Do we owe IRS TAX on BIO or WVO? 400 gallon exemption? What I found so far... - Diesel Forum - TheDieselStop.com
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post #1 of 23 (permalink) Old 08-04-2006, 02:23 PM Thread Starter
 
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Do we owe IRS TAX on BIO or WVO? 400 gallon exemption? What I found so far...

I've got a few running posts elsewhere, but thought I'd put an update in this forum too to make sure anyone here thats interested/concerned would have the info.

After filing with the IRS and State as a blender, I had several conversations with the IRS agent assigned my case and he was very helpful, going above and beyond his departments responsibilities to help me.

First of all, there is no need to file a form 937 if for personal non business use and not for sale. Taxes are still due however and are filed on Form 720, section 60c.

He put some extra effort into the 400 gallon/Qtr exemption thing and explained his and other agents take on why it doesn't apply, tho he is the first to admit the language makes it confusing.

-Where the confusion comes in is understanding that fuel taxes are due when certain "taxable events" occur. Several such events may occur from manufacture to tank, so if the tax were to get paid multiple times, it can be refunded.

-As to the 400 gallon exemption, this is so "blenders" do not have to pay the tax on the "event" of removal or sale if the total is less than 400 gallons per quarter. Does not mean the tax isn't owed, just that it doesn't have to be paid by the blender at that time.

-Putting the fuel in your tank is a separate event that I'm told is not the same as removal or sale. Once you put it in your tank the tax is owed. There is no correlation between using the fuel and blending it (two separate events). That is why the 400 gallon exemption doesn't apply overall. While it may apply to the blending and removal activity, unless you never use it you owe the tax, as far as the IRS is concerned.

I tried contacting the ofice that clarifies tax law to get a ruling specific to our use. The message says the office is closed due to flooding. May be awhile before I can get a "formal" ruling on the 400 gallon thing.

Did get some more clarification for the Backup Tax.
Basically coming back to;
even tho the blender of less than 400 gallons is exempted, any fuel used on public roads is not.

Quote:
[Code of Federal Regulations]
[Title 26, Volume 16]
[Revised as of April 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR48.4082-4]

[Page 126-127]

TITLE 26--INTERNAL REVENUE

CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
(CONTINUED)

PART 48_MANUFACTURERS AND RETAILERS EXCISE TAXES--Table of Contents

Subpart H_Motor Vehicles, Tires, Tubes, Tread Rubber, and Taxable Fuel

Sec. 48.4082-4 Diesel fuel and kerosene; back-up tax.

(a) Imposition of tax--(1) In general. <font color="Red"> Tax is imposed by section
4041 on the delivery into the fuel supply tank of the propulsion engine
of a diesel-powered highway vehicle </font>
(other than a diesel-powered bus)
of--
(i) Any diesel fuel or kerosene on which tax has not been imposed by
section 4081;
(ii) Any diesel fuel or kerosene for which a credit or payment has
been allowed under section 6427; or
<font color="red">(iii) Any liquid (other than taxable fuel) for use as fuel.</font>
(2) Liability for tax--(i) In general. <font color="Red">The operator of the highway
vehicle into which the fuel is delivered is liable for the tax </font>
imposed
under paragraph (a)(1) of this section.
(ii) Joint and several liability of the seller. The seller of the
fuel is jointly and severally liable for the tax imposed under paragraph
(a)(1) of this section if the seller knows or has reason to know that
the fuel will not be used in a nontaxable use.
(3) Rate of tax. The rate of tax is the rate imposed on diesel fuel
by section 4081(a).
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post #2 of 23 (permalink) Old 08-04-2006, 02:33 PM
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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

Very informative. Does this apply to just federal road taxes or does this go down to a state level?

The reason I'm asking, is that one of the members of my co-op wants to make biodiesel for his tow truck company.


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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

States are all different, OR has road tax, not sure about WA. CA has an 18 cent road tax.

Individuals may be treated different than businesses too. CA has regulations as to what fuels businesses may use, and WVO is not one. Renderers out here have been trying for years to get an exception, no luck so far.
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post #4 of 23 (permalink) Old 08-04-2006, 02:53 PM
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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

What is the Fed tax on diesel or Bio, $.38 or something like that?

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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

24.4 cents per gallon Federal

States I think OR and IA are the same, CA is 18 cents, don't know about others...
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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

Texas is .20/gal but BioDiesel is exempt.
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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

[ QUOTE ]
Texas is .20/gal but BioDiesel is exempt.

[/ QUOTE ]
Thats the way it should be! Give an incentive!!! Gov gives breaks on other things concerning energy. We're trying to make America independent again!

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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

I looked on our State's web site and did not readily see a tax for Bio. However, I did not dig deep, so it may be there. The diesel is $.18.

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post #9 of 23 (permalink) Old 08-05-2006, 10:48 AM Thread Starter
 
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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

[ QUOTE ]
Texas is .20/gal but BioDiesel is exempt.

[/ QUOTE ]

Do you have a link for that? Reason I ask, Biodiesel is also exempt under Federal law (by itself), except that under that Backup Tax any fuel used in a diesel engine on public roads is taxed. Want to make sure TX doesn't have a similar provision hidden somewhere....
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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

[ QUOTE ]
[ QUOTE ]
Texas is .20/gal but BioDiesel is exempt.

[/ QUOTE ]

Do you have a link for that? Reason I ask, Biodiesel is also exempt under Federal law (by itself), except that under that Backup Tax any fuel used in a diesel engine on public roads is taxed. Want to make sure TX doesn't have a similar provision hidden somewhere....

[/ QUOTE ]

That sure is a confusing set of laws the IRS has there. The reason pure biodiesel is exempt is that it contains no paraffin. Now you'd think with that paragraph just as plain as day exempting non-paraffin fuels, that they meant for biodiesel to be free of federal taxes... but NOOOOOOoooo along comes that backup tax paragraph that basically says "if for some reason you are burning a fuel in an on the road vehicle that escapes all the previous paragraphs, we're jolly well going to tax it anyway!" I would love to hear the reasoning behind all those paragraphs that are jockeying for validity. I mean, what exactly *were* they trying to accomplish with the paraffin reference, since off-road applications would be free of tax anyway?!

The really fun part is that the bulk of the tax officially expires in a couple of years (I think a few cents is there permanently)... but if you really think they're going to let that happen, you haven't lived in the US very long! Every other time it was due to expire, they extended it. Of course. But you can always hope some year they'll be too busy arguing over some other useless pander-to-the-base law and just forget about the fuels tax! Yeah, yeah, a guy can dream...

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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

[ QUOTE ]
[ QUOTE ]
Texas is .20/gal but BioDiesel is exempt.

[/ QUOTE ]

Do you have a link for that? Reason I ask, Biodiesel is also exempt under Federal law (by itself), except that under that Backup Tax any fuel used in a diesel engine on public roads is taxed. Want to make sure TX doesn't have a similar provision hidden somewhere....

[/ QUOTE ]

No Prob not sure if the link will come through Tax Code According to this the percentage of bioD is not taxable but the percentage of #2 is. I.e. B20 You would pay $.16/gal TX State road tax instead of the full $.20 with B100 not having to pay any TX Road tax and jus the federal road tax.

[ QUOTE ]
TITLE 34 PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER S
MOTOR FUEL TAXRULE 3.443Diesel Fuel Tax Exemption for Water, Fuel Ethanol, Biodiesel, and Biodiesel Mixtures (Tax Code, 162.003, 162.204, and 162.227)

(a) This rule applies only to motor fuel transactions that take place on or after January 1, 2004. Motor fuel transactions that occur prior to January 1, 2004, will be governed by sections in Texas Administrative Code, Title 34, Part 1, Chapter 3, Subchapter L.
(b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Water-based diesel fuel--a combination of water, petroleum diesel fuel, emulsifier, and seasonal additives (when necessary) into an emulsion that is suitable or used for the propulsion of a diesel-powered motor vehicle.
(2) Fuel ethanol--alcohol that is made from agricultural products and bioethanol that is made from cellulosic biomass materials.
(3) Biodiesel--a fuel comprised of monoalkyl esters of long chain fatty acids generally derived from vegetable oils or fats, designated B100, and meeting the requirements of ASTM D 6751.
(4) Biodiesel Blend--a blend of biodiesel fuel meeting ASTM D 6751 with petroleum based diesel fuel, designated Bxx where xx represents the volume percentage of biodiesel fuel in the blend. (Example: B20 is 20% biodiesel and 80% petroleum diesel)
(c) Diesel fuel tax exception. The tax imposed on the first sale or use of diesel fuel in this state does not apply to biodiesel or to the volume of water, fuel ethanol, or biodiesel that is blended with taxable diesel fuel, when the finished product is clearly identified on the retail pump, storage tank, and sales invoice as biodiesel or a combination of diesel fuel and water, fuel ethanol, or biodiesel.
(d) Invoice documentation.
(1) The volume of biodiesel must be identified on the sales invoice on each sales transaction, and must continue to be identified on sales invoices until the blended product is sold to the ultimate consumer.
(2) The volume of water, fuel ethanol, or biodiesel that is combined with taxable diesel fuel must be identified on the sales invoice on each sales transaction after the water, fuel ethanol, or biodiesel is first blended with taxable diesel fuel, and must continue to be identified on sales invoices until the blended product is sold to the ultimate consumer.
(3) A sales invoice must:
(A) identify a water-based diesel fuel, ethanol blended diesel fuel, biodiesel, or biodiesel blend by a commonly accepted commercial or industry name for the blended product;
(B) list the volume in gallons (rounded to the nearest whole gallon) or the percentage (rounded to the nearest tenth of one percent) of the blended product that is water, fuel ethanol, or biodiesel;
(C) list the volume in gallons (rounded to the nearest whole gallon) or the percentage (rounded to the nearest tenth of one percent) of the blended product that is taxable diesel fuel. Taxable diesel fuel includes emulsifiers and additives, but not water, fuel ethanol, or biodiesel; and
(D) list the basis of calculating the tax (if a taxable sale) as either $0.20 for each gallon of taxable diesel fuel in the blended product or a ratable tax rate based on the percent of taxable diesel in the blended product. For example, the invoice for the sale of 100 gallons that is a blend of 20% water and 80% taxable diesel fuel may list: state diesel fuel tax of $0.20 per gallon on 80 gallons, or state diesel fuel tax of $0.16 per gallon on 100 gallons of water-based diesel fuel.
(e) Notice required on storage tank and retail pump.
(1) A notice must be posted in a conspicuous location on each storage tank and retail pump from which biodiesel is stored or sold until sold to the ultimate consumer.
(2) A notice must be posted in a conspicuous location on each storage tank and retail pump from the time that the water, fuel ethanol, or biodiesel is first blended with taxable diesel fuel until the blended product is sold to the ultimate consumer, and state the volume percentage of water, fuel ethanol, or biodiesel that is blended with petroleum diesel fuel.
(3) The notice must:
(A) identify the product by the common industry name or commercial name of the blended product,
(B) state the percentage (rounded to the nearest tenth of one percent) of the finished blended product that is water, fuel ethanol, or biodiesel, and
(C) state the percentage (rounded to the nearest tenth percent of one percent) of the finished blended product that is taxable diesel fuel. Taxable diesel fuel includes emulsifiers and additives, but not water, fuel ethanol, or biodiesel.
(f) Refund of diesel tax paid. The ultimate consumer who has paid tax on biodiesel or on the percentage of product that is water, fuel ethanol, or biodiesel may file a claim for refund of taxes that have been paid on biodiesel or on the volume of water, fuel ethanol, or biodiesel that is blended with taxable diesel fuel as provided by 3.432 of this title (relating to Refunds on Gasoline and Diesel Fuel Tax). The refund claim must be supported with purchase invoice(s) as described in subsection (d) of this section. The total volume of diesel fuel that is purchased is presumed to be taxable diesel fuel if the purchase invoice does not meet the requirements of subsection (d) of this section.
(g) Commercial motor vehicles licensed under the International Fuel Tax Agreement (IFTA).
(1) A water-based diesel fuel, ethanol blended diesel fuel, biodiesel, or biodiesel blend that is delivered into the fuel supply tank(s) of a motor vehicle that is licensed under the IFTA is presumed to be used in the jurisdiction in which it was purchased. This presumption may be overcome if it is shown that the total amount of water-based diesel fuel, ethanol blended diesel fuel, biodiesel, or biodiesel blend that is purchased in other IFTA jurisdictions is greater than the amount of total diesel fuel used in other IFTA jurisdictions by all diesel-powered motor vehicles that the IFTA licensee operates.
(2) In calculating the IFTA fleet average mile-per-gallon, the total gallons of diesel fuel that are consumed includes the total gallons of water-based diesel fuel, ethanol blended diesel fuel, biodiesel, or biodiesel blend.
(3) An IFTA licensee who overpays the tax on a water-based diesel fuel, ethanol blended diesel fuel, biodiesel, or biodiesel blend by way of an IFTA tax return may request a refund from the comptroller. A refund claim must be supported with purchase invoice(s) as described in subsection (d) of this section. The total volume of diesel fuel that is purchased is presumed to be taxable diesel fuel if the purchase invoice(s) do not meet the requirements of subsection (d) of this section.

[/ QUOTE ]
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post #12 of 23 (permalink) Old 08-07-2006, 01:53 PM
 
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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

See that dog over there? The one the says "taxman" on the collar? He's sleeping... stop poking him!
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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

No harm no foul, I say. Unless you're selling, no taxes incurred.


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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

[ QUOTE ]
No harm no foul, I say. Unless you're selling, no taxes incurred.

[/ QUOTE ]

It's called ROAD TAX for a reason. You owe tax on it if you are burning it to propel a vehicle down the highway. If you choose to ignore that fact, then you better quit advertising it. Rick and I are going to be laughing hysterically when the first post shows up about some poor smuck that just got a summons to appear and show cause.

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Re: Do we owe IRS tax on Bio or WVO? 400 gallon exmption? What I found so far...

Certain states allow for a given amount of biodiesel made and consumed.

400 gallons per year seems to be the norm for many states. Selling biodiesel as a motor fuel for on-road use is a whole different ballgame, then taxes have to be charged no matter how small the amount sold.

And who says I'm not paying my road taxes?


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