Tax and Revenue Administration (TRA) Fuel Tax Act Information Circular FT-1R1 Overview of Fuel Tax Last updated: February 9, 2017 NOTE: This information circular is intended to explain legislation and provide specific information. Every effort has been made to ensure the contents are accurate. However, if a discrepancy should occur in interpretation between this information circular and governing legislation, the legislation takes precedence. The Government of Alberta recognizes that many First Nations people and communities in the province prefer not to describe themselves as Indians/Indian bands. These terms have been used where necessary to reflect their legal meaning in the federal Indian Act. Index Framework of the Fuel Tax Act and Regulations Definition of Fuel Definition of Recipients Definition of Direct Remitter Full Direct Remitter Activity-Based Direct Remitter Definition of Exempt-Sale Vendor Definition of Fuel Seller Alberta Indian Tax Exempt (AITE) Retailer LPG Retailer Registration Under the Act When Fuel is Taxed When Fuel is Not Taxed Import and Export of Fuel Tax-Exempt Fuel (Clear or Marked) Marked Fuel in Alberta Refund of Tax Rebate of Tax Email: TRA.Revenue@gov.ab.ca Website: tra.alberta.ca Phone: 780-427-3044 Fax: 780-427-0348 TAX AND REVENUE ADMINISTRATION 9811-109 STREET, EDMONTON AB T5K 2L5 Note: for toll-free service in Alberta, call 310-0000, then enter the number.
- 2 - Framework of the Fuel Tax Act and Regulations 1. Alberta Treasury Board and Finance, Tax and Revenue Administration (TRA) administers Alberta s Fuel Tax Act (Act), which legislates a multi-stage direct tax. Each entity in the fuel distribution chain becomes a fuel taxpayer and recovers the tax paid from the next person in the distribution chain, with the end user (consumer) ultimately paying the fuel tax. 2. The first person in the distribution chain, the direct remitter, usually makes the payment of fuel tax to TRA. The sale or removal of fuel from a refinery or registered terminal or the importation of fuel is generally the first trigger for the payment of fuel tax. This ensures fuel tax is paid at the highest level for administrative efficiency. The role of the direct remitter is explained below. Definition of Fuel 3. Under the Act, fuel is any combustible gas or liquid used to generate power in an internal combustion or turbine engine. Where the fuel contains additives, these are also subject to tax. The most common fuels used in Alberta to generate power in internal combustion and turbine engines are gasoline, diesel fuel, liquefied petroleum gas (LPG) and aviation fuel. Ethanol and biodiesel are also taxable fuels. Locomotive fuel is taxed on use in Alberta. 4. Other fuels may, in specific circumstances, be used to generate motive power in an internal combustion or turbine engine. These fuels are commonly called bunker fuel, kerosene, methanol or condensate. Special rules on the taxability, reporting, and payment of tax on these fuels are provided below. 5. Definitions of Specific Fuels Aviation fuel is a fuel that has been refined or produced specifically for use in aircraft. Liquefied petroleum gas (LPG) is a fuel that is composed predominantly of propane, propylene, butane (normal or isobutene) or butylene or any mixture of the substances. Locomotive fuel is a fuel used to operate a railway locomotive or to provide heat or light to railway cars attached to a railway locomotive. Biodiesel fuel is a fuel comprised of mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats and meets the requirements of ASTM International Standard ASTM D 6751, Standard Specification for Biodiesel Fuel Blend Stock (B100) for Middle Distillate Fuels. Bunker fuel is crude oil distillate having a viscosity of greater than 5.5cST at 40 C.
- 3 - Ethanol is a fuel derived from renewable or non-renewable sources and meets the requirements of either ASTM International Standard ASTM D 4806, Standard Specification for Denatured Fuel Ethanol for Blending with Gasolines for use as Automotive Spark-ignition Engine Fuel, or National Standard of Canada CAN/CGSB-3.511-2005, Oxygenated Unleaded Automotive Gasoline Containing Ethanol. Kerosene is a light petroleum distillate that meets the requirements of National Standard of Canada CAN/CGSB-3.399, Kerosene. Definition of Recipients 6. The Act defines recipients as any persons who: purchase fuel, import fuel into Alberta, sell or remove their own fuel from a refinery or registered terminal, distribute liquefied petroleum gas (LPG), rebrand fuel, or pay tax based on the use of the fuel, including railways and International Fuel Tax Agreement (IFTA) carriers. Definition of Direct Remitters 7. Direct remitters are those recipients who pay tax directly to the Crown. All other recipients pay tax to the person from whom they purchase the fuel. 8. Direct remitters are recipients who: sell fuel or remove their own fuel in Alberta from a refinery or registered terminal; import fuel into Alberta for resale; purchase fuel outside Alberta where the fuel is brought into Alberta and put into the fuel system of an internal combustion engine without first being sold or resold in Alberta; rebrand fuel to a different tax rate in Alberta;
- 4 - use locomotive fuel in Alberta; are distributors of LPG selling or delivering LPG in Alberta into a dispensing system, other than a bulk storage tank, used to dispense LPG for use as motive fuel; or use bunker fuel, kerosene, methanol or condensate to generate motive power using an internal combustion or turbine engine. 9. There are two types of direct remitter: Full Direct Remitter Recipients are full direct remitters for all purposes if they: operate a refinery in Alberta except a refinery that produces only biodiesel, ethanol, bunker fuel, kerosene, methanol or condensate; or manufacture, refine, acquire in Alberta or import into Alberta at least 500 million litres of clear fuel annually. Full direct remitters may purchase fuel from another full direct remitter without paying the tax. Activity-based Direct Remitter A recipient is an activity-based direct remitter if the person carries out an activity described in paragraph 8 above, but does not qualify as a full direct remitter. This includes end consumers who use bunker fuel, kerosene, methanol or condensate to generate motive power using an internal combustion or turbine engine. These consumers must register and submit tax based on use of these products. See Information Circular FT-11, Direct Remitter, for more information. Definition of Exempt-Sale Vendor 10. An exempt-sale vendor is a person who sells tax-exempt fuel (clear or marked) to a consumer and must register with TRA. An exempt-sale vendor may also be a direct remitter, fuel seller, LPG retailer, or a person registered with TRA to provide the Alberta Indian Tax Exemption. Registration criteria vary, depending on the specific program and type of exempt-sale vendor. See Information Circular FT-13, Exempt-sale Vendors, for more information.
- 5 - Definition of Fuel Seller 11. The term fuel seller, while not defined in the Fuel Tax Act (FTA) or Regulation is a term used in administering the Act by TRA. A fuel seller is a person who conducts one or more of the following activities: sells tax-exempt fuel (clear or marked), sells aviation fuel rebrands fuel exports fuel from Alberta in bulk, sells fuel to persons other than consumers, or sells bunker fuel, kerosene, methanol or condensate in bulk. 12. Fuel sellers may sell fuel in bulk to other sellers or to consumers. Fuel sellers who own the fuel, other than the fuel sellers selling only clear taxable fuel to consumers, are required to register with TRA. See Information Circular FT-12, Fuel Sellers, for more information. Alberta Indian Tax Exempt (AITE) Retailer 13. A retailer must be registered with TRA to sell fuel exempt of Alberta tax to eligible Indian consumers. Retailers can be registered under the AITE program only if located on an Indian reserve in Alberta, or if the retailer is a direct remitter or fuel seller and delivers the fuel to an Indian reserve in Alberta. 14. Each retail location must be registered separately. See the AITE series of Information Circulars for more information. LPG Retailer 15. Retailers who have one or more storage tanks that are the source of LPG for both a vehicle dispensing system and a cylinder dispensing system may apply directly to TRA for a refund of the tax paid on the LPG that is not dispensed through the vehicle dispensing system. 16. LPG retailers who own the fuel are required to register with TRA for each location. See the Propane series of Information Circulars for more information.
- 6 - Registration Under the Act 17. The Act requires a person to register with TRA when the person: produces or refines fuel; operates a registered terminal or acts as a position holder within a registered terminal operated by another person; sells fuel for the purpose of resale; sells aviation fuel; sells tax-exempt fuel; marks fuel; rebrands fuel; sells or removes its own fuel from a refinery or registered terminal; imports fuel into Alberta for the purpose of resale; exports fuel from Alberta in bulk; sells fuel dye for use in Alberta; uses locomotive fuel in Alberta; or sells in bulk: bunker fuel, kerosene, methanol or condensate. 18. Registration ensures that TRA knows the participants in Alberta's fuel distribution chain. Retailers who sell only clear taxable fuel to consumers do not have to register unless they sell aviation fuel. When is Fuel Taxed 19. Recipients pay fuel tax on all gasoline, diesel, biodiesel, ethanol and aviation fuel, when the fuel is: sold or removed from a refinery or registered terminal; purchased; imported into Alberta; or
- 7 - rebranded from a non-taxable fuel to a taxable fuel, or fuel is taxable at a higher rate, and when the fuel is bunker fuel, kerosene, methanol or condensate and used by a consumer to generate motive power in an internal combustion or turbine engine. 20. The current rates of fuel tax are available online. 21. The process for paying tax on LPG is described in the Propane series of Information Circulars. 22. Locomotive fuel is taxed based on the consumption in Alberta and not at the time it is sold to the railway. Further details are available in Information Circular RWY- 1, Railways. 23. An interjurisdictional carrier pays tax on gasoline or diesel purchased in Alberta and on fuel consumed in Alberta if the fuel was purchased outside Alberta. Tax is adjusted under the International Fuel Tax Agreement. For more information see the IFTA series Information Circulars. When is Fuel not Taxed 24. No fuel tax is payable at the time fuel is: sold from a full direct remitter to another full direct remitter; imported to a refinery or registered terminal; exported in bulk and change of ownership takes place outside Alberta; sold to authorized purchasers of marked fuel; sold to exempt purchasers of clear fuel; sold as locomotive fuel to a railway; or bunker fuel, kerosene, methanol or condensate are sold. However, the fuel may become taxable at a later time.
- 8 - Import and Export of Fuel 25. Fuel imported into Alberta for resale and not placed into a terminal or registered refinery is taxed at the time of importation. Where fuel is imported into Alberta and placed in the fuel system of an internal combustion engine without having been sold or resold in Alberta, the fuel is subject to tax when it is placed into the fuel system. 26. Fuel exported from Alberta by those who are not full direct remitters will be taxed in Alberta when it leaves a refinery or registered terminal. When the fuel is subsequently exported and used outside Alberta, the fuel tax paid will be refunded on application to TRA. Tax-Exempt Fuel (Clear or Marked) 27. Prior to March 27, 2015, marked fuel was fully exempt from tax. The term taxexempt fuel was introduced effective March 27, 2015 to refer to fuel that is purchased either fully or partially exempt from tax, depending on the circumstances. A consumer is fully exempt from paying tax on clear fuel or is entitled to a partial exemption of $0.09 per litre on marked fuel, if: the consumer provides, at the time of purchase, a fuel tax exemption certificate or other prescribed evidence of the consumer's exemption, and the fuel is intended for a prescribed purpose or use. Tax-exempt fuel must be marked if required by the regulations. 28. Consumers who wish to purchase tax-exempt fuel must apply to TRA for a certificate to be eligible to purchase fuel exempt or partially exempt from tax. Farmers who wish to purchase tax-exempt fuel must apply to Alberta Agriculture and Rural Development for a certificate to purchase marked fuel partially exempt from tax. Refer to Information Circular FT-3, Fuel Tax Exemption Certificates, for information on eligibility and application for the certificate. Marked Fuel in Alberta 29. Only persons registered with TRA as exempt-sale vendors can sell tax-exempt fuel to consumers. Refer to Information Circular FT-5, Marking Fuel, for more information about when fuel must be marked. 30. Gasoline and diesel are marked in Alberta to signify that the fuel is partially exempt from tax. It is an offence to be in possession of marked fuel if you are not registered with TRA, an eligible consumer, or if the fuel is not used in a manner permitted by the Act.
- 9-31. The only persons allowed to mark fuel are those that are registered by TRA to mark fuel in Alberta. Those authorized to mark fuel must use dye purchased from approved dye manufacturers and mark the fuel in accordance with TRA s specifications. Refund of Tax 32. TRA may, on application by a recipient other than a consumer, provide a refund, credit or allowance for all or a portion of the tax paid by a recipient on fuel where TRA is satisfied the recipient paid the tax and one of the following circumstances occurred: the fuel was sold exempt from tax to: an Indian or Indian band, the armed forces of another country stationed in Alberta, the Government of Canada, or the foreign operator of an air transport service. the fuel was clear fuel exported in bulk and used outside Alberta. A consumer who exports aviation fuel in bulk and the aviation fuel is used outside Alberta is also eligible for a refund. a verifiable quantity of fuel was stolen or destroyed. the fuel was rebranded to a: fuel with a lower or zero tax rate, or non-taxable product. the fuel was sold to persons other than consumers and: tax was charged or remitted in error by the recipient; fuel was unsaleable due to contamination; LPG was purchased by a recipient from a system other than a system used to dispense LPG for use as a motive fuel and the fuel was used for any purpose other than as a motive fuel; or tax was remitted for fuel purchased on credit by a recipient, other than a consumer, where all or a portion of the debt becomes a bad debt.
- 10 - More information about refunds is available as follows: FT- 11, Direct Remitters Alberta Indian Tax Exemption (AITE) Publications FT-6, Tax Refunds LPG-1, Propane Distributors Overview Rebate of Tax 33. A consumer may apply to TRA for a rebate of tax paid under the Act where the fuel was clear fuel used for a prescribed purpose. For more information about rebates available to consumers, see the following series of Information Circulars: Tax Exempt Fuel Use (TEFU) Aviation Fuel Tax (AV) Contact Information and Useful Links Contact Tax and Revenue Administration (TRA): Visit our website: Subscribe to receive email updates: TRA Client Self-Service (TRACS): Email: TRA.Revenue@gov.ab.ca tra.alberta.ca tra.alberta.ca/subscribe.html tra.alberta.ca/tracs