Business Accountant - Excise Taxes

Business Accountant - CPA Accounting & Business Services

Business Accountant - Home

Call the Business Accountant

FREE Consultation
FREE Federal Tax Review
FREE State Tax Review
UNCOVER TAX SAVINGS!
FOR FREE - CALL US NOW!

818 753 1945
________ more information

Taxes ________________
Tax Tips
Income Tax
Tax Information
US Tax Treaties
Taxpayers Rights
Personal Deductions

Business _____________
Corporations
Partnerships
Business Expenses
Employers Tax Guide
Small Business Tax Guide

Real Estate ___________
Selling Home
Home Morgage Deduction

News ________________
Business News
Financial News
Real Estate News

Retirement ___________
Retirement Plans
for Small Business
IRA

Foreign Investors ______
Foreign Investors
Tax Guide for Aliens
Informacion en Espanol
English/Spanish Glossary

Information ___________
About Us
F.A.Q. Terms
F.A.Q. Accounting
City and Zip Codes
Contact Business Accountant

Questions?
CALL US
1 818 753 1945
Email - click here

You are here:
Excise Taxes

510 15014I Excise Taxes for 2005 What's New2 Important Reminders2 Introduction2 Excise Taxes Not Covered2 Registration for Certain Activities3 Environmental Taxes3 ODCs3 Imported Taxable Products3 Floor Stocks Tax4 Communications and Air Transportation Taxes5 Uncollected Tax Report5 Communications Tax5 Air Transportation Taxes6 Fuel Taxes9 Items To Note9 Definitions9 Information Returns10 Registration Requirements10 Refunds of Second Tax10 Gasoline11 Diesel Fuel and Kerosene 13 Aviation-Grade Kerosene17 Special Motor Fuels19 Compressed Natural Gas19 Fuels Used on Inland Waterways19 Alcohol Sold as Fuel But Not Used as Fuel20 Biodiesel Sold as Fuel But Not Used as Fuel20 Manufacturers Taxes21 Taxable Event21 Exemptions21 Credits or Refunds22 Sport Fishing Equipment22 Bows, Quivers, Broadheads, and Points23 Arrow Shafts23 Coal23 Taxable Tires24 Gas Guzzler Tax24 Vaccines25 Retail Tax on Heavy Trucks, Trailers, and Tractors25 Ship Passenger Tax28 Foreign Insurance Taxes28 Obligations Not in Registered Form29 Filing Form 72029 Payment of Taxes29 Tax on Wagering31 Penalties and Interest32 Examination and Appeal Procedures32 Rulings Program32 How To Get Tax Help33 Appendix A34 Index46 What's New Use of international air travel facilities.

The tax on use of international air travel facilities has increased for amounts paid during 2005 to:

$14.10 per person for flights that begin or end in the United States or

$7.00 per person for domestic segments that begin or end in Alaska or Hawaii (applies only to departures).

Domestic segment tax.

For amounts paid for each domestic segment of taxable transportation of persons by air, the domestic segment tax is $3.20 per segment for transportation that begins in 2005.

Imported products table.

The imported products table has been deleted from Appendix A of Pub. 510. It can be found in Regulations section 52.4682-3(f)(6).

Communication and air transportation taxes—uncollected tax report.

Instructions have been added regarding the separate report that is required to be filed by collecting agents of communications services and air transportation taxes if the person from whom the facilities or services tax (the tax) is required to be collected (the taxpayer) refuses to pay the tax, or it is impossible for the collecting agent to collect the tax. See Uncollected Tax Report on page 5.

Sonar devices suitable for finding fish.

The tax on sonar devices has been repealed. See Sports Fishing Equipment on page 22.

Fishing tackle boxes.

The rate of tax on fishing tackle boxes has been decreased to 3% of the sales price and appears on its own line on Form 720 as IRS No. 114. See Sports Fishing Equipment on page 22.

Bows.

The tax on bows has been revised to include quivers, broadheads, and points. See Bows, Quivers, Broadheads, and Points on page 23.

Arrow shafts and arrow components.

Effective after March 31, 2005, there is a new tax on arrow shafts at $.39 per arrow shaft; and the tax on arrow components is repealed. See Arrow Shafts on page 23.

Taxable tires.

Highway-type tires is renamed taxable tires and the computation of the tax has changed. The rate is $.0945 ($.04725 for biasply or super singles) for each 10 pounds of the maximum rated load capacity over 3,500 pounds. See Taxable Tires on page 24.

Vaccines.

Hepatitis A and influenza have been added to the list of taxable vaccines. See Vaccines on page 25.

Retail tax on heavy trucks, trailers, and tractors.

Four classifications of truck body types have been designated as meeting the suitable for use standard and will be excluded from the retail tax. See Gross vehicle weight on page 25.

Fuel Taxes.

See Fuel Taxes on page 9 for fuel tax changes.

Important Reminders Photographs of missing children.

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

This publication covers the excise taxes for which you may be liable during 2005. It covers the excise taxes reported on Form 720. It also provides information on wagering activities reported on Forms 11-C and 730.

Comments and suggestions. Comments Suggestions

We welcome your comments about this publication and your suggestions for future editions.

You can email us at *taxforms@irs.gov. Please put Publications Comment on the subject line.

You can write to us at the following address: Internal Revenue Service TE/GE and Specialty Forms and Publications Branch SE:W:CAR:MP:T:T 1111 Constitution Ave. NW, IR-6406 Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

Publication 378 Fuel Tax Credits and Refunds 509 Tax Calendars for 2005 Form (and Instructions) Occupational Tax and Registration Return for Wagering Application for Registration (For Certain Excise Tax Activities) Quarterly Federal Excise Tax Return Amended Quarterly Federal Excise Tax Return Monthly Tax Return for Wagers Export Exemption Certificate Heavy Highway Vehicle Use Tax Return Declaracion del Impuesto sobre el Uso de Vehiculos Pesados en las Carreteras Declaration d'Impot sur L'utilisation des Vehicules Lourds sur les Routes. Credit for Federal Tax Paid on Fuels Gas Guzzler Tax Credit for Alcohol Used as Fuel Environmental Taxes Claim for Refund of Excise Taxes, and Schedules 1-3, 5, and 6 Biodiesel Fuels Credit Information Returns

Form 720-TO, Terminal Operator Report

Form 720-CS, Carrier Summary Report

Notices

Notice 2005-4. You can find Notice 2005-4 on page 289 of Internal Revenue Bulletin 2005-2 at www.irs.gov/pub/irs-irbs/irb05-02.pdf.

Notice 2005-24. You can find Notice 2005-24 on page 757 of Internal Revenue Bulletin 2005-12 at www.irs.gov/pub/irs-irbs/irb05-12.pdf.

See How To Get Tax Help near the end of this publication for information about getting publications and forms.

Excise Taxes Not Covered

In addition to the taxes discussed in this publication, you may have to report certain other excise taxes.

For tax forms relating to alcohol and tobacco, visit the Alcohol and Tobacco Bureau of Trade website at www.ttb.gov.

Form 2290: Heavy Highway Vehicle Use Tax Return Form: 2290 Highway use tax

You report the federal excise tax on the use of certain trucks, truck tractors, and buses on public highways on Form 2290. The tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more. Vans, pickup trucks, panel trucks, and similar trucks generally are not subject to this tax.

Note.

A Spanish version of Form 2290 and its instructions (Form 2290-SP) are also available. New for July 2005, a French version of Form 2290 and its instructions (Form 2290-FR) will be available.

A public highway is any road in the United States that is not a private roadway. This includes federal, state, county, and city roads. Canadian and Mexican heavy vehicles operated on U.S. highways may be subject to this tax. For more information, see the Instructions for Form 2290.

Registration of vehicles.

Generally, you must prove that you paid your federal highway use tax to register your taxable vehicle with your state motor vehicle department or to enter the United States in a Canadian or Mexican registered taxable vehicle. Generally, a copy of Schedule 1 of Form 2290, stamped after payment and returned to you by the IRS, is acceptable proof of payment.

Note.

If you have questions on Form 2290, see How To Get Tax Help later, or you can call the Form 2290 call site at 1-866-699-4096 (toll free) from the United States and 1-859-669-5733 (not toll free) from Canada and Mexico. The hours of service are 8:00 a.m. to 6:00 p.m., EST.

Registration for Certain Activities Form: 637 Registration: Form 637

You must register for certain excise tax activities, such as a blending of gasoline, diesel fuel, or kerosene outside the bulk transfer/terminal system. See the instructions for Form 637 for the list of activities for which you must register. Also see Registration Requirements under Fuel Taxes for information on registration for activities related to fuel. Each business unit that has, or is required to have, a separate employer identification number must register.

To apply for registration, complete Form 637 and provide the information requested in its instructions. If your application is approved, you will receive a Letter of Registration showing the activities for which you are registered, the effective date of the registration, and your registration number. A copy of Form 637 is not a Letter of Registration.

Environmental Taxes Form: 6627 Environmental taxes: Ozone-depleting chemicals Chemicals, ozone-depleting

Environmental taxes are imposed on the sale or use of ozone-depleting chemicals (ODCs) and imported products containing or manufactured with these chemicals. In addition, a floor stocks tax is imposed on ODCs held on January 1 by any person (other than the manufacturer or importer of the ODCs) for sale or for use in further manufacture.

Figure the environmental tax on Form 6627. Enter the tax on the appropriate lines of Form 720 and attach Form 6627 to Form 720.

Environmental taxes: United States (defined)For environmental tax purposes, United States includes the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, any possession of the United States, the Commonwealth of the Northern Mariana Islands, the Trust Territory of the Pacific Islands, the continental shelf areas (applying the principles of section 638 of the Internal Revenue Code), and foreign trade zones. No one is exempt from the environmental taxes, including the federal government, state and local governments, Indian tribal governments, and nonprofit educational organizations.

ODCs

For a list of the taxable ODCs and tax rates, see the Form 6627 instructions.

Taxable Event

Tax is imposed on an ODC when it is first used or sold by its manufacturer or importer. The manufacturer or importer is liable for the tax.

Use of ODCs.

You use an ODC if you put it into service in a trade or business or for the production of income. Also, an ODC is used if you use it in the making of an article, including incorporation into the article, chemical transformation, or release into the air. The loss, destruction, packaging, repackaging, or warehousing of ODCs is not a use of the ODC.

The creation of a mixture containing an ODC is treated as the use of that ODC. An ODC is contained in a mixture only if the chemical identity of the ODC is not changed. Generally, tax is imposed when the mixture is created and not on its sale or use. However, you can choose to have the tax imposed on its sale or use by checking the appropriate box in Part I of Form 6627. You can revoke this choice only with IRS consent.

The creation of a mixture for export or for use as a feedstock is not a taxable use of the ODCs contained in the mixture.

Exceptions. Environmental taxes: Exceptions

The following may be exempt from the tax on ODCs.

Metered-dose inhalers.

Recycled ODCs.

Exported ODCs.

ODCs used as feedstock.

Metered-dose inhalers.

There is no tax on ODCs used or sold for use as propellants in metered-dose inhalers. For a sale to be nontaxable, you must obtain from the purchaser an exemption certificate that you rely on in good faith. The certificate must be in substantially the form set forth in section 52.4682-2(d)(5) of the regulations. The certificate may be included as part of the sales documentation. Keep the certificate with your records.

Recycled ODCs.

There is no tax on any ODC diverted or recovered in the United States as part of a recycling process (and not as part of the original manufacturing or production process). There is no tax on recycled Halon-1301 or recycled Halon-2402 imported from a country that has signed the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol).

The Montreal Protocol is administered by the United Nations (U.N.). To determine if a country has signed the Montreal Protocol, contact the U.N. The Internet address is http://untreaty.un.org.

Exported ODCs.

Generally, there is no tax on ODCs sold for export if certain requirements are met. For a sale to be nontaxable, you and the purchaser must be registered. See Form 637, Application for Registration (for Certain Excise Tax Activities). Also, you must obtain from the purchaser an exemption certificate that you rely on in good faith. Keep the certificate with your records. The certificate must be in substantially the form set forth in section 52.4682-5(d)(3) of the regulations. The tax benefit of this exemption is limited. For more information, see section 52.4682-5 of the regulations.

ODCs used as feedstock.

There is no tax on ODCs sold for use or used as a feedstock. An ODC is used as a feedstock only if the ODC is entirely consumed in the manufacture of another chemical. The transformation of an ODC into one or more new compounds qualifies as use as a feedstock, but use of an ODC in a mixture does not qualify.

For a sale to be nontaxable, you must obtain from the purchaser an exemption certificate that you rely on in good faith. The certificate must be in substantially the form set forth in section 52.4682-2(d)(2) of the regulations. Keep the certificate with your records.

Credits or Refunds Environmental taxes: Credit or refund

A credit or refund (without interest) of tax paid on ODCs may be claimed if a taxed ODC is :

Used as a propellant in a metered-dose inhaler, then the person who used the ODC as a propellant may file a claim.

Exported, then the manufacturer may file a claim.

Used as a feedstock, then the person who used the ODC may file a claim.

For information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849.

Conditions to allowance for ODCs exported.

To claim a credit or refund for ODCs that are exported, you must have repaid or agreed to repay the tax to the exporter, or obtained the exporter's written consent to allowance of the credit or refund. You must also have the evidence required by the Environmental Protection Agency as proof that the ODCs were exported.

Imported Taxable Products Imported taxable products (ODCs) Ozone-depleting chemicals: Imported taxable products

An imported product containing or manufactured with ODCs is subject to tax if it is entered into the United States for consumption, use, or warehousing and is listed in the Imported Products Table. The Imported Products Table is listed in Regulations section 52.4682-3(f)(6).

The tax is based on the weight of the ODCs used in the manufacture of the product. Use the following methods to figure the ODC weight.

The actual (exact) weight of each ODC used as a material in manufacturing the product.

If the actual weight cannot be determined, the ODC weight listed for the product in the Imported Products Table.

However, if you cannot determine the actual weight and the table does not list an ODC weight for the product, the rate of tax is 1% of the entry value of the product.

Taxable Event

Tax is imposed on an imported taxable product when the product is first sold or used by its importer. The importer is liable for the tax.

Use of imported products.

You use an imported product if you put it into service in a trade or business or for the production of income or use it in the making of an article, including incorporation into the article. The loss, destruction, packaging, repackaging, warehousing, or repair of an imported product is not a use of that product.

Entry as use.

The importer may choose to treat the entry of a product into the United States as the use of the product. Tax is imposed on the date of entry instead of when the product is sold or used. The choice applies to all imported taxable products that you own and have not used when you make the choice and all later entries. Make the choice by checking the box in Part II of Form 6627. The choice is effective as of the beginning of the calendar quarter to which the Form 6627 applies. You can revoke this choice only with IRS consent.

Sale of article incorporating imported product.

The importer may treat the sale of an article manufactured or assembled in the United States as the first sale or use of an imported taxable product incorporated in that article if both the following apply.

The importer has consistently treated the sale of similar items as the first sale or use of similar taxable imported products.

The importer has not chosen to treat entry into the United States as use of the product.

Imported Products Table

The table lists all the products that are subject to the tax on imported taxable products and specifies the ODC weight (discussed later) of each product.

Each listing in the table identifies a product by name and includes only products that are described by that name. Most listings identify a product by both name and Harmonized Tariff Schedule (HTS) heading. In those cases, a product is included in that listing only if the product is described by that name and the rate of duty on the product is determined by reference to that HTS heading. A product is included in the listing even if it is manufactured with or contains a different ODC than the one specified in the table.

Part II of the table lists electronic items that are not included within any other list in the table. An imported product is included in this list only if the product meets one of the following tests.

It is an electronic component whose operation involves the use of nonmechanical amplification or switching devices such as tubes, transistors, and integrated circuits.

It contains components described in (1), which account for more than 15% of the cost of the product.

These components do not include passive electrical devices, such as resistors and capacitors. Items such as screws, nuts, bolts, plastic parts, and similar specially fabricated parts that may be used to construct an electronic item are not themselves included in the listing for electronic items.

Rules for listing products.

Products are listed in the table according to the following rules.

A product is listed in Part I of the table if it is a mixture containing ODCs.

A product is listed in Part II of the table if the Commissioner has determined that the ODCs used as materials in the manufacture of the product under the predominant method are used for purposes of refrigeration or air conditioning, creating an aerosol or foam, or manufacturing electronic components.

A product is listed in Part III of the table if the Commissioner has determined that the product meets both the following tests.

It is not an imported taxable product.

It would otherwise be included within a list in Part II of the table.

For example, floppy disk drive units are listed in Part III because they are not imported taxable products and would have been included in the Part II list for electronic items not specifically identified, but for their listing in Part III.

ODC weight.

The Table ODC weight of a product is the weight, determined by the Commissioner, of the ODCs used as materials in the manufacture of the product under the predominant method of manufacturing. The ODC weight is listed in Part II in pounds per single unit of product unless otherwise specified.

Modifying the table.

A manufacturer or importer of a product may request the IRS add a product and its ODC weight to the table. They also may request the IRS remove a product from the table, or change or specify the ODC weight of a product. To request a modification, see Regulations section 52.4682-3(g) for the mailing address and information that must be included in the request.

Floor Stocks Tax Floor stocks tax: Ozone-depleting chemicals Ozone-depleting chemicals: Floor stocks tax

Tax is imposed on any ODC held (other than by the manufacturer or importer of the ODC) on January 1 for sale or use in further manufacturing. The person holding title (as determined under local law) to the ODC is liable for the tax, whether or not delivery has been made.

These chemicals are taxable without regard to the type or size of storage container in which the ODCs are held. The tax may apply to an ODC whether it is in a 14-ounce can or a 30-pound tank.

You are liable for the floor stocks tax if you hold any of the following on January 1.

At least 400 pounds of ODCs other than halons or methyl chloroform,

At least 50 pounds of halons, or

At least 1,000 pounds of methyl chloroform.

If you are liable for the tax, prepare an inventory on January 1 of the taxable ODCs held on that date for sale or for use in further manufacturing. You must pay this floor stocks tax by June 30 of each year. Report the tax on Form 6627 and Part II of Form 720 for the second calendar quarter.

For the tax rates, see the Form 6627 instructions.

ODCs not subject to floor stocks tax.

The floor stocks tax is not imposed on any of the following ODCs.

ODCs mixed with other ingredients that contribute to achieving the purpose for which the mixture will be used, unless the mixture contains only ODCs and one or more stabilizers.

ODCs contained in a manufactured article in which the ODCs will be used for their intended purpose without being released from the article.

ODCs that have been reclaimed or recycled.

ODCs sold in a qualifying sale for:

Use as a feedstock,

Export, or

Use as a propellant in a metered-dose inhaler.

Communications and Air Transportation Taxes

Excise taxes are imposed on amounts paid for certain facilities and services. If you receive any payment on which tax is imposed, you are required to collect the tax, file returns, and pay the tax over to the government.

If you fail to collect and pay over the taxes, you may be liable for the trust fund recovery penalty. See Penalties and Interest, later.

Uncollected Tax Report

A separate report is required to be filed by collecting agents of communications services and air transportation taxes if the person from whom the facilities or services tax (the tax) is required to be collected (the taxpayer) refuses to pay the tax, or it is impossible for the collecting agent to collect the tax. The report must contain the following information: the name and address of the taxpayer, the type of facility provided or service rendered, the amount paid for the facility or service (the amount on which the tax is based), and the date paid.

Regular method taxpayers.

For regular method taxpayers, the report must be filed by the due date of the Form 720 on which the tax would have been reported.

Alternative method taxpayers.

For alternative method taxpayers, the report must be filed by the due date of the Form 720 that includes an adjustment to the separate account for the uncollected tax. See Alternative method on page 30.

Where to file.

Do not file the uncollected tax report with Form 720. Instead, mail the report to: Internal Revenue Service Collected Excise Tax Coordinator S:C:CP:RC:Ex 1111 Constitution Avenue NW, IR-2016 Washington, DC 20224

Communications Tax Communications taxes: Tax rate: Communications tax

A 3% tax is imposed on amounts paid for all the following communications services.

Local telephone service.

Toll telephone service.

Teletypewriter exchange service.

Local telephone service. Communications taxes: Local telephone service Local telephone service

This includes access to a local telephone system and the privilege of telephonic quality communication with most people who are part of the system. Local telephone service also includes any facility or services provided in connection with this service. The tax applies to lease payments for certain customer premises equipment (CPE) even though the lessor does not also provide access to a local telecommunications system.

Private communication service. Communications taxes: Private communication service Exempt communication services: Private communication service

Private communication service is not local telephone service. Private communication service includes accessory-type services provided in connection with a Centrex, PBX, or other similar system for dual use accessory equipment. However, the charge for the service must be stated separately from the charge for the basic system, and the accessory must function, in whole or in part, in connection with intercommunication among the subscriber's stations.

Toll telephone service. Communications taxes: Toll telephone service Toll telephone services

This includes a telephonic quality communication for which a toll is charged that varies with the distance and elapsed transmission time of each communication. The toll must be paid within the United States. It also includes (a) a telephonic quality communication for which a toll is charged that varies only with elapsed transmission time and (b) a long distance service that entitles the subscriber to make unlimited calls (sometimes limited as to the maximum number of hours) within a certain area for a periodic charge.

Teletypewriter exchange service. Communications taxes: Teletypewriter exchange service Teletypewriter exchange service

This includes access from a teletypewriter or other data station to a teletypewriter exchange system and the privilege of intercommunication by that station with most persons having teletypewriter or other data stations in the same exchange system.

Figuring the tax. Communications taxes: Figuring the tax

The tax is based on the sum of all charges for local or toll telephone service included in the bill. However, if the bill groups individual items for billing and tax purposes, the tax is based on the sum of the individual items within that group. The tax on the remaining items not included in any group is based on the charge for each item separately. Do not include in the tax base state or local sales or use taxes that are separately stated on the taxpayer's bill.

Communications taxes: Coin-operated telephones Coin-operated telephonesIf the tax on toll telephone service is paid by inserting coins in coin-operated telephones, figure the tax to the nearest multiple of 5 cents. When the tax is midway between 5-cent multiples, the next higher multiple applies.

Prepaid telephone cards. Communications taxes: Prepaid telephone cards Prepaid telephone cards

A prepaid telephone card is any card or any other similar arrangement that allows its holder to get local or toll telephone service and pay for those services in advance. The tax is imposed when the card is transferred by a telecommunications carrier to any person who is not a telecommunications carrier. The face amount of the card is the amount paid for communications services. If the face amount is not a dollar amount, see section 49.4251-4 of the regulations.

Exemptions Communications taxes: Exemptions Exemptions: Communications taxes

Payments for certain services or payments from certain users are exempt from the communications tax.

Installation charges. Exempt communication services: Installation charges

The tax does not apply to payments received for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment. However, the tax does apply to payments for the repair or replacement of those items incidental to ordinary maintenance.

Answering services. Exempt communication services: Answering service Answering service

The tax does not apply to amounts paid for a private line, an answering service, and a one-way paging or message service if they do not provide access to a local telephone system and the privilege of telephonic communication as part of the local telephone system.

Mobile radio telephone service. Exempt communication services: Mobile radio telephone service Mobile radio telephone service

The tax does not apply to payments for a two-way radio service that does not provide access to a local telephone system.

Coin-operated telephones. Exempt communication services: Coin-operated telephones Coin-operated telephones

The tax for local telephone service does not apply to payments made for services by inserting coins in public coin-operated telephones. The tax for toll telephone service also does not apply if the charge is less than 25 cents. But the tax applies if the coin-operated telephone service is furnished for a guaranteed amount. Figure the tax on the amount paid under the guarantee plus any fixed monthly or other periodic charge.

Telephone-operated security systems. Exempt communication services: Security systems Security systems

The tax does not apply to amounts paid for telephones used only to originate calls to a limited number of telephone stations for security entry into a building. In addition, the tax does not apply to any amounts paid for rented communication equipment used in the security system.

News services. Exempt communication services: News services Exempt communication services: Radio broadcasts News services Radio broadcasts

The tax on toll telephone service and teletypewriter exchange service does not apply to charges for the following news services.

Services dealing exclusively with the collection or dissemination of news for or through the public press or radio or television broadcasting.

Services used exclusively in the collection or dissemination of news by a news ticker service furnishing a general news service similar to that of the public press.

This exemption applies to payments received for messages from one member of the news media to another member (or to or from their bona fide correspondents). For the exemption to apply, the charge for these services must be billed in writing to the person paying for the service and that person must certify in writing that the services are used for an exempt purpose.

Services not exempted.

The tax applies to amounts paid by members of the news media for local telephone service. Toll telephone service in connection with celebrities or special guests on talk shows is subject to the tax.

Common carriers and communications companies. Exempt communication services: Common carriers Communications taxes: WATS service WATS service

The tax on toll telephone service does not apply to WATS (wide area telephone service) used by common carriers, telephone and telegraph companies, or radio broadcasting stations or networks in their business. A common carrier is one holding itself out to the public as engaged in the business of transportation of persons or property for compensation and offering its services to the public generally.

Military personnel serving in a combat zone. Exempt communication services: Military personnel

The tax on toll telephone services does not apply to telephone calls originating in a combat zone that are made by members of the U.S. Armed Forces serving there if the person receiving payment for the call receives a properly executed exemption certificate. The signed and dated exemption certificate must contain all the following information.

The name of the member of the U.S. Armed Forces performing services in the combat zone who originated the call.

The toll charges, point of origin, and name of carrier.

A statement that the charges are exempt from tax under section 4253(d) of the Internal Revenue Code.

The name and address of the telephone subscriber.

This exemption also applies to members of the Armed Forces serving in a qualified hazardous duty area. A qualified hazardous duty area includes an area only while the special pay provision is in effect for that area.

For information about areas designated a combat zone or qualified hazardous duty area, see Publication 3, Armed Forces' Tax Guide.

International organizations and the American Red Cross. Exempt communication services: International organizations Exempt communication services: American Red Cross American Red Cross

The tax does not apply to communication services furnished to an international organization or to the American National Red Cross.

Nonprofit hospitals. Exempt communication services: Nonprofit hospitals

The tax does not apply to telephone services furnished to income tax-exempt nonprofit hospitals for their use. Also, the tax does not apply to amounts paid by these hospitals to provide local telephone service in the homes of their personnel who must be reached during their off-duty hours.

Nonprofit educational organizations. Nonprofit educational organizations Exempt communication services: Nonprofit educational organizations

The tax does not apply to payments received for services and facilities furnished to a nonprofit educational organization for its use. A nonprofit educational organization is one that satisfies all the following requirements.

It normally maintains a regular faculty and curriculum.

It normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.

It is exempt from income tax under section 501(a) of the Internal Revenue Code.

This includes a school operated by an organization exempt under section 501(c)(3) of the Internal Revenue Code if the school meets the above qualifications.

Federal, state, and local government. Exemptions: Federal government Exemptions: State and local governments Exemptions: Nonprofit educational organizations Federal government State and local governments Nonprofit educational organizations Exemptions: Indian tribal governments

The tax does not apply to communication services provided to the government of the United States, the government of any state or its political subdivisions, the District of Columbia, or the United Nations. Treat an Indian tribal government as a state for the exemption from the communications tax only if the services involve the exercise of an essential tribal government function.

Exemption certificate.

Any form of exemption certificate will be acceptable if it includes all the information required by the Internal Revenue Code and Regulations. See Regulations section 49.4253-11. File the certificate with the provider of the communication services.

The following users that are exempt from the communications tax do not have to file an annual exemption certificate after they have filed the initial certificate to claim an exemption from the communications tax.

The American National Red Cross and other international organizations.

Nonprofit hospitals.

Nonprofit educational organizations.

State and local governments.

The federal government does not have to file any exemption certificate.

All other organizations must furnish exemption certificates when required.

Credits or Refunds Communications taxes: Credits or refunds

If tax is collected and paid over for certain services or users exempt from the communications tax:

The collector may claim a credit or refund if it has:

Repaid the tax to the person from whom the tax was collected, or

Obtained the consent of that person to the allowance of the credit or refund, or

The person who paid the tax may claim a refund.

For information about credits or refunds, see the Instructions for Form 720 or Form 8849.

Air Transportation Taxes Air transportation taxes:

Taxes are imposed on amounts paid for all the following services.

Transportation of persons by air.

Use of international air travel facilities.

Transportation of property by air.

Transportation of Persons by Air Air transportation taxes: Persons by air Air transportation taxes: Tax rates Tax rate: Air transportation of persons

The tax on transportation of persons by air is made up of the following two parts.

The percentage tax.

The domestic-segment tax.

Percentage tax.

A tax of 7.5% applies to amounts paid for taxable transportation of persons by air. Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service.

Mileage awards.

The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses.

Generally, the percentage tax does not apply to amounts paid for mileage awards where the mileage awards cannot, under any circumstances, be redeemed for air transportation that is subject to the tax. Until regulations are issued, the following rules apply to mileage awards.

Amounts paid for mileage awards that cannot be redeemed for taxable transportation beginning and ending in the United States are not subject to the tax. For this rule, mileage awards issued by a foreign air carrier are considered to be usable only on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States. Therefore, amounts paid to a foreign air carrier for mileage awards are not subject to the tax.

Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are not subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation.

Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are subject to the tax to the extent those miles will not be awarded in connection with the purchase of taxable transportation.

Domestic-segment tax.

The domestic-segment tax is a flat dollar amount for each segment of taxable transportation for which an amount is paid. However, see Rural airports, later. A segment is a single takeoff and a single landing. The domestic-segment tax is $3.20 per segment that begins during 2005.

Example.

In January 2005, Frank Jones pays $264.40 to a commercial airline for a flight in January from Washington to Chicago with an intermediate stop in Cleveland. The flight comprises two segments. The price includes the $240 fare and $24.40 excise tax [($240 × 7.5%) + (2 × $3.20)] for which Frank is liable. The airline collects the tax from Frank and pays it over to the government.

Charter flights.

If an aircraft is chartered, the domestic-segment tax for each segment of taxable transportation is figured by multiplying the tax by the number of passengers transported on the aircraft.

Example.

In March 2005, Tim Clark pays $1,119.80 to an air charter service to carry 7 employees from Washington to Detroit with an intermediate stop in Pittsburgh. The flight comprises two segments. The price includes the $1,000 charter payment and $119.80 excise tax [($1,000 × 7.5%) + (2 × $3.20 × 7 passengers)] for which Tim is liable. The charter service collects the tax from Tim and pays it over to the government.

Rural airports. Rural airports

The domestic-segment tax does not apply to a segment to or from a rural airport. An airport is a rural airport for a calendar year if it satisfies both the following requirements.

Fewer than 100,000 commercial passengers departed from the airport during the second preceding calendar year.

Either of the following statements is true.

The airport is not located within 75 miles of another airport from which 100,000 or more commercial passengers departed during the second preceding calendar year.

The airport was receiving essential air service subsidies as of August 5, 1997.

An updated list of rural airports can be found on the Department of Transportation website at http://ostpxweb.dot.gov/aviation/domav/ruralair.pdf.

Taxable transportation. Air transportation taxes: 225-mile-zone rule Air transportation taxes: Taxable transportation

Taxable transportation is transportation by air that meets either of the following tests.

It begins and ends either in the United States or at any place in Canada or Mexico not more than 225 miles from the nearest point on the continental United States boundary (this is the 225-mile zone).

It is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if it is not a part of uninterrupted international air transportation, discussed later.

Round trip.

A round trip is considered two separate trips. The first trip is from the point of departure to the destination. The second trip is the return trip from that destination.

Uninterrupted international air transportation. Air transportation taxes: Uninterrupted international Uninterrupted international air transportation

This means transportation entirely by air that does not begin and end in the United States or in the 225-mile zone if there is not more than a 12-hour scheduled interval between arrival and departure at any station in the United States. For a special rule that applies to military personnel, see Exemptions later.

Transportation between the continental U.S. and Alaska or Hawaii. Air transportation taxes: Alaska Air transportation taxes: Hawaii Alaska: Air transportation taxes Hawaii, air transportation taxes

This transportation is partially exempt from the tax on transportation of persons by air. The tax does not apply to the part of the trip between the point at which the route of transportation leaves or enters the continental United States (or a port or station in the 225-mile zone) and the point at which it enters or leaves Hawaii or Alaska. Leaving or entering occurs when the route of the transportation passes over either the United States border or a point 3 nautical miles (3.45 statute miles) from low tide on the coast line, or when it leaves a port or station in the 225-mile zone. Therefore, this transportation is subject to the percentage tax on the part of the trip in U.S. airspace, the domestic-segment tax for each domestic segment, and the tax on the use of international air travel facilities, discussed later.

Transportation within Alaska or Hawaii. Air transportation taxes: Alaska Air transportation taxes: Hawaii

The tax on transportation of persons by air applies to the entire fare paid in the case of flights between any of the Hawaiian Islands, and between any ports or stations in the Aleutian Islands or other ports or stations elsewhere in Alaska. The tax applies even though parts of the flights may be over international waters or over Canada, if no point on the direct line of transportation between the ports or stations is more than 225 miles from the United States (Hawaii or Alaska).

Package tours. Air transportation taxes: Package tours

The air transportation taxes apply to complimentary air transportation furnished solely to participants in package holiday tours. The amount paid for these package tours includes a charge for air transportation even though it may be advertised as free. This rule also applies to the tax on the use of international air travel facilities, discussed later.

Liability for tax. Air transportation taxes: Persons liable

The person paying for taxable transportation is liable for the tax and, ordinarily, the person receiving the payment collects the tax, files the returns, and pays the tax over to the government. However, if payment is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation provided for under that order must collect the tax.

Air transportation taxes: Travel agency Travel agencyA travel agency that is an independent broker and sells tours on aircraft that it charters must collect the transportation tax, file the returns, and pay the tax over to the government. However, a travel agency that sells tours as the agent of an airline must collect the tax and remit it to the airline for the filing of returns and for the payment of the tax over to the government.

The fact that the aircraft does not use public or commercial airports in taking off and landing has no effect on the tax. But see Certain helicopter uses, later.

For taxable transportation that begins and ends in the United States, the tax applies regardless of whether the payment is made in or outside the United States.

If the tax is not paid when payment for the transportation is made, the air carrier providing the initial segment of the transportation that begins or ends in the United States becomes liable for the tax.

Exemptions. Air transportation taxes: Exemptions Exemptions: Air transportation taxes

The tax on transportation of persons by air does not apply in the following situations. See also Special Rules on Transportation Taxes, later.

Military personnel on international trips. Exemptions: Military personnel Air transportation taxes: Military personnel Uninterrupted international air transportation

When traveling in uniform at their own expense, United States military personnel on authorized leave are deemed to be traveling in uninterrupted international air transportation (defined earlier) even if the scheduled interval between arrival and departure at any station in the United States is actually more than 12 hours. However, such personnel must buy their tickets within 12 hours after landing at the first domestic airport and accept the first available accommodation of the type called for by their tickets. The trip must begin or end outside the United States and the 225-mile zone.

Certain helicopter uses. Air transportation taxes: Helicopters Exemptions: Helicopters Helicopters Aircraft: Helicopters

The tax does not apply to air transportation by helicopter if the helicopter is used for any of the following purposes.

Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas.

Planting, cultivating, cutting, transporting, or caring for trees (including logging operations).

Providing emergency medical services.

However, during a use described in items (1) and (2), the tax applies if the helicopter takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. For item (1), treat each flight segment as a separate flight.

Fixed-wing air ambulance. Air transportation taxes: Fixed-wing ambulance Aircraft: Fixed-wing air ambulance Exemptions: Fixed-wing air ambulance

The tax does not apply to air transportation by fixed-wing aircraft if used for emergency medical services. The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services.

Skydiving.

The tax does not apply to any air transportation exclusively for the purpose of skydiving.

Bonus tickets. Exemptions: Bonus tickets Bonus tickets Air transportation taxes: Bonus tickets

The tax does not apply to free bonus tickets issued by an airline company to its customers who have satisfied all requirements to qualify for the bonus tickets. However, the tax applies to amounts paid by customers for advance bonus tickets when customers have traveled insufficient mileage to fully qualify for the free advance bonus tickets.

Use of International Air Travel Facilities Air transportation taxes: International air travel facilities International air travel facilities Tax rate: International air travel facilities

A $14.10 tax per person is imposed on amounts paid during 2005 (whether in or outside the United States) for international flights that begin or end in the United States. However, for a domestic segment that begins or ends in Alaska or Hawaii, a $7.00 tax per person applies only to departures. This tax does not apply if all the transportation is subject to the percentage tax, discussed earlier.

Transportation of Property by Air Tax rate: Air transportation of property Air transportation taxes: Property by air Air transportation taxes: Helicopters

A tax of 6.25% is imposed on amounts paid (whether in or outside the United States) for transportation of property by air. The fact that the aircraft may not use public or commercial airports in taking off and landing has no effect on the tax. The tax applies only to amounts paid to a person engaged in the business of transporting property by air for hire.

The tax applies only to transportation (including layover time and movement of aircraft in deadhead service) that begins and ends in the United States. Thus, the tax does not apply to transportation of property by air that begins or ends outside the United States.

Exemptions.

The tax on transportation of property by air does not apply in the following situations. See also Special Rules on Transportation Taxes, later.

Cropdusting and firefighting service.

The tax does not apply to amounts paid for cropdusting or aerial firefighting service.

Exportation.

Air transportation taxes: Export Form: 1363The tax does not apply to payments for transportation of property by air in the course of exportation (including to United States possessions) by continuous movement, as evidenced by the execution of Form 1363, Export Exemption Certificate. See Form 1363 for more details.

Certain helicopter and fixed-wing air ambulance uses.

The tax does not apply to amounts paid for the use of helicopters in construction to set heating and air conditioning units on roofs of buildings, to dismantle tower cranes, and to aid in construction of power lines and ski lifts.

The tax also does not apply to air transportation by helicopter or fixed-wing aircraft for the purpose of providing emergency medical services. The fixed-wing aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services.

Skydiving.

The tax does not apply to any air transportation exclusively for the purpose of skydiving.

Excess baggage.

Air transportation taxes: BaggageThe tax does not apply to excess baggage accompanying a passenger on an aircraft operated on an established line.

Alaska and Hawaii. Air transportation taxes: Alaska Air transportation taxes: Hawaii

For transportation of property to and from Alaska and Hawaii, the tax in general does not apply to the portion of the transportation that is entirely outside the continental United States (or the 225-mile zone if the aircraft departs from or arrives at an airport in the 225-mile zone). But the tax applies to flights between ports or stations in Alaska and the Aleutian Islands, as well as between ports or stations in Hawaii. The tax applies even though parts of the flights may be over international waters or over Canada, if no point on a line drawn from where the route of transportation leaves the United States (Alaska) to where it reenters the United States (Alaska) is more than 225 miles from the United States.

Liability for tax. Air transportation taxes: Persons liable

The person paying for taxable transportation is liable for the tax and, ordinarily, the person engaged in the business of transporting property by air for hire receives the payment, collects the tax, files the returns, and pays the tax over to the government.

If tax is not paid when a payment is made outside the United States, the person furnishing the last segment of taxable transportation collects the tax from the person to whom the property is delivered in the United States.

Special Rules on Transportation Taxes

In certain circumstances, special rules apply to the taxes on transportation of persons and property by air.

Aircraft used by affiliated corporations. Aircraft: Affiliated corporations Affiliated corporations

The taxes do not apply to payments received by one member of an affiliated group of corporations from another member for services furnished in connection with the use of an aircraft. However, the aircraft must be owned or leased by a member of the affiliated group and cannot be available for hire by a nonmember of the affiliated group. Determine whether an aircraft is available for hire by a nonmember of an affiliated group on a flight-by-flight basis.

For this rule, an affiliated group of corporations is any group of corporations connected with a common parent corporation through 80% or more of stock ownership.

Small aircraft. Aircraft: Small planes

The taxes do not apply to transportation furnished by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less. However, the taxes do apply if the aircraft is operated on an established line. Operated on an established line means the aircraft operates with some degree of regularity between definite points.

Consider an aircraft to be operated on an established line if it is operated on a charter basis between two cities also served by that carrier on a regularly scheduled basis.

Mixed load of persons and property.

If a single amount is paid for air transportation of persons and property, the payment must be allocated between the amount subject to the tax on transportation of persons and the amount subject to the tax on transportation of property. The allocation must be reasonable and supported by adequate records.

Credits or Refunds Air transportation taxes: Credits or refunds

If tax is collected and paid over for air transportation that is not taxable air transportation, the collector may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. Alternatively, the person who paid the tax may claim a refund. For information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849.

Fuel Taxes

Excise taxes are imposed on all the following fuels.

Gasoline, including aviation gasoline and gasoline blendstocks.

Diesel fuel.

Kerosene.

Aviation-grade kerosene.

Special motor fuels (including LPG).

Compressed natural gas.

Fuels used in commercial transportation on inland waterways.

Items To Note

The American Jobs Creation Act of 2004 (the Act), Public Law 108-357, made changes affecting fuel taxes. The following is a brief review of some of these changes.

Biodiesel mixtures.

As under previous law, persons who blend biodiesel with undyed diesel fuel to produce a biodiesel mixture outside the bulk transfer/terminal system must pay the diesel fuel tax on the volume of biodiesel in the mixture. See Form 720 to report this tax. You also must be registered with the IRS as a blender. See Form 637. See Pub. 378 for information on the new biodiesel mixture credit.

Alcohol fuel mixtures.

Persons who blend alcohol with gasoline to produce an alcohol fuel mixture outside the bulk transfer/terminal system must pay the gasoline tax on the volume of alcohol in the mixture. See Form 720 to report this tax. You also must be registered with the IRS as a blender. See Form 637. See Pub. 378 for information on the new alcohol fuel mixture credit.

Aviation-grade kerosene.

Aviation-grade kerosene is taxed and the tax on aviation fuel has been eliminated. The tax rates are the same.

Diesel fuel and kerosene, use in certain intercity and local buses.

The use of dyed diesel fuel used in certain intercity and local buses has been repealed; dyed diesel fuel cannot be used in these buses. A claim can be made if diesel fuel or kerosene is used for this purpose.

Gasoline.

The definition of gasoline has been revised.

Transmix.

The definition of diesel fuel has been revised to include transmix.

Two-party exchanges. Two-party exchanges

In a two-party exchange, the delivering person will not be liable for the tax on removal of taxable fuel from any terminal if certain conditions are met. See Two-party exchanges later.

Exemption for bulk transfers to registered terminals or refineries of taxable fuel.

Pipeline or vessel operators must be registered for the exemption from the tax on removal or entry of taxable fuel by bulk transfer by pipeline or vessel to a terminal or refinery to apply.

Dyed fuel.

The penalty for dyed fuel sold or used in a taxable use has been revised.

Floor stocks, aviation-grade kerosene.

See Form 720 and its instructions for information on the aviation-grade kerosene floor stocks tax.

Appendix A.

All model certificates and waivers are now in Appendix A. Model certificates E, F, H, and I have been deleted. Model certificates A and B have been reversed. Model certificates and waivers K through P have been added.

Credits and refunds.

The Act made many changes affecting fuel tax claims. The claims are described in detail in Pub. 378, Form 8849, and Schedule C (Form 720). The certificates and waivers necessary for many of the claims are included in Appendix A in Pub. 510 and the Appendix in Pub. 378. The following is a brief list of some of the claims.

Biodiesel mixtures.

Alcohol fuel mixtures.

Aviation-grade kerosene sold for use on a farm or for use by state and local governments; claims can only be made by the registered ultimate vendor.

Aviation-grade kerosene sold for nontaxable uses (other than use on a farm or use by state and local governments); claims can be made by the registered ultimate vendor or ultimate purchaser.

Gasoline and aviation gasoline sold to state and local governments and nonprofit educational organizations; claims can be made by the registered ultimate vendor or ultimate purchaser.

Undyed diesel fuel or undyed kerosene sold for use in certain intercity and local buses; claims can be made by the registered ultimate vendor or ultimate purchaser.

Gasoline wholesale distributors.

Refunds to gasoline wholesale distributors have been eliminated for fuel sold after December 31, 2004. Schedule 4 (Form 8849) will not be revised and cannot be used for fuel sold after December 31, 2004.

Definitions

The following terms are used throughout the discussion of fuel taxes. Other terms are defined in the discussion of the specific fuels to which they pertain.

Agri-biodiesel. Agri-biodiesel, defined

Agri-biodiesel means biodiesel derived solely from virgin oils, including esters derived from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, and mustard seeds, and from animal fats.

Approved terminal or refinery. Approved terminal, defined Approved refinery, defined

This is a terminal operated by a registrant that is a terminal operator or a refinery operated by a registrant that is a refiner.

Biodiesel. Biodiesel, defined

Biodiesel means the monoalkyl esters of long chain fatty acids derived from plant or animal matter which meet the registration requirements for fuels and fuel additives established by the Environmental Protection Agency (EPA) under section 211 of the Clean Air Act, and the requirements of the American Society of Testing Materials D6751.

Blended taxable fuel. Blended taxable fuel, defined

This means any taxable fuel produced outside the bulk transfer/terminal system by mixing taxable fuel on which excise tax has been imposed and any other liquid on which excise tax has not been imposed. This does not include a mixture removed or sold during the calendar quarter if all such mixtures removed or sold by the blender contain less than 400 gallons of a liquid on which the tax has not been imposed.

Blender. Blender, defined

This is the person that produces blended taxable fuel. However, if an untaxed liquid is sold as taxed taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel.

Bulk transfer. Bulk transfer, defined

This is the transfer of taxable fuel by pipeline or vessel.

Bulk transfer/terminal system. Bulk transfer/terminal system, defined

This is the taxable fuel distribution system consisting of refineries, pipelines, vessels, and terminals. Fuel in the supply tank of any engine, or in any tank car, railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer/terminal system.

Enterer. Enterer, defined

This is the importer of record for the taxable fuel. However, if the importer of record is acting as an agent, such as a customs broker, the person for whom the agent is acting is the enterer. If there is no importer of record, the owner at the time of entry into the United States is the enterer.

Entry. Entry, defined

Taxable fuel is entered into the United States when it is brought into the United States and applicable customs law requires that it be entered for consumption, use, or warehousing. This does not apply to fuel brought into Puerto Rico (which is part of the U.S. customs territory), but does apply to fuel brought into the United States from Puerto Rico.

Measurement of taxable fuel.

Volumes of taxable fuel can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit.

Pipeline operator. Pipeline operator, defined

This is the person that operates a pipeline within the bulk transfer/terminal system.

Position holder. Position holder, defined

This is the person that holds the inventory position in the taxable fuel in the terminal, as reflected in the records of the terminal operator. You hold the inventory position when you have a contractual agreement with the terminal operator for the use of the storage facilities and terminaling services for the taxable fuel. A terminal operator that owns taxable fuel in its terminal is a position holder.

Rack. Rack, defined

This is a mechanism capable of delivering fuel into a means of transport other than a pipeline or vessel.

Refiner. Refiner, defined

This is any person that owns, operates, or otherwise controls a refinery.

Refinery. Refinery, defined

This is a facility used to produce taxable fuel and from which taxable fuel may be removed by pipeline, by vessel, or at a rack. However, this term does not include a facility where only blended fuel, and no other type of fuel, is produced. For this purpose, blended fuel is any mixture that would be blended taxable fuel if produced outside the bulk transfer/terminal system.

Registrant. Registrant, defined

This is a taxable fuel registrant (see Registration Requirements, later).

Removal. Removal, defined

This is any physical transfer of taxable fuel. It also means any use of taxable fuel other than as a material in the production of taxable or special fuels. However, taxable fuel is not removed when it evaporates or is otherwise lost or destroyed.

Sale. Sale, defined

For taxable fuel not in a terminal, this is the transfer of title to, or substantial incidents of ownership in, taxable fuel to the buyer for money, services, or other property. For taxable fuel in a terminal, this is the transfer of the inventory position if the transferee becomes the position holder for that taxable fuel.

State. State, defined

This includes any state, any of its political subdivisions, the District of Columbia, and the American Red Cross. An Indian tribal government is treated as a state only if transactions involve the exercise of an essential tribal government function.

Taxable fuel.

This means gasoline, diesel fuel, or kerosene.

Terminal. Terminal, defined

This is a storage and distribution facility supplied by pipeline or vessel, and from which taxable fuel may be removed at a rack. It does not include a facility at which gasoline blendstocks are used in the manufacture of products other than finished gasoline if no gasoline is removed from the facility. A terminal does not include any facility where finished gasoline, diesel fuel, or kerosene is stored if the facility is operated by a registrant and all such taxable fuel stored at the facility has been previously taxed upon removal from a refinery or terminal.

Terminal operator. Terminal operator, defined

This is any person that owns, operates, or otherwise controls a terminal.

Throughputter. Throughputter, defined

This is any person that is a position holder or that owns taxable fuel within the bulk transfer/terminal system (other than in a terminal).

Vessel operator. Vessel operator, defined

This is the person that operates a vessel within the bulk transfer/terminal system. However, vessel does not include a deep draft ocean-going vessel.

Information Returns Information returns, liquid products Liquid products, information returns

Form 720-TO and Form 720-CS are information returns used to report monthly receipts and disbursements of liquid products. A liquid product is any liquid transported into storage at a terminal or delivered out of a terminal. For a list of products, see the product code table in the Instructions for Forms 720-TO and 720-CS.

The returns are due the last day of the month following the month in which the transaction occurs. These returns can be filed on paper or electronically. For information on filing electronically, see Publication 3536, Motor Fuel Excise Tax EDI Guide. Pub. 3536 is only available on the IRS website.

Form 720-TO.

This information return is used by terminal operators to report receipts and disbursements of all liquid products to and from all approved terminals. Each terminal operator must file a separate form for each approved terminal.

Form 720-CS.

This information return must be filed by bulk transport carriers (barges, vessels, and pipelines) who receive liquid product from an approved terminal or deliver liquid product to an approved terminal.

Registration Requirements Registration

The following discussion applies to excise tax registration requirements for activities relating to fuels only. See Form 637 for other persons who must register and for more information about registration.

Persons that must register.

You must be registered if you are any of the following persons.

A blender.

An enterer.

A pipeline operator.

A position holder.

A refiner.

A terminal operator.

A vessel operator.

Train operators who uses dyed diesel fuel in their trains and they incur liability for tax at the train rate.

Full rate buyers of aviation-grade kerosene in connection with a removal from a terminal (other than removal directly into the fuel tank of an aircraft).

Producers or importers of alcohol, biodiesel, and agri-biodiesel.

Persons that may register.

You may, but are not required to, register if you are any of the following persons.

A feedstock user.

An industrial user.

A throughputter that is not a position holder.

An ultimate vendor.

Ultimate vendors do not need to be registered to buy or sell fuel. However, they must be registered to file claims for certain sales of fuel.

Taxable fuel registrant. Taxable fuel registrant Registrant

This is an enterer, an industrial user, a refiner, a terminal operator, or a throughputter who received a Letter of Registration under the excise tax registration provisions and whose registration has not been revoked or suspended. The term registrant as used in the discussions of these fuels means a taxable fuel registrant.

Additional information.

See the Form 637 instructions for the information you must submit when you apply for registration.

Failure to register.

The penalty for failure to register if you are required to register, unless due to reasonable cause, is increased to $10,000 for the initial failure, and then $1,000 each day thereafter you fail to register.

Refunds of Second Tax Refund of second tax

If the tax is paid on more than one taxable event for a taxable fuel under section 4081, the person paying the second tax may claim a refund (without interest) of that tax if certain conditions and reporting requirements are met. No credit against any tax is allowed for this tax. For information about taxable events, see the discussions under Gasoline, Diesel Fuel and Kerosene, and Aviation-Grade Kerosene later.

Conditions to allowance of refund.

A claim for refund of the tax is allowed only if all the following conditions are met.

A tax on the fuel was paid to the government and not credited or refunded (the first tax).

After the first tax was imposed, another tax was imposed on the same fuel and was paid to the government (the second tax).

The person that paid the second tax filed a timely claim for refund containing the information required (see Refund claim, later).

The person that paid the first tax has met the reporting requirements, discussed next.

Reporting requirements.

Generally, the person that paid the first tax must file a First Taxpayer's Report with its Form 720 for the quarter to which the report relates. A model first taxpayer's report is shown in Appendix A as Model Certificate B. The report must contain all information needed to complete the model.

By the due date for filing the Form 720, you must also send a separate copy of the report to the following address. Internal Revenue Service Center Cincinnati, OH 45999-0555Write EXCISE – FIRST TAXPAYER'S REPORT across the top of that copy.

Optional reporting.

A first taxpayer's report is not required for the tax imposed on any of the following taxable events.

Removal at a terminal rack.

Nonbulk entries into the United States.

Removals or sales by blenders.

However, if the person liable for the tax expects that another tax will be imposed on that fuel, that person should (but is not required to) file a first taxpayer's report.

Providing information.

The first taxpayer must give a copy of the report to the buyer of the fuel within the bulk transfer/terminal system or to the owner of the fuel immediately before the first tax was imposed, if the first taxpayer is not the owner at that time. If an optional report is filed, a copy should (but is not required to) be given to the buyer or owner.

A person that receives a copy of the first taxpayer's report and later sells the fuel within the bulk transfer/terminal system must give the copy and a Statement of Subsequent Seller to the buyer. If the later sale is outside the bulk transfer/terminal system and that person expects that another tax will be imposed, that person should (but is not required to) give the copy and the statement to the buyer. A model statement of subsequent seller is shown in Appendix A as Model Certificate A. The statement must contain all information necessary to complete the model.

If the first taxpayer's report relates to fuel sold to more than one buyer, copies of that report must be made when the fuel is divided. Each buyer must be given a copy of the report.

Refund claim.

You must have filed Form 720 and paid the second tax before you file for a refund of that tax. You must make your claim for refund on Form 8849. Complete Schedule 5 (Form 8849) and attach it to your Form 8849. Do not include this claim with a claim under another tax provision. You must not have included the second tax in the price of the fuel and must not have collected it from the purchaser. You must submit the following information with your claim.

A copy of the first taxpayer's report (discussed earlier).

A copy of the statement of subsequent seller if the fuel was bought from someone other than the first taxpayer.

Gasoline Fuels: Gasoline

The definition of gasoline has been revised. The reduced rates of tax that applied to gasohol and gasoline sold for the production of gasohol have been repealed.

Gasoline. Gasoline, defined

Gasoline means all products commonly or commercially known or sold as gasoline with an octane rating of 75 or more that are suitable for use as a motor fuel. Gasoline includes any gasoline blend other than:

Qualified ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from coal, including peat),

Partially exempt ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from natural gas), or

Denatured alcohol.

Gasoline also includes gasoline blendstocks, discussed in later, and any product commonly used as an additive in gasoline (other than alcohol).

Aviation gasoline. Aviation gasoline, defined

This means all special grades of gasoline suitable for use in aviation reciprocating engines and covered by ASTM specification D 910 or military specification MIL-G-5572.

Taxable Events

The tax on gasoline is $.184 per gallon. The tax on aviation gasoline is $.194 per gallon. Tax is imposed on the removal, entry, or sale of gasoline. Each of these events is discussed later. However, see the special rules that apply to gasoline blendstocks, later.

If the tax is paid on the gasoline in more than one event, a refund may be allowed for the second tax paid. See Refunds of Second Tax, earlier.

Removal from terminal.

All removals of gasoline at a terminal rack are taxable. The position holder for that gasoline is liable for the tax.

Two-party exchanges. Two-party exchanges

In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply.

The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator.

The exchange transaction occurs before or at the same time as completion of removal across the rack by the receiving person.

The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO.

The transaction is subject to a written contract.

Terminal operator's liability.

However, a terminal operator meeting all the following conditions at the time of the removal will not be liable for the tax.

The terminal operator is a registrant.

The terminal operator has an unexpired notification certificate (discussed later) from the position holder.

The terminal operator has no reason to believe any information on the certificate is false.

Removal from refinery.

The removal of gasoline from a refinery is taxable if the removal meets either of the following conditions.

It is made by bulk transfer and the refiner, the owner of the gasoline immediately before the removal, or the operator of the pipeline or vessel is not a registrant.

It is made at the refinery rack.

The refiner is liable for the tax.

Exception.

The tax does not apply to a removal of gasoline at the refinery rack if all the following requirements are met.

The gasoline is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel.

The gasoline is received at a facility operated by a registrant and located within the bulk transfer/terminal system.

The removal from the refinery is by railcar.

The same person operates the refinery and the facility at which the gasoline is received.

Entry into the United States.

The entry of gasoline into the United States is taxable if the entry meets either of the following conditions.

It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant.

It is not made by bulk transfer.

The enterer is liable for the tax.

Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator.

The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline or the operator of the pipeline or vessel is not a registrant. The position holder is liable for the tax. The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. However, see Terminal operator's liability under Removal from terminal, earlier, for an exception.

Bulk transfers not received at approved terminal or refinery.

The removal by bulk transfer of gasoline from a terminal or refinery, or the entry of gasoline by bulk transfer into the United States, is taxable if the following conditions apply.

No tax was previously imposed (as discussed earlier) on any of the following events.

The removal from the refinery.

The entry into the United States.

The removal from a terminal by an unregistered position holder.

Upon removal from the pipeline or vessel, the gasoline is not received at an approved terminal or refinery (or at another pipeline or vessel).

The owner of the gasoline when it is removed from the pipeline or vessel is liable for the tax. However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax.

The owner is a registrant.

The owner has an unexpired notification certificate (discussed later) from the operator of the terminal or refinery where the gasoline is received.

The owner has no reason to believe any information on the certificate is false.

The operator of the facility where the gasoline is received is liable for the tax if the owner meets these conditions. The operator is jointly and severally liable if the owner does not meet these conditions.

Sales to unregistered person.

The sale of gasoline located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier.

The seller is liable for the tax. However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax.

The seller is a registrant.

The seller has an unexpired notification certificate (discussed later) from the buyer.

The seller has no reason to believe any information on the certificate is false.

The buyer of the gasoline is liable for the tax if the seller meets these conditions. The buyer is jointly and severally liable if the seller does not meet these conditions.

Exception.

The tax does not apply to a sale if all of the following apply.

The buyer's principal place of business is not in the United States.

The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel.

The seller is a registrant and the exporter of record.

The fuel was exported.

Removal or sale of blended gasoline.

The removal or sale of blended gasoline by the blender is taxable. See Blended taxable fuel under Definitions, earlier.

The blender is liable for the tax. The tax is figured on the number of gallons not previously subject to the tax on gasoline.

Persons who blend alcohol with gasoline to produce an alcohol fuel mixture outside the bulk transfer/terminal system must pay must pay the gasoline tax on the volume of alcohol in the mixture. See Form 720 to report this tax. You also must be registered with the IRS as a blender. See Form 637.

However, if an untaxed liquid is sold as taxed taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel.

Notification certificate.

The notification certificate is used to notify a person of the registration status of the registrant. A copy of the registrant's letter of registration cannot be used as a notification certificate. A model notification certificate is shown in Appendix A as Model Certificate C. A notification certificate must contain all information necessary to complete the model.

The certificate may be included as part of any business records normally used for a sale. A certificate expires on the earlier of the date the registrant provides a new certificate, or the date the recipient of the certificate is notified that the registrant's registration has been revoked or suspended. The registrant must provide a new certificate if any information on a certificate has changed.

Additional persons liable.

When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on:

Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or

Anyone who willfully causes the person to fail to pay the tax.

Gasoline Blendstocks Gasoline blendstocks

Gasoline includes gasoline blendstocks. The previous discussions apply to these blendstocks. However, if certain conditions are met, the removal, entry, or sale of gasoline blendstocks is not taxable. Generally, this applies if the gasoline blendstock is not used to produce finished gasoline or is received at an approved terminal or refinery.

Blendstocks.

The following are gasoline blendstocks.

Alkylate.

Butane.

Butene.

Catalytically cracked gasoline.

Coker gasoline.

Ethyl tertiary butyl ether (ETBE).

Hexane.

Hydrocrackate.

Isomerate.

Methyl tertiary butyl ether (MTBE).

Mixed xylene (not including any separated isomer of xylene).

Natural gasoline.

Pentane.

Pentane mixture.

Polymer gasoline.

Raffinate.

Reformate.

Straight-run gasoline.

Straight-run naphtha.

Tertiary amyl methyl ether (TAME).

Tertiary butyl alcohol (gasoline grade) (TBA).

Thermally cracked gasoline.

Toluene.

However, gasoline blendstocks do not include any product that cannot be used without further processing in the production of finished gasoline.

Not used to produce finished gasoline.

Gasoline blendstocks not used to produce finished gasoline are not taxable if the following conditions are met.

Removals and entries not connected to sale.

Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant.

Removals and entries connected to sale.

Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant, and at the time of the sale, meets the following requirements.

The person has an unexpired certificate (discussed later) from the buyer.

The person has no reason to believe any information in the certificate is false.

Sales after removal or entry.

The sale of a gasoline blendstock that was not subject to tax on its nonbulk removal or entry, as discussed earlier, is taxable. The seller is liable for the tax. However, the sale is not taxable if, at the time of the sale, the seller meets the following requirements.

The seller has an unexpired certificate (discussed next) from the buyer.

The seller has no reason to believe any information in the certificate is false.

Certificate of buyer.

The certificate from the buyer certifies the gasoline blendstocks will not be used to produce finished gasoline. The certificate may be included as part of any business records normally used for a sale. A model certificate is shown in Appendix A as Model Certificate D. Your certificate must contain all information necessary to complete the model.

A certificate expires on the earliest of the following dates.

The date 1 year after the effective date (not earlier than the date signed) of the certificate.

The date a new certificate is provided to the seller.

The date the seller is notified the buyer's right to provide a certificate has been withdrawn.

The buyer must provide a new certificate if any information on a certificate has changed.

The IRS may withdraw the buyer's right to provide a certificate if that buyer uses the gasoline blendstocks in the production of finished gasoline or resells the blendstocks without getting a certificate from its buyer.

Received at approved terminal or refinery.

The nonbulk removal or entry of gasoline blendstocks received at an approved terminal or refinery is not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) meets all the following requirements.

The person is a registrant.

The person has an unexpired notification certificate (discussed earlier) from the operator of the terminal or refinery where the gasoline blendstocks are received.

The person has no reason to believe any information on the certificate is false.

Bulk transfers to registered industrial user.

The removal of gasoline blendstocks from a pipeline or vessel is not taxable if the blendstocks are received by a registrant that is an industrial user. An industrial user is any person that receives gasoline blendstocks by bulk transfer for its own use in the manufacture of any product other than finished gasoline.

Credits or Refunds Credit or refund: Gasoline tax

A credit or refund of the gasoline tax (without interest) may be allowable if gasoline is, by any person:

Exported,

Used in a boat engaged in commercial fishing,

Used in military aircraft,

Used in foreign trade,

Sold to a state, political subdivision of a state, or the District of Columbia for its exclusive use (see Claims by registered ultimate vendors),

Sold to a nonprofit educational organization for its exclusive use, as discussed earlier under Communications Tax, (see Claims by registered ultimate vendors),

Sold to the United Nations for its official use, or

Used or sold in the production of special motor fuels (defined later).

Claims by persons who paid the tax to the government.

A credit or refund is allowable to the person that paid the tax to the government if the gasoline was sold to the ultimate purchaser (including an exporter) by either that person or by a retailer for a purpose listed earlier. By signing the claim, the person that paid the tax certifies that it:

Has obtained one of the three items below.

Proof of exportation.

A certificate of ultimate purchaser.

A certificate of ultimate vendor.

Has met any of the following conditions.

Has neither included the tax in the price of the gasoline nor collected the tax from the buyer.

Has repaid, or agreed to repay, the tax to the ultimate vendor of the gasoline.

Has gotten the written consent of the ultimate vendor to the allowance of the credit or refund.

Claims by ultimate purchasers and registered ultimate vendors.

A claim may be made by an ultimate purchaser of taxed gasoline used for a nontaxable use. A claim may be made by a registered ultimate vendor for sales to a state or local government for its exclusive use or to a nonprofit educational organization for its exclusive use if the ultimate purchaser waives its right to the claim. For more information, see Publication 378.

Diesel Fuel and Kerosene Diesel fuel: Definitions Fuels: Diesel Kerosene: Definitions Fuels: Kerosene

Generally, diesel fuel and kerosene are taxed in the same manner as gasoline (discussed earlier).

Dyed diesel fuel and dyed kerosene cannot be used in certain intercity and local buses. All removals of diesel fuel or kerosene at a terminal rack are taxable at $.244 per gallon.

Diesel fuel means:

Any liquid that without further processing or blending, is suitable for use as a fuel in a diesel-powered highway vehicle or train,

Transmix, and

Diesel fuel blendstocks (when identified by the IRS).

A liquid is suitable for this use if the liquid has practical and commercial fitness for use in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. A liquid may possess this practical and commercial fitness even though the specified use is not the predominant use of the liquid. However, a liquid does not possess this practical and commercial fitness solely by reason of its possible or rare use as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. Diesel fuel does not include gasoline, kerosene, excluded liquid, No. 5 and No. 6 fuel oils covered by ASTM specification D 396, or F-76 (Fuel Naval Distillate) covered by military specification MIL-F-16884.

An excluded liquid Excluded liquid is either of the following.

A liquid that contains less than 4% normal paraffins.

A liquid with all the following properties.

Distillation range of 125 degrees Fahrenheit or less.

Sulfur content of 10 ppm or less.

Minimum color of +27 Saybolt.

Transmix Transmix means a by-product of refined products created by the mixing of different specification products during pipeline transportation.

Kerosene.

This means any of the following liquids.

One of the two grades of kerosene (No. 1-K and No. 2-K) covered by ASTM specification D 3699.

Kerosene-type jet fuel covered by ASTM specification D 1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8). See Aviation-Grade Kerosene later.

However, kerosene does not include excluded liquid, discussed earlier.

Kerosene also includes any liquid that would be described above but for the presence of a dye of the type used to dye kerosene for a nontaxable use.

Diesel-powered highway vehicle. Highway vehicle (Diesel-powered)

This is any self-propelled vehicle designed to carry a load over public highways (whether or not also designed to perform other functions) and propelled by a diesel-powered engine. Generally, do not consider as diesel-powered highway vehicles specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation. For more information about these vehicles and for information about vehicles not considered highway vehicles, see Publication 378.

Diesel-powered train. Train (Diesel-powered)

This is any diesel-powered equipment or machinery that rides on rails. The term includes a locomotive, work train, switching engine, and track maintenance machine.

Taxable Events

The tax on diesel fuel and kerosene is $.244 per gallon. It is imposed on the removal, entry, or sale of diesel fuel and kerosene. Each of these events is discussed later. The tax does not apply to dyed diesel fuel or dyed kerosene, discussed later.

If the tax is paid on the diesel fuel or kerosene in more than one event, a refund may be allowed for the second tax paid. See Refunds of Second Tax, earlier.

Use in certain intercity and local buses.

Dyed diesel fuel and dyed kerosene cannot be used in certain intercity and local buses. A claim for $.17 per gallon may be made by the ultimate vendor (under certain conditions) or the ultimate purchaser for undyed diesel fuel or undyed kerosene sold for use in certain intercity or local buses. An intercity or local bus is a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. The bus must be engaged in one of the following activities.

Scheduled transportation along regular routes regardless of the size of the bus.

Nonscheduled transportation if the seating capacity of the bus is at least 20 adults (not including the driver).

A bus is available to the general public if the bus is available for hire to more than a limited number of persons, groups, or organizations.

Removal from terminal.

All removals of diesel fuel or kerosene at a terminal rack are taxable. The position holder for that fuel is liable for the tax.

Two-party exchanges. Two-party exchanges

The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator.

The exchange transaction occurs before or at the same time as completion of removal across the rack by the receiving person.

The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO.

The transaction is subject to a written contract.

Terminal operator's liability.

The terminal operator is jointly and severally liable for the tax if the terminal operator provides any person with any bill of lading, shipping paper, or similar document indicating that diesel fuel or kerosene is dyed (discussed later).

The terminal operator is jointly and severally liable for the tax if the position holder (including the receiving person in a two-party exchange) is a person other than the terminal operator and is not a registrant. However, a terminal operator will not be liable for the tax in this situation if, at the time of the removal, the following conditions are met.

The terminal operator is a registrant.

The terminal operator has an unexpired notification certificate (discussed under Gasoline) from the position holder.

The terminal operator has no reason to believe any information on the certificate is false.

Removal from refinery.

The removal of diesel fuel or kerosene from a refinery is taxable if the removal meets either of the following conditions.

It is made by bulk transfer and the refiner, the owner of the fuel immediately before the removal, or the operator of the pipeline or vessel is not a registrant.

It is made at the refinery rack.

The refiner is liable for the tax.

Exception.

The tax does not apply to a removal of diesel fuel or kerosene at the refinery rack if all the following conditions are met.

The diesel fuel or kerosene is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel.

The diesel fuel or kerosene is received at a facility operated by a registrant and located within the bulk transfer/terminal system.

The removal from the refinery is by:

Railcar and the same person operates the refinery and the facility at which the diesel fuel or kerosene is received, or

For diesel fuel only, a trailer or semi-trailer used exclusively to transport the diesel fuel from a refinery (described in (1)) to a facility (described in (2)) less than 20 miles from the refinery.

Entry into the United States.

The entry of diesel fuel or kerosene into the United States is taxable if the entry meets either of the following conditions.

It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant.

It is not made by bulk transfer.

The enterer is liable for the tax.

Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator.

The removal by bulk transfer of diesel fuel or kerosene from a terminal is taxable if the position holder for that fuel or the operator of the pipeline or vessel is not a registrant. The position holder is liable for the tax. The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. However, see Terminal operator's liability under Removal from terminal, earlier, for an exception.

Bulk transfers not received at approved terminal or refinery.

The removal by bulk transfer of diesel fuel or kerosene from a terminal or refinery or the entry of diesel fuel or kerosene by bulk transfer into the United States is taxable if the following conditions apply.

No tax was previously imposed (as discussed earlier) on any of the following events.

The removal from the refinery.

The entry into the United States.

The removal from a terminal by an unregistered position holder.

Upon removal from the pipeline or vessel, the diesel fuel or kerosene is not received at an approved terminal or refinery (or at another pipeline or vessel).

The owner of the diesel fuel or kerosene when it is removed from the pipeline or vessel is liable for the tax. However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax.

The owner is a registrant.

The owner has an unexpired notification certificate (discussed under Gasoline) from the operator of the terminal or refinery where the diesel fuel or kerosene is received.

The owner has no reason to believe any information on the certificate is false.

The operator of the facility where the diesel fuel or kerosene is received is liable for the tax if the owner meets these conditions. The operator is jointly and severally liable if the owner does not meet these conditions.

Sales to unregistered person.

The sale of diesel fuel or kerosene located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier.

The seller is liable for the tax. However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax.

The seller is a registrant.

The seller has an unexpired notification certificate (discussed under Gasoline) from the buyer.

The seller has no reason to believe any information on the certificate is false.

The buyer of the diesel fuel or kerosene is liable for the tax if the seller meets these conditions. The buyer is jointly and severally liable if the seller does not meet these conditions.

Exception.

The tax does not apply to a sale if all of the following apply.

The buyer's principal place of business is not in the United States.

The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel.

The seller is a registrant and the exporter of record.

The fuel was exported.

Removal or sale of blended diesel fuel or kerosene.

The removal or sale of blended diesel fuel or blended kerosene by the blender is taxable. Blended taxable fuel produced using biodiesel is subject to the tax. See Blended taxable fuel under Definitions, earlier.

The blender is liable for the tax. The tax is figured on the number of gallons not previously subject to the tax.

Persons who blend biodiesel with undyed diesel fuel to produce a biodiesel mixture outside the bulk transfer terminal system must pay must pay the diesel fuel tax on the volume of biodiesel in the mixture. Generally, the biodiesel mixture must be diesel fuel (defined earlier). See Form 720 to report this tax. You also must be registered with the IRS as a blender. See Form 637.

Additional persons liable.

When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on:

Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or

Anyone who willfully causes the person to fail to pay the tax.

Exemptions Diesel fuel: Exemption Kerosene: Exemption

The excise tax on diesel fuel or kerosene is not imposed and the dyeing requirements do not have to be met if the rules related to the following exemptions are met.

Sale or use in certain areas of Alaska.

Kerosene used for feedstock purposes.

Sale or use in certain areas of Alaska. Alaska: Tax on diesel fuel or kerosene

The excise tax is not imposed on the removal, entry, or sale of diesel fuel or kerosene in Alaska for ultimate sale or use in an exempt area of Alaska. The removal or entry of any diesel fuel or kerosene is not taxable if all the following requirements are satisfied.

The person otherwise liable for the tax (position holder, refiner, or enterer):

Is a registrant,

Can show satisfactory evidence of the nontaxable nature of the transaction, and

Has no reason to believe the evidence is false.

In the case of a removal from a terminal, the terminal is an approved terminal.

The owner of the fuel immediately after the removal or entry holds the fuel for its own use in a nontaxable use (discussed later) or is a qualified dealer.

A qualified dealer is any person that holds a qualified dealer license from the state of Alaska or has been registered by the IRS as a qualified retailer. Satisfactory evidence may include copies of qualified dealer licenses or exemption certificates obtained for state tax purposes.

Later sales.

The excise tax applies to diesel fuel or kerosene sold by a qualified dealer after the removal or entry. The tax is imposed at the time of the sale and the qualified dealer is liable for the tax. However, the sale is not taxable if all the following requirements are met.

The fuel is sold in an exempt area of Alaska.

The buyer buys the fuel for its own use in a nontaxable use or is a qualified dealer.

The seller can show satisfactory evidence of the nontaxable nature of the transaction and has no reason to believe the evidence is false.

Kerosene used for feedstock purposes.

The excise tax on kerosene is not imposed on the removal or entry of kerosene if all the following conditions are met.

The person otherwise liable for tax (pos