Executive Director Leon M. Biegalski QUESTIONS: 1. WHETHER DIESEL FUEL TAX SHOULD BE IMPOSED AT THE TIME OF THE SALE OF B100 BIODIESEL AND CLEAR DIESEL FUEL TO A CUSTOMER OR AT THE TIME OF THE BLENDING OF THE TWO FUELS. 2. WHETHER POLLUTANTS TAX SHOULD BE IMPOSED AT THE TIME OF THE SALE OF B100 BIODIESEL AND CLEAR DIESEL FUEL TO A CUSTOMER OR AT THE TIME OF THE BLENDING OF THE TWO FUELS. ANSWERS: 1. THE TRUE IMPOSITION OF TAX ON DIESEL DOES NOT OCCUR WHEN TAXPAYER SELLS FUEL TO A CUSTOMER, BUT IT DOES OCCUR WHEN THE TAXPAYER CREATES OR PRODUCES A TAXABLE PRODUCT BELOW THE BULK TRANSFER SYSTEM. 2. THE POLLUTANTS TAX IMPOSED BY SECTION 206.9935, F.S., WOULD BE DUE ON THE UNDYED DIESEL FUEL. THE POLLUTANTS TAX WOULD NOT BE DUE ON THE BIODIESEL (B100), BECAUSE IT IS A VEGETABLE OR NONPETROLEUM-BASED PRODUCT AND DOES NOT MEET THE DEFINITION OF A TAXABLE PRODUCT FOR POLLUTANTS TAX. THE OTHER APPLICABLE TAXES IMPOSED BY CHAPTER 206, FLORIDA STATUTES, ARE DUE ON THE UNDYED DIESEL FUEL AND THE BIODIESEL (B100) WHEN IT HAS LEFT THE BULK TRANSFER SYSTEM, OR UPON IMPORTATION, OR PRODUCTION, INTO FLORIDA BY TAXPAYER FOR STORAGE AT TAXPAYER S FACILITY WHICH IS NOT A LICENSED TERMINAL FACILITY. November 10, 2016 RE: Technical Assistance Advisement 16B5-001 Points of Taxation for Production Facilities Sections: 206.01, 206.41, 206.86, 206.87, 206.9925, 206.9931, 206.9935, F.S. (Taxpayer) FEIN: Child Support Ann Coffin, Director General Tax Administration Maria Johnson, Director Property Tax Oversight Dr. Maurice Gogarty, Director Information Services Damu Kuttikrishnan, Director www.floridarevenue.com Florida Department of Revenue Tallahassee, Florida 32399-0100
Page 2 Dear : This is in responses to your request dated, for a Technical Assistance Advisement (TAA) pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding the taxability of biodiesel produced in state. An examination of your letter has established that you have complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA. FACTS Taxpayer is a and in Florida. Taxpayer has a bulk facility in Florida that is not registered with the Internal Revenue Service (IRS), where biodiesel, undyed diesel, and dyed diesel are stored. () purchases and sells, among other products, biodiesel fuel. has current terminal supplier, wholesaler, and pollutants licenses. Taxpayer sold 23,995.7 gallons of B100 and 25 gallons of clear diesel fuel to, where causes both fuels to be splashed blended and shipped from Florida by rail car to South Carolina. Taxpayer charged the pollutants tax in the amount of.02071 cents per gallon, as a separate line item, on the 23,995.7 gallons of B100. The fuel was loaded into a rail car at the Taxpayer s facilities where the B100 is produced. REQUESTED ADVISEMNT Taxpayer is seeking a binding TAA from the Department regarding the imposition of tax on a transaction of B100 biodiesel and clear diesel fuel. Specifically, Taxpayer asks: (1) Whether diesel fuel tax should be imposed at the time of the sale of B100 biodiesel and clear diesel fuel to or at the time of the blending of the two fuels. (2) Whether pollutants tax should be imposed at the time of the sale of B100 biodiesel and clear diesel fuel to or at the time of the blending of the two fuels. TAXPAYER POSITION #1 Taxpayer believes that diesel fuel tax should not be imposed on either the removal or sale of B100 biodiesel or clear diesel by the Taxpayer, or at the time of the blending of the B100 biodiesel and clear diesel by. Taxpayer states that the transaction it engaged in does not require the imposition of tax provided by s. 206.87, F.S., or of the backup tax imposed by s. 206.873, F.S. Section 206.01, states in part: LAW & DISCUSSION (15) Bulk transfer means the shipment of fuel by pipeline or marine vessel between terminals or from a refinery to a terminal
Page 3 Section 206.86, states in part: (1) Diesel fuel means all petroleum distillates commonly known as diesel #2, biodiesel, or any other product blended with diesel or any product placed into the storage supply tank of a diesel-powered motor vehicle. (12) Biodiesel means any product made from nonpetroleum-based oils or fats which is suitable for use in diesel-powered engines. Biodiesel is also referred to as alkyl esters. Section 206.87(2), F.S., states in part the taxes specified in this section are imposed on the following: (2)(c) The entry of diesel fuel into this state for sale, consumption, use, or warehousing if either of the following applies: 1. The entry is by bulk transfer and the enterer is not a licensed terminal supplier; or 2. The entry is not by bulk transfer. Within the Taxpayer s analysis, an argument is made regarding each imposition of diesel fuel tax. Taxpayer states that the transaction with does not trigger any specific statutory points of taxation. However, prior to the transaction with, Taxpayer is holding taxable biodiesel fuel in a bulk storage facility that is outside of the bulk transfer system. As Taxpayer states, they are not registered as an IRS terminal and do not consider themselves a refinery. The moment Taxpayer creates nonpetroleum-based B100 in their facility a taxable instance has occurred. B100 biodiesel is a 100% vegetable or nonpetroleum biodiesel product intended for fuel in dieselpowered vehicles or equipment. They have a created a taxable product where no taxes have previously been paid. Taxpayer should report these gallons each month on their receipt schedule on the Wholesaler s return (form DR-309632) 1. Diesel fuel taxes should be remitted as well for each gallon of biodiesel that was created or produced. In the transaction between the Taxpayer and, diesel fuel taxes would be passed down due to the fact that the Taxpayer does not have the authority to collect the destination state s taxes. will then have the ability to file a refund claim once the fuel is shipped out of state and they provide evidence that they paid the destination state s taxes. CONCLUSION The true imposition of tax on diesel does not occur when Taxpayer sells fuel to, but it does occur when the Taxpayer creates or produces a taxable product below the bulk transfer system. 1 Per the instructions on the DR-309632, biodiesel is defined as diesel and products labeled or marketed as biodiesel, including 100% vegetable or animal based products known as B100, that have not been blended with petroleum diesel. Biodiesel is taxed at the diesel fuel rate when produced in or imported into.
Page 4 TAXPAYER POSITION #2 Taxpayer believes that pollutants tax should not be imposed on either the removal or sale of B100 biodiesel or clear diesel by the Taxpayer, or at the blending of the B100 biodiesel and clear diesel by XXX. Section 206.9925, F.S., states in part: LAW & DISCUSSION (4) Petroleum product means any refined liquid commodity made wholly or partially from oil or gas, blends or mixtures of oil with one or more liquid products or byproducts derived from oil or gas, or blends or mixtures of two or more liquid products derived from oil or gas, and includes, but is not limited to, motor gasoline, gasohol, aviation gasoline, naphtha-type jet fuel, kerosene-type get fuel, kerosene, distillate fuel oil, residual fuel oil, motor oil and other lubricants, naphtha of less than 400 o F for petroleum feed, special naphthas, road oil, still gas, unfinished oils, motor gas blending components, including petroleum-derived ethanol when used for such purpose, and aviation gas blending components. Section 206.9931, F.S., states in part: (4) All pollutants imported, produced, or sold in this state are presumed to be subject to the taxes imposed by this part. Any person, except the final retail consumer, who has purchased a pollutant for sale, use, consumption, or distribution in this state must document that the taxes imposed by this part have been paid or must pay such taxes directly to the department in accordance with subsection (2). Section 206.9935, F.S., states in part: (1) Tax For Coastal Protection. (a)1. There is hereby levied an excise tax for the privilege of producing in, importing into, or causing to be imported into this state pollutants for sale, use, or otherwise. 3. The tax shall be imposed on petroleum products and remitted to the department in the same manner as the motor fuel tax imposed pursuant to s. 206.41. (2) Tax For Water Quality. (a)1. There is hereby levied an excise tax for the privilege of producing in, importing into, or causing to be imported into this state pollutants for sale, use, or otherwise. 3. The tax shall be imposed on petroleum products and remitted to the department in the same manner as the motor fuel tax imposed pursuant to s. 206.41.
Page 5 (3) Tax For Inland Protection. (a)1. There is hereby levied an excise tax for the privilege of producing in, importing into, or causing to be imported into this state pollutants for sale, use, or otherwise. (4) For purposes of this section, the term first sale does not include exchanges or loans, gallon-for-gallon, of petroleum products between licensed terminal suppliers before the petroleum products have been sold or removed through the loading rack or transfers between terminal facilities owned by the same taxpayer. The tax on petroleum products first imported into this state by a licensed terminal supplier storing such petroleum products in a terminal facility shall be imposed when the product is first removed through the loading rack. The tax shall be remitted by the licensed terminal supplier who owned the petroleum products immediately prior to removal of such petroleum products from storage. Section 206.41, F.S., provides in part: (6) Unless otherwise provided for by this chapter, the taxes specified in subsection (1) are imposed on all of the following: (a) The removal of motor fuel in this state from a terminal if the motor fuel is removed at the rack. (b) The removal of motor fuel in this state from any refinery if either of the following applies: 1. The removal is by bulk transfer and the owner of the motor fuel immediately before the removal is not a licensed terminal supplier; or 2. The removal is at the refinery rack. (c) The entry of motor fuel into this state for sale, consumption, use, or warehousing if either of the following applies: 1. The entry is by bulk transfer and the enterer is not licensed as a terminal supplier or importer; or 2. The entry is not by bulk transfer. (d) The removal of motor fuel in this state to an unregistered person, unless there was a prior taxable removal, entry, or sale of the motor fuel. (e) The removal or sale of blended motor fuel in this state by the blender thereof. The number of gallons of blended motor fuel subject to tax is the difference between the total number of gallons of blended motor fuel removed or sold and the number of gallons of previously taxed motor fuel used to produce the blended motor fuel. Taxpayer sold two fuel products to : biodiesel (B100) and undyed diesel fuel. The two fuels were intended to be blended once took ownership of the fuels in their rail cars. Based on the transaction, pollutants tax is not due on the biodiesel. Product B100 is vegetable-based product and does not meet the definition of a taxable product for pollutants tax. Pollutants taxes are due on oil, gas, petroleum products, pollutants, and solvents. Undyed diesel fuel is considered to be a petroleum product. The imposition of pollutants tax on petroleum products is based on s. 206.41, F.S. Taxes would have been imposed either prior to the Taxpayer s ownership of the undyed diesel or the moment Taxpayer owned the fuel in their storage facility. If Taxpayer
Page 6 purchased the undyed diesel from a terminal, pollutants taxes should have been paid to the terminal supplier. All pollutants taxes would have been passed down to. can then apply for a refund claim of the applicable taxes once evidence has been provided that the exportation occurred. Taxpayer could have imported the undyed diesel fuel via the Importer s license. Once the undyed diesel entered into the state, pollutants tax would have been due, since the fuel was held below the bulk transfer system. Again, all pollutants taxes would be passed down to when the transaction occurred and would apply for a refund claim once they have evidence an export has occurred. CONCLUSION The pollutants tax imposed by Section 206.9935, F.S., would be due on the undyed diesel fuel. The pollutants tax would not be due on the biodiesel (B100), because it is a vegetable or nonpetroleum-based product and does not meet the definition of a taxable product for pollutants tax. The other applicable taxes imposed by Chapter 206, Florida Statutes, are due on the undyed diesel fuel and the biodiesel (B100) when it has left the bulk transfer system, or upon importation, or production, into Florida by Taxpayer for storage at Taxpayer s facility which is not a licensed terminal facility. This response constitutes a Technical Assistance Advisement under Section 213.22, F.S., which is binding on the Department only under the facts and circumstances described in the request for this advice as specified in Section 213.22, F.S. Our response is predicated on those facts and the specific situation summarized above. You are advised that subsequent statutory or administrative rule changes, judicial interpretations or the statutes or rules, or changes to the facts, upon which this advice is based, may subject similar future transactions to a different treatment than expressed in this response. You are further advised that this response, your request and related documents are public records under Chapter 119, F.S., which are subject to disclosure to the public under the conditions of Section 213.22, F.S. Your name, address, and other details, which might lead to identification of the taxpayer, must be deleted before disclosure. In an effort to protect the confidentiality of such information, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, backup material and response within fifteen days of the date of this advisement. If you have any questions or concerns regarding this issue, you can contact me directly at 850-717-7610. Sincerely, Michael Tay Tax Law Specialist Technical Assistance and Dispute Resolution Record ID: 211002