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Part 4. Examining Process

Chapter 24. Excise Tax

Section 13. Fuel Compliance Officer Technical Guidance (Cont. 1)

4.24.13  Fuel Compliance Officer Technical Guidance (Cont. 1)

4.24.13.9 
Inspection Types and Procedures

4.24.13.9.4  (11-09-2007)
Retailer Inspections

  1. Fuel Retailers

    • Obtain fuel from wholesalers,

    • Sell dyed and/or undyed fuel to end-users,

    • May operate diesel operated delivery trucks (thus are also end-users of diesel fuel).

  2. Retailer inspections, including truckstops, are conducted to

    • Verify dyed fuel dispensers contain the required notice. See Treasury Regs §48.4082-2,

    • Verify the strength or composition of dyed fuel has not been altered,

    • Verify fuel dispensed from undyed diesel and kerosene pumps do not show visible evidence of dye,

    • Determine the concentration of sulfur in samples obtained from diesel fuel pumps,

    • Verify registered Form 637 UP pumps meet the blocked pump criteria. See IRM 4.24.13.29 for a definition of a blocked pump,

    • Obtain BTR compliance and sweep samples,

    • Determine if gasoline has been adulterated, and

    • Educate taxpayers concerning fuel tax laws,

  3. The FCO must record the inspection on ExFON.

4.24.13.9.4.1  (11-09-2007)
Retailer Inspection Procedure

  1. Prior to conducting the inspection the FCO should, if possible, query ExFON for prior inspections and review the history.

  2. The FCO must present his/her credentials as well as provide the retailer with a Notice 916 and Publication 1 prior to conducting the inspection.

  3. The FCO will tour the facility and obtain information from the retailer that will help the FCO understand the operation of the business, including but not limited to the

    • Hours of operation,

    • Location of all pumps and tanks,

    • Types of fuel stored and/or sold at this location,

    • Identity of the fuel supplier,

    • Types of records kept of sales and deliveries,

    • Sale of dyed product to end-users,

    • Source of the fuel in the propulsion tanks of the retailer's trucks, and

    • Registration information.

  4. The FCO will obtain a nozzle sample from each tank holding diesel or kerosene, whether dyed or not. See IRM 4.24.13.10.

  5. Refer to the applicable IRM section if the retailer also engages in business activity that would classify it as an end-user ( See IRM 4.24.13.9.5.)

  6. The retailer may be subject to penalties if any of the following is found:

    If the lab confirms Then ...
    The dye concentration of the sample has been altered A violation under IRC section 6715(a)(3) or 6715(a)(4) may be applicable. See IRM 20.1.10.15.1.3 for information regarding when a dye alteration penalty is applicable.
    The presence of dye in a sample from a retail pump not labeled with the required notice A notice violation under IRC section 6715(a)(1) may be applicable
    The presence of dye in a sample from the propulsion tank of the company controlled vehicle A violation under IRC section 6715(a)(2) will be applicable
    The sulfur content of the diesel fuel transferred for resale, sold for resale or held out for resale for use in a diesel-powered train or highway vehicle exceeds the allowable level established by the EPA regulations An IRC section 6720A penalty may be applicable. See IRM 4.24.13.18.5. for guidance.

  7. At a minimum, the case history documentation must include the following:

    • Identification of individual that authorized the inspection,

    • Delivery of Publication 1 and Notice 916,

    • Comments on fuel storage,

    • Identity of fuel supplier(s),

    • Comments on types and number of retail pumps,

    • Results of the screening of company vehicles,

    • Samples taken and sampling procedures,

    • Comments on registration verification,

    • Comments on necessary corrective actions discussed with taxpayer, and

    • Date samples results received and closing letter issued.

  8. Follow the procedures in IRM 4.24.13.18 to close the inspection.

  9. For procedures relating to a BTR inspection, See IRM 4.24.13.9.6.

  10. For procedures relating to biodiesel or sulfur, See IRM 4.24.13.9.3.1.1.

4.24.13.9.5  (11-09-2007)
End-User Inspections

  1. End-user inspections are conducted to

    • Ensure dyed fuel is not being used or held for use in a taxable manner,

    • Verify that the strength or composition of dyed fuel has not been altered,

    • Determine if the gasoline or diesel fuel has been adulterated,

    • Obtain BTR compliance and sweep samples, and

    • Educate taxpayers concerning fuel tax laws.

  2. End-user inspections may be conducted at the permanent place of business for a company, such as the company yard, or may be conducted at sites such as construction sites.

  3. ExFON will be used throughout the inspection process. See IRM 4.24.13.16. and IRM 4.24.13.23 for guidance.

4.24.13.9.5.1  (11-09-2007)
End User Inspection Procedures

  1. Prior to conducting the inspection the FCO should, if possible, query ExFON for prior inspections and review the history.

  2. The FCO must present his/her credentials as well as provide the end-user with a Notice 916 and Publication 1 prior to conducting the inspection.

  3. The FCO will tour the facility and obtain information from the end-user that would help the FCO understand the operation of the business, including but not limited to the

    • Type of business activity,

    • Types of fuel used in vehicles,

    • Types of fuel stored at this location,

    • The number of diesel trucks owned or operated,

    • Location of fuel storage tanks,

    • Identity of the fuel supplier,

    • Records of deliveries,

    • Truck fueling procedure,

    • Records for the fueling of the trucks,

    • Types and number of pieces of off road diesel equipment,

    • Portable diesel tanks used by the company, and

    • Safeguards in place to ensure dyed fuel is not used in a taxable manner.

  4. The FCO will screen the fuel in the on road diesel vehicles. See IRM 4.24.13.10.

  5. If the fuel appears to be dyed or the FCO is suspicious of its content, the FCO will obtain a sample.

  6. The FCO will obtain samples from the storage tanks that are the source of the dyed fuel in the vehicles.

    1. In accordance with Needsome Farms, et al. v. United States, Civil Action No. 97-1375 MLB (D KS, July 16, 1999), all dyed fuel held in a storage tank is subject to a penalty under IRC Section 6715(a)(2) if that tank is the source of dyed fuel found in a propulsion tank violation.

  7. The FCO will obtain information to determine the culpable parties. Joint and several liability may apply.

  8. FCO will "follow the fuel" and conduct follow up inspections as required to determine the extent of the non-compliance. If geographically necessary, the FCO will notify his or her manager to have the information referred to an FCO in the appropriate area for follow up.

  9. At a minimum, the case history documentation must include the following:

    • Identification of individual that authorized the inspection,

    • Delivery of Publication 1 and Notice 916,

    • Comment on fuel storage,

    • Identity of fuel supplier(s),

    • Results of the screening of company vehicles and fueling practices,

    • Samples taken and sampling procedures,

    • Date samples results received and closing letter issued, and

    • See paragraph 3 above

  10. For case processing procedures, See IRM 4.24.13.18.

4.24.13.9.5.2  (11-09-2007)
Farm Inspections

  1. Special rules apply to the assertion of IRC 6715 penalties during farm inspections.

  2. Farmers who own or operate registered diesel vehicles found with dyed fuel in the propulsion tanks may not be subject to penalties under IRC 6715(a)(2) if

    1. The vehicle found with dyed fuel was located on a farm (See IRC Section 6420(c)(2) for the definition of a farm) at the time of the inspection and

    2. The vehicle is used for farming purposes. See IRC Section 6420(c)(3) for the definition of farming purposes.

  3. An FCO who finds dyed fuel in a truck used for farm purposes on the farm may attempt to establish the vehicle was used on the highway.

    1. The burden of proof is on the government to establish the violation.

    2. The FCO must fully develop the facts to support the government’s position.

  4. A registered farm vehicle using dyed fuel on the highway is subject to a penalty under IRC 6715(a)(2).

    Example:

    An FCO screens a registered flatbed truck being used on a farm and finds dyed fuel. The truck is used to move hay from one area of the farm to another. No IRC Section 6715(a)(2) penalty may be applied.
    The same truck, carrying hay to another farm, is screened at a weigh station and is found to contain dyed fuel. An IRC Section 6715(a)(2) penalty would apply.

4.24.13.9.6  (11-09-2007)
Below-The-Rack (BTR) Instructions and Procedures

  1. These instructions provide a standard method for working Below-the-Rack (BTR) compliance initiatives and BTR sweeps, collectively called BTR activities.

4.24.13.9.6.1  (11-09-2007)
BTR In General

  1. FCOs are the only IRS personnel authorized to enter taxable fuel terminals unannounced and to conduct unannounced on-site fuel inspections there and at other points below the terminal rack.

  2. The IRS Excise Forensics Laboratory (EFL) processes BTR samples and associated data sheets with the goal to get all abnormal compliance sample results back to the appropriate FCO Group Manager within three (3) working days from the date the sample is received at the lab.

  3. There is no disclosure issue raised when an FCO provides properly filled out labels and BTR data sheets to the EFL.

  4. Third-party contact issues are not raised when an FCO provides properly filled out labels and BTR data sheets to the EFL.

  5. An FCO who discovers a dyed fuel issue or violation while engaged in a BTR activity should work the dyed fuel issue and then return to working the BTR activity.

  6. To assist in the recording and the input of the inspection, FCOs will use the data capture device and BTR data sheets. See IRM 4.24.13.9.6.5 for more information on completing the BTR data sheets.

  7. Managers and FCOs will not be advised of "normal" results.

4.24.13.9.6.2  (11-09-2007)
FCO Group Manager Responsibilities

  1. Each FCO group will complete the number of BTR activities specified by Fuel Policy each fiscal year.

  2. The FCO Group Manager will plan the location of the activity and the number of FCOs who will participate. The plan must be coordinated with the territory manager and the management of the EFL.

  3. FCO group managers should ensure all needed supplies are available prior to the beginning of a BTR activity. Necessary supplies include but are not limited to

    1. appropriate number of reference and/or compliance form pads,

    2. pre-printed manual sample bottle labels,

    3. pre-printed "To/From" labels,

    4. pre-printed "To Be Opened by Addressee Only" labels,

    5. pre-printed disk labels containing the activity ID,

    6. pre-prepared pro-forma Form 4564s,

    7. pre-printed Forms 3210,

    8. pre-printed FedEx forms,

    9. computer disks or CD-Rs (as appropriate) for data transfers from Logitech Pens, and

    10. copies of Letter 3918.

  4. A list of terminals and their Terminal Control Numbers (TCNs) will be provided at the beginning of the BTR Compliance Initiative.

  5. Managers may also want to supply FCOs with a map of the focus area and the location of potential inspection sites.

  6. Managers or designees should be available by phone during business hours for questions that arise during a BTR activity.

  7. The Group Manager should appoint a central contact person for each BTR activity. This person should be available at a central location to

    1. receive and forward phone calls to and from FCOs, managers, and taxpayers;

    2. act as the contact point for taxpayers responding to an information document request (Form 4564) left by an FCO; and

    3. obtain information that may not be available at the compliance location, such as EINs.

  8. FCO group managers will be informed by the EFL only if the sample results are "abnormal" . See IRM 4.24.13.9.6.9for instructions on referring abnormal results to a fuel territory manager.

4.24.13.9.6.3  (11-09-2007)
Collecting and Documenting Reference Samples

  1. During a BTR Compliance Initiative reference samples are expected to be collected from all terminals handling middle distillate fuels within a defined Compliance Initiative area

  2. Unless otherwise instructed, the FCO will sample all storage tanks that contain undyed (clear) middle-distillate products sold for highway use, such as clear low sulfur No. 1 and No. 2. Because it can be so easily diverted FCOs will collect reference samples of jet fuel if available.

  3. If available, the FCO will collect one sample of transmix (product code 100) from each terminal visited in the reference portion of the Compliance Initiative.

  4. The FCO will use the initial interview of the terminal operator to determine and document

    1. All types of clear highway-fuel products and jet fuel handled in the terminal,

    2. The number of tanks and loading arms used for these products,

    3. Information about the last three receipts of each type of undyed middle-distillate fuel,

    4. Source refinery,

    5. Method of receipt, e.g., pipeline, barge, etc.,

    6. Product,

    7. Volume, and

    8. Date of receipt.

  5. The FCO will collect at least five separate samples of each taxable middle-distillate fuel product, including jet fuel if available, at each terminal per visit. At least one sample must be collected from each storage tank containing those products. Thus, in large facilities, the FCO should expect to collect more than five samples.

    Note:

    Transmix samples, see paragraph 3, require only one sample of the material.

  6. The usual procedure is to take four separate samples from the storage tanks and one sample from the loading arm (rack) serving those storage tanks as follows:

    1. One tank, one loading arm – take four separate samples from the tank and one from the loading arm.

    2. Two tanks, one loading arm – take two separate samples from each tank, one sample from the loading arm.

    3. Three tanks, one loading arm – take one sample from each tank, one more separate sample from a random choice of the three tanks, then one from the loading arm.

    4. Four tanks, one loading arm – one sample from each tank, one sample from the loading arm.

    5. Seven tanks, two loading arms – take one sample from each tank and one from each loading arm for a total of nine samples.

  7. Do not take reference samples from transport cargo compartments. Residue from previous cargo WILL contaminate the subsequent sample.

  8. "Separate samples" means that each sample stands alone. For instance, if taking a sample from a spigot on a large storage tank putting product into a container once and then taking four (4) pump samples from that container is not correct

    1. For scientific validity, a portion of product should be poured into the container, a vacuum pump sample collected, and then the residual in the container discarded.

    2. Then the process at (b) is performed three (3) more times.

  9. The five samples of each taxable middle-distillate fuel are recorded on the same BTR Reference Data Sheet. Separate BTR Reference Data Sheets must be filled out for each different fuel product. See IRM 4.24.13.9.6.5 for information on completing the BTR Data Sheets.

  10. Visit each terminal and collect reference samples once each week for the first two weeks of the compliance initiative.

  11. During the second week, the FCO will duplicate as near as possible the schedule and order established in the first week and again collect reference samples.

  12. A Reference sample must be shipped to the EFL by the afternoon of the third day after the sample was secured.

    Note:

    All reference samples should be shipped to the EFL by Thursday afternoon of the second week of reference sampling.

  13. In situations where the FCO cannot personally secure a sample, terminal personnel may be observed collecting the sample, taking safety issues into consideration.

    1. Current or "fresh" samples are required.

    2. Do not accept any "retain" samples offered by terminal employees.

  14. Use Letter 3144, Dyed Fuel Terminal Inspection (select the first check box) to provide closure for each terminal operator from which reference samples were collected.

4.24.13.9.6.4  (11-09-2007)
Collecting and Documenting Compliance/Sweep Samples

  1. Compliance samples are collected after the reference samples have been obtained, usually starting the mid-point of the second week of the Compliance Initiative. The collecting of compliance samples should be completed within two weeks.

  2. Compliance/Sweep samples are collected from terminals, wholesalers, retailers, and end-users.

  3. Since BTR Sweeps are a single phase activity, all samples obtained during this two to three week activity are considered sweep samples. There are no reference samples collected during a sweep.

  4. At the start of each compliance or sweep inspection, the taxpayer will be provided with a completed Letter 3918 along with a Notice 916 and a Publication 1. The letter explains the following:

    1. The purpose of the inspection,

    2. The action to be taken if the fuel is found not to contain adulterants, and

    3. The actions to be taken if abnormal results are found.

  5. FCOs will collect a sample of transmix (product code 100) from each terminal visited for sweep sampling,

  6. FCOs will collect one sample from each middle distillate fuel storage tank holding clear fuel at each compliance/sweep sampling location, and

  7. Send compliance/sweep samples to the EFL no later than the evening of the next business day after the samples were collected.

4.24.13.9.6.5  (11-09-2007)
Completing the BTR Data Sheets

  1. BTR Data Sheets must be complete, legible, accurate, and timely submitted.

    1. The BTR method is based on timely receiving a certain amount of information in a particular format.

    2. This information is analyzed by the EFL and scientifically supportable results are generated.

    3. Missing, incomplete, or late-received BTR Data Sheets may make other information gathered for a specific BTR activity useless.

  2. Use the Logitech Pen to make all entries on the Data Sheets.

  3. Fill out one BTR Compliance Data Sheet for each sample taken.

  4. It is important that the FCO record the amount of fuel in the source tank whenever a compliance/sweep sample is collected. This record is the basis for tax calculations proposed on this taxpayer as a result of the BTR activity.

  5. Document the last three deliveries of middle-distillate fuel received by the terminal, wholesaler, or retailer. This information may be found on delivery receipts kept at the location of the inspection. If the following information is not readily available at the site of the inspection, ask employees to call management or the home office to obtain the data.

    • If the source is a terminal, provide the Terminal Control Number (TCN).

    • If the TCN is not available, use the complete name and city of the reported terminal source.

    • If the compliance/sweep sample is from a terminal, identify the refinery or refineries supplying the last three shipments of middle distillate fuel.

    • Identify the product by using product codes.

    • Identify the volume received.

    • Identify the date received for each shipment.

    • Identify the volume of that product in the receiving tank before each shipment was received.

    • Identify carrier name, city and state as a marginal note on the BTR data sheet.

    Note:

    Delivery records for shipments beyond 60 days from the date of the inspection are not required. In this situation, make a note in the margin on the BTR data sheet, "+60 Days" . If there is a need to obtain records for such receipts, the FCO will be specifically alerted to collect the required data.

  6. As a last resort, the FCO may complete an Information Document Request (IDR), Form 4564, addressed to the responsible party, requesting that information not available during the visit be provided. Such information includes the inspectee’s EIN, and the information related to the last three receipts as detailed in paragraphs 6 through 10, immediately above.

  7. The Form 4564 requires the addressee to fax or phone the information to the BTR project coordinator, appointed by the manager, within 24 hours of being issued.

  8. When a Form 4564 is issued, the FCO will mark the spaces on the BTR Compliance Data Sheet corresponding to the missing data as follows:

    1. EIN-enter all zeros,

    2. Source-enter all zeros in the space for TCN,

    3. Product-enter all zeros,

    4. Date of delivery-enter today’s date,

    5. Volume of delivery-enter all zeros.

      Note:

      A BTR Compliance Data Sheet with these specific entries alerts the EFL that a Form 4564 is outstanding and to expect the missing data within 48 hours or start inquiries.

  9. Form 4564s are prepared in duplicate:

    1. Original copy to the addressee and

    2. The duplicate copy to the BTR project coordinator

  10. Inform the BTR project coordinator that a Form 4564 has been left with a specific taxpayer and to expect to receive a fax or telephone call with the requested information within 24-hours with the following information

    1. the date the Form 4564 was issued,

    2. the FCO’s name,

    3. entity information,

    4. specific information requested, e.g., EIN/SSN; date, product, volume, and source terminal of the last three deliveries of middle-distillate highway fuel; and

    5. any other information requested.

  11. The coordinator or another assigned person will fax the information received on the Form 4564s within 24 hours to the EFL for data perfection.

  12. FCOs will upload each day’s data to the laptop and perfect it.

4.24.13.9.6.6  (11-09-2007)
Transmitting BTR Datasheets

  1. After perfecting the data, FCOs will send the data as an attachment to an encrypted email (Secure Messaging) to the EFL technician so it precedes the arrival of the samples, and retain the hard copy of data sheets for six weeks following the conclusion of the BTR activity.

  2. In the event an online connection is not available, the following alternative procedure may be used.

    1. Save the data to a disk or CD-R.

    2. The furnished disk/CD-R label will be placed on the disk/CD-R and must contain the Compliance Initiative or sweep ID, date that the data was gathered (not date sent), and the FCO ExFON ID.

    3. Place the disk/CD-R, hard copies of the BTR Data Sheets, a completed Form 3210 in a sealed envelope with an adhesive pre-printed label marked "To be opened by addressee only." .

    4. Insert the envelope into the sample shipping box between the outer cardboard wall and the inner plastic liner.

4.24.13.9.6.7  (11-09-2007)
Packing and Shipping Instructions for BTR Samples

  1. See IRM 4.24.13.15 for general instructions on packing and shipping samples.

  2. Verify that the Form 9667 sample number on each sample bottle matches the sample number entered on the appropriate BTR Data Sheet and chain of custody documents.

  3. Do not put the chain of custody form in an envelope.

  4. In addition to the information covered in IRM 4.24.15, the BTR activity ID, e.g. "T4-05-01" must be visible on the box and not covered by any FedEx forms. The pre-printed "To/From" stickers specific to a given BTR activity that include the BTR activity code may be used to fulfill this requirement.

  5. Place a pre-printed adhesive label "To be opened by addressee only" on the outside of the shipping box on the same side as the "To/From" labels.

  6. Handwrite an "R" for reference or "C" for compliance and sweep samples at the end of the BTR activity ID number.

4.24.13.9.6.8  (11-09-2007)
ExFON Issues

  1. An ExFON inspection is created when the Logitech pen downloads to the laptop.

  2. The FCO must take the appropriate actions to close each inspection including, but not limited to

    1. Updating the inspection if additional taxpayer contacts were made or information received,

    2. Issuance of the appropriate closing letter, and

    3. Updating the approval status.

  3. See IRM 4.24.13.17 for instructions on reporting the time used to conduct BTR activities.

4.24.13.9.6.9  (11-09-2007)
Procedures for BTR Results

  1. The FCO manager will notify the FCO about an "abnormal" result. If the manager has not input a taxpayer contact stating that the sample was "abnormal" within fifteen (15) days after the sample was sent to the lab, the FCO may issue the closing Letter 3143 and close the case.

  2. The EFL will inform the FCO manager and territory manager about abnormal sample results within three (3) business days of receipt of the samples at the lab. The results are also sent to the Excise Fuel Territory Manager and appropriate fuel group manager.

  3. The FCO manager will record the abnormal results in ExFON as a Taxpayer Contact.

  4. The FCO manager will inform the FCO about the "abnormal" results within 10 business days by forwarding the email results.

  5. The revenue agent assigned the abnormal may request the assistance of an FCO if additional samples will be collected. The request will be routed through the FCO group manager who will assign an FCO based on factors including but not limited to proximity to the site and availability.

  6. The revenue agent may request the FCO obtain samples from sources upstream. If the upstream site is outside of the FCO’s normal territory, the FCO should discuss the assignment with the FCO manager.

  7. Follow-up samples are considered BTR compliance/sweep samples

    1. The sample bottle must be labeled as "BTR compliance" . In addition, a statement indicating this is a follow up sample and identifying the original sample number must be included on the label. See IRM 4.24.13.13.5 for further labeling instructions.

    2. The BTR Datasheet for the follow-up sample will also include the statement indicating this is a follow up sample and identifying the original sample number.

  8. The FCO will complete the initial case.

    • Issue the Letter 3143 as the closing letter to the taxpayer.

    • Select the option that informs the taxpayer of the lab result and that a revenue agent will be investigating the "abnormal" findings.

    • Close the case on ExFON.

  9. The EFL will report the follow-up sample whether the result is "abnormal" or "normal"

  10. The follow up sample obtained by the FCO is part of the revenue agent’s case. The FCO will close the case on ExFON as complete; a closing letter is not issued.

4.24.13.10  (11-09-2007)
Sampling Methods

  1. There are two approved methods of sampling fuel. These methods provide safety to the FCO and other persons and permit verifiable evidentiary samples to be obtained.

  2. Sampling Pump Method

    1. Cut a section of new flexible tubing of suitable length to reach the source of the fuel.

      Note:

      To reduce the possibility of cross-contamination, the tubing shall not be cleaned and reused. FCOs shall use new tubing to obtain samples from each distinct source of fuel. For example, if an FCO is obtaining one sample from each of the two propulsion tanks of a vehicle, the FCO will use a section of new tubing to obtain each sample. If the FCO is obtaining two samples from one tank, the FCO may use the same tubing to obtain both samples.

    2. Wear safety glasses ( See IRM 4.24.13.4.4.1.) and nitrile gloves ( See IRM 4.24.13.4.4.2.)

      Note:

      If the sample is to come from a compartment on a transport truck, put the gloves on after climbing the truck.

    3. Place the tubing in the sampling pump and attach a bottle

    4. Bond with the truck ( See IRM 4.24.13.4.5.)

    5. Open the hatch or cap of the fuel tank

    6. Lower the tubing into the tank

    7. Draw fuel into the bottle using the sampling pump

    8. Stop pumping when the bottle contains 30 ml (approximately 1 ounce) but keep the tubing in the fuel

    9. Release the pressure by loosening the bottle (but do not remove) or pressing the release button on the pump, if so equipped.

    10. Allow the fuel in the tube to flow back into the tank

    11. Remove the tubing from the tank and cradle the end of the tubing in an absorbent towel.

    12. Close and secure the hatch or cap of the tank

    13. Remove the bottle from the pump

    14. Seal the bottle with a cap and a properly applied Form 9667 ( See IRM 4.24.13.13.).

  3. Nozzle Method

    1. Wear safety glasses ( See IRM 4.24.13.4.4.1.) and nitrile gloves ( See IRM 4.24.13.4.4.2.)

    2. Place a clean two quart glass measuring cup or wide mouth jar into a bucket (to prevent spillage)

    3. Turn on the fuel pump

    4. Dispense fuel through the nozzle into the cup or jar.

    5. Dispense enough fuel to obtain a 30 ml (approximately one ounce) sample.

    6. Use the sampling pump method to pump fuel from the cup or jar into a clean, unused sample bottle.

    7. Seal the bottle with a cap and a properly applied Form 9667 ( See IRM 4.24.13.13.)

4.24.13.10.1  (11-09-2007)
Approved Sample Bottles

  1. All samples will be shipped in two ounce glass bottles.

  2. Only caps with a seal should be used.

4.24.13.11  (11-09-2007)
Screening Techniques

  1. There are two approved screening techniques during an inspection

    • Pipette Screening Method

    • Acoustic Inspection Device Screening Method

4.24.13.11.1  (11-09-2007)
Pipette Screening Method

  1. Pipette Screening Method

    1. Unseal a new pipette.

    2. Bond with the propulsion tank ( See IRM 4.24.13.4.5.)

    3. Open the fuel tank.

    4. Insert the pipette into the tank as far as it will reach.

    5. Place a thumb firmly over the upper end of the pipette, forming a seal to hold the fuel in the pipette.

    6. Pull the pipette up until the fuel inside the pipette can be observed.

    7. If no dye is detected, remove the thumb from the end of the pipette, releasing the fuel back into the tank.

    8. If dye is detected, call the driver's attention to it then fold the pipette so both ends are facing up, then release the fuel into an absorbent pad or container.

    9. Properly dispose of the used pipette.

    10. If dye was detected, obtain a sample using the Sampling Pump Method.

4.24.13.11.2  (11-09-2007)
Acoustic Inspection Device Screening Method

  1. The Acoustic Inspection Device (AID) is a self-contained system of portable components used to screen liquid in a closed container.

4.24.13.11.2.1  (11-09-2007)
Uses of the AID

  1. Depending on how the device is configured,

    1. the AID can identify a specific product in a closed container or

    2. the AID can verify that the liquid in a closed container is/is not gasoline, diesel fuel, or kerosene.

  2. Either type of determination is made quickly, without opening the container, and without the need to collect a sample of the product.

  3. The AID can verify that the product being carried is consistent with the product on the Bill of Lading.

  4. The AID can also be configured to detect anomalies in the size and shape of a container, e.g., false bottoms, hidden compartments, etc.

4.24.13.11.2.2  (11-09-2007)
Field Deployment of the AID

  1. AID systems are intended to quickly and non-intrusively screen cargo in liquid transport vehicles at:

    1. International border crossings (in both directions),

    2. Weigh-stations and other inspection sites, see Treas. Regs. section 48.4083-1(b), where a high volume of liquid transport vehicles is found or expected to be found.

    3. Any other location where its unique capabilities are appropriate.

  2. AID systems are assigned to FCO groups that share an international border.

4.24.13.12  (11-09-2007)
Investigative Samples

  1. FCOs will encounter fuel held by taxpayers where the nature and composition of the fuel is questionable.

  2. Such fuel may raise suspicions because of what it looks like, smells like, what it is called, and/or where it is found.

  3. A sample collected of this fuel is called an "investigative sample" .

  4. Investigative samples are "fingerprinted," and subjected to other analytical procedures to determine unusual components and the percentage of each component in the total volume.

4.24.13.12.1  (11-09-2007)
Requests for Investigative Samples

  1. The request to collect investigative samples may come from a variety of sources such as:

    1. An FCO comes upon an unusual and suspicious fuel product.

    2. IRS Criminal Investigation requests that certain fuel be collected and analyzed for content.

    3. A similar request may come from State agencies, acting under a MOU.

    4. An excise manager requests that a taxpayer’s product be analyzed to see if it is what the taxpayer says it is, or what the agent and manager suspect it is.

4.24.13.12.2  (11-09-2007)
Investigative Sample Procedure

  1. The samples must be obtained using one of the approved sampling methods. See IRM 4.24.13.10.

  2. The EFL needs more than 1 ounce of fuel to conduct the necessary testing. From each source of fuel for which investigative sample testing is requested, FCOs must collect four (4) one ounce samples.

  3. Using the Logitech pen, the FCO will complete a BTR Compliance sheet to record as much essential information as is available about the investigative sample. See IRM 4.24.13.9.6.5. for instructions on completing the form.

  4. A written statement must be included with the shipment to alert the EFL chemist of what is suspected and what should be done. See Exhibit 4.24.13-1. for an example of a form that may be used to capture the required information.

    • The statement gives the chemist a starting point for the investigation

    • The statement will include the name, address, secure email address, fax number and phone number of the person(s) to whom the lab analysis will be sent.

    • An example of a statement explaining the reason for the sample would be: "Fuel may be mixed with used motor oil, PCBs and other waste products. Test for adulterants to verify. Provide the name of the adulterant(s) and the percentage of each."

  5. See IRM 4.24.13.13.6. for the required label information on the Form 9667.

  6. See IRM 4.24.13.14. for information on the chain of custody.

4.24.13.12.3  (11-09-2007)
Shipping of Investigative Samples

  1. See IRM 4.24.13.15. for general instructions on packing and shipping samples. See IRM 4.24.13.9.6.7. for specific instructions for BTR samples.

  2. Place the completed BTR Compliance sheet and the written statement into the box. See IRM 4.24.13.12.2. for detailed information on these documents.

  3. Legibly mark four sides of the box"Investigative Samples From (insert the state from which the samples were collected)" .

    Example:

    Investigative Samples From North Dakota

4.24.13.12.4  (11-09-2007)
Referral of Results

  1. The EFL will notify the person(s) identified in the statement that accompanied the shipment about the sample results within three (3) business days of receipt of the samples at the lab.

  2. If the results from an IRS initiated sample indicate the need for further development, a referral will be made within one day.

  3. A revenue agent may request the assistance of an FCO if additional samples will be collected. The request will be routed through the FCO manager who will assign an FCO based on factors including, but not limited to, proximity to the site and availability.

  4. The revenue agent may request the FCO obtain samples from sources upstream. If the upstream site is outside of the FCO’s normal territory, the FCO should discuss the assignment with the FCO manager.

4.24.13.13  (11-09-2007)
Sample Bottle Labeling

  1. Use only pre-printed, sequentially numbered, bar coded, adhesive labels, Form 9667.

    Note:

    Do not use the ExFON generated sample number

  2. The completed sample bottle label will be affixed before leaving the inspection site.

  3. The information recorded on the Form 9667 is determined by the type of test to be done on the sample

  4. The types of test listed on the Form 9667 include:

    • Concentration

    • Usage

    • BTR Compliance

    • BTR Reference

    • BTR Investigation

    Note:

    See IRM 4.24.13.2 and IRM 4.24.13.27.2 for a definition of each sample type.

  5. Information on sample bottle labels, including the sample number, has been deemed taxpayer information protected by IRC section 6103.

  6. Only the prescribed data explained within this section should be entered on any type of sample bottle label.

  7. Samples obtained from a state employee must include a "Z" on the right side of the sample label number.

  8. Ensure that all the required information is accurately recorded in the appropriate space on each part of the Form 9667.

  9. The Form 9667 has five label sections:

    • Each contains the unique sample reference number

    • Three are placed on the bottle

    • One is used on the Chain of Custody and Shipping Record

    • One is available for use if a paper file is created

  10. Sample Bottle Labeling Procedure

    1. Crisscross the top two labeling strips over the top of the capped bottle so that four approximately equal lengths come down the outside of the bottle.

      Caution:

      When applying these strips the FCO should press the strips against the side of the cap while one end of the strip is still not applied to the bottle. This will reduce the chance that the strips will tear and thus compromise the integrity of the sample

    2. Wrap the third section (identified as "bottle label" on the Form 9667) around the bottle, covering the bottom ends of the two crisscrossed strips.

4.24.13.13.1  (11-09-2007)
Completing the Form 9667 For a Concentration Sample

  1. See IRM 4.24.13.29. for a definition of a concentration sample

  2. Required information on Form 9667:

    • FCO I.D. - enter the four digit FCO identification number

    • Date - enter the date the sample was collected

    • Type of Test - check mark the space to the left of "Concentration"

    • Fuels - check mark the space to the left of "Dyed" . If "Other" is selected, identify the type of fuel sampled.

    • TCN - if applicable, enter the complete and verified terminal control number assigned to that terminal.

    • If there is no TCN, enter City, State and Zip code

4.24.13.13.2  (11-09-2007)
Completing the Form 9667 For a Usage Sample

  1. See IRM 4.24.13.29. for a definition of a usage sample

  2. Required information on Form 9667:

    • FCO I.D. - enter the four digit FCO identification number

    • Date - enter the date the sample was collected

    • Type of Test - check mark the space to the left of "Usage"

    • Fuels - check mark the space to the left of "Dyed" . If "Other" is selected, identify the type of fuel sampled.

4.24.13.13.3  (11-09-2007)
Completing the Form 9667 For a Sulfur Sample

  1. See IRM 4.24.13.29. for a definition of a sulfur sample.

  2. Required information on Form 9667:

    • FCO I.D.- enter the four digit FCO identification number

    • Date - enter the date the sample was collected

    • Type of Test - leave blank

    • Fuels - check mark the space to the left of the proper fuel type. In the blank space next to "Other" the FCO will write "ULSD" if the pump dispensing the fuel was labeled ULSD.

4.24.13.13.4  (11-09-2007)
Completing the Form 9667 For a BTR Reference Sample

  1. See IRM 4.24.13.29. for a definition of a BTR reference sample

  2. Required information on Form 9667:

    • FCO I.D.- enter the four digit FCO identification number

    • Date - enter the date the sample was collected

    • Type of Test - check mark the space to the left of "Reference"

    • Fuels - check mark the space to the left of the proper fuel type. If "Other" is selected, identify the type of fuel sampled.

    • TCN - enter the complete and verified terminal control number assigned to that terminal or fractionator.

4.24.13.13.5  (11-09-2007)
Completing the Form 9667 For a BTR Compliance or Sweep Sample

  1. See IRM 4.24.13.29. for a definition of a BTR reference sample and a BTR sweep sample

  2. Required information on Form 9667:

    • FCO I.D.- enter the four digit FCO identification number

    • Date - enter the date the sample was collected

    • Type of Test - check mark the space to the left of "Compliance"

    • Fuels - check mark the space to the left of the proper fuel type. If "Other" is selected, identify the type of fuel sampled.

    • TCN - enter the name of the city, town or village, the name of the state and the zip code of where the sample was collected.

4.24.13.13.6  (11-09-2007)
Completing the Form 9667 For an Investigative Sample

  1. See IRM 4.24.13.29. for a definition of an investigative sample.

  2. Required information on Form 9667:

    • FCO I.D.- enter the four digit FCO identification number

    • Date - enter the date the sample was collected

    • Type of Test - check mark the space to the left of "Investigation"

    • Fuels - check mark the space to the left of the proper fuel type. If "Other" is selected, identify the type of fuel sampled.

      Note:

      If the type of fuel is unknown, check mark "Other" and indicate what the fuel is alleged or suspected to be. The FCO may also use this space to direct the EFL to an enclosed statement that provides more detail regarding the sample.

4.24.13.13.7  (11-09-2007)
Completing the Form 9667 For a Sample Containing Gasoline

  1. Required information on Form 9667:

    • FCO I.D.- enter the four digit FCO identification number

    • Date - enter the date the sample was collected

    • Type of Test - check mark the space to the left of "Investigation"

    • Fuels - check mark "Other" , and identify the type of fuel sampled.

4.24.13.14  (11-09-2007)
Chain-of-Custody

  1. Samples are evidence and must be documented by an unbroken chain-of-custody.

  2. There are two Chain of Custody forms used by FCOs:

    • Chain of Custody Control Document

    • Chain of Custody and Shipping Record

  3. A properly completed Chain of Custody Control Document must be completed for each sample. It is documented each time the sample is transferred, such as from one FCO to another or for each sample a state officer transfers to an FCO. It includes the sample number, the date each party received the sample and when custody of the sample was relinquished.

  4. A Chain of Custody and Shipping Record must be completed by the FCO for every box of samples relinquished to FedEx and sent to the EFL.

  5. The FCO may use a manual Chain of Custody and Shipping Record or the ExFON generated form.

    Note:

    The FCO must manually enter "ULSD" in the Description of Sample column and "Sulfur Content" in the Type column

  6. The FedEx tracking number must be written on the Chain of Custody and Shipping Record.

  7. The Chain of Custody and Shipping Record and the Chain of Custody Control Document will be placed in the box with the fuel samples to which they pertain.

4.24.13.15  (11-09-2007)
Packing and Shipping Samples

  1. The US Department of Transportation (USDOT) regulations (49 CFR 173.4) cover the packing and shipping of small volumes of Hazard Class 3 liquids.

  2. All taxable fuels, including gasoline, are Hazard Class 3 liquids and are eligible for shipping under 49 CFR 173.4.

  3. The only documentation required on the outer box is the precise statement, "This package conforms to 49 CFR 173.4."

  4. Packing and shipping under 49 CFR 173.4 eliminates requirements for:

    1. Shipper’s Declaration for Dangerous Goods form,

    2. UN numbers and product name on the box,

    3. orientation arrows,

    4. "Q-value" calculations, and

    5. entering "LTD QTY" on the box.

  5. Shipments under 49 CFR 173.4 are accepted at FedEx locations that ship dangerous goods.

  6. Shipments under 49 CFR 173.4 are not charged an accessible dangerous good surcharge.

  7. Failure to follow procedures in 49 CFR 173.4 may subject the FCO to fines and result in an unsafe shipping situation.

4.24.13.15.1  (11-09-2007)
Packing Instructions

  1. 49 CFR 173.4 allows a maximum of 30 ml (approximately one fluid ounce) per "inner packaging." An "inner packaging" is one sample bottle.

  2. The approved shipping box has two layers and can hold up 12 bottles per layer for a total of 24 bottles. No other shipping box should be used to ship the two ounce bottles.

  3. Packing procedure:

    1. Construct an approved shipping box and tape the bottom.

    2. Place the large plastic bag into the box.

    3. Place the assembled cardboard dividers into the bag.

    4. Wrap each 30 ml sample bottle in absorbent material.

    5. Place each sample bottle in an individual plastic bag and seal the bag. Do not use tape to seal the bag.

    6. Place each sample into the box

      Note:

      Samples shall only be placed in the inner compartments of the box. The outer compartments act as a cushion to prevent breakage.

    7. Seal the bag

4.24.13.15.2  (11-09-2007)
Shipping Instructions

  1. All samples will be shipped via FedEx Priority Overnight.

  2. Ship samples to:

    1. IRS Excise Forensics Laboratory
      350 Hills St
      Richland WA 99354
      Attn: Bob Wright (509) 376-3715

  3. Samples must be timely shipped to the Excise Forensics Laboratory (EFL.) Extensions may be granted by the FCO manager, if warranted.

    1. Dyed fuel samples must be shipped to the EFL within five business days of being taken or as otherwise required by a Memorandum of Understanding (MOU) between the IRS and a state agency.

    2. BTR Reference samples must be shipped to the EFL by the afternoon of the third day after the sample was secured.

      Note:

      All reference samples should be shipped to the EFL by Thursday afternoon of the second week of reference sampling.

    3. BTR Compliance/Sweep and Investigative samples must be shipped to the EFL no later than the evening of the next business day after the samples were collected.

  4. Include in the box with the samples:

    1. Chain of Custody and Shipping Record and the Chain of Custody Control Document, if applicable. See IRM 4.24.13.14. for information on the chain of custody requirements.

      Note:

      FCOs must record the Federal Express Air Waybill number on the Chain of Custody and Shipping Record.

    2. See IRM 4.24.13.9.6.7. for additional information on what should be included in the shipping box for BTR samples.

    3. See IRM 4.24.13.12.3. for more information on what should be included in the shipping box for Investigative samples.

  5. Seal the shipping box with packaging tape.

  6. The shipping box must be labeled with the required specific statement "This box conforms to 49 CFR 173.4" This statement must be clear and legible.

4.24.13.16  (11-09-2007)
Excise Tax Fuel On-line Network (ExFON)

  1. The ExFON system provides automated support for the Fuel Compliance Officer program.

  2. Provides access to inspection data to system users based on the user's role.

  3. ExFON is comprised of three distinct sections:

    1. FCO system

    2. Group Manager system

    3. Cincinnati Compliance Service Center

  4. FCOs and group managers should refer to the ExFON text for guidance on specific applications within ExFON.

  5. See the applicable IRM section that relates to the ExFON application for guidance on the time period within which FCOs must have their work input into ExFON.


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