and Refunds 4. Alcohol Fuel Mixture Credit Biodiesel (Including Agri-biodiesel) Mixture Credit...12

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1 Department of the Publication 378 (Rev. April 2005) Cat. No F Contents What s New... 1 Introduction... 2 Treasury Fuel Tax Internal 1. Fuels... 2 Revenue Service 2. Definitions of Nontaxable Uses... 5 Credits 3. Filing Claims... 8 and Refunds 4. Alcohol Fuel Mixture Credit Biodiesel (Including Agri-biodiesel) Mixture Credit Alcohol Fuel Credit Biodiesel (Including Agri-biodiesel) Fuel Credit How To Get Tax Help...13 Appendix...15 Index...21 What s New Get forms and other information faster and easier by: Internet FAX (from your fax machine) The American Jobs Creation Act of 2004 (the Act), Public Law , made changes affecting fuel tax credits and refunds. The following is a brief review of some of these changes. The credits and refunds for the nontaxable use of gasohol and, generally, the use of gasoline taxed at the full rate to produce gasohol have been eliminated. Credit for Alcohol Fuel Mixtures and Biodiesel (Including Agri-biodiesel) Mixtures. The Act allows two new credits against any fuel tax liability reported on Form 720: The alcohol fuel mixture credit is 51 cents per gallon of ethanol (60 cents per gallon for alcohol other than ethanol). The biodiesel mixture credit is 50 cents per gallon of biodiesel ($1.00 per gallon of agri-biodiesel). Producers and importers must first take the alcohol fuel mixture credit and biodiesel mixture credit on Schedule C (Form 720) against any fuel tax liability. A payment is allowed for any excess credit and may be taken as a credit on Schedule C (Form 720), as a refund on Schedule 3 (Form 8849), or as an income tax credit on Forms 4136, 6478, or 8864 as applicable. Only one claim may be made for any particular amount of alcohol or biodiesel. Persons who blend alcohol with gasoline, diesel fuel, or kerosene 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. Persons who blend biodiesel with undyed diesel fuel to produce a biodiesel mixture

2 outside the bulk transfer terminal system The filled-in forms have been removed. For We respond to many letters by telephone. must pay the diesel fuel tax on the volume copies of any forms referenced in this publica- Therefore, it would be helpful if you would inof biodiesel in the mixture. See Form 720 tion, see How To Get Tax Help later. clude your daytime phone number, including the to report this tax. You also must be regis- area code, in your correspondence. tered with the IRS as a blender. See Form 637. Useful Items Producers and importers of straight alcohol Introduction You may want to see: or straight biodiesel must be registered This publication covers federal fuel tax credits with the IRS. See Form 637. Publication you may be able to claim on your income tax return. It also covers fuel tax refunds you may be 510 Excise Taxes for 2005 Aviation-grade kerosene is taxed and the able to claim during the year. tax on aviation fuel has been eliminated. The Form (and Instructions) This publication discusses the following subcredit and refund rates are the same. jects. Claims for Aviation-grade kerosene sold 637 Application for Registration (For for use on a farm or for use by state and local Certain Excise Tax Activities) The kinds of fuels that qualify for a credit governments can only be made by the regis- or refund. 720 Quarterly Federal Excise Tax tered ultimate vendor. Return The uses of fuels that qualify for a credit or Credits and refunds can be made to certain refund. 720X Amended Quarterly Federal Excise registered ultimate vendors if the ultimate Tax Return Who may claim a credit or refund. purchaser waives its right to a claim for 4136 Credit for Federal Tax Paid on credit or refund as follows. How to claim a credit or refund for fuel Fuels Aviation-grade kerosene sold for nontax- taxes. able uses (other than use on a farm or use by 6478 Credit for Alcohol Used as Fuel The alcohol fuel mixture credit. state and local governments) Claim for Refund of Excise Taxes Gasoline and aviation gasoline sold to The biodiesel mixture credit. state and local governments and nonprofit edu Biodiesel Fuels Credit The alcohol fuel credit. cational organizations. Undyed diesel fuel or undyed kerosene The biodiesel fuel credit. Notices sold for use by certain intercity and local buses. Refunds to gasoline wholesale distribu- Notice You can find Notice Comments and suggestions. We welcome tors have been eliminated for fuel sold after on page 289 of Internal Revenue your comments about this publication and your December 31, Schedule 4 (Form 8849) Bulletin at suggestions for future editions. will not be revised and cannot be used for fuel irs-irbs/irb05-02.pdf. sold after December 31, You can us at *taxforms@irs.gov. Notice You can find Notice Definition of off-highway vehicle. The Act Please put Publications Comment on the sub on page 757 of Internal Revenue provides that a vehicle with certain described ject line. Bulletin at features for off-highway transportation is not You can write to us at the following address: irs-irbs/irb05-12.pdf. treated as a highway vehicle. This provision applies to taxable periods after October 22, Internal Revenue Service Fuel used in mobile machinery in an TE/GE and Specialty Forms and Publicaoff-highway business use is limited to an annual tions Branch claim for taxable years beginning after October SE:W:CAR:MP:T:T 22, Constitution Ave. NW Additional nontaxable uses of liquefied pe- IR-6406 troleum gas have been added. Washington, DC Table 1 1. Type of Use Table Fuels No. Type of Use (See Chapter 2 for definition of terms) 1 On a farm for farming purposes Federal excise taxes are imposed on certain 2 Off-highway business use (for business use other than in a highway vehicle fuels. This chapter defines the fuels and lists the registered or required to be registered for highway use) (other than use in mobile nontaxable uses of each fuel. The nontaxable machinery) uses are defined in Chapter 2. 3 Export 4 In a boat engaged in commercial fishing Type of use table. The nontaxable uses listed 5 In certain intercity and local buses under each fuel are from Table 1 1. The first 6 For diesel fuel or kerosene in a qualified local bus column of the table is the number you enter on 7 In a bus transporting students and employees of schools (school buses) Form 4136, Form 8849, or Schedule C (Form 8 For diesel fuel and kerosene (other than aviation-grade kerosene) used other 720) for that type of use. For type of use 2, the than as a fuel in the propulsion engine of a train or diesel-powered highway mobile machinery parenthetical applies only to vehicle (but not off-highway business use) Form 8849 and Form In foreign trade 10 Certain helicopter and fixed-wing air ambulance uses 11 For aviation-grade kerosene used other than as a fuel in the propulsion engine of an aircraft Gasoline and Aviation 12 In a highway vehicle owned by the United States that is not used on a highway 13 Exclusive use by a nonprofit educational organization Gasoline 14 Exclusive use by a state, political subdivision of a state, or the District of Columbia Gasoline means all products commonly or com- 15 In an aircraft or vehicle owned by an aircraft museum mercially known or sold as gasoline with an 16 In military aircraft octane rating of 75 or more that are suitable for 17 For use in the production of special fuels use as a motor fuel. Gasoline includes any gasoline blend other than: Page 2 Chapter 1 Fuels

3 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 Publication 510, and any product commonly used as an additive in gasoline (other than alcohol). Aviation gasoline 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 Nontaxable Uses The following are the uses of gasoline for which a credit or refund may be allowable to an ulti- mate purchaser. On a farm for farming purposes (credit only). Off-highway business use. Export. Sales by Registered Ultimate Vendors This is a new category of registered ultimate vendor. This is an ultimate vendor that sells gasoline or aviation gasoline to any of the following. A state or local government for its exclusive use (including essential government use by an Indian tribal government). A nonprofit educational organization for its exclusive use. Transmix means a by-product of refined products created by the mixing of different spec- ification products during pipeline transportation. Kerosene means any of the following li- quids. The registered ultimate vendor may make the claim if the ultimate purchaser waives its right to the credit or refund by providing the registered ultimate vendor with a certificate. A sample certificate is included as Model Certificate D in the Appendix on page 18. The registered ultimate vendor must have the certificate at the time the credit or refund is claimed. The ultimate vendor must be registered by the IRS. See Publication 510 for a discussion of the registration requirements. Gasohol Blending The following are the uses of undyed diesel fuel and undyed kerosene for which a credit or refund may be allowable to an ultimate pur- chaser. Exclusive use by a state, political subdivision of a state, or the District of Columbia (see sales by registered ultimate vendors). In an aircraft or vehicle owned by an aircraft museum. The following are the uses of aviation gasoline for which a credit or refund may be allowable to an ultimate purchaser. On a farm for farming purposes (credit only). Export. In foreign trade. Certain helicopter and fixed-wing air ambulance uses. In commercial aviation (other than foreign trade). Exclusive use by a state, political subdivi- Undyed Diesel Fuel and Undyed Kerosene (Other Than Aviation-Grade Kerosene) F-76 (Fuel Naval Distillate) covered by military specification MIL-F An excluded liquid is either of the following. 1. A liquid that contains less than 4% normal paraffins. 2. A liquid with all the following properties. a. Distillation range of 125 degrees Fahr- enheit or less. b. Sulfur content of 10 ppm or less. c. Minimum color of +27 Saybolt. One of the two grades of kerosene (No. 1 K and No. 2 K) covered by ASTM specification D 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. In a boat engaged in commercial fishing. The credits and refunds for the nontax- In certain intercity and local buses.! able use of gasohol and, generally, the CAUTION use of gasoline taxed at the full rate to In a school bus. produce gasohol have been eliminated. The In a highway vehicle owned by the United new credits for alcohol fuel mixtures and bi- States that is not used on a highway. odiesel mixtures are discussed in Chapter 4, Alcohol Fuel Mixture Credit, and Chapter 5, Bi- Exclusive use by a nonprofit educational odiesel Mixture Credit. organization (see sales by registered ultimate vendors). 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. However, kerosene does not include an ex- cluded liquid, discussed above. Nontaxable Uses Off-highway business use. Export. In certain intercity and local buses. Exclusive use by a nonprofit educational organization (see sales by registered ulti- mate vendors). In a qualified local bus. In a school bus. Used other than as a fuel. Diesel fuel means: In a train (undyed diesel fuel only). Any liquid that without further processing In a highway vehicle owned by the United or blending, is suitable for use as a fuel in States that is not used on a highway. a diesel-powered highway vehicle or train, Exclusive use by a nonprofit educational Transmix, and organization. Diesel fuel blendstocks (when identified by In a vehicle owned by an aircraft museum. the IRS). A liquid is suitable for this use if the liquid has No credit or refund is allowable for any use of practical and commercial fitness for use in the dyed diesel fuel and dyed kerosene. You buy propulsion engine of a diesel-powered highway these fuels excise tax free. See Publication 510 vehicle or diesel-powered train. A liquid may for more information about dyed fuels. possess this practical and commercial fitness sion of a state, or the District of Columbia even though the specified use is not the predom- Sales by Registered Ultimate (see sales by registered ultimate vendors). inant use of the liquid. However, a liquid does Vendors In a aircraft owned by an aircraft museum. In military aircraft. 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-pow- ered train. Diesel fuel does not include gasoline, kerosene, excluded liquid, No. 5 and No. 6 fuel oils covered by ASTM specification D 396, or The following are the sales for which a credit or refund may be allowable to the registered ultimate vendor only. Undyed diesel fuel or undyed kerosene sold for use on a farm for farming pur- Chapter 1 Fuels Page 3

4 poses or for exclusive use by a state or (discussed in Publication 510), a registered ulti- Sales by Registered Ultimate local government, mate vendor, or a registered ultimate vendor Vendors (blocked pump). Undyed kerosene sold from a blocked pump (defined below), Undyed kerosene sold for blending, or Undyed diesel fuel or undyed kerosene used in certain intercity and local buses, only if the ultimate purchaser waives its right to the credit or refund by providing the registered ultimate vendor with a waiver. A credit or refund may be allowable to a registered ultimate vendor (blending) if the vendor sold undyed kerosene in an area described in an IRS declaration of extreme cold for the production of a cold weather blend. Cold weather blend. This is a blend of ker- osene and diesel fuel produced in an area de- scribed in an IRS declaration of extreme cold and sold for use or used for heating purposes. The registered ultimate vendor of aviation-grade kerosene may make a claim for a nontaxable use only if the ultimate purchaser waives its right to make a claim by providing the registered ultimate vendor with a waiver. A sample waiver is included as Model Waiver C in the Appendix on page 17. The ultimate vendor must have the waiver at the time the credit or payment is claimed. A nontaxable use for this purpose means any use that is exempt from the tax imposed under section 4041(c) (other than by reason of a prior imposition of tax) and any use in commer- cial aviation within the meaning of section 4083(b). Registered ultimate vendor (farming and state use). This is a person that sells undyed Registered ultimate vendor (certain intercity diesel fuel or undyed kerosene to any of the and local buses). This is a new category of following. registered ultimate vendor. This is an ultimate The owner, tenant, or operator of a farm vendor that sells undyed diesel fuel or undyed for use by that person on a farm for farm- kerosene to the ultimate purchaser for use in ing purposes. certain intercity and local buses. A person other than the owner, tenant, or The registered ultimate vendor may make operator of a farm for use by that person the claim if the ultimate purchaser waives its on a farm in connection with cultivating, right to the credit or refund by providing the raising, or harvesting. registered ultimate vendor with a waiver. A sample waiver is included as Model Waiver E in the A state or local government for its exclu- Appendix on page 19. The registered ultimate sive use (including essential government use by an Indian tribal government). vendor must have the waiver at the time the credit or payment is claimed. The ultimate vendor must be registered by the IRS. See Publication 510 for a discussion of the registration requirements. Registered ultimate vendor (blocked pump). This is an ultimate vendor that sells undyed kerosene from a blocked pump. A credit or refund may be allowable to a registered ultimate vendor (blocked pump) if the vendor sold to a buyer undyed kerosene from a blocked pump for use other than as a fuel in a diesel-powered highway vehicle and the vendor had no reason to believe the kerosene would not be used in that manner. Aviation-Grade Kerosene Aviation-grade kerosene replaces aviation fuel. Aviation-grade kerosene means 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). Nontaxable Uses Registered ultimate vendor (farming and state use). This is an ultimate vendor that sells aviation-grade kerosene to any of the fol- lowing. The owner, tenant, or operator of a farm for use by that person on a farm for farm- ing purposes. A person other than the owner, tenant, or operator of a farm for use by that person on a farm in connection with cultivating, raising, or harvesting. A state or local government for its exclusive use (including essential government use by an Indian tribal government). The claim for a credit or refund may be allowable to the registered ultimate vendor only. The ultimate vendor must be registered by the IRS. See Publication 510 for a discussion of the registra- tion requirements. Blocked pump. A blocked pump is a fuel Liquefied Petroleum pump that meets all the following requirements. The following are the uses of aviation-grade Gas 1. It is used to make retail sales of undyed kerosene for use by the buyer in any nontaxable use. 2. It is at a fixed location. Export. Liquefied petroleum gas (LPG) includes pro- pane, butane, and pentane, or mixtures of those gases. kerosene taxed at the full rate for which a credit or refund of the full rate may be allowable to an ultimate purchaser. 3. It is identified with a legible and conspicu- In foreign trade. Nontaxable Uses ous notice stating, UNDYED UNTAXED Certain helicopter and fixed-wing air am- KEROSENE, NONTAXABLE USE ONLY. bulance uses. The following are the uses of taxed LPG for 4. It meets either of the following conditions. which a credit or refund may be allowable to an Used other than as a fuel in the propulsion ultimate purchaser. a. It cannot reasonably be used to dis- engine of an aircraft. pense fuel directly into the fuel supply On a farm for farming purposes. Exclusive use by a nonprofit educational tank of a diesel-powered highway vehiorganization. Off-highway business use. cle or train. In a aircraft owned by an aircraft museum. In a boat engaged in commercial fishing. b. It is locked by the vendor after each sale and unlocked by the vendor only in In military aircraft. In certain intercity and local buses. response to a buyer s request for un- In a qualified local bus. dyed kerosene for use other than as a A credit or refund at a reduced rate may be fuel in a diesel-powered highway vehi- allowable to an ultimate purchaser of In a school bus. cle or train. aviation-grade kerosene taxed at the full rate Exclusive use by a nonprofit educational and used in commercial aviation (other than organization. The ultimate vendor (blocked pump) must be foreign trade). registered by the IRS. See Publication 510 for a Exclusive use by a state, political subdivi- discussion of the registration requirements. A credit or refund may be allowable to an sion of a state, or the District of Columbia. ultimate purchaser of aviation-grade kerosene In an aircraft or vehicle owned by an airtaxed at the commercial aviation rate and used Registered ultimate vendor (blending for craft museum. cold weather). This is a taxable fuel registrant in foreign trade. Page 4 Chapter 1 Fuels

5 determine who bore the cost of the fuel. For example, if the owner of a farm and the tenant equally share the cost of gasoline that is used on Off-Highway Business 2. a farm for farming purposes, each can claim a Use (No. 2) credit for the tax on one-half the fuel used. Off-highway business use means fuel used in a Custom application of fertilizer and pestitrade or business or in an income-producing Definitions cide. The use of fuel in the aerial or other activity other than as a fuel in a highway vehicle application of fertilizer, pesticides, or other subregistered or required to be registered for use on This chapter provides definitions of the terms stances is a use of fuel on a farm for farming public highways. The terms, highway vehicle, used in Table 1 1 for nontaxable uses. If appli- purposes. In the case of gasoline, you, as the public highway, and registered are defined cable, the type of use number from Table 1 1 is owner, tenant, or operator, may waive your right below. Do not consider any use in a boat as an indicated in each heading. to be treated as the ultimate purchaser. If you off-highway business use. waive your right, the applicator is treated as Off-highway business use includes fuels having used the gasoline on a farm for farming used in any of the following ways. purposes. See Chapter 14 of Pub. 225, In stationary machines such as genera- On a Farm for Farming Farmer s Tax Guide, for a sample waiver. tors, compressors, power saws, and simi- To waive your right to be treated as the lar equipment. Purposes (No. 1) ultimate purchaser, you must take all the following actions. For cleaning purposes. On a farm for farming purposes means fuel used in carrying on a trade or business of farming, on In forklift trucks, bulldozers, and Before the applicator files his or her claim, a farm in the United States, and for farming earthmovers. execute in writing an irrevocable agreepurposes. ment stating that you knowingly give up For transmix (diesel fuel), the refining of your right to the credit or refund. You may tax paid transmix into gasoline, diesel fuel, Farm. A farm includes livestock, dairy, fish, authorize an agent, such as a cooperative, or kerosene. poultry, fruit, fur-bearing animals, and truck farms, orchards, plantations, ranches, nur- to sign the waiver for you. Generally, this use does not include nonbusiseries, ranges, and feed yards for fattening cat- Identify clearly the period the waiver cov- ness use of fuel, such as use by minibikes, tle. It also includes structures such as ers. snowmobiles, power lawn mowers, chain saws, greenhouses used primarily for the raising of and other yard equipment. agricultural or horticultural commodities. A fish The applicator must retain a copy of the farm is an area where fish are grown or raised waiver and give you a copy. Do not send a copy Example. Caroline owns a landscaping not merely caught or harvested. to the Internal Revenue Service unless rechain saws in her business. The gasoline used business. She uses power lawn mowers and quested to do so. Farming purposes. As an owner, tenant, or in the power lawn mowers and chain saws qualioperator, you use fuel on a farm for farming The waiver may be a separate document or it fies as fuel used in an off-highway business use. purposes if you use it in any of the following may appear on an invoice or another document The gasoline used in her personal lawn mower ways. from the applicator. If the waiver appears on an at home does not qualify. invoice or other document, it must be printed in a 1. To cultivate the soil or to raise or harvest section clearly set off from all other material, and Highway vehicle. A highway vehicle is any any agricultural or horticultural commodity. it must be printed in type sufficiently large to put self-propelled vehicle designed to carry a load 2. To raise, shear, feed, care for, train, or you on notice that you are waiving your right to over public highways, whether or not it is also manage livestock, bees, poultry, fur-bear- the credit or refund. If the waiver appears as part designed to perform other functions. Examples ing animals, or wildlife. of an invoice or other document, it must be of vehicles designed to carry a load over public signed separately from any other item that re- highways are passenger automobiles, 3. To operate, manage, conserve, improve, quires your signature. motorcycles, buses, and highway-type trucks or maintain your farm and its tools and The effective period of the waiver cannot and truck tractors. A vehicle is a highway vehicle equipment. even though the vehicle s design allows it to extend beyond your tax year. When the period 4. To handle, dry, pack, grade, or store any perform a highway transportation function for covered by the waiver extends beyond the raw agricultural or horticultural commodity. only one of the following. applicator s tax year, the applicator can only For this use to qualify, you must have proclaim a credit or refund for fuel used in the part of A particular type of load, such as passen- duced more than half the commodity so the waiver period included in the applicator s tax gers, furnishings, and personal effects (as treated during the tax year. Commodity year. The applicator must wait until the next tax in a house, office, or utility trailer). means a single raw product. For example, apples and peaches are two separate year to file a claim for fuel used in the rest of the A special kind of cargo, goods, supplies, commodities. waiver period. or materials. 5. To plant, cultivate, care for, or cut trees or Fuel not used for farming. Fuel is not used Some off-highway task unrelated to highon a farm for farming purposes if it is used in any way transportation, except as discussed to prepare (other than sawing logs into lumber, chipping, or other milling) trees for of the following ways. next. market, but only if the planting, etc., is incidental to your farming operations. Your Off the farm, such as on the highway or in Vehicles not considered highway vehicles. tree operations will be incidental only if noncommercial aviation, even if the fuel is Generally, the following kinds of vehicles are not they are minor in nature when compared to used in transporting livestock, feed, crops, considered highway vehicles for purposes of the the total farming operations. or equipment. credit or refund of fuel taxes. If any other person, such as a neighbor or For personal use, such as mowing the 1. Specially designed mobile machinery custom operator, performs a service for you on lawn. for nontransportation functions. A your farm for any of the purposes listed in (1) or In processing, packaging, freezing, or can- self-propelled vehicle is not a highway ve- (2), you are considered to be the ultimate purning operations. hicle if all the following apply. chaser that used the fuel on a farm for farming purposes. However, see Custom application of In processing crude gum into gum spirits a. The chassis has permanently mounted fertilizer and pesticide, next. of turpentine or gum resin or in processing to it machinery or equipment used to If doubt exists whether the owner, the tenant, maple sap into maple syrup or maple perform certain operations (construcsugar. or the operator of the farm bought the fuel, tion, manufacturing, drilling, mining, tim- Chapter 2 Definitions Page 5

6 bering, processing, farming, or similar Example. The motor of a registered operations) if the operation of the ma- concrete-mixer truck operates both the engine chinery or equipment is unrelated to and the mixing unit by means of a power Buses transportation on or off the public highmixer is not off-highway business use. In Certain Intercity and Local take-off. The fuel used in the motor to run the ways. b. The chassis has been specially deness Use in separate motor. Off-highway busi- Buses (No. 5) use includes fuel used in a separate motor signed to serve only as a mobile carto operate special equipment, such as a refrigerriage and mount for the machinery or In certain intercity and local buses means fuel ation unit, pump, generator, or mixing unit. If you used in a bus engaged in furnishing (for com- equipment, whether or not the machinpensation) passenger land transportation availdraw fuel from the same tank that supplies fuel ery or equipment is in operation. to the propulsion motor, you must figure the able to the general public. The bus must be c. The chassis could not, because of its quantity used in the separate motor operating engaged in one of the following activities. special design and without substantial the special equipment. You may make a reason- Scheduled transportation along regular structural modification, be used as part able estimate based on your operating experi- routes. of a vehicle designed to carry any other ence and supported by your records. load. You can use devices that measure the miles Nonscheduled operations if the seating the vehicle has traveled (such as hubometers) capacity of the bus is at least 20 adults, d. The vehicle must have traveled less to figure the gallons of fuel used to propel the not including the driver. Vans and similar than 7,500 miles on public highways vehicle. Add to this amount the fuel consumed vehicles used for van-pooling or taxi serv- during the owner s taxable year. while idling or warming up the motor before ice do not qualify. 2. Vehicles specially designed for off-highyour propelling the vehicle. The difference between way transportation. A vehicle is not total fuel used and the fuel used to propel Available to the general public. This means treated as a highway vehicle if the vehicle is the vehicle is the fuel used in the separate mo- you offer service to more than a limited number specially designed for the primary function tor. of persons or organizations. If a bus operator of transporting a particular type of load other normally provides charter operations through than over the public highway and because Example. Hazel owns a refrigerated truck. It travel agencies but has buses available for charof this special design, the vehicles s capa- has a separate motor for the refrigeration unit. tering by the general public, this service is avail- bility to transport a load over a public hightruck s The same tank supplies both motors. Using the able to the general public. A bus does not qualify way is substantially limited or impaired. hubometer, Hazel figures that 90% of the when its operator uses it to provide exclusive To make this determination, you can take fuel was used to propel the truck. Therefore, services to only one person, group, or organizainto account the vehicle s size, whether the 10% of the fuel is used in an off-highway busi- tion. Also, intercity bus transportation does not vehicle is subject to licensing, safety, or ness use. include transporting students and employees of other requirements, and whether the vehi- Fuel lost or destroyed. You cannot treat fuel schools or intercity transportation in a qualified cle can transport a load at a sustained lost or destroyed through spillage, fire, or other local bus. speed of at least 25 miles per hour. It does casualty as fuel used in an off-highway business not matter that the vehicle can carry heavier use. For Diesel Fuel or Kerosene loads off highway than it is allowed to carry in a Qualified Local Bus over the highway. 3. Nontransportation trailers and semitrailers. A trailer or semi-trailer is not treated as a highway vehicle if it is specially designed to function only as an enclosed stationary shelter for carrying on a nontransportation function at an off-high- way site. For example, a trailer that is ca- pable only of functioning as an office for an off-highway construction operation is not a Export (No. 3) Export means fuel removed from the United States with the intention that the fuel remain in a foreign country or possession of the United States. Fuel is not exported if it is in the fuel supply tank of a vehicle or aircraft. (No. 6) In a qualified local bus means fuel used in a bus meeting all the following requirements. It is engaged in furnishing (for compensation) intracity passenger land transportation available to the general public. It operates along scheduled, regular routes. highway vehicle. It has a seating capacity of at least 20 adults (excluding the driver). In a Boat Engaged in Public highway. A public highway includes It is under contract with (or is receiving any road in the United States that is not a private Commercial Fishing more than a nominal subsidy from) any roadway. This includes federal, state, county, and city roads and streets. (No. 4) transportation. state or local government to furnish the Registered. A vehicle is considered regis- In a boat engaged in commercial fishing means Intracity passenger land transportation. tered when it is registered or required to be fuel used in taking, catching, processing, or This is the land transportation of passengers registered for highway use under the law of any transporting fish, shellfish, or other aquatic life between points located within the same metrostate, the District of Columbia, or any foreign for commercial purposes, such as selling or politan area. It includes transportation along country in which it is operated or situated. Any processing the catch, on a specific trip basis. routes that cross state, city, or county boundahighway vehicle operated under a dealer s tag, They include boats used in both fresh and salt ries if the routes remain within the metropolitan license, or permit is considered registered. A water fishing. They do not include boats used for area. highway vehicle is not considered registered both sport fishing and commercial fishing on the solely because a special permit allows the vehi- same trip. Under contract. A bus is under contract with a cle to be operated at particular times and under state or local government only if the contract specified conditions. imposes a bona fide obligation on the bus operator to furnish the transportation. Dual use of propulsion motor. Off-highway business use does not include any fuel used in More than a nominal subsidy. A subsidy is the propulsion motor of a registered highway more than nominal if it is reasonably expected to vehicle even though that motor also operates exceed an amount equal to 3 cents multiplied by special equipment by means of a power take-off the number of gallons of fuel used in buses on or power transfer. It does not matter if the spe- subsidized routes. A company that operates its cial equipment is mounted on the vehicle. buses along subsidized and unsubsidized in- Page 6 Chapter 2 Definitions

7 tracity routes may consider its buses qualified velopment or removal of, hard minerals, empt from income tax under section 501(a) of local buses only when the buses are used on the oil, or gas. the Internal Revenue Code that meets both of subsidized intracity routes. the following requirements. 2. Planting, cultivating, cutting, transporting, or caring for trees (including logging opera- It has a regular faculty and curriculum. In a School Bus (No. 7) tions). It has a regularly enrolled body of students In a school bus means fuel used in a bus engaged in the transportation of students or employees of schools. A school is an educational organization with a regular faculty and curricu- lum and a regularly enrolled body of students who attend the place where the educational ac- tivities occur. 3. Providing emergency medical services. During a use described in items (1) and (2), the helicopter must not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to section or 44913(b) or subchapter I of chapter the above requirements. 471 of title 49, United States Code. For item (1), treat each flight segment as a separate flight. who attend the place where the instruction normally occurs. A nonprofit educational organization also in- cludes a school operated by a church or other organization described in section 501(c)(3) of the Internal Revenue Code if the school meets For Diesel Fuel and Fixed-wing air ambulance uses. Fixed-wing Exclusive Use by a Kerosene (Other Than air ambulance uses means fuel used by a fixed-wing aircraft providing emergency medical State, Political Aviation-Grade services. The aircraft must be equipped for and exclusively dedicated on that flight to acute care Subdivision of a State, Kerosene) Used Other emergency medical services. or the District of Than as a Fuel (No. 8) Columbia (No. 14) Diesel fuel and kerosene (other than aviation For Aviation-Grade Exclusive use by a state, political subdivision of grade kerosene) used other than as a fuel in the a state, or the District of Columbia means fuel propulsion engine of a diesel-powered highway Kerosene Used Other purchased by the state or local government for vehicle or diesel-powered train (not including its exclusive use. A state or local government is off-highway business use), means undyed die- Than as a Fuel in the any state, any political subdivision thereof, or sel fuel and undyed kerosene used in the followthe District of Columbia. An Indian tribal goving ways: Propulsion Engine of ernment is treated as a state only if the fuel is used in an activity that involves the exercise of For home heating, lighting, and cooking. an Aircraft (No. 11) an essential tribal government function. Gaso- In boats. For any of the following nonbusiness uses. 1. In stationary machines, such as generators and compressors. Aviation-grade kerosene used other than as a fuel in the propulsion engine of an aircraft means aviation-grade kerosene used in the following ways. In stationary machines, such as generators and compressors. line, diesel fuel, and kerosene used by the American Red Cross is considered to be the use of these fuels by a state. In foreign trade means fuel used in civil aircraft employed in foreign trade or trade between the Owned by the United 2. For cleaning purposes. In an Aircraft or 3. In minibikes and snowmobiles. For cleaning purposes. Vehicle Owned by an In vehicles. Aircraft Museum In Foreign Trade (No. 15) (No. 9) In a Highway Vehicle In an aircraft or vehicle owned by an aircraft museum means fuel used in an aircraft or vehicle that is owned by an organization that meets all the following requirements. United States and any of its possessions. In the States That is Not Used 1. It is exempt from income tax as an organicase of aircraft registered in a foreign country, the country must allow reciprocal benefits for on a Highway (No. 12) Code. aircraft registered in the United States. In a highway vehicle owned by the United States that is not used on a highway means fuel used in a vehicle was not used on public highways during the period covered by the claim. This use applies whether or not the vehicle is registered or required to be registered for highway use. zation described in section 501(c)(3) of the 2. It is operated as a museum under a state (or District of Columbia) charter. Certain Helicopter and Fixed-Wing Air Ambulance Uses (No. 10) Exclusive Use by a clusively for the purposes described in item (3). Certain helicopter uses. Certain helicopter Nonprofit Educational uses means fuel used by a helicopter for any of the following purposes. Organization (No. 13) 3. It is operated exclusively for acquiring, ex- hibiting, and caring for aircraft of the type used for combat or transport in World War II. The aircraft or vehicle (such as a ground servicing vehicle for aircraft) must be used ex- 1. Transporting individuals, equipment, or supplies in the exploration for, or the de- Exclusive use by a nonprofit educational organization means fuel used by an organization ex- Chapter 2 Definitions Page 7

8 In Military Aircraft (No. 16) In a military aircraft means fuel used in an aircraft owned by the United States or any foreign nation and constituting a part of its armed forces. and when to include the credit or refund in your income. General Information c. The ultimate purchaser of undyed die- Generally, you will provide all the information needed to claim a credit or refund when you properly complete Form 8849, Form 4136, or Form 720 (Schedule C). In some cases, you will have to attach additional information. You need to keep records that support your claim for a credit or refund. b. The ultimate purchaser of aviation-grade kerosene used for a nontaxable use may waive its right to make a claim by providing a waiver that is signed under penalties of perjury by a person authorized to bind the ultimate purchaser and is in the same format as the Model Waiver C on page 17. A new waiver is required each year or when any information in the current waiver expires. For Use in the Production of Special sel fuel or undyed kerosene used in Fuels (No. 17) Keep at your principal place of business all records needed to enable the viding a waiver that is signed under For use in the production of special fuels means used to produce any liquid fuel (including LPG or liquefied natural gas) that is not gas oil, fuel oil, or a product taxable under section RECORDS IRS to verify that you are the person entitled to claim a credit or refund and the amount you claimed. In Commercial Aviation Registered ultimate vendor. Registered ulti- mate vendors may make claims for certain sales (Other Than Foreign of fuels on Form 4136, Form 8849 (Schedule 1), The number of gallons purchased and and Form 720 (Schedule C) if reporting excise Trade) Ultimate purchaser. Ultimate purchasers may make claims for the nontaxable use of fuels on Form 4136, Form 8849 (Schedule 1), and Form 720 (Schedule C) if reporting excise tax liability on that return. If you are an ultimate purchaser, you must keep the following records. certain intercity and local buses may waive its right to make a claim by pro- penalties of perjury by a person authorized to bind the ultimate purchaser and is in the same format as the Model Waiver E on page 19. A new waiver is required each year or when any information in the current waiver expires. used during the period covered by your tax liability on that return. If you are a registered claim. In commercial aviation (other than foreign trade) ultimate vendor, you must keep certain informameans fuel used in an aircraft in the business of The dates of the purchases. tion pertaining to the sale of the fuel. transporting persons or property by air for com- To make a claim, you must have sold the fuel The names and addresses of suppliers pensation or hire. However, commercial aviation at a tax-excluded price, repaid the tax to the and amounts purchased from each in the does not include any of the following. buyer, or obtained the buyer s written consent to period covered by your claim. the allowance of the claim. You are required to Any use of an aircraft that has a maximum The nontaxable use for which you used have a valid certificate or waiver in your possescertificated takeoff weight of 6,000 pounds the fuel. sion in order to make the claim. or less unless the aircraft is operated on In addition, you must have a registration The number of gallons used for each nontaxable use. an established line. number that has not been revoked or sus- Any use exclusively for the purpose of pended. You can get a registration number from skydiving. It is important that your records show separately the IRS by completing Form 637, Application for the number of gallons used for each nontaxable Registration (For Certain Excise Tax Activities), Any use of an aircraft owned or leased by use that qualifies as a claim. If the fuel is ex- and providing the information requested in its a member of an affiliated group and un- ported, you must have proof of exportation. instructions. available for hire by nonmembers of the group. The determination of whether an For more information about keeping records, Farming and state use. To make a claim aircraft is available for hire by nonmem- see Publication 583, Starting a Business and as an ultimate vendor (farming or state), you bers is made on a flight-by-flight basis. Keeping Records, or Publication 552, Record- must have a UV registration number. If you sell keeping for Individuals. undyed diesel fuel, undyed kerosene, or Exceptions. aviation-grade kerosene for use on a farm for farming purposes or for use by a state or local 1. The ultimate purchaser may not claim a government, you must keep the following infor- Use in a Train credit or refund for undyed diesel fuel, undyed mation. kerosene, or aviation-grade kerosene The name and taxpayer identification Use in a train means fuel used in the propulsion engine of equipment or machinery that rides on sold for the exclusive use of a state or number of each person (farmer, custom rails. This includes use in a locomotive, work local government; or for use on a farm for harvester, or government unit) that bought train, switching engine, and track maintenance farming purposes or the fuel. machine. 2. The ultimate purchaser may not claim a The number of gallons sold to each percredit or refund if it has waived its right to a son. claim for credit or refund as follows. An unexpired certificate from the buyer. a. The ultimate purchaser of gasoline or See Model Certificate B on page 16. The aviation gasoline used by a state or lo- certificate expires on the earlier of one 3. cal government for its exclusive use or year after the date of the certificate or the a by nonprofit educational organization date a new certificate is given to the regisfor its exclusive may waive its right to tered ultimate vendor. Filing Claims make a claim by providing a certificate that is signed under penalties of perjury Nonprofit educational organization and by a person authorized to bind the ultivendor state use. To make a claim as an ultimate mate purchaser and is in the same forstate), (nonprofit educational organization or This chapter tells you how and when to make a mat as the Model Certificate D on page you must have a UV registration number. claim for a credit or refund of excise taxes on 18. A new certificate is required each If you sell gasoline or aviation gasoline to a fuels. This chapter also covers recordkeeping year or when any information in the cursive nonprofit educational organization for its exclu- requirements, interest and penalty provisions, rent certificate expires. use or to a state or local government for its Page 8 Chapter 3 Filing Claims

9 exclusive use, you must keep the following infor- quarter (for which no other claim has been filed) The date of each sale. mation. during the tax year. The name and address of the buyer. If you cannot claim at least $750 at the end of The name and taxpayer identification a quarter, you carry the amount over to the next number of each person (nonprofit educaquarter of your tax year to determine if you can The number of gallons sold to the buyer. tional organization or government unit) A copy of the waiver signed by the buyer claim at least $750. If you cannot claim at least that bought the fuel. at the time the credit or payment is $750 at the end of your tax year, you must claim The number of gallons sold to each per- claimed. See Model Waiver C on page 17. a credit on your income tax return using son. Form An unexpired certificate from the buyer. Taxpayer identification number. To file a Use in mobile machinery. An ultimate pur- See Model Certificate D on page 18. The claim, you must have a taxpayer identification chaser may only make an annual claim for certificate expires on the earlier of one number. Your taxpayer identification number off-highway business use in mobile machinery. year after the date of the certificate or the can be any of the following. date a new certificate is given to the regis- How to file. File the claim for refund by filling tered ultimate vendor. Employer identification number (EIN). out Schedule 1 (Form 8849) and attaching it to Social security number (SSN). Form Send it to the address shown in the Blocked pump. To make a claim as an ulti- instructions. Only one claim may be filed for a mate vendor (blocked pump), you must have a Individual taxpayer identification number quarter. UP registration number. If you sell undyed kernot have and are not eligible to get an Example. You purchased gasoline and un- (ITIN), if you are an alien individual and do osene (other than aviation-grade kerosene) from a pump that qualifies as a blocked pump SSN. dyed diesel fuel. For the first quarter of your tax because it is locked by you after each sale and is year, the excise tax on fuel you use for an unlocked by you at the request of the buyer, you If you normally file only a U.S. individual in- off-highway business use is $184 for gasoline must keep the following information for each come tax return (such as Form 1040 or and $244 for diesel fuel. You cannot file a claim sale of more than 5 gallons. 1040NR), use your SSN or ITIN. You get an for refund since the total ($428) is less than SSN by filing Form SS-5, Application for a Social $750. The date of each sale. Security Card, with the Social Security Adminisyou For the second quarter, the excise tax on fuel The name and address of the buyer. tration. To get an ITIN, file Form W-7, Application use for an off-highway business use is $92 for IRS Individual Taxpayer Identification for gasoline and $244 for diesel fuel. You add The number of gallons sold to that buyer. Number, with the IRS. the amount from the first quarter ($428) to the If you operate a business, use your EIN. If total amount from the second quarter ($336) and Blending for extreme cold. To make a you do not have an EIN, you may apply for one determine you can file a claim for refund since claim, you must be a taxable fuel registrant, a the total is $764. registered ultimate vendor, or a registered ultibusinesses/small/ and click on the Employer ID online. Go to the IRS website at mate vendor (blocked pump). If you sell undyed When to file. You must file a quarterly claim kerosene (other than aviation-grade kerosene) Numbers (EINs) link. You may also apply for an by the last day of the first quarter following the for blending with diesel fuel in an area under a EIN by telephone by calling , or last quarter included in the claim. If you do not declaration of extreme cold and the blend will be you can fax or mail Form SS-4, Application for file a timely refund claim for any quarter of your sold for use or used for heating purposes, you Employer Identification Number, to the IRS. tax year, you will have to claim a credit for that must keep the following information. amount on your income tax return, as discussed The number of gallons sold to each perearlier. son. Generally, an annual claim must be made Claiming a Refund on Form 4136 (as discussed under Claiming a An unexpired certificate from the buyer for Credit on Form 4136 later). However, the followeach purchase of kerosene. See Model Generally, you may claim a refund on Form ing must use Schedule 1 (Form 8849) to file an Certificate A on page Complete and attach to Form 8849 the annual claim. appropriate Form 8849 schedules. However, if Certain intercity and local bus use. To The United States. you file Form 720, you can use the Schedule C make a claim as an ultimate vendor of undyed portion of Form 720 for your refund claims for A state, political subdivision of a state, and diesel fuel or undyed kerosene used in certain the quarter. See the Form 720 instructions. Do the District of Columbia. intercity and local buses, you must have a UB not claim a refund on Form 8849 for any amount registration. Current UV registrants will be able An organization exempt from income tax for which you have filed or will file a claim on to file registered ultimate vendor claims for ununder section 501(a) of the Internal Reve- Schedule C (Form 720) or Form dyed diesel fuel or undyed kerosene used in nue Code that is not required to file an Alcohol fuel mixture credits and biodiesel certain intercity or local buses until June 30, income tax return You must keep the following information: mixture credits must be taken on Schedule C (Form 720) against your taxable fuel liability. To The date of each sale. the extent the alcohol fuel mixture credit and Registered Ultimate Vendors The name and address of the buyer. biodiesel mixture credit exceed taxable fuel lia- If you are a registered ultimate vendor, you can bility, a payment is allowed and may be taken as The number of gallons sold to the buyer. make a claim for refund of the excise tax on fuel a credit on Schedule C (Form 720), as a refund that you sold for certain uses. Complete Form A copy of the waiver signed by the buyer on Schedule 3 (Form 8849), or as an income tax 8849 and Schedule 2 (including line 6 or line 7, if at the time the credit or payment is credit on Forms 4136, 6478, or 8864 as applica- applicable) to make the claim. See Chapter 1. claimed. See Model Waiver E on page 19. ble. Only one claim may be made for any partic- Fuels. ular amount of alcohol or biodiesel. Aviation-grade kerosene. To make a claim Undyed diesel fuel. You must meet the folas an ultimate vendor of aviation-grade ker- Ultimate Purchasers lowing requirements for this claim. osene for a nontaxable use or use in commercial If you are an ultimate purchaser, you may claim The claim must be for undyed diesel fuel aviation (other than foreign trade), you must a refund for the excise tax on fuels you purchase sold for use on a farm for farming pur- have a UA registration number. See and use for a nontaxable use. You may file a poses or by a state or local government Aviation-grade kerosene on page 4 for a list of claim for refund for any quarter of your tax year (including essential government use by an nontaxable uses. Current UV registrants will be for which you can claim at least $750. This Indian tribal government). able to file registered ultimate vendor claims for aviation-grade kerosene until June 30, amount is the excise tax on all fuels used for a The claim must be for sales during a penontaxable You must keep the following information: use during that quarter or any prior riod of at least 1 week. Chapter 3 Filing Claims Page 9