule 2 (Form
8849), and Schedule C (Form 720) if reporting
excise tax liability on that return. If you are a
registered ultimate vendor, you must keep certain information pertaining to the sale of the fuel.
To make a claim, you must have sold the
fuel at a tax-excluded price, repaid the tax to
the buyer, or obtained the buyer's written consent to the allowance of the claim. You are required to have a valid certificate or waiver in
your possession in order to make the claim.
In addition, you must have a registration
number that hasn’t been revoked or suspended. See Form 637.
State use. To make a claim as an ultimate
vendor (state), you must have a UV registration
number and the fuel can't be purchased with a
credit card as explained below. If you sell
undyed diesel fuel, undyed kerosene, or kerosene for use in aviation for use by a state or local government, you must keep the following information.
• The name and taxpayer identification number of each person (government unit) that
bought the fuel.
• The number of gallons sold to each person.
• An unexpired certificate from the buyer.
See Model Certificate P in the Appendix.
The certificate expires on the earlier of 1
year after the date of the certificate or the
date a new certificate is given to the registered ultimate vendor.
Nonprofit educational organization and
state use. To make a claim as an ultimate vendor (nonprofit educational organization or
state), you must have a UV registration number
and the fuel can't be purchased with a credit
card as explained later. If you sell gasoline or
aviation gasoline to a nonprofit educational organization for its exclusive use or to a state or
local government for its exclusive use, you must
keep the following information.
• The name and taxpayer identification number of each person (nonprofit educational
organization or government unit) that
bought the fuel.
• The number of gallons sold to each per-
son.
• An unexpired certificate from the buyer.
See Model Certificate M in the Appendix.
The certificate expires on the earlier of 1
year after the date of the certificate or the
date a new certificate is given to the registered ultimate vendor.
Blocked pump. To make a claim as an ultimate vendor (blocked pump), you must have a
UP registration number. If you sell undyed kerosene (other than kerosene for use in aviation)
from a pump that qualifies as a blocked pump
because it's locked by you after each sale and
is unlocked by you at the request of the buyer,
you must keep the following information for
each sale of more than 5 gallons.
• The date of each sale.
• The name and address of the buyer.
• The number of gallons sold to that buyer.
Certain intercity and local bus use. To
make a claim as an ultimate vendor of undyed
diesel fuel or undyed kerosene used in certain
intercity and local buses, you must have a UB
registration number. You must keep the following information.
• The date of each sale.
• The name and address of the buyer.
• The number of gallons sold to the buyer.
• A copy of the waiver signed by the buyer at
the time the credit or payment is claimed.
See Model Waiver N in the Appendix.
Kerosene for use in commercial aviation
or noncommercial aviation. To make a claim
as an ultimate vendor of kerosene for use in
commercial aviation (other than foreign trade)
or noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive
use by a state, political subdivision of a state, or
the District of Columbia), you must have a UA
registration number. See Kerosene for use in
aviation, earlier, for a list of nontaxable uses.
You must keep the following information.
• The date of each sale.
• The name and address of the buyer.
• The number of gallons sold to the buyer.
• A copy of the waiver signed by the buyer at
the time the credit or payment is claimed.
See Model Waiver L in the Appendix.
Kerosene for use in nonexempt, noncommercial aviation. To make a claim as an
ultimate vendor of kerosene for use in nonexempt, noncommercial aviation, you must
have a UA registration number. You must keep
the following information.
• The date of each sale.
• The name and address of the buyer.
• The number of gallons sold to the buyer.
• A copy of the certificate signed by the
buyer at the time the credit or payment is
claimed. See Model Certificate Q in the
Appendix.
Claims by credit card issuers. For sales of
gasoline, aviation gasoline, diesel fuel, kerosene, or kerosene for use in aviation that are
purchased by an exempt user with the use of a
credit card, the registered credit card issuer is
the only person who can make the claim. An exempt user for this purpose is:
• For gasoline or aviation gasoline, a state or
local government (including essential government use by an Indian tribal government) or a nonprofit educational organization; or
• For diesel fuel, kerosene, or kerosene for
use in aviation, a state or local government
(including essential government use by an
Indian tribal government).
If gasoline is purchased without the use of a
credit card, then the registered ultimate vendor
of the gasoline may make the claim for refund
or credit. However, if the gasoline is purchased
with a credit card issued to a state, but the
credit card issuer isn't registered by the IRS or
doesn't meet the conditions described, the
credit card issuer must collect the tax and the
state may make the claim.
If diesel fuel, kerosene, or kerosene for use
in aviation is purchased without the use of a
credit card, the registered ultimate vendor may
make the claim for refund or credit. A state isn't
allowed to make a claim for these fuels. However, if the diesel fuel or kerosene is purchased
with a credit card issued to a state, but the
credit card issuer isn't registered by the IRS or
doesn't meet the conditions described, the
credit card issuer must collect the tax and the
state may make the claim.
The claim from the credit card issuer must
contain the following information as it applies to
the fuel covered in the claim.
• The total number of gallons.
• Its registration number.
• A statement that it hasn’t collected the
amount of tax from the ultimate purchaser
or has obtained the written consent of the
ultimate purchaser to make the claim.
• A statement that it has repaid or agreed to
repay the amount of tax to the ultimate
vendor, has obtained the written consent
of the ultimate vendor to make the claim, or
has otherwise made arrangements which
directly or indirectly provide the ultimate
vendor with reimbursement of the tax.
• Has in its possession an unexpired certificate similar to Model Certificate R in the
Appendix and has no reason to believe
any of the information in the certificate is
false.
Taxpayer identification number. To file a
claim, you must have a taxpayer identification
number. Your taxpayer identification number
can be an:
• Employer identification number (EIN),
• Social security number (SSN), or
• Individual taxpayer identification number
(ITIN), if you are an alien individual and
don't have and aren’t eligible to get an
SSN.
If you normally file only a U.S. individual income tax return (such as Form 1040 or
1040NR), use your SSN or ITIN. You get an
SSN by filing Form SS-5, Application for a Social Security Card, with the Social Security Administration. To get an ITIN, file Form W-7, Application
for
IRS
Individual
Taxpayer
Identification Number, with the IRS.
If you operate a business, use your EIN. If
you don't have an EIN, you may apply for one
Chapter 2
online. Go to the IRS website at IRS.gov/
Businesses/Small and click on the “Employer ID
Numbers (EINs)” link. You may also apply for
an EIN by faxing or mailing Form SS-4, Application for Employer Identification Number, to the
IRS.
Claiming A Refund
Generally, you may claim a refund of excise
taxes on Form 8849. Complete and attach to
Form 8849 the appropriate Form 8849 schedules. The instructions for Form 8849 and the
separate instructions for each schedule explain
the requirements for making a claim for refund.
If you file Form 720, you can use the Schedule C (Form 720) for your refund claims for the
quarter. See the Instructions for Form 720.
Don't claim a refund on Form 8849 for any
amount for which you have filed or will file a
claim on Schedule C (Form 720) or Form 4136.
Only one claim may be made for any particular amount of alternative fuel.
Claiming a Credit on Form
4136
A credit may be claimed for certain uses and
sales of fuels on Form 4136 when you file your
income tax return at the end of the year. If you
meet certain requirements (discussed earlier),
you may be able to make a claim during the
year.
Credit only. You can claim the following
taxes only as a credit on Form 4136.
• Tax on fuels used for nontaxable uses if
the total for your tax year is less than $750.
• Tax on fuel you didn’t include in any claim
for refund previously filed for any quarter of
your tax year.
• Tax on fuel you used in mobile machinery
(off-highway business use) that traveled
less than 7,500 miles on public highways.
Don't claim a credit for any amount for which
you have filed a refund claim on Form 8849 or
credit on Schedule C (Form 720).
When to file. You can claim a fuel tax credit on
your income tax return for the year you used the
fuel (or sold the fuel in the case of a registered
ultimate vendor claim).
You may be able to make a fuel tax
TIP claim on an amended income tax re-
turn for the year you used the fuel.
Generally, you must file an amended return by
the later of 3 years from the date you filed your
original return or within 2 years from the date
you paid the income tax.
How to claim a credit. How you claim a credit
depends on whether you are an individual, partnership, corporation, S corporation, or farmers'
cooperative association.
Individuals. You claim the credit on the
“Credits from” line of Form 1040. Also check
box b on that line. If you wouldn’t otherwise
have to file an income tax return, you must do
so to get a fuel tax credit.
Fuel Tax Credits and Refunds
Page 21
Partnerships. Partnerships (other than
electing large partnerships) claim the credit by
including a statement on Schedule K-1 (Form
1065), Partner's Share of Income, Deductions,
Credits, etc., showing each partner's share of
the number of gallons of each fuel sold or used
for a nontaxable use, the type of use, and the
applicable credit per gallon. Each partner
claims the credit on his or her income tax return
for the partner's share of the fuel used by the
partnership.
Other entities. Corporations, S corporations, farmers' cooperative associations, and
trusts must make the claim on the appropriate
line of their applicable income tax return.
Federal, state, and local governments, and
certain tax-exempt organizations (as discussed
earlier under Claiming a Refund) must use
Form 8849, not Form 4136, to make an annual
claim.
Including the Credit or
Refund in Income
In most situations, the amount claimed
as a credit or refund will be less than
CAUTION the amount deducted as fuel tax expense because the LUST tax is generally not
refunded.
!
Include any credit or refund of excise taxes on
fuels in your gross income if you claimed the total cost of the fuel (including the excise taxes)
as an expense deduction that reduced your income tax liability.
The year you include a credit or refund in
gross income depends on whether you use the
cash or an accrual method of accounting.
Cash method. If you use the cash method and
file a claim for refund, include the refund
amount in your gross income for the tax year in
which you receive the refund. If you claim a
credit on your income tax return, include the
credit amount in gross income for the tax year in
which you file Form 4136. If you file an amended return and claim a credit, include the credit
amount in gross income for the tax year in
which you receive the credit.
Example 1. Sharon Brown, a cash basis
farmer, filed her 2021 Form 1040 on March 3,
2022. On her Schedule F (Form 1040), Sharon
deducted the total cost of gasoline (including
$110 of excise taxes) used on the farm. Then,
on Form 4136, Sharon claimed $108 as a
Page 22
Chapter 2
credit. Sharon reports the $108 as additional income on her 2022 Schedule F (Form 1040).
Example 2. March Corporation uses the
calendar year as its tax year. For 2021, the following amounts of excise tax were included in
the cost of gasoline the corporation used each
quarter in a nontaxable use.
Calendar Quarters
Jan. 1 – March 31
. . . .
Fuel Tax
Expense
Fuel Tax
Claim
. . . . . .
$1,300
$1,293
. . . . . . .
1,100
1,094
July 1 – Sept. 30
. . . . . . .
400
397
Oct. 1 – Dec. 31
. . . . . . .
300
298
$3,100
$3,082
April 1 – June 30
Total
The corporation deducts the entire cost of
the gasoline (including the $3,100 in excise
taxes) it used during the year as a business expense on its corporation income tax return,
thereby reducing its corporate income tax liability for that year.
Form 8849. March Corporation files quarterly refund claims for the first 2 quarters (ending March 31 and June 30). It can't file a quarterly refund claim for the third or fourth quarter
because it didn’t meet the $750 minimum requirement.
Since March Corporation uses the cash
method of accounting, the corporation includes
$2,387 ($1,293 + $1,094) in its gross income for
the tax year in which it receives the refunds
(2021).
Form 4136. The corporation claims the remaining amounts ($397 + $298) as a credit on
its 2021 income tax return by attaching Form
4136. It files its tax return in 2022. It includes
this credit ($695) in its 2022 gross income.
Example 3. Tyler S. Sands used undyed
diesel fuel in vehicles used in his construction
business. The vehicles weren’t registered (or
required to be registered) for highway use. In
the fourth quarter of his 2021 income tax year,
which ends in December, he used 3,000 gallons of undyed diesel fuel. The excise tax on
the 3,000 gallons of undyed diesel fuel he used
was $732 (tax of $.244 per gallon).
Because the tax is less than $750, Tyler
must claim a credit for the tax on his 2021 income tax return. He fills out Form 4136 and attaches it to his 2021 income tax return, which
he files in 2022. He enters $729 (credit of $.243
Fuel Tax Credits and Refunds
per gallon) on the “Credits from” line of his Form
1040 and checks box b.
Tyler uses the cash method of accounting.
On his 2021 Schedule C (Form 1040), he deducts the total cost of the fuel, including the tax.
When Tyler files his 2022 Form 1040, he will include the $729 credit shown on his 2021 Form
4136 as additional income on his Schedule C
(Form 1040) for 2022.
Example, continued. For the first 2 quarters
of 2021, Tyler's records show the following.
Quarter
Gallons Used
Claim
Tax Rate
First
Second
2,750
2,500
.243
.243
Claim
Amount
$668.25
607.50
Tyler couldn’t file a claim for a refund for the
first quarter because the amount of the claim
was less than $750. He adds the first quarter
amount ($668.25) to the second quarter amount
($607.50) and claims a refund of $1,275.75 by
filing Form 8849 and Schedule 1 (Form 8849).
The claim must be filed by September 30, 2021,
which is the last day of the first quarter (July –
September) following the last quarter (April –
June) included in the claim. He will have to include the $1,275.75 excise tax refund as additional income on his Schedule C (Form 1040)
for 2021.
Accrual method. If you use an accrual
method, include the amount of credit or refund
in gross income for the tax year in which you
used the fuels (or sold the fuels if you are a registered ultimate vendor). It doesn't matter
whether you filed for a quarterly refund or
claimed the entire amount as a credit.
Example 1. Patty Green uses an accrual
method. She files her 2021 return in April 2022.
On Schedule C (Form 1040), she deducts the
total cost of gasoline (including $155 of excise
taxes) used for an off-highway business use
during 2021. On Form 4136, Patty claims $153
as a credit. She reports the $153 as additional
income on her 2021 Schedule C (Form 1040).
Example 2. Use the same facts as in Example 2 above, except that March Corporation
uses an accrual method of accounting. Since
the nontaxable use occurred in 2021, the corporation reports the $3,082 of excise taxes as income on its 2021 income tax return. This consists of the $2,387 it claimed on Form 8849 and
the $695 it claimed on Form 4136.
Part Two.
Excise Taxes
Other Than Fuel
Taxes
3.
Environmental
Taxes
Environmental taxes are imposed on crude oil
and petroleum products (oil spill liability), the
sale or use of ozone-depleting chemicals
(ODCs), and imported products containing or
manufactured with ODCs. In addition, a floor
stocks tax is imposed on ODCs held on January 1 by any person (other than the manufacturer or importer of the ODCs) for sale or for use
in further manufacture.
Figure the environmental tax on Form 6627. Enter the tax on the appropriate lines of Form 720
and attach Form 6627 to Form 720.
For environmental tax purposes, United States
includes the 50 states, the District of Columbia,
the Commonwealth of Puerto Rico, any possession of the United States, the Commonwealth of
the Northern Mariana Islands, the Trust Territory of the Pacific Islands, the continental shelf
areas (applying the principles of section 638),
and foreign trade zones. No one is exempt from
the environmental taxes, including the federal
government, state and local governments, Indian tribal governments, and nonprofit educational organizations.
Oil Spill Liability Tax
The oil spill liability tax is reported on Form
6627, Environmental Taxes, and Form 720,
Quarterly Federal Excise Tax Return (IRS Nos.
18 and 21). The oil spill liability tax rate is $.09
per barrel and generally applies to crude oil received at a U.S. refinery and to petroleum products entered into the United States for consumption, use, or warehousing. The tax also
applies to certain uses and the exportation of
domestic crude oil.
Crude oil includes crude oil condensates
and natural gasoline. Petroleum products include crude oil, refined and residual oil, and
other liquid hydrocarbon refinery products.
Crude oil. Tax is imposed on crude oil when
it's received at a United Sates refinery. The operator of the refinery is liable for the tax.
Tax is imposed on domestic crude oil used
or exported before it's received at a United
States refinery. However, the use of crude oil
for extracting oil or natural gas on the premises
where such crude oil was produced isn't taxable. The user or exporter is liable for the tax.
Imported petroleum products. Tax is imposed on petroleum products when they enter
the United States for consumption, use, or
warehousing. The person entering the petroleum product into the country is liable for the
tax, including the tax on imported crude oil,
even if it's subsequently received at a U.S. refinery.
Tax is imposed only once on any imported
petroleum product. Thus, the operator of a U.S.
refinery that receives imported crude oil must
establish that the petroleum tax has already
been imposed on such crude oil in order not to
be liable for the tax.
Ozone-Depleting
Chemicals (ODCs)
For a list of the taxable ODCs and tax rates, see
the Form 6627 instructions.
Taxable event. Tax is imposed on an ODC
when it's first used or sold by its manufacturer
or importer. The manufacturer or importer is liable for the tax.
Use of ODCs. You use an ODC if you put it
into service in a trade or business or for the production of income. Also, an ODC 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 isn't a use of the ODC.
The creation of a mixture containing an ODC
is treated as a taxable use of the ODC contained in the mixture. An ODC is contained in a
mixture only if the chemical identity of the ODC
isn't 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 on Form 6627. You can revoke this
choice only with IRS consent.
The creation of a mixture for export or for
use as a feedstock isn't a taxable use of the
ODCs contained in the mixture.
Exceptions. The following may be exempt
from the tax on ODCs.
• Metered-dose inhalers.
• Recycled ODCs.
• Exported ODCs.
• ODCs used as feedstock.
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
as the sample certificate set forth in Regulations
section 52.4682-2(d)(5). The certificate may be
included as part of the sales documentation.
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 website is 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. See Form
637, Application for Registration (for Certain Excise Tax Activities). Also, 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 same form as the sample certificate set forth in Regulations section
52.4682-5(d)(3). The tax benefit of this exemption is limited. For more information, see Regulations section 52.4682-5.
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 as
use as a feedstock, but use of an ODC in a mixture doesn't 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 same form as the sample
certificate set forth in Regulations section
Chapter 3
Environmental Taxes
Page 23
52.4682-2(d)(2). Keep the certificate with your
records.
Credits or refunds. A credit or refund (without
interest) of tax paid on ODCs may be claimed if
a taxed ODC is:
• Used as a propellant in a metered-dose inhaler (the person who used the ODC as a
propellant may file a claim),
• Exported (the manufacturer may file a
claim), or
• Used as a feedstock (the person who used
the ODC may file a claim).
For information on how to file for credits or refunds, see the Instructions for Form 720 or
Schedule 6 (Form 8849).
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 EPA as proof that the
ODCs were exported.
Imported Taxable Products
An imported product containing or manufactured with ODCs is subject to tax if it's entered
into the United States for consumption, use, or
warehousing and is listed in the Imported Products Table. The Imported Products Table is listed in Regulations section 52.4682-3(f)(6).
The tax is based on the weight of the ODCs
used in the manufacture of the product. Use the
following methods to figure the ODC weight.
• The actual (exact) weight of each ODC
used as a material in manufacturing the
product.
• If the actual weight can't be determined,
the ODC weight listed for the product in the
Imported Products Table.
However, if you can't determine the actual
weight and the table doesn't list an ODC weight
for the product, the rate of tax is 1% of the entry
value of the product.
Taxable event. Tax is imposed on an imported
taxable product when the product is first sold or
used by its importer. The importer is liable for
the tax.
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 isn't 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
haven’t 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 effecPage 24
Chapter 3
Environmental Taxes
tive 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.
• The importer has consistently treated the
sale of similar items as the first sale or use
of similar taxable imported products.
• The importer hasn’t chosen to treat entry
into the United States as use of the product.
Imported products table. The table lists all
the products that are subject to the tax on imported taxable products and specifies the ODC
weight (discussed later) of each product.
Each listing in the table identifies a product
by name and includes only products that are
described by that name. Most listings identify a
product by both name and Harmonized Tariff
Schedule (HTS) heading. In those cases, a
product is included in that listing only if the
product is described by that name and the rate
of duty on the product is determined by reference to that HTS heading. A product is included
in the listing even if it's manufactured with or
contains a different ODC than the one specified
in the table.
Part II of the table lists electronic items that
aren’t included within any other list in the table.
An imported product is included in this list only
if the product meets one of the following tests.
• it's an electronic component whose operation involves the use of nonmechanical
amplification or switching devices such as
tubes, transistors, and integrated circuits.
• It contains components described in (1),
which account for more than 15% of the
cost of the product.
These components don’t include passive
electrical devices, such as resistors and capacitors. Items such as screws, nuts, bolts, plastic
parts, and similar specially fabricated parts that
may be used to construct an electronic item
aren’t themselves included in the listing for
electronic items.
For example, floppy disk drive units are listed in Part III because they aren’t 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 that 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. To request a modification, see Regulations section 52.4682-3(g)
for the mailing address and information that
must be included in the request.
Floor Stocks Tax
Tax is imposed on any ODC held (other than by
the manufacturer or importer of the ODC) on
January 1 for sale or use in further manufacturing. The person holding title (as determined under local law) to the ODC is liable for the tax,
whether or not delivery has been made.
These chemicals are taxable without regard
to the type or size of storage container in which
the ODCs are held. The tax may apply to an
ODC whether it's in a 14-ounce can or a
30-pound tank.
You are liable for the floor stocks tax if you
hold any of the following on January 1.
1. At least 400 pounds of ODCs other than
halons or methyl chloroform,
2. At least 50 pounds of halons, or
3. At least 1,000 pounds of methyl chloroform.
Rules for listing products. Products are
listed in the table according to the following
rules.
If you are liable for the tax, prepare an inventory on January 1 of the taxable ODCs held on
that date for sale or for use in further manufacturing. You must pay this floor stocks tax by
June 30 of each year. Report the tax on Form
6627 and Part II of Form 720 for the second calendar quarter.
1. A product is listed in Part I of the table if it's
a mixture containing ODCs.
For the tax rates, see the Form 6627 instructions.
2. A product is listed in Part II of the table if
the Commissioner has determined that the
ODCs used as materials in the manufacture of the product under the predominant
method are used for purposes of refrigeration or air conditioning, creating an aerosol
or foam, or manufacturing electronic components.
3. A product is listed in Part III of the table if
the Commissioner has determined that the
product meets both the following tests.
a. It isn't an imported taxable product.
b. It would otherwise be included within
a list in Part II of the table.
ODCs not subject to floor stocks tax. The
floor stocks tax isn't imposed on any of the following ODCs.
1. ODCs mixed with other ingredients that
contribute to achieving the purpose for
which the mixture will be used, unless the
mixture contains only ODCs and one or
more stabilizers.
2. ODCs contained in a manufactured article
in which the ODCs will be used for their intended purpose without being released
from the article.
3. ODCs that have been reclaimed or recycled.
4. ODCs sold in a qualifying sale for:
a. Use as a feedstock,
b. Export, or
c. Use as a propellant in a metered-dose
inhaler.
4.
Communications
and Air
Transportation
Taxes
Excise taxes are imposed on amounts paid for
certain facilities and services. If you receive any
payment on which tax is imposed, you are required to collect the tax, file returns, and pay the
tax over to the government.
If you fail to collect and pay over the taxes, you
may be liable for the trust fund recovery penalty. See chapter 14, later.
Uncollected Tax Report
A separate report is required to be filed by collecting agents of communications services and
air transportation taxes if the person from whom
the facilities or services tax (the tax) is required
to be collected (the taxpayer) refuses to pay the
tax, or it's impossible for the collecting agent to
collect the tax. The report must contain the
name and address of the taxpayer, the type of
facility provided or service rendered, the
amount paid for the facility or service (the
amount on which the tax is based), and the date
paid.
Regular method taxpayers. For regular
method taxpayers, the report must be filed by
the due date of the Form 720 on which the tax
would have been reported.
Alternative method taxpayers. For alternative method taxpayers, the report must be filed
by the due date of the Form 720 that includes
an adjustment to the separate account for the
uncollected tax. See Alternative method in
chapter 11.
Where to file. Don't file the uncollected tax
report with Form 720. Instead, mail the report
to:
Department of the Treasury
Internal Revenue Service
Cincinnati, OH 45999
Communications Tax
A 3% tax is imposed on amounts paid for local
telephone service and teletypewriter exchange
service.
Local telephone service. This includes 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 doesn't also provide access
to a local telecommunications system.
Local-only service. Local-only service is
local telephone service as described above,
provided under a plan that doesn't include long
distance telephone service or that separately
states the charge for local service on the bill to
customers. Local-only service also includes any
facility or services provided in connection with
this service, even though these services and facilities may also be used with long-distance
service.
Private communication service. Private
communication service isn't 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.
Teletypewriter exchange service. This includes 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 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. Don't include
in the tax base state or local sales or use taxes
that are separately stated on the taxpayer's bill.
Exemptions
Payments for certain services or payments from
certain users are exempt from the communications tax.
Nontaxable
service. Nontaxable
service
means bundled service and long distance service. Nontaxable service also includes pre-paid
telephone cards and pre-paid cellular service.
Bundled service. Bundled service is local
and long distance service provided under a
plan that doesn't separately state the charge for
Chapter 4
the local telephone service. Bundled service includes plans that provide both local and long
distance service for either a flat monthly fee or a
charge that varies with the elapsed transmission time for which the service is used. Telecommunications companies provide bundled
service for both landlines and wireless (cellular)
service. If Voice over Internet Protocol service
provides both local and long distance service
and the charges aren’t separately stated, such
service is bundled service.
The method for sending or receiving a call,
such as on a landline telephone, wireless (cellular), or some other method, doesn't affect
whether a service is local-only or bundled.
Long distance service. Long distance
service is telephonic quality communication
with persons whose telephones are outside the
local telephone system of the caller.
Pre-paid telephone cards (PTC). A PTC
will be treated as bundled service unless a PTC
expressly states it's for local-only service. Generally, the person responsible for collecting the
tax is the carrier who transfers the PTC to the
transferee. The transferee is the first person
that isn't a carrier to whom a PTC is transferred
by the carrier. The transferee is the person liable for the tax and is eligible to request a credit
or refund. For more information, see Regulations section 49.4251-4.
The holder is the person that purchases a
PTC to use and not to resell. Holders aren’t liable for the tax and can't request a credit or refund.
Pre-paid cellular telephones. Rules similar to the PTC rules described above apply to
pre-paid cellular telephones. The transferee is
the person eligible to request the credit or refund.
Installation charges. The tax doesn't 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 doesn't apply to
amounts paid for a private line, an answering
service, and a one-way paging or message
service if they don’t 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
doesn't apply to payments for a two-way radio
service that doesn't provide access to a local
telephone system.
Coin-operated telephones. The tax for local
telephone service doesn't apply to payments
made for services by inserting coins in public
coin-operated telephones. 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 doesn't apply to amounts paid for telephones used only to originate calls to a limited
Communications and Air Transportation Taxes
Page 25
number of telephone stations for security entry
into a building. In addition, the tax doesn't apply
to any amounts paid for rented communication
equipment used in the security system.
News services. The tax on teletypewriter exchange service doesn't apply to charges for the
following news services.
• Services dealing exclusively with the collection or dissemination of news for or
through the public press or radio or television broadcasting.
• Services used exclusively in the collection
or dissemination of news by a news ticker
service furnishing a general news service
similar to that of the public press.
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.
International organizations and the American Red Cross. The tax doesn't apply to communication services furnished to an international organization or to the American National
Red Cross.
Nonprofit hospitals. The tax doesn't apply to
telephone services furnished to income tax-exempt nonprofit hospitals for their use. Also, the
tax doesn't 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 doesn't 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.
• It normally maintains a regular faculty and
curriculum.
• It normally has a regularly enrolled body of
pupils or students in attendance at the
place where its educational activities are
regularly carried on.
• it's exempt from income tax under section
501(a).
This includes a school operated by an organization exempt under section 501(c)(3) if the
school meets the above qualifications.
Qualified blood collector organizations.
The tax doesn't apply to telephone services furnished to qualified blood collector organizations
for their use. A qualified blood collector organization is one that is:
• Described in section 501(c)(3) and exempt
from tax under section 501(a),
• Primarily engaged in the activity of collecting human blood,
• Registered with the IRS, and
• Registered by the Food and Drug Administration to collect blood.
Page 26
Chapter 4
Federal, state, and local government. The
tax doesn't 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. See Regulations section 49.4253-11. File the certificate with the provider of the communication services. An exemption certificate isn't required for nontaxable
services.
The following users that are exempt from the
communications tax don’t have to file an annual
exemption certificate after they have filed the initial certificate to claim an exemption from the
communications tax.
• The American National Red Cross and
other international organizations.
• Nonprofit hospitals.
• Nonprofit educational organizations.
• Qualified blood collector organizations.
• State and local governments.
The federal government doesn't have to file
any exemption certificate.
All other organizations must furnish exemption certificates when required.
Credits or Refunds
If tax is collected and paid over for nontaxable
services, or for certain services or users exempt
from the communications tax, the collector or
taxpayer may claim a credit or refund if it has repaid the tax to the person from whom the tax
was collected or obtained the consent of that
person to the allowance of the credit or refund.
Alternatively, the person who paid the tax may
claim a refund. For more information on how to
file for credits or refunds, see the Instructions
for Form 720 or Form 8849.
Collectors. The collector may request a credit
or refund if it has repaid the tax to the person
from whom the tax was collected, or obtained
the consent of that person to the allowance of
the credit or refund. These requirements also
apply to nontaxable service refunds.
Collectors using the regular method for
deposits. Collectors using the regular method
for deposits must use Form 720-X to request a
credit or refund if the collector has repaid the
tax to the person from whom the tax was collected, or obtained the consent of that person to
the allowance of the credit or refund.
Collectors using the alternative method
for deposits. Collectors using the alternative
method for deposits must adjust their separate
accounts for the credit or refund if it has repaid
the tax to the person from whom the tax was
collected, or obtained the consent of that person to the allowance of the credit or refund. For
more information, see the Instructions for Form
720.
Communications and Air Transportation Taxes
Air Transportation Taxes
Taxes are imposed on amounts paid for:
• Transportation of persons by air,
• Use of international air travel facilities, and
• Transportation of property by air.
Aircraft Management
Services
Amounts paid by an aircraft owner for certain
aircraft management services are exempt from
the section 4261 and 4271 excise taxes imposed on transportation by air. An aircraft
owner includes a person that owns an aircraft
and a person that leases an aircraft for 31 days
or more. A person owns an aircraft if the person
holds legal title to the aircraft, or if the person
holds substantial incidents of ownership in the
aircraft for a period of more than 31 days. A lessee of an aircraft includes the beneficiary of an
owner trust that holds legal title to the aircraft.
If an aircraft owner pays an amount to an aircraft management services provider for flights
on the aircraft owner's aircraft, the amount paid
isn't subject to the section 4261 or 4271 excise
tax, even if the aircraft owner is not on the flight.
However, tax may apply if an aircraft owner
pays an amount to an aircraft management
services provider for flights on a substitute aircraft. An allocation is required if an aircraft
owner pays an amount to an aircraft management services provider that includes an amount
attributable to flights on the aircraft owner's aircraft and an amount attributable to flights on a
substitute aircraft.
The aircraft management services exemption does not apply to amounts paid by an aircraft owner for aircraft management services
related to (i) an aircraft that the aircraft owner
has leased for a period of less than 31 days, (ii)
a fractionally owned aircraft; or (iii) an aircraft
used for scheduled passenger service for which
tickets are sold on a seat-by-seat basis to the
general public.
Transportation of
Persons by Air
The tax on transportation of persons by air is
made up of the:
• Percentage tax, and
• Domestic-segment tax.
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 doesn't apply
to amounts paid for mileage awards where the
mileage awards can't, 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.
• Amounts paid for mileage awards that
can't be redeemed for taxable transportation beginning and ending in the United
States aren’t subject to the tax. For this
rule, mileage awards issued by a foreign
air carrier are considered to be usable only
on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States.
Therefore, amounts paid to a foreign air
carrier for mileage awards aren’t subject to
the tax.
• Amounts paid by an air carrier to a domestic air carrier for mileage awards that can
be redeemed for taxable transportation
aren’t subject to the tax to the extent those
miles will be awarded in connection with
the purchase of taxable transportation.
• Amounts paid by an air carrier to a domestic air carrier for mileage awards that can
be redeemed for taxable transportation are
subject to the tax to the extent those miles
won’t be awarded in connection with the
purchase of taxable transportation.
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 below. A segment is a single takeoff and a single
landing.
Note. Generally, the tax on each domestic-segment of taxable air transportation increases annually based on adjustments for inflation.
See the Instructions for Form 720 for the tax
rate.
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
doesn't apply to a segment to or from a rural airport. An airport is a rural airport for a calendar
year if fewer than 100,000 commercial passengers departed from the airport by air during the
second preceding calendar year (the 100,000
passenger rule), and one of the following is
true:
1. The airport isn't located within 75 miles of
another airport from which 100,000 or
more commercial passengers departed
during the second preceding calendar
year,
2. The airport was receiving essential air
service subsidies as of August 5, 1997, or
3. The airport isn't connected by paved roads
to another airport.
To apply the 100,000 passenger rule to any
airport described in (3) above, only count commercial passengers departing from the airport
by air on flight segments of at least 100 miles.
An updated list of rural airports can be found
on the Department of Transportation website at
www.dot.gov and enter the phrase “Essential
Air Service” in the search box.
Taxable transportation. Taxable transportation is transportation by air that meets either of
the following tests.
• It begins and ends either in the United
States or at any place in Canada or Mexico
not more than 225 miles from the nearest
point on the continental United States
boundary (this is the 225-mile zone).
• it's directly or indirectly from one port or
station in the United States to another port
or station in the United States, but only if it
isn't a part of uninterrupted international air
transportation, discussed later.
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 doesn't begin and end in the United
States or in the 225-mile zone if there isn't 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, later.
Transportation between the continental
United States and Alaska or Hawaii. This
transportation is partially exempt from the tax
on transportation of persons by air. The tax
doesn't 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
coastline, 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.
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. An
independent third party that isn't under the airline's supervision or control, but is acting on behalf of, and receiving compensation from, a
passenger, isn't required to collect the tax and
pay it to the government. For more information
on resellers of air transportation, see Revenue
Ruling 2006-52. You can find Revenue Ruling
2006-52 on page 761 of I.R.B. 2006-43, at
IRS.gov/PUB/IRB/IRB2006-43#RR2006-52.
The fact that the aircraft doesn't 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 isn't 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. The tax on transportation of persons by air doesn't 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 doesn't
apply to air transportation by helicopter if the
helicopter is used for any of the following purposes.
1. Transporting individuals, equipment, or
supplies in the exploration for, or the development or removal of, hard minerals,
oil, or gas.
2. Planting, cultivating, cutting, transporting,
or caring for trees (including logging operations).
3. Providing emergency medical transportation.
Liability for tax. The person paying for taxable
transportation is liable for the tax and, ordinarily,
Chapter 4
Communications and Air Transportation Taxes
Page 27
However, during a use described in items
(1) or (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 aircraft uses. The tax doesn't
apply to air transportation by fixed-wing aircraft
if the fixed-wing aircraft is used for any of the
following purposes.
1. Planting, cultivating, cutting, transporting,
or caring for trees (including logging operations).
2. Providing emergency medical transportation. The aircraft must be equipped for,
and exclusively dedicated on that flight to,
acute care emergency medical services.
3. Providing emergency medical transportation if the fixed-wing aircraft is equipped
for, and exclusively dedicated on that flight
to, acute care emergency medical services.
However, during a use described in item (1),
the tax applies if the fixed-wing aircraft 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.
Skydiving. The tax doesn't apply to any air
transportation exclusively for the purpose of
skydiving.
Seaplanes. The tax doesn't apply to any air
transportation by seaplane for any segment
consisting of a takeoff from, and a landing on,
water if the places where the takeoff and landing occur aren’t receiving financial assistance
from the Airport and Airways Trust Fund.
Bonus tickets. The tax doesn't 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.
International
Air Travel Facilities
A tax per person is imposed (whether in or outside the United States) for international flights
that begin or end in the United States. However, for a domestic segment that begins or
ends in Alaska or Hawaii, a reduced tax per
person applies only to departures. This tax
doesn't apply if all the transportation is subject
to the percentage tax, discussed earlier. It also
doesn't apply if the surtax on fuel used in a fractional ownership program aircraft (discussed
earlier) is imposed. See the Instructions for
Form 720 for the tax rates.
Note. Generally, both the tax on the use of
international air travel facilities for any international air transportation, if the transportation
Page 28
Chapter 4
begins or ends in the United States, and the tax
per person for domestic segments that begins
or ends in Alaska or Hawaii (applies to departures only), are increased annually based on inflation adjustments. See the Instructions for
Form 720 for the tax rate.
Transportation of
Property by Air
A tax of 6.25% is imposed on amounts paid
(whether in or outside the United States) for
transportation of property by air. The fact that
the aircraft may not use public or commercial
airports in taking off and landing has no effect
on the tax. The tax applies only to amounts paid
to a person engaged in the business of transporting property by air for hire.
The tax applies only to transportation (including layover time and movement of aircraft in
deadhead service) that begins and ends in the
United States. Thus, the tax doesn't apply to
transportation of property by air that begins or
ends outside the United States.
Exemptions. The tax on transportation of
property by air doesn't apply in the following situations. See also Special Rules on Transportation Taxes, later.
Cropdusting and firefighting service.
The tax doesn't apply to amounts paid for cropdusting or aerial firefighting service.
Exportation. The tax doesn't 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 information.
Certain helicopter and fixed-wing air ambulance uses. The tax doesn't 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 doesn't 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 doesn't apply to any air
transportation exclusively for the purpose of
skydiving.
Excess baggage. The tax doesn't apply to
excess baggage accompanying a passenger
on an aircraft operated on an established line.
Surtax on fuel used in a fractional ownership program aircraft. The tax doesn't apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is
imposed.
Alaska and Hawaii. For transportation of
property to and from Alaska and Hawaii, the tax
in general doesn't apply to the portion of the
transportation that is entirely outside the continental United States (or the 225-mile zone if the
Communications and Air Transportation Taxes
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.
Seaplanes. The tax doesn't apply to any air
transportation by seaplane for any segment
consisting of a takeoff from, and a landing on,
water if the places where the takeoff and landing occur aren’t receiving financial assistance
from the Airport and Airways Trust Fund.
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 isn't 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.
Special Rules on
Transportation Taxes
Aircraft used by affiliated corporations.
The taxes don’t 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 can't 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.
For this rule, an affiliated group of corporations is any group of corporations connected
with a common parent corporation through 80%
or more of stock ownership.
Small aircraft. The taxes don’t 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. However, it doesn't include any time an aircraft is being operated on
a flight that is solely for sightseeing.
Consider an aircraft to be operated on an
established line if it's operated on a charter basis between two cities also served by that carrier on a regularly scheduled basis.
Also, the taxes apply if the aircraft is
jet-powered, regardless of its maximum certificated takeoff weight or whether or not it's operated on an established line.
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.
Credits or refunds. If tax is collected and paid
over for air transportation that isn't taxable air
transportation, the collector may claim a credit
or refund if it has repaid the tax to the person
from whom the tax was collected or obtained
the consent of that person to the allowance of
the credit or refund. Alternatively, the person
who paid the tax may claim a refund. For information on how to file for credits or refunds, see
the Instructions for Form 720 or Form 8849.
5.
Manufacturers
Taxes
The following discussion of manufacturers
taxes applies to the tax on:
• Sport fishing equipment;
• Fishing rods and fishing poles;
• Electric outboard motors;
• Fishing tackle boxes;
• Bows, quivers, broadheads, and points;
• Arrow shafts;
• Coal;
• Taxable tires;
• Gas guzzler automobiles; and
• Vaccines.
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 (unassembled) 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 that 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 sale price.
The manufacturers taxes imposed on the sale
of sport fishing equipment, electric outboard
motors, and bows 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.
1. Include both the following charges in the
price.
a. Any charge for coverings or containers (regardless of their nature).
b. Any charge incident to placing the article in a condition packed ready for
shipment.
2. Exclude all the following amounts from
the price.
a. The manufacturers excise tax,
whether or not it's stated as a separate charge.
b. The transportation charges pursuant
to the sale. The cost of transportation
of goods to a warehouse before their
bona fide sale isn't excludable.
c. Delivery, insurance, installation, retail
dealer preparation charges, and other
charges you incur in placing the article in the hands of the purchaser under a bona fide sale.
d. Discounts, rebates, and similar allowances actually granted to the purchaser.
e. Local advertising charges. A charge
made separately when the article is
sold and that qualifies as a charge for
“local advertising” may, within certain
limits, be excluded from the sale
price.
f. Charges for warranty paid at the purchaser's option. However, a charge
for a warranty of an article that the
manufacturer requires the purchaser
to pay to obtain the article is included
in the sale price on which the tax is
figured.
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.
Example. A manufacturer sells a quantity
of taxable articles and gives the purchaser certain nontaxable articles as a bonus. The sale
price of the shipment is $1,500. The normal
sale price is $2,000: $1,500 for the taxable articles and $500 for the nontaxable articles. Since
the taxable items represent 75% of the normal
sale price, the tax is based on 75% of the actual
sale price, or $1,125 (75% of $1,500). The remaining $375 is allocated to the nontaxable articles.
Taxable Event
Tax attaches when the title to the article sold
passes from the manufacturer to the buyer.
When the title passes depends on the intention
of the parties as gathered from the contract of
sale. In the absence of expressed intention, the
legal rules of presumption followed in the jurisdiction where the sale occurs determine when
title passes.
If the taxable article is used by the manufacturer, the tax attaches at the time use begins.
The manufacturer is liable for the tax.
Partial payments. The tax applies to each
partial payment received when taxable articles
are:
• Leased,
• Sold conditionally,
• Sold on installment with chattel mortgage,
or
• Sold on installment with title to pass in the
future.
To figure the tax, multiply the partial payment by
the tax rate in effect at the time of the payment.
Exemptions
The following sales by the manufacturer are exempt from the manufacturers tax.
• Sale of an article to a state or local government for the exclusive use of the state or
local government. This exemption doesn't
apply to the taxes on coal, gas guzzlers,
and vaccines. State is defined in Definitions in chapter 1.
• Sale of an article to a nonprofit educational
organization for its exclusive use. This exemption doesn't apply to the taxes on coal,
gas guzzlers, and vaccines. Nonprofit educational organization is defined under
Communications Tax in chapter 4.
• Sale of an article to a qualified blood collector organization. This exemption doesn't
apply to gas guzzlers, recreational equipment, and vaccines. Qualified blood collector organizations are defined under
Communications Tax in chapter 4.
• Sale of an article for use by the purchaser
as supplies for vessels. This exemption
doesn't apply to the taxes on coal and vaccines. Supplies for vessels means ships'
stores, sea stores, or legitimate equipment
on vessels of war of the United States or
any foreign nation, vessels employed in
the fisheries or whaling business, or vessels actually engaged in foreign trade.
Chapter 5
Manufacturers Taxes
Page 29
• Sale of an article for use by the purchaser
for further manufacture, or for resale by the
purchaser to a second purchaser for use
by the second purchaser for further manufacture. This exemption doesn't apply to
the tax on coal and tires. Use for further
manufacture means use in the manufacture or production of an article subject to
the manufacturers excise taxes. 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.
• Sale of an article for export or for resale by
the purchaser to a second purchaser for
export. The article may be exported to a
foreign country or to a possession of the
United States. A vaccine shipped to a possession of the United States isn't considered to be exported. If an article is sold tax
free for export and the manufacturer
doesn't receive proof of export, described
later, the manufacturer is liable for the tax.
• Sales of articles of native Indian handicraft,
such as bows and arrow shafts, manufactured by Indians on reservations, in Indian
schools, or under U.S. jurisdiction in
Alaska.
• For tire exemptions, see section 4221(e)
(2).
Requirements for Exempt
Sales
The following requirements must be met for a
sale to be exempt from the manufacturers tax.
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 isn't required for:
• State or local governments,
• Foreign purchasers of articles sold or resold for export,
• The U.S. Government, or
• Parties to a sale of supplies for vessels
and aircraft.
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
Regulations
section
48.4221-5(c) for the certificate requirements.
For sales for use as supplies for vessels and
aircraft, if the manufacturer and purchaser
aren’t registered, the owner or agent of the vessel must provide an exemption certificate to the
manufacturer before or at the time of sale. See
Regulations section 48.4221-4(d) for the certificate requirements.
Page 30
Chapter 5
Manufacturers Taxes
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
Regulations section 48.4221-3(d) 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
Regulations
section
48.4221-2(c) 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.
Credits or Refunds
The manufacturer may be eligible to obtain a
credit or refund of the manufacturers tax for certain uses, sales, exports, and price readjustments. The claim must set forth in detail the
facts upon which the claim is based.
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:
• Exported,
• Used or sold for use as supplies for vessels (except for coal and vaccines),
• Sold to a state or local government for its
exclusive use (except for coal, gas guzzlers, and vaccines),
• Sold to a nonprofit educational organization for its exclusive use (except for coal,
gas guzzlers, and vaccines),
• Sold to a qualified blood collector organization for its exclusive use (except for gas
guzzlers, recreational equipment, and vaccines), or
• Used for further manufacture of another article subject to the manufacturers taxes
(except for coal).
Export. 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,
nonprofit educational organization, or qualified
blood collector organization, the person who
paid the tax must certify on the claim that one of
the following applies and that the claimant has
the required supporting information.
• The claimant sold the article at a tax-excluded price.
• The person has repaid, or agreed to repay,
the tax to the ultimate vendor of the article.
• The person has obtained the written consent of the ultimate vendor to make the
claim.
The ultimate vendor generally is the seller making the sale that gives rise to the overpayment
of tax.
Claim for further manufacture. To claim
a credit or refund for further manufacture the
claimant must include a statement that contains
the following.
• The name and address of the manufacturer and the date of payment.
• An identification of the article for which the
credit or refund is claimed.
• The amount of tax paid on the article and
the date on which it was paid.
• Information indicating that the article was
used as material in the manufacture or production of, or as a component part of, a
second article manufactured or produced
by the manufacturer, or was sold on or in
connection with, or with the sale of a second article manufactured or produced by
the manufacturer.
• An identification of the second article.
For claims by the exporter or shipper, the
claim must contain the proof of export and a
statement signed by the person that paid the
tax waiving the right to claim a credit or refund.
The statement must include the amount of tax
paid, the date of payment, and the office to
which it was paid.
Claim for price readjustment. To claim a
credit or refund for a price readjustment, the
person who paid the tax must include with the
claim, a statement that contains the following.
• A description of the circumstances that
gave rise to the price readjustment.
• An identification of the article whose price
was readjusted.
• The price at which the article was sold.
• The amount of tax paid on the article and
the date on which it was paid.
• The name and address of the purchaser.
• The amount repaid to the purchaser or
credited to the purchaser's account.
Sport Fishing Equipment
A tax of 10% of the sale price is imposed on
many articles of sport fishing equipment sold by
the manufacturer. This includes any parts or accessories sold on or in connection with the sale
of those articles.
Pay this tax with Form 720. No tax deposits
are required.
Sport fishing equipment includes all the following items.
1. Fishing rods and poles (and component
parts), fishing reels, fly fishing lines, and
other fishing lines not over 130 pounds
test, fishing spears, spear guns, and spear
tips.
2. Items of terminal tackle, including leaders,
artificial lures, artificial baits, artificial flies,
fishing hooks, bobbers, sinkers, snaps,
drayles, and swivels (but not including natural bait or any item of terminal tackle designed for use and ordinarily used on fishing lines not described in (1)).
3. The following items of fishing supplies and
accessories: fish stringers, creels, bags,
baskets, and other containers designed to
hold fish, portable bait containers, fishing
vests, landing nets, gaff hooks, fishing
hook disgorgers, and dressing for fishing
lines and artificial flies.
4. Fishing tip-ups and tilts.
5. Fishing rod belts, fishing rodholders, fishing harnesses, fish fighting chairs, fishing
outriggers, and fishing downriggers.
See Revenue Ruling 88-52 in Cumulative Bulletin 1988-1 for a more complete description of
the items of taxable equipment.
Fishing rods and fishing poles. The tax on
fishing rods and fishing poles (and component
parts) is 10% of the sales price not to exceed
$10 per article. The tax is paid by the manufacturer, producer, or importer.
Fishing tackle boxes. The tax on fishing
tackle boxes is 3% of the sales price. The tax is
paid by the manufacturer, producer, or importer.
Electric outboard boat motors. A tax of 3%
of the sale price is imposed on the sale by the
manufacturer of electric outboard motors. This
includes any parts or accessories sold on or in
connection with the sale of those articles.
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, isn't imposed
if the constructive sale price rules under section
4216(b) 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).
draw weight of 30 pounds or more. The tax is
also imposed on the sale of any part or accessory suitable for inclusion in or attachment to a
taxable bow and any quiver, broadhead, or
point suitable for use with arrows described below.
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.
Pay this tax with Form 720. No tax deposits
are required.
Example. If you sell 21,000 pounds (10.5
tons) of coal from an underground mine for
$525, the price per ton is $50. The tax is $1.10
× 10.5 tons ($11.55).
Arrow Shafts
Generally, the section 4161 tax on arrow shafts
increases annually based on inflation adjustments. See Form 720 for the tax rate. The tax is
paid by the manufacturer, producer, or importer
of any arrow shaft (whether sold separately or
incorporated as part of a finished or unfinished
product) of a type used in the manufacture of
any arrow that after its assembly meets either of
the following conditions.
• It measures 18 inches or more in overall
length.
• It measures less than 18 inches in overall
length but is suitable for use with a taxable
bow, described earlier.
Exemption for certain wooden arrows.
The tax doesn't apply to any shaft made of all
natural wood with no laminations or artificial
means of enhancing the spine of such shaft
(whether sold separately or incorporated as part
of a finished or unfinished product) and used in
the manufacture of any arrow that after its assembly meets both of the following conditions.
• It measures 5/16 of an inch or less in diameter.
• It isn't suitable for use with a taxable bow,
described earlier.
Pay this tax with Form 720. No tax deposits
are required.
Coal
Section 4121 imposes a tax on the first sale of
coal mined in the United States. The producer
of the coal is liable for the tax. The producer is
the person who has vested ownership of the
coal under state law immediately after the coal
is severed from the ground. Determine vested
ownership without regard to any contractual arrangement for the sale or other disposition of
the coal or the payment of any royalties between the producer and third parties. A producer includes any person who extracts coal
from coal waste refuse piles (or from the silt
waste product that results from the wet washing
of coal).
The tax isn't imposed on coal extracted from
a riverbed by dredging if it can be shown that
the coal has been taxed previously.
Bows, Quivers,
Broadheads, and Points
Tax rates. The tax on underground-mined coal
is the lower of:
• $1.10 a ton, or
• 4.4% of the sale price.
The tax on bows is 11% (.11) of the sales price.
The tax is paid by the manufacturer, producer,
or importer. It applies to bows having a peak
of:
The tax on surface-mined coal is the lower
• 55 cents a ton, or
• 4.4% of the sale price.
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 isn't 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.
Don't 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 doesn't 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 doesn't apply to coal used as fuel
in the coal drying process since it's 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
isn't 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.
Chapter 5
Manufacturers Taxes
Page 31
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 can't 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 doesn't 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 doesn't 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:
1. The coal is loaded on an export vessel
and title is transferred from the producer to
a foreign purchaser, or
2. The producer sells the coal to an export
broker in the United States under terms of
a contract showing that the coal is to be
shipped to a foreign country.
Proof of export includes any of the following
items.
• A copy of the export bill of lading issued by
the delivering carrier.
• A certificate signed by the export carrier's
agent or representative showing actual exportation of the coal.
• A certificate of landing signed by a customs officer of the foreign country to which
the coal is exported.
• If the foreign country doesn't have a customs administrator, a statement of the foreign consignee showing receipt of the
coal.
Taxable Tires
!
CAUTION
Taxable tires are divided into three categories for reporting and figuring the
tax as described below.
A tax is imposed on taxable tires sold by the
manufacturer, producer, or importer at the rate
of $.0945 ($.04725 in the case of a biasply tire
or super single tire) for each 10 pounds of the
maximum rated load capacity over 3,500
pounds. The three categories for reporting the
tax and the tax rate are listed below.
• Taxable tires other than biasply or super
single tires at $.0945.
• Taxable tires, biasply or super single tires
(other than super single tires designed for
steering) at $.04725.
• Taxable tires, super single tires designed
for steering at $.0945.
Page 32
Chapter 5
Manufacturers Taxes
A taxable tire is any tire of the type used on
highway vehicles if wholly or partially made of
rubber and if marked according to federal regulations for highway use. A biasply tire is a pneumatic tire on which the ply cords that extend to
the beads are laid at alternate angles substantially less than 90 degrees to the centerline of
the tread. A super single tire is a tire greater
than 13 inches in cross section width designed
to replace 2 tires in a dual fitment.
Special rule, manufacturer's retail stores.
The excise tax on taxable tires is imposed at
the time the taxable 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 taxable tire excise tax when the article is
sold (except in the case of an automobile bus
chassis or body with tires).
Also, a credit or refund (without interest) is
allowable on tax-paid tires sold by any person
on, or in connection with, any other article that
is sold or used in an activity listed above.
The person who paid the tax is eligible to
make the claim.
Gas Guzzler Tax
Tax is imposed on the sale by the manufacturer
of automobiles of a model type that has a fuel
economy standard as measured by the Environmental Protection Agency (EPA) of less than
22.5 miles per gallon. If you import an automobile for personal use, you may be liable for this
tax. Figure the tax on Form 6197, as discussed
later. The tax rate is based on fuel economy rating. The tax rates for the gas guzzler tax are
shown on Form 6197.
A person that lengthens an existing automobile is the manufacturer of an automobile.
Tires exempt from tax. The tax on taxable
tires doesn't apply to the following items.
• Domestically recapped or retreaded tires if
the tires have been sold previously in the
United States and were taxable tires at the
time of sale.
• Tire carcasses not suitable for commercial
use.
• Tires for use on qualifying intercity, local,
and school buses. For tax-free treatment,
the registration requirements discussed
earlier under Requirements for Exempt
Sales apply.
• Tires sold for the exclusive use of the Department of Defense or the Coast Guard.
• Tires of a type used exclusively on mobile
machinery. A taxable tire used on mobile
machinery isn't exempt from tax.
Automobiles. An automobile (including limousines) means any four-wheeled vehicle that is:
• Rated at an unloaded gross vehicle weight
of 6,000 pounds or less,
• Propelled by an engine powered by gasoline or diesel fuel, and
• Intended for use mainly on public streets,
roads, and highways.
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).
a. As ambulances or combination ambulance-hearses,
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 on tax-paid tires if the tires
have been:
• Exported;
• Sold to a state or local government for its
exclusive use;
• Sold to a nonprofit educational organization for its exclusive use (as defined under
Communications Tax in chapter 4);
• Sold to a qualified blood collector organization (as defined under Communications
Tax in chapter 4) for its exclusive use in
connection with a vehicle the organization
certifies will be primarily used in the collection, storage, or transportation of blood;
• Used or sold for use as supplies for vessels; or
• Sold in connection with qualified intercity,
local, or school buses.
Vehicles not subject to tax. For the gas
guzzler tax, the following vehicles aren’t considered automobiles.
1. Limousines with a gross unloaded vehicle
weight of more than 6,000 pounds.
2. Vehicles operated exclusively on a rail or
rails.
3. Vehicles sold for use and used primarily:
b. For police or other law enforcement
purposes by federal, state, or local
governments, or
c. For firefighting purposes.
4. Vehicles treated under 49 U.S.C. 32901
(1978) as non-passenger automobiles.
This includes limousines manufactured
primarily to transport more than 10 persons.
The manufacturer can sell a vehicle described in item (3) 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 also applies to automobiles that don’t 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 that has
no assigned fuel economy rating must be either:
• Converted by installation of emission controls to conform in all material respects to
an automobile already certified for sale in
the United States, or
• Modified by installation of emission control
components and individually tested to
demonstrate emission compliance.
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 isn't generally available for modified imported automobiles because
the EPA doesn't 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 category).
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, qualified blood
collector organizations, 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 Form
6197 instructions for more information and the
one-time filing rules.
Credit or refund. If the manufacturer paid the
tax on a vehicle that is used or resold for an
emergency use (see item (3) under Vehicles not
subject to tax), the manufacturer can claim a
credit or refund. For information about how to
file for credits or refunds, see the Instructions
for Form 720 or Form 8849.
Vaccines
Tax is imposed on certain vaccines sold by the
manufacturer in the United States. A taxable
vaccine means any of the following vaccines.
• Any vaccine containing diphtheria toxoid.
• Any vaccine containing tetanus toxoid.
• Any vaccine containing pertussis bacteria,
extracted or partial cell bacteria, or specific
pertussis antigens.
• Any vaccine containing polio virus.
• Any vaccine against measles.
• Any vaccine against mumps.
• Any vaccine against rubella.
• Any vaccine against hepatitis A.
• Any vaccine against hepatitis B.
• Any vaccine against chicken pox.
• Any vaccine against rotavirus gastroenteri•
•
•
•
•
tis.
Any HIB vaccine.
Any conjugate vaccine against streptococcus pneumoniae.
Any trivalent vaccine against influenza or
any other vaccine against influenza.
Any meningococcal vaccine.
Any vaccine against the human papillomavirus.
The effective date for the tax on any vaccine
against influenza, other than trivalent influenza
vaccines, is the later of August 1, 2013, or the
date the Secretary of Health and Human Services lists a vaccine against seasonal influenza
for purposes of compensation for any vaccine-related injury or death through the Vaccine
Injury Compensation Trust Fund.
The tax is $.75 per dose of each taxable
vaccine. The tax per dose on a vaccine that
contains more than one taxable vaccine is $.75
times the number of taxable vaccines.
Taxable use. Any manufacturer (including a
governmental entity) that uses a taxable vaccine before it's sold will be liable for the tax in
the same manner as if the vaccine was sold by
the manufacturer.
Credit or refund. A credit or refund (without
interest) is available if the vaccine is:
• Returned to the person who paid the tax
(other than for resale), or
• Destroyed.
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 written consent of such purchaser to
allowance of the credit or refund.
• Tractors of the kind chiefly used for highway transportation in combination with a
trailer or semitrailer.
A truck is a highway vehicle primarily designed
to transport its load on the same chassis as the
engine, even if it's equipped to tow a vehicle,
such as a trailer or semitrailer.
A tractor is a highway vehicle designed to tow a
vehicle, such as a trailer or semitrailer. A tractor
may carry incidental items of cargo when towing or limited amounts of cargo when not towing.
A sale of a truck, truck trailer, or semitrailer is
considered a sale of a chassis and a body.
The seller is liable for the tax.
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's 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
aren’t considered highway vehicles for purposes of the retail tax.
1. Specially designed mobile machinery
for nontransportation functions. A
self-propelled vehicle isn't a highway vehicle if all the following apply.
6.
Retail Tax on
Heavy Trucks,
Trailers, and
Tractors
A tax of 12% of the sales price is imposed on
the first retail sale of the following articles, including related parts and accessories sold on or
in connection with, or with the sale of, the articles.
• Truck chassis and bodies.
• Truck trailer and semitrailer chassis and
bodies.
Chapter 6
a. 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.
b. The chassis has been specially designed to serve only as a mobile carriage and mount (and power source, if
applicable) for the machinery or
equipment, whether or not the machinery or equipment is in operation.
c. The chassis couldn’t, because of its
special design and without substantial
structural modification, be used as
part of a vehicle designed to carry any
other load.
Retail Tax on Heavy Trucks, Trailers, and Tractors
Page 33
2. Vehicles specially designed for
off-highway transportation. A vehicle
isn't 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 doesn't matter that the vehicle can carry
heavier loads off highway than it's allowed
to carry over the highway.
3. Nontransportation trailers and
semitrailers. A trailer or semitrailer isn't
treated as a highway vehicle if it's 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 isn't
a highway vehicle.
Gross vehicle weight. The tax doesn't apply
to truck chassis and bodies suitable for use with
a vehicle that has a gross vehicle weight (defined below) of 33,000 pounds or less. It also
doesn't 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 that have a
gross vehicle weight of 19,500 pounds or less
and a gross combined weight of 33,000 pounds
or less are excluded from the 12% retail tax.
The following four classifications of truck
body types meet the suitable for use standard and will be excluded from the retail excise
tax.
• Platform truck bodies 21 feet or less in
length.
• Dry freight and refrigerated truck van bodies 24 feet or less in length.
• Dump truck bodies with load capacities of
8 cubic yards or less.
• Refuse packer truck bodies with load capacities of 20 cubic yards or less.
For more information on these classifications,
see Revenue Procedure 2005-19, which is on
page
832
of
I.R.B.
2005-14
at
IRS.gov/PUB/IRB/IRB2015-14#RR2005-19.
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 is determined solely on the basis
of the strength of the chassis frame and the axle
capacity and placement. The seller may not
take into account any readily attachable components (such as tires or rim assemblies) in determining the gross vehicle weight. See Regulations section 145.4051-1(e)(3) for more
information.
Page 34
Chapter 6
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 doesn't apply to parts and
accessories that are spares or replacements.
The tax imposed on parts and accessories
sold on or in connection with the taxable articles
listed earlier and the tax imposed on the separate purchase of parts and accessories (discussed next) for the taxable articles listed earlier don’t apply to an idling reduction device or
insulation that has an R value of at least R35
per inch.
Idling reduction device. An idling reduction device is any device or system of devices
that provide the tractor with services, such as
heat, air conditioning, and electricity, without
the use of the main drive engine while the tractor is temporarily parked or stationary. The device must be affixed to the tractor and determined by the Administrator of the EPA, in
consultation with the Secretary of Energy and
Secretary of Transportation, to reduce idling
while parked or stationary. The EPA discusses
idling reduction technologies on its website at
www.epa.gov/smartway/technology/idling.htm.
Separate purchase. The tax generally applies to the price of a part or accessory and its
installation if the following conditions are met.
• The owner, lessee, or operator of any vehicle that contains a taxable article installs
any part or accessory on the vehicle.
• The installation occurs within 6 months after the vehicle is first placed in service.
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 doesn't apply if the installed part or
accessory is a replacement part or accessory.
The tax also doesn't 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
Retail Tax on Heavy Trucks, Trailers, and Tractors
and accessories (and installation charges) during that period.
Example. You bought a taxable vehicle
and placed it in service on April 8. On May 3,
you bought and installed parts and accessories
at a cost of $850. On July 15, you bought and
installed parts and accessories for $300. Tax of
$138 (12% of $1,150) applies on July 15. Also,
tax will apply to any costs of additional parts
and accessories installed on the vehicle before
October 8.
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.
• There has been a prior taxable sale, lease,
or use of the article (however, see Tax on
resale of tax-paid trailers and semitrailers,
later).
• The sale qualifies as a tax-free sale under
section 4221 (see Sales exempt from tax,
later).
• The seller in good faith accepts from the
purchaser a statement signed under penalties of perjury and executed in good faith
that the purchaser intends to resell the article or lease it on a long-term basis. There
is no registration requirement.
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 domestic use or
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
can't exceed the tax on the resale. See Regulations section 145.4052-1(a)(4) 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 doesn't 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 isn't 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 6-1 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. Don't 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 don’t add a presumed markup to
the tax base. However, you do add a markup if
all the following apply.
• You don’t perform any significant activities
relating to the processing of the sale of a
taxable article.
• The main reason for processing the sale
through you is to avoid or evade the presumed markup.
• You don’t have records proving that the article was sold for a price that included a
markup equal to or greater than the presumed markup percentage.
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
Table 6-1. Tax Base
IF the transaction is a...
THEN figure the base by using the...
Sale by the manufacturer, producer,
importer, or related person
Sales price plus (presumed markup
percentage × sales price)
Sale by the dealer
Total consideration paid for the item including
any charges incident to placing it in a
condition ready for use
Long-term lease by the manufacturer,
producer, importer, or related person
Constructive sales price plus (presumed
markup percentage × constructive sales price)
Short-term lease by the manufacturer,
producer, importer, or related person
Constructive sales price at which such or
similar articles are sold
Long- or Short-term lease by a lessor other
than the manufacturer, producer, importer,
or related person
Price for which the article was sold to the
lessor plus the cost of parts and accessories
installed by the lessor plus a presumed
markup percentage
Short-term lease where the articles are
regularly sold at arm's length
Lowest established retail price in effect at the
time of the taxable use
Chapter 6
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 don't exceed what it would
have cost to ship the article to the dealer.
Exclude amounts charged for machinery or
equipment that doesn't 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 isn't at arm's length if either of the following apply.
• One of the parties is controlled (in law or in
fact) by the other or there is common control, whether or not the control is actually
exercised to influence the sales price.
• The sale is made under special arrangements between a seller and a purchaser.
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, tax
liability 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.
Repairs and modifications. The tax
doesn't 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 doesn't apply to
an article that wasn't subject to the tax when it
was new.
Further manufacture. The tax doesn't 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. Don't
treat a person as engaged in the manufacture
of any article merely because that person combines the article with a:
• Coupling device (including any fifth wheel);
• Wrecker crane;
• Loading and unloading equipment (including any crane, hoist, winch, or power liftgate);
Retail Tax on Heavy Trucks, Trailers, and Tractors
Page 35
• Aerial ladder or tower;
• Ice and snow control equipment;
• Earth moving, excavation, and construc-
process or prepare concrete. This exemption
doesn't apply to the chassis on which the article
is mounted.
•
•
•
•
Sales exempt from tax. The following sales
are ordinarily exempt from tax.
• Sales to a state or local government for its
exclusive use.
• Sales to Indian tribal governments, but
only if the transaction involves the exercise
of an essential tribal government function.
• Sales to a nonprofit educational organization for its exclusive use.
• Sales to a qualified blood collector organization (as defined under Communications
Tax in chapter 4) for its exclusive use in the
collection, storage, or transportation of
blood.
• Sales for use by the purchaser for further
manufacture of other taxable articles (see
below).
• Sales for export or for resale by the purchaser to a second purchaser for export.
• Sales to the United Nations for official use.
tion equipment;
Spreader;
Sleeper cab;
Cab shield; or
Wood or metal floor.
Combining an article with an item in this list
doesn't give rise to taxability. However, see
Parts or accessories discussed earlier.
Articles exempt from tax. The tax on heavy
trucks, trailers, and tractors doesn't 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). Don't 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.
• it's designed to be used as a trash container.
• It isn't designed to carry freight other than
trash.
• It isn't designed to be permanently mounted on or affixed to a truck chassis or body.
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. Further, the tax doesn't 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
Page 36
Chapter 7
Ship Passenger 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, sales to foreign purchasers
for export, and sales for resale or long term
leasing.
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 made the first retail sale of
them.
Credits or refunds. A credit or refund (without
interest) of the retail tax on the taxable articles
described earlier 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:
• Exported,
• Used or sold for use as supplies for vessels,
• Sold to a state or local government for its
exclusive use,
• Sold to a nonprofit educational organization for its exclusive use, or
• Sold to a qualified blood collector organization (as defined underCommunications
Tax in chapter 4) for its exclusive use in the
collection, storage, or transportation of
blood.
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 in chapter 5.
Tire credit. A credit is allowed against the retail tax on the taxable articles described earlier
if taxable 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 taxable tires (discussed earlier). This is the section
4051(d) taxable tire credit and is claimed on
Schedule C (Form 720) for the same quarter for
which the tax on the heavy vehicle is reported.
7.
Ship Passenger
Tax
A tax of $3 per passenger is imposed on certain
ship voyages, as explained later under Taxable
situations. The tax is imposed only once for
each passenger, either at the time of first embarkation or disembarkation in the United
States.
The person providing the voyage (the operator
of the vessel) is liable for the tax.
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 doesn't 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.
Example 1. John Smith works as a guest
lecturer. The cruise line hired him for the benefit
of the passengers. Therefore, he is engaged in
the business of the vessel and isn't a passenger.
Example 2. Marian Green is a travel agent.
She is taking the cruise as a promotional trip to
determine if she wants to offer it to her clients.
She is a passenger.
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 isn't
conducted, sponsored, or operated by the
owner or operator isn't gambling for determining
if the voyage is subject to the ship passenger
tax.
Exemptions. The tax doesn't apply when a
vessel is on a voyage of less than 12 hours between two points in the United States or if a
vessel is owned or operated by a state or local
government.
8.
Foreign
Insurance Taxes
Tax is imposed on insurance policies issued by
foreign insurers. Any person who makes, signs,
issues, or sells any of the documents and instruments subject to the tax, or for whose use or
benefit they are made, signed, issued, or sold,
is liable for the tax.
The following tax rates apply to each dollar (or
fraction thereof) of the premium paid.
1. Casualty insurance and indemnity, fidelity,
and surety bonds: 4 cents. For example,
on a premium payment of $10.10, the tax
is 44 cents.
2. Life, sickness, and accident insurance,
and annuity contracts: 1 cent. For example, on a premium payment of $10.10, the
tax is 11 cents.
3. Reinsurance policies covering any of the
taxable contracts described in items (1)
and (2): 1 cent.
However, the tax doesn't apply to casualty insurance premiums paid to foreign insurers for
coverage of export goods in transit to foreign
destinations.
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.
9.
Who must file. The person who pays the premium to the foreign insurer (or to any nonresident person such as a foreign broker) must pay
the tax and file the return. Otherwise, any person who issued or sold the policy, or who is insured under the policy, is required to pay the
tax and file the return.
Obligations Not
in Registered
Form
The person liable for this tax must keep
accurate records that identify each polRECORDS icy 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.
Tax is imposed on any person who issues a
registration-required obligation not in registered
form. The tax is:
• 1% of the principal of the obligation, multiplied by
• The number of calendar years (or portions
of calendar years) during the period starting on the date the obligation was issued
and ending on the date it matures.
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.
For information on reinsurance premiTIP ums paid from one foreign insurer to
another foreign insurer, see Rev. Rul.
2008-15. You can find Rev. Rul. 2008-15 on
page
633
of
I.R.B.
2008-12
at
IRS.gov/PUB/IRB/IRB2008-12#RR2008-15.
Treaty-based positions under IRC 6114.
You may have to file an annual report disclosing
the amount of premiums exempt from U.S. 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 Instructions for Form 720 for
information on 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.
A registration-required obligation is any obligation other than one that meets any of the following conditions.
1. It's issued by a natural person.
2. It isn't of a type offered to the public.
3. It has a maturity (at issue) of not more than
1 year.
4. It's a tax-exempt bond.
5. It's issued under an arrangement reasonably designed to ensure that the obligation
will be sold only to foreign persons.
For item (5), if the obligation isn't in registered
form, the interest on the obligation must be payable only outside the United States and its possessions. Also, the obligation must state on its
face that any U.S. person who holds it shall be
subject to limits under the U.S. income tax laws.
10.
Indoor Tanning
Services Tax
The tax on indoor tanning service is 10% of the
amount paid for that service. The tax is paid by
the person paying for the services and is collected by the person receiving payment for the indoor tanning services.
Definition of indoor tanning services. Indoor tanning service means a service employing any electronic product designed to incorporate one or more ultraviolet lamps and intended
for the irradiation of an individual by ultraviolet
radiation, with wavelengths in air between 200
and 400 nanometers, to induce skin tanning.
The term doesn't include phototherapy service
Chapter 10
Indoor Tanning Services Tax
Page 37
performed by, and on the premises of, a licensed medical professional (such as a dermatologist, psychologist, or registered nurse). See
regulations section 49.5000B-1 for more information, and special rules for qualified physical
fitness facilities, undesignated payment cards,
and bundled payments.
File Form 720. The person receiving the payment for indoor tanning services (collector)
must collect and remit the tax and file the return.
If the tax isn't collected for any reason, the collector is liable for the tax. The collector isn't required to make semimonthly deposits of the tax.
of applicable self-insured health plans (section
4376) for policy and plan years ending on or after October 1, 2012. Generally, references to
taxes on Form 720 include this fee.
Specified health insurance policies. See
the Instructions for Form 720 revised for the
second quarter of each year for information on
the fee amount. Generally, issuers of specified
health insurance polices must use one of the
following four alternative methods to determine
the average number of lives covered under a
policy for the policy year
1. The actual count method.
2. The snapshot method.
3. The member months method.
4. The state form method.
11.
Patient-Centered
Outcomes
Research Fee
The patient-centered outcomes research fee is
imposed on issuers of specified health insurance policies (section 4375) and plan sponsors
Page 38
Chapter 11
Applicable self-insured health plans. See
the Instructions for Form 720 revised for the
second quarter of each year for information on
the fee amount. Generally, plan sponsors of applicable self-insured health plans must use one
of the following three alternative methods to determine the average number of lives covered
under a plan for the plan year.
1. Actual count method.
2. Snapshot method.
3. Form 5500 method.
Patient-Centered Outcomes Research Fee
Reporting and paying the fee. File Form 720
annually to report and pay the fee on the second quarter Form 720 no later than July 31 of
the calendar year immediately following the last
day of the policy year or plan year to which the
fee applies. If you file Form 720 only to report
the fee, don’t file Form 720 for the first, third, or
fourth quarters of the year. If you file Form 720
to report quarterly excise tax liability for the first,
third, or fourth quarter of the year (for example,
filers reporting the foreign insurance tax (IRS
No. 30)), don’t make an entry on the line for IRS
No. 133 on those filings.
Deposits aren’t required for this fee, so issuers and plan sponsors aren’t required to pay the
fee using Electronic Federal Tax Payment System (EFTPS).
However, if the fee is paid using EFTPS, the
payment should be applied to the second quarter. See Electronic deposit requirement under
How To Make Deposits in chapter 13, later.
More information. For more information, including methods for calculating the average
number of lives covered, see the Instructions for
Form 720, sections 4375, 4376, 4377 and Regulations 46.4375-1; also see T.D. 9602, which
is on page 746 of I.R.B. 2012-52 at
IRS.gov/PUB/IRB/IRB2012-52#TD9602.
Part Three.
Quarterly Filing
Information
12.
Filing Form 720
Use Form 720 to report and pay the excise
taxes previously discussed in this publication.
File Form 720 for each calendar quarter until
you file a final Form 720. For information on filing Form 720 electronically, visit the IRS e-file
website at IRS.gov/eFile.
You may be required to file your returns on a
monthly or semimonthly basis instead of quarterly if you don’t make deposits as required (see
Payment of Taxes, later) or are liable for the excise tax on taxable fuels and meet certain conditions.
Form 720 has three parts and three schedules.
• Part I consists of excise taxes generally required to be deposited (see Payment of
Taxes, later).
• Part II consists of excise taxes that aren’t
required to be deposited.
• Part III is used to figure your tax liability for
the quarter and the amount of any balance
due or overpayment.
• Schedule A, Excise Tax Liability, is used
to record your net tax liability for each semimonthly period in a quarter. Complete it if
you have an entry in Part I.
• Schedule C, Claims, is used to make
claims. However, Schedule C can only be
used if you are reporting a liability in Part I
or Part II.
• Schedule T, Two-Party Exchange Information Reporting, is used to report certain
exchanges of taxable fuel before or in connection with the removal at the terminal
rack.
Attachments to Form 720. You may have
to attach the following forms.
• Form 6197 for the gas guzzler tax.
• Form 6627 for environmental taxes.
Form 720-X. This form is used to make adjustments to Forms 720 filed in prior quarters. You
can file Form 720-X by itself or, if it shows a decrease in tax, you can attach it to Form 720.
See Form 720-X for more information.
Conditions to allowance. For tax decreases, the claimant must check the appropriate
box on Form 720-X stating that:
1. For adjustments of communications or air
transportation taxes, the claimant has:
a. Repaid the tax to the person from
whom it was collected, or
you are making your payment by check or
money order.
b. Obtained the consent of that person
to the allowance of the adjustment.
2. For other adjustments, the claimant has:
a. Not included the tax in the price of the
article and not collected the tax from
the purchaser,
b. Repaid the tax to the ultimate purchaser, or
c. Attached the written consent of the ultimate purchaser to the allowance of
the adjustment.
However, the conditions listed under (2) don’t
apply to environmental taxes, the ship passenger tax, obligations not in registered form, foreign insurance taxes, fuels used on inland waterways, cellulosic or second generation biofuel
sold as but not used as fuel, biodiesel 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, LPG, and CNG).
Final return. File a final return if:
• You go out of business, or
• You won’t owe excise taxes that are reportable on Form 720 in future quarters.
Due dates. Form 720 must be filed by the following due dates.
Quarter Covered
Due Dates
January, February, March . . . . .
April, May, June . . . . . . . . . . . . .
July, August, September . . . . . .
October, November,
December . . . . . . . . . . . . . . . . . .
April 30
July 31
October 31
January 31
If any due date falls on a Saturday, Sunday,
or legal holiday, you can file the return on the
next business day.
One-time filing. If you import a gas guzzling
automobile, you may be eligible to make a
one-time filing using your SSN if you:
• Don't import gas guzzling automobiles in
the course of your trade or business, and
• Aren’t required to file Form 720 reporting
other excise taxes for the calendar quarter,
except for a one-time filing.
If you meet both requirements above, see
Gas guzzler tax (IRS No. 40) in the Instructions
for Form 720 for how to file and pay the tax.
Payment voucher. Form 720-V, Payment
Voucher, must be included with Form 720 if you
have a balance due on line 10 of Form 720 and
13.
Payment of
Taxes
Generally, semimonthly deposits of excise
taxes are required. A semimonthly period is the
first 15 days of a month (the first semimonthly
period) or the 16th through the last day of a
month (the second semimonthly period).
However, no deposit is required for the situations listed below; the taxes are payable with
Form 720.
• The net liability for taxes listed in Part I
(Form 720) doesn't exceed $2,500 for the
quarter.
• The gas guzzler tax is being paid on a
one-time filing.
• The liability is for taxes listed in Part II
(Form 720), except for the floor stocks tax
which generally requires a single deposit.
How To Make Deposits
Electronic deposit requirement. You must
use electronic funds transfer to make excise tax
deposits. Generally, electronic funds transfers
are made using the EFTPS. If you don’t want to
use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or
other trusted third party to make deposits on
your behalf. Also, you may arrange for your financial institution to submit a same-day wire
payment on your behalf.
EFTPS is a free service provided by the Department of Treasury. Services provided by
your tax professional, financial institution, payroll service, or other third party may have a fee.
To get more information about EFTPS or to enroll in EFTPS, visit www.eftps.gov or call
1-800-555-4477. Additional information about
EFTPS is also available in Publication 966,
Electronic Federal Tax Payment System: A
Guide to Getting Started.
Depositing on time. For EFTPS deposits
to be on time, you must submit the transaction
at least 1 day before the date the deposit is due
(by 8:00 p.m. Eastern time).
Chapter 13
Payment of Taxes
Page 39
Same-day wire payment option. If you fail to
submit a deposit transaction on EFTPS by 8:00
p.m. Eastern time the day before the date a deposit is due, you can still make your deposit on
time by using the Federal Tax Collection Service (FTCS). To use the same-day wire payment
method, you will need to make arrangements
with your financial institution ahead of time.
Please check with your financial institution regarding availability, deadlines, and costs. Your
financial institution may charge you a fee for
payments made this way. To learn more about
the information you will need to provide your financial institution to make a same-day wire
payment, visit IRS.gov/Payments and click on
Same-day wire.
You will automatically be enrolled in
TIP EFTPS when you apply for an EIN. You
will receive a separate mailing containing instructions for activating your EFTPS enrollment after you receive your EIN.
When To Make Deposits
There are two methods for determining deposits: the regular method and the alternative
method.
The regular method applies to all taxes in
Part I of Form 720 except for communications
and air transportation taxes if deposits are
based on amounts billed or tickets sold, rather
than on amounts actually collected. See Alternative method below.
If you are depositing more than one tax under a method, combine all the taxes under the
method and make one deposit for the semimonthly period.
Regular method. The deposit of tax for a semimonthly period is due by the 14th day following
that period. Generally, this is the 29th day of a
month for the first semimonthly period and the
14th day of the following month for the second
semimonthly period. If the 14th or the 29th day
falls on a Saturday, Sunday, or legal holiday,
you must make the deposit by the immediately
preceding day that isn't a Saturday, Sunday, or
legal holiday.
Alternative method (IRS Nos. 22, 26, 27,
and 28). Deposits of communications and air
transportation taxes may be based on taxes included in amounts billed or tickets sold during a
semimonthly period instead of on taxes actually
collected during the period. Under the alternative method, the tax included in amounts billed
or tickets sold during a semimonthly period is
considered collected during the first 7 days of
the second following semimonthly period. The
deposit of tax is due by the third banking day after the seventh day of that period.
For an example of the alternative method,
see the Instructions for Form 720.
To use the alternative method, you must
keep a separate account of the tax included in
amounts billed or tickets sold during the month
and report on Form 720 the tax included in
amounts billed or tickets sold and not the
amount of tax that is actually collected. For example, amounts billed in December, January,
Page 40
Chapter 14
and February are considered collected during
January, February, and March and are reported
on Form 720 as the tax for the first quarter of
the calendar year.
The separate account for each month must
reflect:
1. All items of tax included in amounts billed
or tickets sold during the month, and
2. Other items of adjustment relating to tax
for prior months (within the statute of limitations on credits or refunds).
The separate account for any month can't
include an adjustment resulting from a refusal to
pay or inability to collect unless the refusal has
been reported to the IRS. See Uncollected Tax
Report in chapter 4.
The net amount of tax that is considered collected during the semimonthly period must be
either:
• The net amount of tax reflected in the separate account for the corresponding semimonthly period of the preceding month, or
• One-half of the net amount of tax reflected
in the separate account for the preceding
month.
Special rule for deposits of taxes in September. See the Instructions for Form 720 for a
special rule on deposits made in September.
Amount of Deposits
Deposits for a semimonthly period generally
must be at least 95% of the net tax liability for
that period unless the safe harbor rule (discussed later) applies. Generally, you don't have
to make a deposit for a period in which you incurred no tax liability.
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.
!
Don't reduce your liability by any
amounts from Form 720-X.
CAUTION
Safe Harbor Rule
The safe harbor rule applies separately to deposits under the regular method and the alternative method. Persons who filed Form 720 for
the look-back quarter (the second calendar
quarter preceding the current quarter) are considered to meet the semimonthly deposit requirement if the deposit for each semimonthly
period in the current quarter is at least 1/6
(16.67%) of the net tax liability reported for the
look-back quarter.
For the semimonthly period for which the
additional deposit is required, the additional deposit must be at least 11/90 (12.23%), 10/90
(11.12%) for non-EFTPS, of the net tax liability
reported for the look-back quarter. Also, the
total deposit for that semimonthly period must
Penalties and Interest
be at least 1/6 (16.67%) of the net tax liability
reported for the look-back quarter.
Exceptions. The safe harbor rule doesn't
apply to:
• The first and second quarters beginning on
or after the effective date of an increase in
the rate of tax unless the deposit of taxes
for each semimonthly period in the calendar quarter is at least 1/6 (16.67%) of the
tax liability you would have had for the
look-back quarter if the increased rate of
tax had been in effect for that look-back
quarter,
• Any quarter if liability includes any tax not
in effect throughout the look-back quarter,
or
• For deposits under the alternative method,
any quarter if liability includes any tax not
in effect throughout the look-back quarter
and the month preceding the look-back
quarter.
Requirements to be met. For the safe harbor
rule to apply, you must:
• Make each deposit timely at an authorized
financial institution, and
• Pay any underpayment for the current
quarter by the due date of the return.
The IRS may withdraw the right to
make deposits of tax using the safe
CAUTION harbor rule from any person not complying with these rules.
!
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 can't be less than 1/6 of the
refigured tax liability.
14.
Penalties
and Interest
Penalties and interest may result from any of
the following acts.
• Failing to collect and pay over tax as the
collecting agent (see Trust fund recovery
penalty, later).
• Failing to keep adequate records.
• Failing to file returns.
• Failing to pay taxes.
• Filing returns late.
• Filing false or fraudulent returns.
• Paying taxes late.
• Failing to make deposits.
• Depositing taxes late.
• Making false statements relating to tax.
• Failing to register.
• Misrepresenting that tax is excluded from
the price of an article.
Failure to register. The civil penalty for failure
to register if you are required to register, unless
due to reasonable cause, is $10,000 for the initial failure, and then $1,000 each day thereafter
you fail to register.
Claims. There are criminal penalties for false
or fraudulent claims. In addition, any person
who files a refund claim with respect to the use
of certain fuels for an excessive amount (without reasonable cause) may have to pay a civil
penalty. An excessive amount is the amount
claimed that is more than the allowable amount.
The penalty is the greater of two times the excessive amount or $10.
Trust fund recovery penalty. If you provide
taxable communications, air transportation
services, or indoor tanning 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
aren’t 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.
15.
Examination and
Appeal
Procedures
If your excise tax return is examined and you
disagree with the findings, you can get information about audit and appeal procedures from
Publication 556, Examination of Returns,
Appeal Rights, and Claims for Refund. An unagreed case involving an excise tax covered in
this publication differs from other tax cases in
that you can only contest it in court after payment of the tax by filing suit for a refund in the
United States District Court or the United States
Court of Federal Claims.
16.
Rulings Program
The IRS has a program for assisting taxpayers
who have technical problems with tax laws and
regulations. The IRS will answer inquiries from
individuals and organizations about the tax effect of their acts or transactions. The National
Office of the IRS issues rulings on those matters.
A ruling is a written statement to a taxpayer that
interprets and applies tax laws to the taxpayer's
specific set of facts. There are also determination letters issued by IRS directors and information letters issued by IRS directors or the National Office.
There is a fee for most types of determination
letters and rulings. For complete information on
the rulings program, see the first Internal Revenue Bulletin published each year.
17.
How To Get Tax
Help
If you have questions about a tax issue, need
help preparing your tax return, or want to download free publications, forms, or instructions, go
to IRS.gov and find resources that can help you
right away.
Preparing and filing your tax return. After
receiving all your wage and earnings statements (Form W-2, W-2G, 1099-R, 1099-MISC,
1099-NEC, etc.); unemployment compensation
statements (by mail or in a digital format) or
other government payment statements (Form
1099-G); and interest, dividend, and retirement
statements from banks and investment firms
(Forms 1099), you have several options to
choose from to prepare and file your tax return.
You can prepare the tax return yourself, see if
you qualify for free tax preparation, or hire a tax
professional to prepare your return.
Free options for tax preparation. Go to
IRS.gov to see your options for preparing and
filing your return online or in your local community, if you qualify, which include the following.
• Free File. This program lets you prepare
and file your federal individual income tax
return for free using brand-name tax-preparation-and-filing software or Free File fillable forms. However, state tax preparation
may not be available through Free File. Go
to IRS.gov/FreeFile to see if you qualify for
free online federal tax preparation, e-filing,
and direct deposit or payment options.
• VITA. The Volunteer Income Tax Assistance (VITA) program offers free tax help
to people with low-to-moderate incomes,
persons with disabilities, and limited-English-speaking taxpayers who need help
preparing their own tax returns. Go to
IRS.gov/VITA, download the free IRS2Go
app, or call 800-906-9887 for information
on free tax return preparation.
• TCE. The Tax Counseling for the Elderly
(TCE) program offers free tax help for all
taxpayers, particularly those who are 60
years of age and older. TCE volunteers
specialize in answering questions about
pensions and retirement-related issues
unique to seniors. Go to IRS.gov/TCE ,
download the free IRS2Go app, or call
888-227-7669 for information on free tax
return preparation.
• MilTax. Members of the U.S. Armed
Forces and qualified veterans may use MilTax, a free tax service offered by the Department of Defense through Military OneSource.
Also, the IRS offers Free Fillable
Forms, which can be completed online and
then filed electronically regardless of income.
Using online tools to help prepare your return. Go to IRS.gov/Tools for the following.
• The Earned Income Tax Credit Assistant
(IRS.gov/EITCAssistant) determines if
you’re eligible for the earned income credit
(EIC).
• The Online EIN Application (IRS.gov/EIN)
helps you get an employer identification
number (EIN).
• Tax Withholding Estimator (IRS.gov/
W4app) makes it easier for everyone to
pay the correct amount of tax during the
year. The tool is a convenient, online way
to check and tailor your withholding. It’s
more user-friendly for taxpayers, including
retirees and self-employed individuals. The
features include the following.
– Easy to understand language.
– The ability to switch between screens,
correct previous entries, and skip
screens that don’t apply.
– Tips and links to help you determine if
you qualify for tax credits and deductions.
– A progress tracker.
– A self-employment tax feature.
– Automatic calculation of taxable social
security benefits.
• The First Time Homebuyer Credit Account
Look-Up (IRS.gov/HomeBuyer) tool provides information on your repayments and
account balance.
Chapter 17
How To Get Tax Help
Page 41
• The Sales Tax Deduction Calculator
(IRS.gov/SalesTax) figures the amount you
can claim if you itemized deductions on
Schedule A (Form 1040).
Getting answers to your tax law
questions. On IRS.gov, get up-to-date
information on current events and
changes in tax law.
• IRS.gov/Help A variety of tools that will
help you get answers to some of the most
common tax questions.
• IRS.gov/ITA The Interactive Tax Assistant,
a tool that will ask you questions on a number of tax law topics and provide answers.
• IRS.gov/Forms Find forms, instructions,
and publications. You will find details on
2021 tax changes and hundreds of interactive links to help you find answers to your
questions.
• You may be able to access tax law information in your electronic filing software.
Need someone to prepare your tax return?
There are various types of tax return preparers,
including tax preparers, enrolled agents, certified public accountants (CPAs), attorneys, and
many others who don’t have professional credentials. If you choose to have someone prepare your tax return, choose that preparer
wisely. A paid tax preparer is:
• Primarily responsible for the overall substantive accuracy of your return,
• Required to sign the return, and
• Required to include their preparer tax identification number (PTIN).
Although the tax preparer always signs the return, you're ultimately responsible for providing
all the information required for the preparer to
accurately prepare your return. Anyone paid to
prepare tax returns for others should have a
thorough understanding of tax matters. For
more information on how to choose a tax preparer, go to Tips for Choosing a Tax Preparer
on IRS.gov
Coronavirus. Go to IRS.gov/Coronavirus for
links to information on the impact of the coronavirus, as well as tax relief available for individuals and families, small and large businesses,
and tax-exempt organizations.
Tax reform. Tax reform legislation affects individuals, businesses, and tax-exempt and government entities. Go to IRS.gov/TaxReform for
information and updates on how this legislation
affects your taxes.
Employers can register to use Business
Services Online. The Social Security Administration (SSA) offers online service at SSA.gov/
employer for fast, free, and secure online W-2
filing options to CPAs, accountants, enrolled
agents, and individuals who process Form W-2,
Wage and Tax Statement, and Form W-2c,
Corrected Wage and Tax Statement.
IRS social media. Go to IRS.gov/SocialMedia
to see the various social media tools the IRS
uses to share the latest information on tax
changes, scam alerts, initiatives, products, and
services. At the IRS, privacy and security are
paramount. We use these tools to share public
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Chapter 17
How To Get Tax Help
information with you. Don’t post your SSN or
other confidential information on social media
sites. Always protect your identity when using
any social networking site.
The following IRS YouTube channels provide short, informative videos on various tax-related topics in English, Spanish, and ASL.
• Youtube.com/irsvideos.
• Youtube.com/irsvideosmultilingua .
• Youtube.com/irsvideosASL .
Watching IRS Videos. The IRS Video portal
(IRSVideos.gov) contains video and audio presentations for individuals, small businesses,
and tax professionals.
Online tax information in other languages.
You can find information on IRS.gov/
MyLanguage if English isn’t your native language.
Free interpreter service. Multilingual assistance, provided by the IRS, is available at Taxpayer Assistance Centers (TACs) and other
IRS offices. Over-the-phone interpreter service
is accessible in more than 350 languages.
Getting tax forms and publications. Go to
IRS.gov/Forms to view, download, or print all
the forms and publications you may need. You
can also download and view popular tax publications and instructions (including the 1040 and
1040-SR instructions) on mobile devices as an
eBook at no charge at IRS.gov/eBooks. Or, you
can go to IRS.gov/OrderForms to place an order and have them mailed to you within 10 business days.
Access your online account (Individual taxpayers only). Go to IRS.gov/Account to securely access information about your federal tax
account.
• View the amount you owe, pay online or
set up an online payment agreement.
• Access your tax records online.
• Review the past 24 months of your payment history.
• Go to IRS.gov/SecureAccess to review the
required identity authentication process.
Using direct deposit. The fastest way to receive a tax refund is by combining direct deposit and IRS e-file. Direct deposit securely and
electronically transfers your refund directly into
your financial account. Eight in 10 taxpayers
use direct deposit to receive their refund. The
IRS issues more than 90% of refunds in less
than 21 days.
Getting a transcript or copy of a return. The
quickest way to get a copy of your tax transcript
is to go to IRS.gov/Transcripts. Click on either
"Get Transcript Online" or "Get Transcript by
Mail" to order a copy of your transcript. If you
prefer, you can order your transcript by calling
800-908-9946.
Resolving tax-related identity theft issues.
• Tax-related identity theft happens when
someone steals your personal information
to commit tax fraud. Your taxes can be affected if your SSN is used to file a fraudulent return or to claim a refund or credit.
• The IRS doesn’t initiate contact with tax-
payers by email or telephone to request
personal or financial information. This includes requests for personal identification
numbers (PINs), passwords, or similar information for credit cards, banks or other financial accounts.
• Go to IRS.gov/IdentityTheft, the IRS Identity Theft Central webpage, for information
on identity theft and data security protection for taxpayers, tax professionals and
businesses. If your SSN has been lost or
stolen or you suspect you’re a victim of
tax-related identity theft, you can learn
what steps you should take.
• Get an Identity Protection PIN (IP PIN). IP
PINs are six-digit numbers assigned to eligible taxpayers to help prevent the misuse
of their SSNs on fraudulent federal income
tax returns. When you have an IP PIN, it
prevents someone else from filing a tax return with your SSN. To learn more, go to
IRS.gov/IPPIN .
Checking on the status of a refund.
• Go to IRS.gov/Refunds .
• The IRS can’t issue refunds before
mid-February 2021 for returns that properly
claimed the EIC or the additional child tax
credit (ACTC). This applies to the entire refund, not just the portion associated with
these credits.
• Download the official IRS2Go app to your
mobile device to check your refund status.
• Call the automated refund hotline at
1-800-829-1954.
Making a tax payment. The IRS uses the latest encryption technology to ensure your electronic payments are safe and secure. You can
make electronic payments online, by phone,
and from a mobile device using the IRS2Go
app. Paying electronically is quick, easy, and
faster than mailing in a check or money order.
Go to IRS.gov/Payments to make a payment
using any of the following options.
• IRS Direct Pay: Pay your individual tax bill
or estimated tax payment directly from
your checking or savings account at no
cost to you.
• Debit or Credit Card: Choose an approved
payment processor to pay online, by
phone, and by mobile device.
• Electronic Funds Withdrawal: Offered only
when filing your federal taxes using tax
preparation software or through a tax professional.
• Electronic Federal Tax Payment System:
Best option for businesses. Enrollment is
required.
• Check or money order: Mail your payment
to the address listed on the notice or instructions.
• Cash: You may be able to pay your taxes
with cash at a participating retail store.
• Same-Day Wire: You may be able to do a
same-day wire from your financial institution. Contact your financial institution for
availability, cost, and cut-off times.
What if I can’t pay now? Go to IRS.gov/
Payments for more information about your options.
• Apply for an online payment agreement
(IRS.gov/OPA) to meet your tax obligation
in monthly installments if you can’t pay
your taxes in full today. Once you complete
the online process, you will receive immediate notification of whether your agreement has been approved.
• Use the Offer in Compromise Pre-Qualifier
to see if you can settle your tax debt for
less than the full amount you owe. For
more information on the Offer in Compromise program, go to IRS.gov/OIC.
Filing an amended return. You can now file
Form 1040-X electronically with tax filing software to amend 2019 Forms 1040 and 1040-SR.
To do so you must have e-filed your original
2019 return. Amended returns for all prior years
must be mailed. See Tips for taxpayers who
need to file an amended return tax return and
go to IRS.gov/Form1040X for information and
updates.
Checking the status of an amended return.
Go to IRS.gov/WMAR to track the status of
Form 1040-X amended returns. Please note
that it can take up to 3 weeks from the date you
mailed your amended return for it to show up in
our system and processing it can take up to 16
weeks.
Understanding an IRS notice or letter. Go to
IRS.gov/Notices to find additional information
about responding to an IRS notice or letter.
Contacting your local IRS office. Keep in
mind, many questions can be answered on
IRS.gov without visiting an IRS Tax Assistance
Center (TAC). Go to IRS.gov/LetUsHelp for the
topics people ask about most. If you still need
help, IRS TACs provide tax help when a tax issue can’t be handled online or by phone. All
TACs now provide service by appointment so
you’ll know in advance that you can get the
service you need without long wait times. Before you visit, go to IRS.gov/TACLocator to find
the nearest TAC, check hours, available services, and appointment options. Or, on the
IRS2Go app, under the Stay Connected tab,
choose the Contact Us option and click on “Local Offices.”
The Taxpayer Advocate
Service (TAS) Is Here To
Help You
What is TAS?
TAS is an independent organization within the
Internal Revenue Service that helps taxpayers
and protects taxpayer rights. Our job is to ensure that every taxpayer is treated fairly and
that you know and understand your rights under
the Taxpayer Bill of Rights.
How Can You Learn About Your
Taxpayer Rights?
The Taxpayer Bill of Rights describes 10 basic
rights that all taxpayers have when dealing with
the IRS. Go to TaxpayerAdvocate.IRS.gov to
help you understand what these rights mean to
you and how they apply. These are your rights.
Know them. Use them.
What Can the TAS Do For You?
TAS can help you resolve problems that you
can’t resolve with the IRS. And their service is
free. If you qualify for their assistance, you will
be assigned to one advocate who will work with
you throughout the process and will do everything possible to resolve your issue. TAS can
help you if:
• Your problem is causing financial difficulty
for you, your family, or your business;
• You face (or your business is facing) an
immediate threat of adverse action; or
• You’ve tried repeatedly to contact the IRS
but no one has responded, or the IRS
hasn’t responded by the date promised.
Low Income Taxpayer
Clinics (LITCs)
LITCs are independent from the IRS. LITCs
represent individuals whose income is below a
certain level and need to resolve tax problems
with the IRS, such as audits, appeals, and tax
collection disputes. In addition, clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language.
Services are offered for free or a small fee. To
find a clinic near you, visit IRS.gov/LITC or see
IRS Publication 4134, Low Income Taxpayer
Clinic List.
18.
Appendix
This appendix contains models of the certificates, waivers, reports, and statements discussed in Part One.
How Can You Reach TAS?
TAS has offices in every state, the District of
Columbia, and Puerto Rico. Your local advocate’s number is in your local directory and at
TaxpayerAdvocate.IRS.gov/Contact-Us.
You
can also call us at 877-777-4778.
How Else Does TAS Help
Taxpayers?
TAS works to resolve large-scale problems that
affect many taxpayers. If you know of one of
these broad issues, please report it to us at
IRS.gov/SAMS.
TAS also has a website, Tax Reform
Changes, which shows you how the new tax
law may change your future tax filings and helps
you plan for these changes. The information is
categorized by tax topic in the order of the IRS
Form 1040 or 1040-SR. Go to TaxChanges.us
for more information.
TAS to Tax Professionals
TAS can provide a variety of information for tax
professionals, including tax law updates and
guidance, TAS programs, and ways to let TAS
know about systemic problems you’ve seen in
your practice.
Chapter 18
Appendix
Page 43
Model Certificate A
STATEMENT OF SUBSEQUENT SELLER
1.
Name, address, and employer identification number of seller in subsequent sale
2.
Name, address, and employer identification number of the buyer in subsequent sale
3.
4.
Date and location of subsequent sale
Volume and type of taxable fuel sold
The undersigned seller (“Seller”) has received the copy of the first taxpayer's report provided with this statement in
connection with Seller's purchase of the taxable fuel described in this statement.
Under penalties of perjury, Seller declares that Seller has examined this statement, including any accompanying
schedules and statements, and, to the best of Seller's knowledge and belief, they are true, correct and complete.
Signature and date signed
Printed or typed name of person signing this report
Title—
Page 44
Chapter 18
Appendix
Model Certificate B
FIRST TAXPAYER'S REPORT
1.
First Taxpayer's name, address and employer identification number
2.
Name, address, and employer identification number of the buyer of the taxable fuel subject to tax
3.
Date and location of removal, entry, or sale
4.
Volume and type of taxable fuel removed, entered or sold
5. Check type of taxable event:
Removal from refinery
Entry into United States
Bulk transfer from terminal by unregistered position holder
Bulk transfer not received at an approved terminal
Sale within the bulk transfer/terminal system
Removal at the terminal rack
Removal or sale by the blender
6.
Amount of federal excise tax paid on account of the removal, entry, or sale
The undersigned taxpayer (“Taxpayer”) hasn’t received, and won’t claim, a credit with respect to, or a refund of, the tax
on the taxable fuel to which this form relates.
Under penalties of perjury, Taxpayer declares that Taxpayer has examined this statement, including any accompanying
schedules and statements, and to the best of Taxpayer's knowledge and belief, they are true, correct and complete.
Signature and date signed
Printed or typed name of person signing this report
Title
Chapter 18
Appendix
Page 45
Model Certificate C
NOTIFICATION CERTIFICATE OF TAXABLE FUEL REGISTRANT
Name, address, and employer identification number of person receiving certificate
The undersigned taxable registrant (“Registrant”) hereby certifies under penalties of perjury that Registrant is registered
by the Internal Revenue Service with registration number
and that Registrant's registration hasn’t
been revoked or suspended by the Internal Revenue Service.
Registrant understands that the fraudulent use of this certificate may subject Registrant and all parties making such
fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.
Signature and date signed
Printed or typed name of person signing
Title of person signing
Name of Registrant
Employer identification number
Address of Registrant
Page 46
Chapter 18
Appendix
Model Certificate D
CERTIFICATE OF PERSON BUYING GASOLINE BLENDSTOCKS FOR USE OTHER THAN IN THE PRODUCTION OF
FINISHED GASOLINE
(To support tax-free sales (other than LUST) under section 4081 of the Internal Revenue Code.)
Name, address, and employer identification number of seller
The undersigned buyer (“Buyer”) hereby certifies the following under penalties of perjury:
The gasoline blendstocks to which this certificate relates won’t be used to produce finished gasoline.
This certificate applies to the following (complete as applicable):
If this is a single purchase certificate, check here
and enter:
1. Invoice or delivery ticket number
2.
(number of gallons) of
(type of gasoline blendstocks)
If this is a certificate covering all purchases under a specified account or order number, check here
and enter:
1. Effective date
2. Expiration date
(period not to exceed 1 year after the effective date)
3. Type (or types) of gasoline blendstocks
4. Buyer's account or order number
Buyer won’t claim a credit or refund under section 6427(h) of the Internal Revenue Code for any gasoline blendstocks
covered by this certificate.
Buyer will provide a new certificate to the seller if any information in this certificate changes.
If Buyer resells the gasoline blendstocks to which this certificate relates, Buyer will be liable for tax unless Buyer obtains a
certificate from the purchaser stating that the gasoline blendstocks won’t be used to produce finished gasoline and otherwise
complies with the conditions of §48.4081-4(b)(3) of the Manufacturers and Retailers Excise Tax Regulations.
Buyer understands that if Buyer violates the terms of this certificate, the Internal Revenue Service may withdraw Buyer's
right to provide a certificate.
Buyer hasn’t been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn.
In addition, the Internal Revenue Service hasn’t notified Buyer that the right to provide a certificate has been withdrawn from a
purchaser to which Buyer sells gasoline blendstocks tax free.
Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such fraudulent use
of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.
Signature and date signed
Printed or typed name of person signing
Title of person signing
Name of Buyer
Employer identification number
Address of Buyer
Chapter 18
Appendix
Page 47
Model Certificate G
CERTIFICATE OF REGISTERED FEEDSTOCK USER
(To support tax-free removals and entries (other than LUST) of kerosene under section 4082 of the Internal Revenue Code.)
Name of buyer
(Buyer) certifies the following under penalties of perjury:
Buyer is a registered feedstock user with registration number
or suspended.
. Buyer's registration hasn’t been revoked
The kerosene to which this certificate applies will be used by Buyer for a feedstock purpose.
This certificate applies to
percent of Buyer's purchases from
identification number of seller) as follows (complete as applicable):
1. A single purchase on invoice or delivery ticket number
(name, address, and employer
.
2. All purchases between
(effective date) and
(expiration date) (period not to exceed
one year after the effective date) under account or order number(s)
. If this certificate applies only to Buyer's
purchases for certain locations, check here
and list the locations.
If Buyer sells the kerosene to which this certificate relates, Buyer will be liable for tax on that sale.
Buyer will provide a new certificate to the seller if any information in this certificate changes.
If Buyer violates the terms of this certificate, the Internal Revenue Service may revoke the Buyer's registration.
Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making any fraudulent use of
this certificate to a fine or imprisonment, or both, together with the costs of prosecution.
Printed or typed name of person signing
Title of person signing
Employer identification number
Address of Buyer
Signature and date signed
Page 48
Chapter 18
Appendix
Model Certificate J
CERTIFICATE OF PERSON BUYING COMPRESSED NATURAL GAS (CNG) FOR A NONTAXABLE USE
(To support tax-free sales of CNG under section 4041 of the Internal Revenue Code.)
Name, address, and employer identification number of seller
(“Buyer”) certifies the following under penalties of perjury:
Name of buyer
The CNG to which this certificate relates will be used in a nontaxable use.
This certificate applies to the following (complete as applicable):
If this is a single purchase certificate, check here
and enter:
1. Invoice or delivery ticket number
2.
(Gasoline gallon equivalents)
If this is a certificate covering all purchases under a specified account or order number, check here
and enter:
1. Effective date
2. Expiration date
(period not to exceed 1 year after the effective date)
3. Buyer's account or order number
Buyer won’t claim a credit or refund under section 6427 of the Internal Revenue Code for any CNG to which this certificate
relates.
Buyer will provide a new certificate to the seller if any information in this certificate changes.
Buyer understands that if Buyer violates the terms of this certificate, the Internal Revenue Service may withdraw Buyer's
right to provide a certificate.
Buyer hasn’t been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn.
In addition, the Internal Revenue Service hasn’t notified Buyer that the right to provide a certificate has been withdrawn
from a purchaser to which Buyer sells CNG tax free.
Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making any fraudulent use
of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.
Printed or typed name of person signing
Title of person signing
Employer identification number
Address of Buyer
Signature and date signed
Chapter 18
Appendix
Page 49
Model Certificate K
CERTIFICATE OF PERSON BUYING KEROSENE FOR USE IN AVIATION FOR
COMMERCIAL AVIATION OR NONTAXABLE USE
(To support operator liability for tax on removals of kerosene for use in aviation directly into the fuel tank of an aircraft in
commercial aviation pursuant to § 4081 of the Internal Revenue Code or to support a tax rate of zero under § 4041(c) pursuant
to §§4041(c) and 4082.)
Name, address, and employer identification number of position holder
The undersigned aircraft operator (“Buyer”) hereby certifies the following under the penalties of perjury:
The kerosene for use in aviation to which this certificate relates is purchased (check one):
for
use on a farm for farming purposes;
for use in foreign trade (reciprocal benefits required for foreign registered airlines);
for use in certain helicopter and fixed-wing air ambulance uses;
for use other than as a fuel in the propulsion engine
of an aircraft;
for the exclusive use of a qualified blood collector organization;
for the exclusive use of a nonprofit
educational organization;
for the exclusive use of a state;
for use in an aircraft owned by an aircraft museum;
for
use in military aircraft; or
for use in commercial aviation (other than foreign trade).
With respect to kerosene for use in aviation purchased after June 30, 2005, for use in commercial aviation
(other than foreign trade), Buyer's registration number is
. Buyer's registration hasn’t been suspended or revoked
by the Internal Revenue Service.
This certificate applies to the following (complete as applicable):
This is a single purchase certificate:
1.
Invoice or delivery ticket number
2.
Number of gallons
This is a certificate covering all purchases under a specified account or order number:
1. Effective date
2. Expiration date
(period not to exceed 1 year after the effective date)
3. Buyer's account number
Buyer agrees to provide the person liable for tax with a new certificate if any information in this certificate changes.
If the kerosene for use in aviation to which this certificate relates is being bought for use in commercial aviation
(other than foreign trade), Buyer is liable for tax on its use of the fuel and will pay that tax to the government.
If Buyer sells or uses the kerosene for use in aviation to which this certificate relates for a use other than the use
stated above, Buyer will be liable for tax.
Buyer understands that it must be prepared to establish by satisfactory evidence the purpose for which the
fuel purchased under this certificate was used.
Buyer hasn’t been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn.
If Buyer violates the terms of this certificate, the Internal Revenue Service may withdraw Buyer's right to provide a certificate.
The fraudulent use of this certificate may subject Buyer and all parties making any fraudulent use of this certificate
to a fine or imprisonment, or both, together with the costs of prosecution.
Printed or typed name of person signing
Title of person signing
Name of Buyer
Employer identification number
Address of Buyer
Signature and date signed
Page 50
Chapter 18
Appendix
Model Waiver L
WAIVER FOR USE BY ULTIMATE PURCHASERS OF KEROSENE FOR CERTAIN USES IN AVIATION
(To support vendor's claim for a credit or payment under § 6427(l)(4)(C)(i) of the Internal Revenue Code.)
Name, Address, and Employer Identification Number of Ultimate Vendor
The undersigned ultimate purchaser (“Buyer”) hereby certifies the following under penalties of perjury:
A.
B.
The kerosene to which this waiver relates is purchased for — (check one):
1.
Use on a farm for farming purposes,
2.
Use in foreign trade (reciprocal benefits required for foreign registered airlines),
3.
Use in certain helicopter and fixed-wing air ambulance uses,
4.
The exclusive use of a qualified blood collector organization,
5.
The exclusive use of a nonprofit educational organization,
6.
Use in an aircraft owned by an aircraft museum,
7.
Use in military aircraft, or
8.
Use in commercial aviation (other than foreign trade).
This waiver applies to the following (complete as applicable):
This is a single purchase waiver:
1.
Invoice or delivery ticket number
2.
Number of gallons
This is a waiver covering all purchases under a specified account or order number:
1. Effective date
2. Expiration date
(period not to exceed 1 year after the effective date)
3. Buyer's account number
Buyer will provide a new waiver to the vendor if any information in this waiver changes.
If Buyer uses the kerosene for use in aviation to which this waiver relates for a use other than the use stated above, Buyer will be liable for
tax.
Buyer understands that by signing this waiver, Buyer gives up its right to claim any credit or payment for the kerosene for use in aviation
used in a nontaxable use.
Buyer acknowledges that it hasn’t and won’t claim any credit or payment for the kerosene for use in aviation to which this waiver relates.
Buyer understands that the fraudulent use of this waiver may subject Buyer and all parties making such fraudulent use of this waiver to a
fine or imprisonment, or both, together with the costs of prosecution.
Printed or typed name of person signing
Title of person signing
Name of Buyer
Employer identification number
Address of Buyer
Signature and date signed
Chapter 18
Appendix
Page 51
Model Certificate M
CERTIFICATE FOR STATE USE OR NONPROFIT EDUCATIONAL
ORGANIZATION USE
(To support vendor's claim for a credit or payment under § 6416(a)(4) of the Internal Revenue Code.)
Name, address, and employer identification number of ultimate vendor
The undersigned ultimate purchaser (“Buyer”) hereby certifies the following under the penalties of perjury:
Buyer will use the gasoline or aviation gasoline to which this certificate relates (check one):
For the exclusive use of a state or local government; or
For the exclusive use of a nonprofit educational organization.
This certificate applies to the following (complete as applicable):
This is a single purchase certificate:
1.
Invoice or delivery ticket number
2.
Number of gallons
This is a certificate covering all purchases under a specified account or order number:
1. Effective date
2. Expiration date
(period not to exceed 1 year after the effective date)
3. Buyer's account number
Buyer will provide a new certificate to the vendor if any information in this certificate changes.
Buyer understands that by signing this certificate, Buyer gives up its right to claim any credit or payment for
the gasoline or aviation gasoline to which this certificate relates.
Buyer acknowledges that it hasn’t and won’t claim any credit or payment for the gasoline or aviation gasoline
to which this certificate relates.
Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such
fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.
Printed or typed name of person signing
Title of person signing
Name of Buyer
Employer identification number
Address of Buyer
Signature and date signed
Page 52
Chapter 18
Appendix
Model Waiver N
WAIVER FOR USE BY ULTIMATE PURCHASERS OF DIESEL FUEL OR
KEROSENE USED IN INTERCITY BUS TRANSPORTATION
(To support vendor's claim for a credit or payment under § 6427 of the Internal Revenue Code.)
Name, address, and employer identification number of ultimate vendor
The undersigned ultimate purchaser (“Buyer”) hereby certifies the following under the penalties of perjury:
The diesel fuel or kerosene to which this waiver relates is purchased for use in intercity bus transportation.
This waiver applies to the following (complete as applicable):
This is a single purchase waiver:
1.
Invoice or delivery ticket number
2.
Number of gallons
This is a waiver covering all purchases under a specified account or order number:
1. Effective date
2. Expiration date
(period not to exceed 1 year after the effective date)
3. Buyer's account number
Buyer will provide a new waiver to the vendor if any information in this waiver changes.
If Buyer uses the diesel fuel or kerosene to which this waiver relates for a use other than in intercity bus
transportation, Buyer will be liable for tax.
Buyer understands that by signing this waiver, Buyer gives up its right to claim any credit or payment for the
diesel fuel or kerosene used in intercity bus transportation.
Buyer acknowledges that it hasn’t and won’t claim any credit or payment for the diesel fuel or kerosene to
which this waiver relates.
Buyer understands that the fraudulent use of this waiver may subject Buyer and all parties making such
fraudulent use of this waiver to a fine or imprisonment, or both, together with the costs of prosecution.
Printed or typed name of person signing
Title of person signing
Name of Buyer
Employer identification number
Address of Buyer
Signature and date signed
Chapter 18
Appendix
Page 53
Model Certificate O
CERTIFICATE FOR BIODIESEL
Certificate Identification Number:
(To support a claim related to biodiesel or a biodiesel mixture under section 6426 of the Internal Revenue Code.)
The undersigned biodiesel producer (“Producer”) hereby certifies the following under penalties of perjury:
1.
Producer's name, address, and employer identification number (EIN)
2.
Name, address, and EIN of person buying the biodiesel from Producer
3.
Date and location of sale to buyer
4. This certificate applies to
gallons of biodiesel.
5. Producer certifies that the biodiesel to which this certificate relates is:
%
%
Agri-biodiesel (derived solely from virgin oils)
Biodiesel other than agri-biodiesel
This certificate applies to the following sale:
Invoice or delivery ticket number
Total number of gallons of biodiesel sold under that invoice or delivery ticket number (including biodiesel not
covered by this certificate)
Total number of certificates issued for that invoice or delivery ticket number
6.
Name, address, and employer identification number of reseller to whom certificate is issued (only in the case of certificates
reissued to a reseller after the return of the original certificate)
7.
Original Certificate Identification Number (only in the case of certificates reissued to a reseller after return of the
original certificate).
Producer is registered as a biodiesel producer with registration number
.
Producer's registration hasn’t been suspended or revoked by the Internal Revenue Service.
Producer certifies that the biodiesel to which this certificate relates in monoalkyl esters of long chain fatty acids derived
from plant or animal matter that meets the requirements of the American Society of Testing and Materials D6751 and
the registration requirements for fuels and fuel additives established by EPA under section 211 of the Clean Air Act (42
U.S.C. 7545).
Producer understands that the fraudulent use of this certificate may subject Producer and all parties making any
fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.
Printed or typed name of person signing this certificate
Title of person signing
Signature and date signed
Page 54
Chapter 18
Appendix
Model Certificate P
CERTIFICATE OF STATE USE
(To support vendor's claim for credit or payment under section 6427 of the Internal Revenue Code.)
Name, Address, and Employer Identification Number of Vendor
The undersigned buyer (“Buyer”) hereby certifies the following under penalties of perjury:
A. Buyer will use the diesel fuel or kerosene to which this certificate relates for the exclusive use of a state or local
government, or the District of Columbia.
B. This certificate applies to the following (complete as applicable):
1.
If this is a single purchase certificate, check here
a.
and enter:
Invoice or delivery ticket number
b. Number of gallons
2.
If this is a certificate covering all purchases under a specified account or order number, check here
and enter:
a.
Effective date
b. Expiration date
(period not to exceed 1 year after effective date)
c.
Buyer's account or order number
▪
Buyer will provide a new certificate to the vendor if any information in this certificate changes.
▪
If Buyer uses the diesel fuel or kerosene to which this certificate relates for a purpose other than stated in the
certificate, Buyer will be liable for any tax.
▪
Buyer acknowledges that it hasn’t and won’t claim any credit or payment for the diesel fuel or kerosene to which
this certificate relates.
▪
Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such
fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.
Printed or typed name of person signing
Title of person signing
Name of Buyer
Employer identification number
Address of Buyer
Signature and date signed
Chapter 18
Appendix
Page 55
Model Certificate Q
CERTIFICATE OF ULTIMATE PURCHASER OF KEROSENE FOR USE IN NONEXEMPT, NONCOMMERCIAL AVIATION
(To support vendor's claim for credit or payment under section 6427(l)(4)(C)(ii) of the Internal Revenue Code.)
Name, Address, and Employer Identification Number of Ultimate Vendor
The undersigned ultimate purchaser (“Buyer”) hereby certifies the following under penalties of perjury:
A. The kerosene to which this certificate relates is purchased for a nonexempt use in noncommercial aviation.
B. This certificate applies to the following (complete as applicable):
1.
If this is a single purchase certificate, check here
and enter:
a. Invoice or delivery ticket number
b. Number of gallons
2.
This is a certificate covering all purchases under a specified account or order number:
a. Effective date
b. Expiration date
(period not to exceed 1 year after effective date)
c. Buyer's account number
▪
Buyer will provide a new certificate to the vendor if any information in this certificate changes.
▪
If Buyer uses the kerosene to which this certificate relates for a use other than the nontaxable use stated above, Buyer will be
liable for tax.
▪
Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such fraudulent use of this
certificate to a fine or imprisonment, or both, together with the costs of prosecution.
Printed or typed name of person signing
Title of person signing
Name of Buyer
Employer identification number
Address of Buyer
Signature and date signed
Page 56
Chapter 18
Appendix
Model Certificate R
CERTIFICATE OF BUYER OF TAXABLE FUEL FOR USE BY A STATE OR NONPROFIT EDUCATIONAL
ORGANIZATION
(To support credit card issuer's claim for credit, refund, or payment under section 6416(a)(4)(B) or section 6427(l)(5)(D) of
the Internal Revenue Code.)
Name, Address, and Employer Identification Number of Credit Card Issuer.
The undersigned ultimate purchaser (“Buyer”) hereby certifies the following under penalties of perjury:
A. Buyer will use the taxable fuel to which this certificate relates for the exclusive use of a state; or
B. Buyer will use the gasoline to which this certificate relates for the exclusive use of a nonprofit
educational organization.
C. This certificate applies to all purchases made with the credit card identified below during the period
specified:
a. Effective date of certificate
b. Expiration date of certificate
(period not to exceed 2 years after effective date)
c. Buyer's account number
▪
Buyer will provide a new certificate to the credit card issuer if any information in this certificate changes.
▪
Buyer understands that by signing this certificate, Buyer gives up its right to claim a credit or payment for
the taxable fuel purchased with the credit card to which this certificate relates.
▪
Buyer acknowledges that it hasn’t and won’t claim any credit or payment for the taxable fuel purchased
with the credit card to which this certificate relates.
▪
Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making
such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of
prosecution.
Printed or typed name of person signing
Title of person signing
Name of Buyer
Employer identification number
Address of Buyer
Signature and date signed
Chapter 18
Appendix
Page 57
Model Statement S
STATEMENT OF BIODIESEL RESELLER
(To support a claim related to biodiesel or a biodiesel mixture under section 6426 of the Internal Revenue Code.)
The undersigned biodiesel producer (“Reseller”) hereby certifies the following under penalties of perjury:
1.
Reseller's name, address, and employer identification number (EIN)
2.
Name, address, and EIN of Reseller's buyer
3.
Date and location of sale to buyer
4. Volume of biodiesel sold
5. Certificate Identification Number on the Certificate for Biodiesel
Reseller has bought the biodiesel described in the accompanying Certificate for Biodiesel and Reseller has no reason
to believe that any information in the certificate is false.
Reseller hasn’t been notified by the Internal Revenue Service that its right to provide a certificate or statement has been
withdrawn.
Reseller understands that the fraudulent use of this statement may subject Reseller and all parties making any
fraudulent use of this statement to a fine or imprisonment, or both, together with the costs of prosecution.
Printed or typed name of person signing this certificate
Title of person signing
Signature and date signed
Index
A
To help us develop a more useful index, please let us know if you have ideas for index entries.
See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.
Affiliated corporations 28
Agri-biodiesel, defined 4
Aircraft 19
Affiliated corporations 28
Small planes 28
Aircraft museum 19
Air transportation taxes 26
225-mile-zone rule 27
Alaska 27, 28
Baggage 28
Bonus tickets 28
Credits or refunds 29
Exemptions 27
Export 28
Page 58
Fixed-wing aircraft 28
Hawaii 27, 28
Helicopters 27, 28
International air travel
facilities 28
Military personnel 27
Package tours 27
Persons by air 26
Persons liable 27, 28
Property by air 28
Taxable transportation 27
Tax rates 26
Travel agency 27
Uninterrupted international 27
Alaska:
Air transportation taxes 27
Tax on diesel fuel or kerosene 9 Biodiesel, defined 4
Alcohol and tobacco taxes 3
Blended taxable fuel, defined 4
Alternative fuel, defined 4
Blender, defined 4
Alternative fuel credit 20
Blocked pump 15
American Red Cross 26
Blood collector organizations,
Answering service 25
qualified 19, 26
Appeal procedures 41
Boats 18
Approved refinery, defined 4
Bonus tickets 28
Approved terminal, defined 4
Bows, Quivers, Broadheads, and
Arrow shafts 31
Points 31
Assistance (See Tax help)
Bulk transfer, defined 4
Aviation gasoline, defined 5
Bulk transfer/terminal system,
defined 4
Buses 18
Tire tax 32
B
Back-up tax 10
Publication 510 (July 2021)
C
Chemicals, ozone-depleting 23
Claims:
Claiming a credit 21
Claiming a refund 21
Filing claims 20
Coal:
Blending 32
Exemptions 32
Producer 31
Production 31
Selling price 31
Tax rates 31
Coin-operated telephones 25
Comments 2
Commercial aviation 19
Commercial fishing 18
Commercial waterway
transportation 12
Communications taxes:
Credits or refunds 26
Exemptions 25
Figuring the tax 25
Local-only service 25
Local telephone service 25
Private communication
service 25
Teletypewriter exchange
service 25
Credit card purchases:
Aviation gasoline 14
Gasoline 14
Kerosene for use in aviation 16
Undyed diesel fuel 15
Undyed kerosene 15
Credit or refund:
Gas guzzler tax 33
Manufacturers taxes 30
Resale of tax-paid
semitrailers 34
Retail tax 36
Tire tax 32
Vaccines 33
Credits 21
D
Deposits, How to make 39
Deposits:
Net tax liability 40
Diesel fuel:
Definitions 7
Exported 7
Diesel-water fuel emulsion,
defined 4
Dyed diesel fuel 9
Dyed kerosene 9
E
Electric outboard motors 31
Enterer, defined 4
Entry, defined 4
Environmental taxes:
Credit or refund 24
Exceptions 23
Ozone-depleting chemicals
(ODCs) 23
United States (defined) 23
Examination procedures 41
Excluded liquid 7
Exempt articles, retail tax 36
Publication 510 (July 2021)
Exempt communication services:
American Red Cross 26
Answering service 25
Coin-operated telephones 25
Installation charges 25
International organizations 26
Mobile radio telephone
service 25
News services 26
Nonprofit educational
organizations 26
Nonprofit hospitals 26
Private communication
service 25
Qualified blood collector
organizations 26
Radio broadcasts 26
Security systems 25
Exemptions:
Air transportation taxes 27
Bonus tickets 28
Coal 32
Communications taxes 25
Federal government 26
Fixed-wing aircraft 28
For export 29
Further manufacturing 29
Helicopters 27
Indian handicrafts 29
Indian tribal governments 26
Military personnel 27
Nonprofit educational
organizations 26, 29
Qualified blood collector
organizations 29
State and local
governments 26, 29
Taxable tires 32
Vessel supplies 29
Exempt sales, heavy trucks 36
Export 18
Exported taxable fuel 14
F
Farming 17
Federal government 26
Fishing 18
Fishing rods and fishing
poles. 31
Fishing tackle boxes 31
Fixed-wing aircraft 28
Floor stocks, ODCs 23
Floor stocks tax:
Ozone-depleting chemicals 24
Foreign trade 19
Form:
1363 28
4136 21
6197 32, 33, 39
637 2
6627 23, 39
720 21, 33, 39
720-X 39
8849 21
8864 13
Form 720:
Attachments 39
Due dates 39
Final return 39
Schedule A 39
Schedule C 39
Schedule T 39
Free tax services 41
Fuels:
Alternative fuel 12
Diesel 7
Diesel-water fuel emulsion 10
For use in aviation 10
Gasoline 5
Kerosene 7
Other Fuels 12
Used on inland waterways 12
G
Gambling 36
Gas guzzler tax:
Automobiles 32
Credit or refund 33
Limousines 32
Vehicles not subject to tax 32
Gasoline, defined 5
Gasoline blendstocks 6
H
Hawaii, air transportation
taxes 27
Heavy Motor Vehicle User Fee 3
Heavy trucks:
First retail sale, defined 34
Further manufacture 35
Installment sales 35
Parts or accessories 34
Presumptive retail sales
price 35
Related persons 35
Separate purchases 34
Tax base 35
Tax rate 33
Helicopter 19
Help (See Tax help)
Highway vehicle 17, 19
Highway vehicle
(Diesel-powered) 7
I
Identifying number 21
Identity theft 42
Imported taxable products
(ODCs) 24
Income, include in 22
Indoor tanning services 37
Information returns, liquid
products 5
Inland and intracoasal
waterways 12
Inland waterways 12
Intercity and local buses 18
Interest and penalties 40
International air travel
facilities 28
K
Kerosene:
Definitions 7
Exported 7
For use in aviation 10
M
Manufacturer, defined 29
Manufacturers taxes:
Arrow shafts 31
Bows, Quivers, Broadheads, and
Points 31
Coal 31
Credits or refunds 30
Exemptions 29
Gas guzzler tax 32
Lease 29
Lease payments 29
Partial payments 29
Registration 30
Related person 31
Requirements for exempt
sales 30
Sale 29
Sport fishing equipment 30
Taxable Tires 32
Vaccines 33
Military aircraft 19
Mobile radio telephone
service 25
N
News services 26
Nonprofit educational
organization 19
Nonprofit educational
organizations 26
Nonprofit educational
organization use and state
use 20
Nontaxable uses, definitions 17
Nontaxable uses, type of use
table 17
O
Obligations not in registered
form 37
Off-highway use 17
Oil spill liability 23
Other fuels, defined 4
Other Fuels (Including
Alternative Fuels) 12
Ozone-depleting chemicals:
Floor stocks tax 24
Imported taxable products 24
P
Patient-centered outcomes
research fee 38
Payment of taxes 39
Penalties:
Dyed diesel fuel 9
Dyed kerosene 9
Pipeline operator, defined 4
Position holder, defined 4
Publications (See Tax help)
Q
Qualified local bus 18
L
Liquid products, information
returns 5
Local-only service 25
Local telephone service 25
R
Rack, defined 4
Radio broadcasts 26
Page 59
Records 20
Refiner, defined 4
Refinery, defined 4
Refunds 21
Refunds of second tax 16
Registered ultimate vendor 15,
20
Registrant 5
Registrant, defined 4
Registration 5
Form 637 2
Registration-required
obligations 37
Related persons:
Heavy trucks 35
Sport fishing equipment 31
Removal, defined 4
Retail tax:
Credits or refunds 36
Heavy trucks 33
Rulings Program 41
Rural airports 27
S
Sale, defined 4
Sales by registered ultimate
vendors, gasoline 14
Sales by registered ultimate
vendors, kerosene for use in
aviation 16
Sales price:
Bonus goods 29
Cost of transportation 29
Delivery costs 29
Discounts 29
Installation costs 29
Page 60
Insurance costs 29
Local advertising charges 29
Manufacturers excise tax 29
Rebates 29
Retail dealer preparation
costs 29
Warranty charges 29
School bus 18
Second generation biofuel 4
Security systems 25
Ship passenger tax 36
Special September rule, When to
deposit 40
Sport fishing equipment:
List of equipment 30
Resales 31
State, defined 5
State and local governments 26
State or local governments 19
State or nonprofit educational
organization use 14
State use 15, 20
Suggestions 2
T
Tanning tax 37
Taxable fuel registrant 5
Taxable Tires:
Taxable tires:
Exemptions 32
Manufacturers taxes 32
Taxes, Payment of 39
Tax help 41
Taxpayer identification
number 21
Tax rate 31
Air transportation of persons 26
Air transportation of property 28
Arrow shafts 31
Bows, Quivers, Broadheads, and
Points 31
Coal 31
Electric outboard motor 31
International air travel
facilities 28
Obligations not in registered
form 37
Policies issued by foreign
persons 37
Ship passenger tax 36
Sport fishing equipment 30
Trucks 33
Teletypewriter exchange
service 25
Terminal, defined 5
Terminal operator, defined 5
Throughputter, defined 5
Tires:
Credit against heavy truck
tax 36
Credit or refund of tax 32
Train 19
Train (Diesel-powered) 7
Transmix 7
Travel agency 27
TTY/TDD information 41
Two-party exchanges 5, 8
U
Uninterrupted international air
transportation 27
Used other than as a fuel:
Diesel fuel and kerosene 18
Uses, nontaxable:
Alternative fuels 16
Aviation gasoline 14
Diesel fuel 14
Diesel-water fuel emulsion 15
Gasoline 14
Kerosene 14
Kerosene for use in aviation 15
Liquefied petroleum gas
(LPG) 16
Other Fuels 16
V
Vaccines:
Credit or refund 33
Manufacturers tax 33
Vehicles:
Gas guzzler 32
Imported 33
Law enforcement 32
Vendors, registered ultimate 15,
20
Vessel operator, defined 5
W
Wagering and occupational
wagering fee 3
When to deposit 40
Ultimate purchaser 20
Publication 510 (July 2021)
| File Type | application/pdf |
| File Title | Publication 510 (Rev. July 2021) |
| Subject | Excise Taxes, (Including Fuel Tax Credits and Refunds) |
| Author | W:CAR:MP:FP |
| File Modified | 2021-09-01 |
| File Created | 2021-07-21 |