Winter 12 - Don't Overlook Federal Fuel Tax Credit
Federal excise taxes on motor vehicle fuels are designed to help cover the cost of building and maintaining the federal highway system. If you operate diesel-powered off-road equipment, such as earth-moving machinery and other heavy equipment, be sure you aren’t paying this road tax for fuel that is used for off-road purposes.
Fuel distributors collect a federal excise tax of 18.4 cents per gallon on gasoline and 24.4 cents per gallon on clear diesel fuel, but no tax is collected on diesel that is dyed red and intended for off-road use only. Virtually all large distributors are careful to distinguish between the two types of diesel. But if, for any reason, you end up using clear diesel in off-road equipment, you may be eligible for a refund of the federal excise tax you paid.
Generally, refunds of $750 or more may be claimed quarterly. Claims that are smaller than $750 per quarter may be claimed as a credit on your federal income tax return. In either case, you must have good records to support your claim. These records should show the number of gallons used, dates of purchase, names and addresses of suppliers and the amount bought from each, and the purposes for which the fuel was used.
Note that the refund is available only when clear diesel is used in machinery that is operated exclusively off-road. Moreover, you cannot claim a refund for clear diesel used in the engine of any vehicle that is registered for highway use, regardless of where the vehicle is actually used. Conversely, you may be subject to a substantial penalty if you use red dyed off-road diesel fuel in a highway vehicle.
If you have any doubt about how diesel fuel supplies are managed, talk to your fuel distributor or contact us for more information.
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For more information, contact:
Dale A. Ruther, partner
Practice Leader
330.255.2427
Email