Preparation for Motor Fuel Reviews

There are two objectives for motor fuel reviews:

• To determine if motor fuel data reporting is in conformance with the requirements in A Guide to Reporting Highway Statistics. It is critical that FHWA be able to present the data on a comparable basis for all States because of the use of motor fuel data in the apportionment of Federal-aid highway funds.
• To improve FHWA's understanding of the State's motor fuel taxation. A thorough understanding of the tax system ensures that FHWA correctly interprets State data in the FHWA analyses.

A standard set of questions is used for each review (copy attached), supplemented with questions specific to the State.

Items to have on hand for the review:

• Blank samples of the fuel tax return forms including those used by motor carriers.
• Samples of any Department of Revenue reports used in preparing Forms FHWA-551M and FHWA-556. It is important that someone with a good understanding of the Department of Revenue reports attend the review, even if this person doesn't complete the FHWA forms. A common source of error is misinterpretation of revenue reports by persons completing the FHWA reports

GUIDELINE FOR FIELD OFFICE REVIEWS OF MOTOR FUEL REPORTING

1. When is the FHWA-551M report prepared and submitted?

The Guide to Reporting Highway Statistics (Guide) provides for reporting not later than 90 days after the close of the month for which the data are being reported.

2. If the report is not transmitted within 90 days, what are the reasons? What improvements can be achieved to permit more timely reporting?

Timely reporting of this information is critical.

3. Is the report submitted to the correct office?

The report should be submitted to:

Federal Highway Administration, Office of Highway Policy Information (HPPI), Suite 3306, 400 7th Street, SW, Washington, DC 20590 (A copy should be furnished to the division office at the same time)

4. For which month should motor fuel gallons be reported?

Motor fuel gallons should be reported for the month during which the fuel was sold (or transferred), rather than the month tax collections were received.

5. Are gasoline and gasohol reported separately?

Gasoline and gasohol should be reported separately. If they are not, this should be cited as a deficiency. The State should be encouraged to report actual gasohol gallons; if this is not possible, then the State should develop an acceptable procedure for estimating gasohol gallons. Gasohol gallons reported in Column 2 should be excluded from gasoline gallons reported in Column 1.

6. Do gasohol gallons reported in Column 2 only include blends which meet the criteria established on page 2-3 of the Guide? Are you reporting gasohol blends on page 2 of the Form?

Gasohol should include the three different types as defined by Federal law and identified as percentage by type on page 2. Gasoline/alcohol blends include: alcohol produced from petroleum, natural gas, or coal. Gasoline/alcohol blends, of which the alcohol is less than 190 proof, or blends which have a alcohol content of 5.7% or less by volume, should be excluded.

7. For other than diesel fuel, do gross gallons reported include:

a. Sales to the U.S. Government (including military and National Guard)?

b. Losses?

c. Other classes of use (including aviation) that are partially tax-exempt or that are taxed at an initial rate lower than the general rate applicable to highway use?

For fuel other than diesel fuel, gross gallons reported should include all fuel except exports and dealer-to-dealer transfers.

Aviation fuel reported in gross gallons should include aviation gasoline only, not jet fuel. If aviation fuel can only be reported annually, please note on page 2. If the State cannot separate aviation gasoline from jet fuel, aviation use should be omitted entirely from FHWA-551M, and should be accordingly footnoted on page 2. In addition, if aviation fuel use is omitted from the FHWA-556, a note to that effect should appear on the FHWA-556 each year. In these cases, FHWA will add in estimated aviation gasoline gallons from Department of Energy data.

8. Is diesel fuel gallons reported for highway use only?

On Form FHWA-551M only highway fuel use should be reported. For States that report total fuel use (highway, nonhighway, and loses), appropriate notes should be included on page 2 to explain losses and nonhighway use. If the State prefers, it may show the actual gross volume along with exempted and refunded fuel volumes and provide the detail necessary for FHWA to deduct losses as well as nonhighway and public use. A few States have more than one rate for taxing diesel fuel. In these cases, States should provide detailed information.

9. Do gross gallons reported for special fuel exclude public use (Federal, State, and local)?

Public fuel use (other than local transit use) should be excluded from gross gallons reported. It is apparent, however, that nonhighway public uses are difficult to determine. For example, in some States, diesel fuel is taxed at the retail level and gallons sold untaxed for public use may not be included in the State reporting system. To maintain comparability among States, Highway Statistics tables report use of special fuel excluding public use. States should include transit gallons in identifying how the fuel was taxed: at full rate, exempt, refunded partially refunded, or taxed at an initially lower rate.

10. Is interstate motor-carrier fuel use properly accounted for on Form FHWA-551M?

Complete and accurate reporting of interstate motor-carrier fuel use is critical to an accurate presentation of total motor fuel use by State. The objective is to report fuel use by interstate motor carriers within the State, rather than reporting fuel sales within the State. By coincidence, sales may equal use in some States; however, in most States, an adjustment (positive or negative) is necessary, based on interstate motor-carrier fuel use reports.

Under International Fuel Tax Agreement (IFTA) rules, Interstate motor carriers are required by States to report fuel purchased and used within the State. If a motor carrier uses less fuel in a particular State than it purchased in that State, excess taxes paid by the carrier are refunded. On the other hand, if a motor carrier uses more fuel in a State than it purchased in that State, the carrier must pay additional taxes. The difference between fuel purchased in the State and fuel used in the State (obtained from all interstate motor carrier fuel use reports) is the amount that should be reported on Form FHWA-551M. (See the 1997 revision of the Guide for more detail concerning this subject.) As Indicated in the Guide, and as discussed above, States should report both total fuel (gasoline and diesel) used within the State by interstate motor carriers. The difference is then added to or subtracted from the gallons reported by distributors and bulk users within the State using IFTA rules, carriers report these adjustments to their home base State. and the States make payment adjustments among themselves.

There are two ways to arrive at net fuel use by interstate motor carriers. Examples are provided below:

This example is based on the difference between fuel used within the State but purchased outside the State, and fuel purchased within the State but used to obtain net gallons. Although this provides satisfactory results, it does not present the complete picture of interstate motor-carrier fuel use that the second example provides. An example showing this approach is provided below:

11. Do any intra-State motor carrier filings affect revenue or gallons reported? Is this information included in the State's data?

a. How are IFTA gallons reported?

12. Are assessments reported in line 1a for the month in which assessments were made or the month in which payment was received and noted on page 2?

Assessments are gallons that the State determines, through audits or review of taxpayer returns, that the taxpayer owes tax on and did not report as taxable gallons. They should be reported for the month that payment was received regardless of when the assessments were made. Some assessments may be reduced or canceled, requiring later adjustments of gallons for States that report assessments when made. It is common practice among most States not to consider assessments as real gallons until payment is received.

13. Should tax rates be entered on the January report and in any month in which a rate change becomes effective?

It is especially important to report changes in the tax rates for the month in which new rates became effective. The information on tax rates provided by the States is used to verify the accuracy of data obtained from other sources (e.g., Lexis-Nexis, Commerce Clearing House, etc.).

14. At what points are the State gasoline and diesel taxes collected?

Are taxes collected from: the terminal, the wholesaler or distributor, the retailer or the end user? Review Attachment A with the State and verify if the Attachment is correct. Provide corrections if necessary.

15. Has the State adequately documented motor fuel reporting and estimating procedures?

Reporting and estimation procedures used by the States in determining gasohol and net IMC use should be well documented. This is important to assure consistency of reporting on a year-to-year basis and to provide continuity as staff changes occur at the State. Copies of written procedures should be furnished to FHWA Headquarters along with a copy of the review.

16. Are gasoline tax exempt and fully refunded uses handled in accordance with reporting instructions in the Guide?

17. Does the State have any continuing legal or enforcement issues affecting the collection of motor fuel taxes?

Examples of these types of issues include: untaxed motor fuel sales to the general public on Native American reservations, or unreported fuel shipped into the State from a neighboring State with lower taxes.

FHWA-556 - State Motor-Fuel Tax Receipts and Initial Distribution by Collection Agencies

1. Should motor fuel receipts entered separately for gasoline and special fuels?

Receipts should be entered separately by fuel type. If no differentiation is made to the data processing by the motor fuel tax agency, a note should be added on page 2 of the Form indicating the approximate amounts apportioned to each fuel type. This is especially important when the tax rates differ for gasoline and diesel fuel.

If the State omits aviation use gallonage from FHWA-551M due to an inability to segregate aviation gasoline from jet fuel in its tax reports, the receipts from aviation use should likewise be omitted from FHWA-556, with an accompanying note explaining the omission FHWA will add in appropriate revenue corresponding to the estimated aviation gasoline gallonage it added to FHWA-551M.

2. Are entries in 1b, All other receipts under Motor Fuel Tax Law, adequately identified?

This type of receipt should be identified with enough specificity so that FHWA will know how to classify treat it in the analysis. For example, Motor Carrier Road Tax will be treated as a gallonage tax, whereas such items as Truck Identification, Special Fuel User Permits, etc., will be classified as Other Related Receipts.

3. Are gasoline/diesel fuel revenues being reported on other 500 series Forms? For example, Form FHWA 571 which could include interstate/intrastate fuel usage?

Attachment A:

Underlining indicates items changed on effective date shown. The term Distributor includes suppliers and wholesalers.

a North Carolina dyed fuel penalties effective 1/01/95.

b North Dakota-Dyed fuel when used for highway purposes is assessed the 20-cent per gallon tax.

c Tennessee-Collection point for diesel fuel changes from the distributor to the terminal level effective 1/01/98.

d Destination State required on shipping documents (effective 1/01/98 for Tennessee).

Prepared by Federal Highway Administration (FHWA). Contact Stephen Baluch (202-366-9243) or Linda Morris (202-366-9234) to report updates or corrections.

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