Skip to contentU.S. Department of Transportation/Federal Highway Administration

Fuel Tax Evasion

Printable Version [PDF, 21KB]
PDF files can be viewed with the Acrobat® Reader®

Federal Highway Administration
  Highway Information Seminar
  2011

Highway Use Tax Evasion

  • Fuel Taxes
  • Heavy Vehicle Use Tax
  • Truck Tax Tire Fee

 

 

Types of Evasion Schemes

  • Federal
    • Dyed diesel fuel use on highway
    • Cocktailing
    • Foreign Imports
    • Mislabeling of products
  • State
    • Daisy chain Bootlegging
    • IFTA Issues

 

Dyed diesel fuel use on highway

  • Federal (IRS) and State enforcement
    • On highway
    • Through internal audit
    • Dyed fuel use database
    • Sharing information with neighboring states
      • Regional meetings
      • Teleconferences
      • Regular reports

 

Cocktailing

  • Introduction of foreign matter into taxable product
    • May include:
      • Waste oil
      • Fuel not considered normally for road use (#4 Oil, #6 Oil)
      • Chemical products
      • Transmix
      • Hazardous materials

 

Foreign Imports

  • Understand foreign trade zones
  • Understand fuel removed from military storage
  • Lightered barges
  • Rail product

Mislabeling of Product

  • Mineral spirits
  • Jet Fuel/Avgas

 

Daisy Chain

  • Reduced opportunity at Federal level and States which impose tax at rack
  • Sales to several companies before final customer followed by disappearance of one or more companies in the chain
  • Still possible for state tax

 

Bootlegging

  • State tax issues
  • Product is moved across state lines without reporting;
    • Tax rate is lower in state of export
  • Or, product is not moved although it is reported as such
    • Tax rate is higher in state of export
  • Diversion registry

 

IFTA Issues

  • Vehicles over 26,000 lbs. report usage per jurisdiction (48 US States and 10 Canadian Provinces)
  • State rates are different
    • Fraudulent reporting of activity
    • Inaccurate reporting of activity
  • Internal Audits
  • Field Audit (3% of registrations per year)

 

Heavy Vehicle Fuel Tax (HVUT)

  • Tax collected by IRS
  • Proof of payment needed to receive registration
  • States certify compliance annually
  • Evasion may result from invalid proofs of payment
  • FHWA conducts HVUT compliance reviews once each 3 years

http://www.fhwa.dot.gov/policyinformation/vehicleusetax.cfm

 

Truck Tax

Tire Fee

Enforcement efforts

  • Studies
  • Research

 

  • Why do we care?
    • Federal taxes come back to states
    • State % should be accurate
    • Shortage of trust fund monies means funding is taken from other sources
  • What more can we do?
    • Analyze data; year-to-year, etc.
    • Encourage communication and cooperation between state transportation and revenue agencies

 

Contact Information

Michael Dougherty
Office of Highway Policy Information
(202) 366-9234

 

Questions?
Who?
What?
When?
Where?
Why