Publication 510 - Excise Taxes - Gasoline and Aviation Gasoline

Publication 510

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Gasoline and Aviation Gasoline

When this publication was prepared for printing, all or a portion of the taxes on gasoline (other than aviation gasoline), were scheduled to expire on September 30, 2011. To find out if the taxes are extended, monitor the news media or go to www.irs.gov, click on Forms and Publications, and then click on Changes to Current Tax Products.

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Gasoline means all products commonly or commercially known or sold as gasoline with an octane rating of 75 or more that are suitable for use as a motor fuel. Gasoline includes any gasoline blend other than:

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 later.

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This means all special grades of gasoline suitable for use in aviation reciprocating engines and covered by ASTM specification D910 or military specification MIL-G-5572.

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The tax on gasoline is $.184 per gallon. The tax on aviation gasoline is $.194 per gallon. Tax is imposed on the removal, entry, or sale of gasoline. Each of these events is discussed later. Also, see the special rules that apply to gasoline blendstocks, later.

If the tax is paid on the gasoline in more than one event, a refund may be allowed for the "second" tax paid. See Refunds of Second Tax in chapter 2.

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All removals of gasoline at a terminal rack are taxable. The position holder for that gasoline is liable for the tax.

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In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply.

The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator.
The exchange transaction occurs before or at the same time as removal across the rack by the receiving person.
The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO.
The transaction is subject to a written contract.

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The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant.

However, a terminal operator meeting all the following conditions at the time of the removal will not be liable for the tax.

The terminal operator is a registrant.
The terminal operator has an unexpired notification certificate (discussed later) from the position holder.
The terminal operator has no reason to believe any information on the certificate is false.

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The removal of gasoline from a refinery is taxable if the removal meets either of the following conditions.

It is made by bulk transfer and the refiner, the owner of the gasoline immediately before the removal, or the operator of the pipeline or vessel is not a registrant.
It is made at the refinery rack.

The refiner is liable for the tax.

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The tax does not apply to a removal of gasoline at the refinery rack if all the following requirements are met.

The gasoline is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel.
The gasoline is received at a facility operated by a registrant and located within the bulk transfer/terminal system.
The removal from the refinery is by railcar.
The same person operates the refinery and the facility at which the gasoline is received.

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The entry of gasoline into the United States is taxable if the entry meets either of the following conditions.

It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant.
It is not made by bulk transfer.

The enterer is liable for the tax.

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The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant.

However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax.

The importer of record has an unexpired notification certificate (discussed later) from the enterer.
The importer of record has no reason to believe any information in the certificate is false.

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The customs bond will not be charged for the tax imposed on the entry of the gasoline if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false.

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The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline or the operator of the pipeline or vessel is not a registrant. The position holder is liable for the tax. The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. However, see Terminal operator's liability under Removal from terminal, earlier, for an exception.

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The removal by bulk transfer of gasoline from a terminal or refinery, or the entry of gasoline by bulk transfer into the United States, is taxable if the following conditions apply.

No tax was previously imposed (as discussed earlier) on any of the following events.
1. The removal from the refinery.
2. The entry into the United States.
3. The removal from a terminal by an unregistered position holder.
Upon removal from the pipeline or vessel, the gasoline is not received at an approved terminal or refinery (or at another pipeline or vessel).

The owner of the gasoline when it is removed from the pipeline or vessel is liable for the tax. However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax.

The owner is a registrant.
The owner has an unexpired notification certificate (discussed later) from the operator of the terminal or refinery where the gasoline is received.
The owner has no reason to believe any information on the certificate is false.

The operator of the facility where the gasoline is received is liable for the tax if the owner meets these conditions. The operator is jointly and severally liable if the owner does not meet these conditions.

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The sale of gasoline located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier.

The seller is liable for the tax. However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax.

The seller is a registrant.
The seller has an unexpired notification certificate (discussed later) from the buyer.
The seller has no reason to believe any information on the certificate is false.

The buyer of the gasoline is liable for the tax if the seller meets these conditions. The buyer is jointly and severally liable if the seller does not meet these conditions.

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The tax does not apply to a sale if all of the following apply.

The buyer's principal place of business is not in the United States.
The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel.
The seller is a registrant and the exporter of record.
The fuel was exported.

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The removal or sale of blended gasoline by the blender is taxable. See Blended taxable fuel under Definitions, earlier.

The blender is liable for the tax. The tax is figured on the number of gallons not previously subject to the tax on gasoline.

Persons who blend alcohol with gasoline to produce an alcohol fuel mixture outside the bulk transfer/terminal system 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.

However, if an untaxed liquid is sold as taxed taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel.

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The notification certificate is used to notify a person of the registration status of the registrant. A copy of the registrant's letter of registration cannot be used as a notification certificate. A model notification certificate is shown in the Appendix as Model Certificate C. A notification certificate must contain all information necessary to complete the model.

The certificate may be included as part of any business records normally used for a sale. A certificate expires on the earlier of the date the registrant provides a new certificate, or the date the recipient of the certificate is notified that the registrant's registration has been revoked or suspended. The registrant must provide a new certificate if any information on a certificate has changed.

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When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on:

Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or
Anyone who willfully causes the person to fail to pay the tax.

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Gasoline Blendstocks

Gasoline blendstocks may be subject to $.001 per gallon LUST tax as discussed below.

Gasoline includes gasoline blendstocks. The previous discussions apply to these blendstocks. However, if certain conditions are met, the removal, entry, or sale of gasoline blendstocks are taxed at $.001 per gallon or are not subject to the excise tax.

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Gasoline blendstocks are:

Alkylate,
Butane,
Butene,
Catalytically cracked gasoline,
Coker gasoline,
Ethyl tertiary butyl ether (ETBE),
Hexane,
Hydrocrackate,
Isomerate,
Methyl tertiary butyl ether (MTBE),
Mixed xylene (not including any separated isomer of xylene),
Natural gasoline,
Pentane,
Pentane mixture,
Polymer gasoline,
Raffinate,
Reformate,
Straight-run gasoline,
Straight-run naphtha,
Tertiary amyl methyl ether (TAME),
Tertiary butyl alcohol (gasoline grade) (TBA),
Thermally cracked gasoline, and
Toluene.

However, gasoline blendstocks do not include any product that cannot be used without further processing in the production of finished gasoline.

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Gasoline blendstocks not used to produce finished gasoline are not taxable (other than LUST) if the following conditions are met.

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Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant.

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Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant, and at the time of the sale, meets the following requirements.

The person has an unexpired certificate (discussed later) from the buyer.
The person has no reason to believe any information in the certificate is false.

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The sale of a gasoline blendstock that was not subject to tax on its nonbulk removal or entry, as discussed earlier, is taxable. The seller is liable for the tax. However, the sale is not taxable if, at the time of the sale, the seller meets the following requirements.

The seller has an unexpired certificate (discussed next) from the buyer.
The seller has no reason to believe any information in the certificate is false.

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The certificate from the buyer certifies the gasoline blendstocks will not be used to produce finished gasoline. The certificate may be included as part of any business records normally used for a sale. A model certificate is shown in the Appendix as Model Certificate D. The certificate must contain all information necessary to complete the model.

A certificate expires on the earliest of the following dates.

The date 1 year after the effective date (not earlier than the date signed) of the certificate.
The date a new certificate is provided to the seller.
The date the seller is notified that the buyer's right to provide a certificate has been withdrawn.

The buyer must provide a new certificate if any information on a certificate has changed.

The IRS may withdraw the buyer's right to provide a certificate if that buyer uses the gasoline blendstocks in the production of finished gasoline or resells the blendstocks without getting a certificate from its buyer.

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The nonbulk removal or entry of gasoline blendstocks received at an approved terminal or refinery is not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) meets all the following requirements.

The person is a registrant.
The person has an unexpired notification certificate (discussed earlier) from the operator of the terminal or refinery where the gasoline blendstocks are received.
The person has no reason to believe any information on the certificate is false.

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The removal of gasoline blendstocks from a pipeline or vessel is not taxable (other than LUST) if the blendstocks are received by a registrant that is an industrial user. An industrial user is any person that receives gasoline blendstocks by bulk transfer for its own use in the manufacture of any product other than finished gasoline.

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A credit or refund of the gasoline tax may be allowable if gasoline is used for a nontaxable purpose or exempt use. For more information, see chapter 2.

Previous Page | Table of Contents | Top of Page | Index | Next Page Right Arrow

Gasoline and Aviation Gasoline(p5)

Gasoline.(p5)

Aviation gasoline.(p5)

Taxable Events(p5)

Removal from terminal.(p5)

Removal from refinery.(p6)

Entry into the United States.(p6)

Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator.(p6)

Bulk transfers not received at approved terminal or refinery.(p6)

Sales to unregistered person.(p6)

Removal or sale of blended gasoline.(p6)

Notification certificate.(p6)

Additional persons liable.(p6)

Gasoline Blendstocks(p6)

Blendstocks.(p6)

Not used to produce finished gasoline.(p7)

Certificate of buyer.(p7)

Received at approved terminal or refinery.(p7)

Bulk transfers to registered industrial user.(p7)

Credits or Refunds(p7)