Table of Contents
- 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
- On a Farm for Farming Purposes (No. 1)
- Off-Highway Business Use (No. 2)
- Export (No. 3)
- In a Boat Engaged in Commercial Fishing (No. 4)
- In Certain Intercity and Local Buses (No. 5)
- In a Qualified Local Bus (No. 6)
- In a School Bus (No. 7)
- For Diesel Fuel and Kerosene (Other Than Kerosene Used in Aviation) Used Other Than as a Fuel (No. 8)
- In Foreign Trade (No. 9)
- Certain Helicopter and Fixed-Wing Aircraft Uses (No. 10)
- Exclusive Use by a Qualified Blood Collector Organization (No. 11)
- In a Highway Vehicle Owned by the United States That is Not Used on a Highway (No. 12)
- Exclusive Use by a Nonprofit Educational Organization (No. 13)
- Exclusive Use by a State, Political Subdivision of a State, or the District of Columbia (No. 14)
- In an Aircraft or Vehicle Owned by an Aircraft Museum (No. 15)
- In Military Aircraft (No. 16)
- In Commercial Aviation (Other Than Foreign Trade)
- Use in a Train
- Alcohol Fuel Mixture Credit
- Biodiesel Mixture Credit
- Alcohol Fuel Credit
- Biodiesel Fuel Credit
- Renewable Diesel Credits
- Alternative Fuel Credits
- Filing Claims
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 alcohol fuel mixture credit, the biodiesel mixture credit, the alcohol fuel credit, the biodiesel fuel credit, the renewable diesel credits, and the alternative fuel credits.
Information on how to make a claim for credit or refund is included in this chapter and can also can be found in the instructions for:
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Form 720,
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Form 4136,
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Form 8849,
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Form 6478, and
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Form 8864.
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A copy of the export bill of lading issued by the delivering carrier,
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A certificate by the agent or representative of the export carrier showing actual exportation of the fuel,
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A certificate of lading signed by a customs officer of the foreign country to which the fuel is exported, or
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A statement of the foreign consignee showing receipt of the fuel.
The following are the uses of gasoline (defined earlier) for which a credit or refund may be allowable to an ultimate purchaser.
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On a farm for farming purposes (credit only).
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Off-highway business use.
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Export.
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In a boat engaged in commercial fishing.
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In certain intercity and local buses.
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In a school bus.
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Exclusive use by a qualified blood collector organization.
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In a highway vehicle owned by the United States that is not used on a highway.
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Exclusive use by a nonprofit educational organization (see Sales by Registered Ultimate Vendors and Credit Card Purchases, later).
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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).
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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.
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On a farm for farming purposes (credit only).
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Export.
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In foreign trade.
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Certain helicopter and fixed-wing air ambulance uses.
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In commercial aviation (other than foreign trade).
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Exclusive use by a qualified blood collector organization.
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Exclusive use by a nonprofit education organization (see Sales by Registered Ultimate Vendors and Credit Card Purchases, later).
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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).
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In an aircraft owned by an aircraft museum.
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In military aircraft.
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.
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A state or local government for its exclusive use (including essential government use by an Indian tribal government).
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A nonprofit educational organization for its exclusive use.
The registered ultimate vendor may make the claim if the ultimate purchaser did not 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.
If gasoline and aviation gasoline are purchased with a credit card issued to a state or local government for its exclusive 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:
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Is registered by the IRS,
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Has established that the amount of tax has not 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
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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 are not 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.
For conditions to an allowance of a credit or refund on exported dyed diesel fuel and dyed kerosene, see Exported taxable fuel, earlier.
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.
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On a farm for farming purposes.
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Off-highway business use.
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Export.
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In a qualified local bus.
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In a school bus.
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Other than as a fuel in a propulsion engine of a diesel-powered highway vehicle (such as home heating oil).
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Exclusive use by a qualified blood collector organization.
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In a highway vehicle owned by the United States that is not used on a highway.
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Exclusive use by a nonprofit educational organization (see Sales by Registered Ultimate Vendors and Credit Card Purchases, later).
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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).
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In a vehicle owned by an aircraft museum.
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As a fuel in a propulsion engine of a diesel-powered train (subject to back-up tax, discussed earlier).
The following are the sales for which a credit or refund may be allowable to the registered ultimate vendor only.
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Undyed diesel fuel or undyed kerosene sold for the exclusive use by a state or local government (if credit card rules (defined later) do not apply),
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Undyed kerosene sold from a blocked pump (defined below), or
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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.
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It is used to make retail sales of undyed kerosene for use by the buyer in any nontaxable use.
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It is at a fixed location.
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It is identified with a legible and conspicuous notice stating, “UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY.”
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It meets either of the following conditions.
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It cannot reasonably be used to dispense fuel directly into the fuel supply tank of a diesel-powered highway vehicle or train.
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It is locked by the vendor after each sale and unlocked by the vendor only in response to a buyer's request for undyed kerosene for use other than as a fuel in a diesel-powered highway vehicle or train.
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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:
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Is registered by the IRS,
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Has established that the amount of tax has not 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
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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 are not 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.
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.
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On a farm for farming purposes.
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Off-highway business use.
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Export.
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In a qualified local bus.
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In a school bus.
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Other than as fuel in the propulsion engine of a train or diesel-powered highway vehicle (but not off-highway use).
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Exclusive use by a qualified blood collector organization.
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In a highway vehicle owned by the United States that is not used on a highway.
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Exclusive use by a nonprofit educational organization.
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Exclusive use by a state, political subdivision of a state, or the District of Columbia.
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In an aircraft or vehicle owned by an aircraft museum.
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The diesel-water fuel emulsion contains at least 14 percent water,
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The emulsion additive is registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act,
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Undyed diesel fuel taxed at $.244 was used to produce the diesel-water fuel emulsion, and
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The diesel-water fuel emulsion was used or sold for use in the blender's trade or business.
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 has not 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.
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On a farm for farming purposes.
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In foreign trade.
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Certain helicopter and fixed-wing aircraft uses.
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Exclusive use by a qualified blood collector organization.
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Exclusive use by a nonprofit educational organization.
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In an aircraft or vehicle owned by an aircraft museum.
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In military aircraft.
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.
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.
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.
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:
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Is registered by the IRS,
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Has established that the amount of tax has not 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
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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 are not 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.
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.
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On a farm for farming purposes.
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Off-highway business use.
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In a boat engaged in commercial fishing.
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In certain intercity and local buses.
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In a school bus.
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In a qualified local bus.
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Exclusive use by a qualified blood collector organization.
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Exclusive use by a nonprofit educational organization.
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Exclusive use by a state, political subdivision of a state, or the District of Columbia.
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In an aircraft or vehicle owned by an aircraft museum.
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Use in any boat operated by the United States for its exclusive use or any vessel of war of any foreign nation.
For information on the alternative fuel credit and alternative fuel mixture credit, see Alternative Fuel Credits, later.
The tax on dyed diesel fuel for inland waterways fuel use applies at the rate 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) cannot be claimed.
If the tax is paid and reported to the government on more than one taxable event for a taxable fuel under Internal Revenue Code 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.
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A tax on the fuel was paid to the government and not credited or refunded (the “first tax”).
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After the first tax was imposed, another tax was imposed on the same fuel and was paid to the government (the “second tax”).
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The person that paid the second tax filed a timely claim for refund containing the information required (see Refund claim, later).
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The person that paid the first tax has met the reporting requirements, discussed next.
Department of the Treasury
Internal Revenue Service
Cincinnati, OH 45999-0555
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Removal at a terminal rack,
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Nonbulk entries into the United States, and
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Removals or sales by blenders.
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A copy of the first taxpayer's report (discussed earlier).
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A copy of the statement of subsequent seller if the fuel was bought from someone other than the first taxpayer.
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.
Table 2-1. Type of Use Table
No. | Type of Use |
1 | On a farm for farming purposes |
2 | Off-highway business use (for business use other than in a highway vehicle registered or required to be registered for highway use) (other than use in mobile machinery) |
3 | Export |
4 | In a boat engaged in commercial fishing |
5 | In certain intercity and local buses |
6 | In a qualified local bus |
7 | In a bus transporting students and employees of schools (school buses) |
8 | For diesel fuel and kerosene (other than 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) |
9 | In foreign trade |
10 | Certain helicopter and fixed-wing aircraft uses |
11 | Exclusive use by a qualified blood collector organization |
12 | In a highway vehicle owned by the United States that is not used on a highway |
13 | Exclusive use by a nonprofit educational organization |
14 | Exclusive use by a state, political subdivision of a state, or the District of Columbia |
15 | In an aircraft or vehicle owned by an aircraft museum |
16 | In military aircraft |
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.
raised — not merely caught or harvested.
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To cultivate the soil or to raise or harvest any agricultural or horticultural commodity.
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To raise, shear, feed, care for, train, or manage livestock, bees, poultry, fur-bearing animals, or wildlife.
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To operate, manage, conserve, improve, or maintain your farm and its tools and equipment.
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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.
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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.
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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.
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For personal use, such as mowing the lawn.
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In processing, packaging, freezing, or canning operations.
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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 means fuel used in a trade or business or in an income-producing activity other than as a fuel in a highway vehicle registered or required to be registered for use on public highways. The terms “highway vehicle,” “public highway,” and “registered” are defined below. Do not consider any use in a boat as an off-highway business use.
Off-highway business use includes fuels used in any of the following ways.
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In stationary machines such as generators, compressors, power saws, and similar equipment.
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For cleaning purposes.
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In forklift trucks, bulldozers, and earthmovers.
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For transmix (diesel fuel), the refining of tax-paid transmix into gasoline, diesel fuel, or kerosene.
Generally, this use does not include nonbusiness use of fuel, such as use by minibikes, snowmobiles, power lawn mowers, chain saws, and other yard equipment.
Example.
Caroline owns a landscaping business. She uses power lawn mowers and chain saws in her business. The gasoline used in the power lawn mowers and chain saws qualifies as fuel used in an off-highway business use. The gasoline used in her personal lawn mower at home does not qualify.
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A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer).
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A special kind of cargo, goods, supplies, or materials.
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Some off-highway task unrelated to highway transportation, except as discussed next.
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Specially designed mobile machinery for nontransportation functions. A self-propelled vehicle is not a highway vehicle if all the following apply.
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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.
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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.
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The chassis could not, because of its special design and without substantial structural modification, be used as part of a vehicle designed to carry any other load.
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The vehicle must have traveled less than 7,500 miles on public highways during the taxable year.
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Vehicles specially designed for off-highway transportation. A vehicle is not treated as a highway vehicle if the vehicle is specially designed for the primary function of transporting a particular type of load other than over the public highway and because of this special design, the vehicles's capability to transport a load over a public highway is substantially limited or impaired.
To make this determination, you can take into account the vehicle's size, whether the vehicle is subject to licensing, safety, or other requirements, and whether the vehicle can transport a load at a sustained speed of at least 25 miles per hour. It does not matter that the vehicle can carry heavier loads off highway than it is allowed to carry over the highway.
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Nontransportation trailers and semitrailers. A trailer or semi-trailer is not treated as a highway vehicle if it is specially designed to function only as an enclosed stationary shelter for carrying on a nontransportation function at an off-highway site. For example, a trailer that is capable only of functioning as an office for an off-highway construction operation is not a highway vehicle.
Export means fuel removed from the United States with the intention that the fuel remain in a foreign country or possession of the United States. Fuel is not exported if it is in the fuel supply tank of a vehicle or aircraft.
In a boat engaged in commercial fishing means fuel used in taking, catching, processing, or transporting fish, shellfish, or other aquatic life for commercial purposes, such as selling or processing the catch, on a specific trip basis. They include boats used in both fresh and salt water fishing. They do not include boats used for both sport fishing and commercial fishing on the same trip.
In certain intercity and local buses means fuel used in a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. The bus must be engaged in one of the following activities.
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Scheduled transportation along regular routes.
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Nonscheduled operations if the seating capacity of the bus is at least 20 adults, not including the driver. Vans and similar vehicles used for van-pooling or taxi service do not qualify.
In a qualified local bus means fuel used in a bus meeting all the following requirements.
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It is engaged in furnishing (for compensation) intracity passenger land transportation available to the general public.
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It operates along scheduled, regular routes.
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It has a seating capacity of at least 20 adults (excluding the driver).
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It is under contract with (or is receiving more than a nominal subsidy from) any state or local government to furnish the transportation.
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.
Diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train (not including off-highway business use) means undyed diesel fuel and undyed kerosene used:
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For home heating, lighting, and cooking;
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In boats;
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In stationary machines, such as generators and compressors;
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For cleaning purposes; or
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In minibikes and snowmobiles.
In foreign trade means fuel used in civil aircraft employed in foreign trade or trade between the United States and any of its possessions. 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.
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Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas.
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Planting, cultivating, cutting, transporting, or caring for trees (including logging operations).
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Providing emergency medical transportation.
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Planting, cultivating, cutting, transporting, or caring for trees (including logging operations).
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Providing emergency medical transportation. The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services.
Exclusive use by a qualified blood collector organization means fuel used by the qualified blood collector organization for its exclusive use in the collection, storage, or transportation of blood.
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Described in section 501(c)(3) and exempt from tax under section 501(a),
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Primarily engaged in the activity of collecting human blood,
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Registered with the IRS, and
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Registered by the Food and Drug Administration to collect blood.
In a highway vehicle owned by the United States that is not used on a highway means fuel used in a vehicle that was not used on public highways during the period covered by the claim. This use applies whether or not the vehicle is registered or required to be registered for highway use.
Exclusive use by a nonprofit educational organization means fuel used by an organization exempt from income tax under Internal Revenue Code section 501(a) that meets both of the following requirements.
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It has a regular faculty and curriculum.
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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 Internal Revenue Code 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 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 means fuel used in an aircraft or vehicle that is owned by an organization that meets all the following requirements.
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It is exempt from income tax as an organization described in Internal Revenue Code section 501(c)(3).
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It is operated as a museum under a state (or District of Columbia) charter.
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It is operated exclusively for acquiring, exhibiting, and caring for aircraft of the type used for combat or transport in
World War II.
The aircraft or vehicle (such as a ground servicing vehicle for aircraft) must be used exclusively for the purposes described in item (3).
In 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.
A producer of an alcohol fuel mixture can make a claim for the alcohol used to produce an alcohol fuel mixture. Special rules determine the order in which the claim can be made. An alcohol fuel mixture for this purpose is a mixture of alcohol with gasoline, diesel fuel, or kerosene. You do not treat adding denaturants to alcohol as the production of a mixture.
You, as the producer of the mixture, must either sell the mixture for use as a fuel to another person or use the mixture as a fuel in your trade or business. The credit is allowed for each gallon of alcohol you used to produce a mixture only if the sale or use is in your trade or business.
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Alcohol produced from petroleum, natural gas, or coal (including peat).
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Alcohol with a proof of less than 190 (150 proof for purposes of a mixture credit taken under section 40 on Form 6478). In figuring the proof of any alcohol, disregard any denaturants (additives that make the alcohol unfit for human consumption).
A producer of a biodiesel mixture can make a claim for the biodiesel (defined earlier) used to produce a biodiesel mixture. Special rules determine the order in which the claim can be made. A mixture for this purpose is a mixture of biodiesel with diesel fuel without regard to kerosene that is at least 0.1% (by volume) of diesel fuel.
You can make a claim only for a mixture you produce and sell or use. You must sell the mixture to any person for use as a fuel, or use it as a fuel in your trade or business. The credit is allowed for each gallon of biodiesel you used to produce a mixture only if the sale or use is in your trade or business. The biodiesel used to produce the biodiesel mixture must meet ASTM D6751 and meet the registration requirements for fuels and fuel additives established by the EPA under section 211 of the Clean Air Act.
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Certificate identification number.
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Total gallons of biodiesel on certificate.
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Total gallons claimed on Schedule 3 (Form 8849).
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Total gallons claimed on Schedule C (Form 720).
If you sell or use alcohol (not in a mixture) as a fuel, you may be eligible for a credit on your income tax return. The alcohol fuel credit consists of the straight alcohol credit, the alcohol fuel mixture credit, and the small ethanol producer credit. The alcohol fuel mixture credit was discussed earlier.
Alcohol eligible for the credit includes methanol and ethanol. This includes methanol produced from methane gas formed in waste disposal sites. But it does not include any of the following.
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Alcohol produced from petroleum, natural gas, or coal (including peat).
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Alcohol with a proof of less than 150.
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Ethanol produced as a by-product from manufacturing ethylcellulose derived from ethane.
In figuring the proof of any alcohol, disregard any denaturants (additives that make the alcohol unfit for human consumption).
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You used it as a fuel in your trade or business.
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You sold it at retail and placed it in the fuel tank of the buyer's vehicle.
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Use in the production of a qualified mixture in that person's trade or business (except casual off-farm production).
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Use as a fuel in that person's trade or business.
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Sale at retail by that person who puts the ethanol in the fuel tank of the buyer's vehicle.
The biodiesel fuel credit consists of the straight biodiesel credit, the biodiesel mixture credit, and the small agri-biodiesel producer credit. If you sell or use biodiesel (not in a mixture) as a fuel, you may be eligible for a general business credit on your income tax return. The biodiesel mixture credit was discussed earlier.
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You used it as a fuel in your trade or business.
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You sold it at retail and placed it in the fuel tank of the buyer's vehicle.
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Use in the production of a qualified mixture in that person's trade or business (except casual off-farm production).
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Use as a fuel in that person's trade or business.
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Sale at retail by that person who puts the agri-biodiesel in the fuel tank of the buyer's vehicle.
Form 8864 is the only form on which you can claim the straight biodiesel fuel credit.
Form 8864 is the only form on which you can claim the renewable diesel credit.
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Liquefied petroleum gas,
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Compressed natural gas,
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Liquefied natural gas,
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Liquefied hydrogen,
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Liquid fuel derived from coal (including peat) through the Fischer-Tropsch process,
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Liquid fuel derived from biomass (as defined in Internal Revenue Code section 45K(c)(3)), and
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P Series Fuels (as defined under section 13211(2) of title 42 (United States Code).
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.
Keep at your principal place of business all records needed to enable the IRS to verify that you are the person entitled to claim a credit or refund and the amount you claimed.
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The number of gallons purchased and used during the period covered by your claim.
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The dates of the purchases.
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The names and addresses of suppliers and amounts purchased from each in the period covered by your claim.
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The nontaxable use for which you used the fuel.
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The number of gallons used for each nontaxable use.
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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.
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The ultimate purchaser may not claim a credit or refund as follows.
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The ultimate purchaser of gasoline or aviation gasoline used by a state or local government for its exclusive use or a by nonprofit educational organization for its exclusive 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.
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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.
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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.
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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.
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The name and taxpayer identification number of each person (government unit) that bought the fuel.
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The number of gallons sold to each person.
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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.
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The name and taxpayer identification number of each person (nonprofit educational organization or government unit) that bought the fuel.
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The number of gallons sold to each person.
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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.
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The date of each sale.
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The name and address of the buyer.
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The number of gallons sold to that buyer.
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The date of each sale.
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The name and address of the buyer.
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The number of gallons sold to the buyer.
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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.
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The date of each sale.
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The name and address of the buyer.
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The number of gallons sold to the buyer.
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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.
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The date of each sale.
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The name and address of the buyer.
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The number of gallons sold to the buyer.
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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.
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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
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For diesel fuel, kerosene, or kerosene for use in aviation, a state or local government (including essential government use by an Indian tribal government).
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The total number of gallons.
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Its registration number.
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A statement that it has not collected the amount of tax from the ultimate purchaser or has obtained the written consent of the ultimate purchaser to make the claim.
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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.
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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.
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Employer identification number (EIN),
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Social security number (SSN), or
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Individual taxpayer identification number (ITIN), if you are an alien individual and do not have and are not eligible to get an SSN.
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 portion of Form 720 for your refund claims for the quarter. See the Form 720 instructions. Do not 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.
The alcohol fuel mixture credit, biodiesel mixture credit, renewable diesel mixture credit, and alternative fuel mixture credit must first be taken on Schedule C (Form 720) against your taxable fuel liability for gasoline, diesel fuel, and kerosene. The alternative fuel credit must first be taken on Schedule C (Form 720) against your taxable fuel liability for alternative fuel and CNG. To the extent the alcohol fuel mixture credit, biodiesel mixture credit, renewable mixture credit, alternative fuel credit, and alternative fuel mixture credit exceed taxable fuel liability, a payment is allowed and may be taken as a credit on Schedule C (Form 720), as a refund on Schedule 3 (Form 8849), or as an income tax credit on Forms 4136, 6478, or 8864, as applicable.
Only one claim may be made for any particular amount of alcohol, biodiesel, renewable diesel, or alternative fuel.
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.
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Tax on fuels used for nontaxable uses if the total for the tax year is less than $750.
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Tax on fuel you did not include in any claim for refund previously filed for any quarter of the tax year.
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Tax on fuel you used in mobile machinery (off-highway business use) that traveled less than 7,500 miles on public highways.
Do not claim a credit for any amount for which you have filed a refund claim on Form 8849 or credit on Schedule C (Form 720).
You may be able to make a fuel tax claim on an amended income tax return 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.
In most situations, the amount claimed as a credit or refund will be less than 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.
Example 1.
Sharon Brown, a cash basis farmer, filed her 2007 Form 1040 on March 3, 2008. On her Schedule F, 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 credit. Sharon reports the $108 as additional income on her 2008 Schedule F.
Example 2.
March Corporation uses the calendar year as its tax year. For 2007, the following amounts of excise tax were included in the cost of gasoline the corporation used each quarter in a nontaxable use:
Calendar Quarters | Fuel Tax Expense | Fuel Tax Claim |
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January 1 - March 31 | $1,300 | $1,293 |
April 1 - June 30 | 1,100 | 1,094 |
July 1 - Sept. 30 | 400 | 397 |
Oct. 1 - Dec. 31 | 300 | 298 |
Total | $3,100 | $3,082 |
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 two quarters (ending March 31 and June 30). It cannot file a quarterly refund claim for the third or fourth quarter because it did not 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 (2007).
Form 4136. The corporation claims the remaining amounts ($397 + $298) as a credit on its 2007 income tax return by attaching Form 4136. It files its tax return in 2008. It includes this credit ($695) in its 2008 gross income.
Example 3.
Patty Green uses an accrual method. She files her 2007 return on April 15, 2008. 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 2007. On Form 4136, Patty claims $153 as a credit. She reports the $153 as additional income on her 2007 Schedule C.
Example 4.
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 2007, the corporation reports the $3,082 of excise taxes as income on its 2007 income tax return. This consists of the $2,387 it claimed on Form 8849 and the $695 it claimed on Form 4136.
Tyler S. Sands used undyed diesel fuel in vehicles used in his construction business. The vehicles were not registered (or required to be registered) for highway use. In the fourth quarter of his 2007 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 2007 income tax return. He fills out Form 4136 and attaches it to his 2007 income tax return, which he files in 2008. He enters $729 (credit of $.243 per gallon) on line 70 of his Form 1040 and checks box b.
Tyler uses the cash method of accounting. On his 2007 Schedule C (Form 1040), he deducts the total cost of the fuel, including the tax. When Tyler files his 2008 Form 1040, he will include the $729 credit shown on his 2007 Form 4136 as additional income on his Schedule C (Form 1040) for 2008.
Claim | Claim | ||
Quarter | Gallons Used | Tax Rate | Amount |
First | 2,750 | .243 | $668.25 |
Second | 2,500 | .243 | 607.50 |
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