Fuel Tax Update

by McNees Wallace & Nurick LLC
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[author: Sharon R. Paxton]

Motor Fuel Tax Bulletin 2012-01 – Responsibility for Collection and Payment of Alternative Fuels Tax
The Department issued Bulletin 2012-01 to remind persons who are, or plan to be, engaged in the sale or use of alternative fuels (such as compressed natural gas) of Pennsylvania’s licensing, tax, and reporting responsibilities related to alternative fuels.

“Alternative fuels” include natural gas, compressed natural gas, liquefied natural gas, liquid propane gas and liquefied petroleum gas, alcohols, gasoline alcohol mixtures containing at least 85% alcohol by volume, hydrogen, hythane, electricity and any other fuel used to propel motor vehicles on the public highways other than gasoline or diesel. For purposes of determining the tax rate applicable to each alternative fuel, the alternative fuel is first converted to a gasoline gallon equivalent. Note: Biodiesel is not an alternative fuel; biodiesel is treated the same as petroleum-based diesel for tax purposes.

The point of taxation for alternative fuels is at the retail or end-user level. Since most alternative fuels have many uses other than as vehicle fuel, they do not qualify as an “alternative fuel” for tax purposes until they are placed into a vehicle. The statute defines an alternative fuel “dealer-user” as “any person who delivers or places alternative fuels into the fuel supply tank or other device of a vehicle for use on the public highways.” In the case of fuel sales by a retailer, where the fuel is placed into the vehicle at a retail pump, the retailer must report and pay the tax (which it collects from its customers). When a trucking company purchases alternative fuels in bulk and fuels its trucks from bulk storage tanks as needed, the trucking company must obtain an alternative fuels license and report and pay the applicable tax for the fuel placed into its vehicles.

Informational Notice Motor Fuel Taxes 2012-03 – Restrictions on Exemptions and Sales of Fuels and Liquid Fuels to or by Political Subdivisions in this Commonwealth

Notice 2012-03 was issued on September 14, 2012 to remind political subdivisions of their responsibilities in the proper purchase and use of tax-free fuels. The notice also advises all exempt entities to maintain records which accurately reflect the proper purchase and use of such fuels.

The notice states that the tax exemption for gasoline and diesel delivered to a political subdivision is limited to fuel purchased and used for official purposes. Political subdivisions may not disperse tax-free fuel for personal use or any other use that is not for official political subdivision purposes. Also, political subdivisions may not sell tax-free fuels.

In the case of an exempt entity that purchases tax-paid fuel from a distributor for qualifying uses, a request for refund of the tax paid may be filed with the Board of Finance and Revenue on an annual basis.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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