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Frequently Asked Questions

Frequently Asked Questions

 

What is the tax rate on motor fuel?

There are different levels of taxes that are charged on motor fuel. These include Federal, State, and Local taxes along with some other fees. At the Federal level, there are different rates depending on type of fuel in question. The current rates for the most commonly used motor fuels are as follows:

Fuel Type Rate (¢ per gallon)  
Gasoline 18.4  
Diesel and Kerosene 24.4  
Liquefied Petroleum Gas 18.3 These tax rates are based
on energy content relative
to gasoline
Liquefied Natural Gas 24.3
Compressed Natural Gas 18.4

Included in the Gasoline, Diesel/Kerosene, and Compressed Natural Gas rates is a 0.1 ¢ per gallon charge for the Leaking Underground Storage Tank Trust Fund.

Most states have similar types of taxing scales although some do have additional charges such as sales taxes, petroleum business taxes, environmental fees, and clean-up fees.

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What makes up the price of gasoline?

Although there are great changes in the price of fuel, the attached diagram, from November 2013, shows what made up the total cost of fuel. The tax portion of the price was over 32% in January 2000, but has dropped to the 13% range now.

Regular Gasoline (November 2013) - Retail Price: $3.24/gallon [Taxes(13%), Distribution/Marketing(11%), Refining(8%), Crudade Oil(69%)] Diesel Gasoline (November 2013) - Retail Price: $3.84/gallon [Taxes(13%), Distribution/Marketing(14%), Refining(15%), Crudade Oil(58%)]
Source: Energy Information Administration

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How is the fuel tax collected?

At the Federal level, the majority of the taxes are collected when product is removed from the bulk storage terminals. The companies pay the tax to the Internal Revenue Service (IRS). The states have different rules for the point of taxation as some tax the product “at the rack”, which is upon removal from the bulk terminal, while other states impose the tax at the distributor level, having a series of approved bulk distributors, who hold licenses and file regular (usually monthly) returns where the state and local taxes are paid.

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Where does the revenue from the fuel tax go?

The revenue from the collected Federal fuel taxes are deposited into the Highway Trust Fund, which has several accounts. Though the percentages vary depending on the fuel type, the majority (approximately 83 to 87%) is deposited into the Highway Account, to be used on road construction and maintenance. An additional amount (approximately 11 to 15%) goes to the Mass Transit Account, and for many fuels, 0.1 cents per gallon goes to the Leaking Underground Storage Tank Trust Fund. Some States have similar trust funds, but there are a number of ways the revenue is handled.

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Is anyone exempt from the fuel tax?

The IRS defines taxable events for motor fuel, which are specific to the types of fuel. For the majority of motor fuel used in the United States (gasoline and diesel) the only exemptions would be for licensed exporters who are delivering product out of the US, and for dyed diesel and dyed kerosene out of terminals approved by the IRS for such activity.

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How do I get a refund of the fuel tax?

Refunds are allowed for certain non-highway uses of fuel and use by certain non-profit agencies.  IRS publication 510, which describes the taxation of motor fuels on the Federal level, also includes complete instructions on how to apply for a refund of qualifying taxes paid on the purchase of motor fuels.

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What is a LUST fee?

The LUST fee is the Leaking Underground Storage Tank (LUST) Trust Fund. Congress created the Leaking Underground Storage Tank Trust Fund in 1986 by amending Subtitle I of the Resource Conservation and Recovery Act. The LUST Trust Fund has two purposes. First, it provides money for overseeing and enforcing corrective action taken by a responsible party, who is the owner or operator of the leaking UST. Second, the Trust Fund provides money for cleanups at UST sites where the owner or operator is unknown, unwilling, or unable to respond, or which require emergency action.

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Can I import fuel into or export fuel out of the United States?

All fuels imported into the US are subject to Federal, State, and Local fuel tax laws and regulations. Any amounts of fuel in storage containers larger than 119 gallons (450 liters) will be subject to further licensing and handling requirements as the driver and vehicle will be considered transporting hazardous materials.  More information can be found at the Pipeline and Hazardous Materials Safety Administration of the US DOT (http://www.phmsa.dot.gov).  Exports may qualify for refunds or may be made without the tax being paid at the terminal depending on the fuel type and the registration status of the exporter.  IRS Publication 510 has more details on exports (http://www.irs.gov/pub/irs-pdf/p510.pdf).

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How can I be sure I am getting the quantity and quality of fuel I should be getting?

At the federal level, the quality of fuel is regulated by the Environmental Protection Agency.  A number of states have active fuel sampling and testing programs where samples are taken and tested on a regular basis.  The quantity issues fall under the jurisdiction of weights and measures offices which are often found in state departments of agriculture.

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What is MAP-21?

The oversight program at the Federal level which directs the federal surface transportation funding is currently the Moving Ahead for Progress in the 21st Century (MAP-21) Act.  This current authorization will run through the Federal Fiscal Year 2014 and sets the rules for funding the Highway Trust Fund and the related distribution of funds back to the States.

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What is the difference between dyed diesel and clear diesel fuel?

Fuels that are designed for non-highway use (such as farm or construction equipment) have generally been allowed to contain a higher level of sulfur than fuel for on-highway vehicles.  The Environmental Protection Agency (EPA) in conjunction with the Internal Revenue Service (IRS) created rules in which the higher sulfur fuels, designed for off road use, would be dyed so that it could be identified for the high sulfur content, and also could be sold without fuel tax, since it was not to be used on highway.  The IRS and many state revenue and law enforcement agencies have comprehensive testing programs to check for the illegal use of the dyed fuel in highway vehicles.

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Are electronic forms available for reporting fuel taxes?

The Internal Revenue Service (IRS) has several different electronic forms available for paying the fuel taxes on motor fuel, and for some information reports connected with the storage and distribution of motor fuels.  IRS form 720 is used for the payment of taxes.  www.irs.gov has the form, and the complete instructions for filing the form and the associated information reports.  Likewise, many states have electronic filing programs in place to facilitate the reporting of fuel taxes.

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Where can I get more information on production and usage of motor fuels?

The Energy Information Administration Division of the United States Department of Energy has a website with a wealth of information regarding fuel production and usage (http://www.eia.doe.gov)

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