Use of ODCs.

You use an ODC if you put it into service in a trade or business or for the production of income. An ODC also is used if you use it in the making of an article, including incorporation into the article, chemical transformation, or release into the air. The loss, destruction, packaging, repackaging, or warehousing of ODCs is not a use of the ODC.

The creation of a mixture containing an ODC is treated as the use of that ODC. An ODC is contained in a mixture only if the chemical identity of the ODC is not changed. Generally, tax is imposed when the mixture is created and not on its sale or use. However, you can choose to have the tax imposed on its sale or use by checking the appropriate box in Part I of Form 6627. You can revoke this choice only with IRS consent.

The creation of a mixture for export or for use as a feedstock is not a taxable use of the ODCs contained in the mixture.

Exceptions.

The following may be exempt from the tax on ODCs.

Metered-dose inhalers.

There is no tax on ODCs used or sold for use as propellants in metered-dose inhalers. For a sale to be nontaxable, you must obtain from the purchaser an exemption certificate that you rely on in good faith. The certificate must be in substantially the form set forth in section 52.4682–2(d)(5) of the regulations. Keep the certificate with your records.

Recycled ODCs.

There is no tax on any ODC diverted or recovered in the United States as part of a recycling process (and not as part of the original manufacturing or production process). There is no tax on recycled Halon-1301 or recycled Halon-2402 imported from a country that has signed the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol).

The Montreal Protocol is administered by the United Nations (U.N.). To determine if a country has signed the Montreal Protocol, contact the U.N. The Internet address is http://untreaty.un.org/.

Exported ODCs.

Generally, there is no tax on ODCs sold for export if certain requirements are met. For a sale to be nontaxable, you and the purchaser must be registered. You must obtain from the purchaser an exemption certificate that you rely on in good faith. Keep the certificate with your records. The certificate must be in substantially the form set forth in section 52.4682–5(d)(3) of the regulations. The tax benefit of this exemption is limited. For more information, see section 52.4682–5 of the regulations.

ODCs used as feedstock.

There is no tax on ODCs sold for use or used as a feedstock. An ODC is used as a feedstock only if the ODC is entirely consumed in the manufacture of another chemical. The transformation of an ODC into one or more new compounds qualifies, but use of an ODC in a mixture does not qualify.

For a sale to be nontaxable, you must obtain from the purchaser an exemption certificate that you rely on in good faith. The certificate must be in substantially the form set forth in section 52.4682–2(d)(2) of the regulations. Keep the certificate with your records.

Conditions to allowance for ODCs exported.

To claim a credit or refund for ODCs that are exported, you must have repaid or agreed to repay the tax to the exporter, or obtained the exporter's written consent to allowance of the credit or refund. You must also have the evidence required by the Environmental Protection Agency as proof that the ODCs were exported.

Use of imported products.

You use an imported product if you put it into service in a trade or business or for the production of income or use it in the making of an article, including incorporation into the article. The loss, destruction, packaging, repackaging, warehousing, or repair of an imported product is not a use of that product.

Entry as use.

The importer may choose to treat the entry of a product into the United States as the use of the product. Tax is imposed on the date of entry instead of when the product is sold or used. The choice applies to all imported taxable products that you own and have not used when you make the choice and all later entries. Make the choice by checking the box in Part II of Form 6627. The choice is effective as of the beginning of the calendar quarter to which the Form 6627 applies. You can revoke this choice only with IRS consent.

Sale of article incorporating imported product.

The importer may treat the sale of an article manufactured or assembled in the United States as the first sale or use of an imported taxable product incorporated in that article if both the following apply.

Rules for listing products.

Products are listed in the table according to the following rules.

For example, floppy disk drive units are listed in Part III because they are not imported taxable products and would have been included in the Part II list for electronic items not specifically identified, but for their listing in Part III.

ODC weight.

The Table ODC weight of a product is the weight, determined by the Commissioner, of the ODCs used as materials in the manufacture of the product under the predominant method of manufacturing. The ODC weight is listed in Part II in pounds per single unit of product unless otherwise specified.

Modifying the table.

A manufacturer or importer of a product may request the IRS add a product and its ODC weight to the table. They also may request the IRS remove a product from the table, or change or specify the ODC weight of a product.

Include your name, address, taxpayer identification number, and principal place of business in your request. The request must include the following information for each product to be modified.

Send your request to the following address.

ODCs not subject to floor stocks tax.

The floor stocks tax is not imposed on any of the following ODCs.

Local telephone service.

This means access to a local telephone system and the privilege of telephonic quality communication with most people who are part of the system. Local telephone service also includes any facility or services provided in connection with this service. The tax applies to lease payments for certain customer premises equipment (CPE) even though the lessor does not also provide access to a local telecommunications system.

Private communication service.

Private communication service is not local telephone service. Private communication service includes accessory-type services provided in connection with a Centrex, PBX, or other similar system for dual use accessory equipment. However, the charge for the service must be stated separately from the charge for the basic system, and the accessory must function, in whole or in part, in connection with intercommunication among the subscriber's stations.

Toll telephone service.

This means a telephonic quality communication for which a toll is charged that varies with the distance and elapsed transmission time of each communication. The toll must be paid within the United States. It also includes a long distance service that entitles the subscriber to make unlimited calls (sometimes limited as to the maximum number of hours) within a certain area for a flat charge. Microwave relay service used for the transmission of television programs and not for telephonic communication is not a toll telephone service.

Teletypewriter exchange service.

This means access from a teletypewriter or other data station to a teletypewriter exchange system and the privilege of intercommunication by that station with most persons having teletypewriter or other data stations in the same exchange system.

Figuring the tax.

The tax is based on the sum of all charges for local or toll telephone service included in the bill. However, if the bill groups individual items for billing and tax purposes, the tax is based on the sum of the individual items within that group. The tax on the remaining items not included in any group is based on the charge for each item separately. Do not include in the tax base state or local sales or use taxes that are separately stated on the taxpayer's bill.

If the tax on toll telephone service is paid by inserting coins in coin-operated telephones, figure the tax to the nearest multiple of 5 cents. When the tax is midway between 5-cent multiples, the next higher multiple applies.

Prepaid telephone cards.

A prepaid telephone card is any card or any other similar arrangement that allows its holder to get local or toll telephone service and pay for those services in advance. The tax is imposed when the card is transferred by a telecommunications carrier to any person who is not a telecommunications carrier. The face amount of the card is the amount paid for communications services. If the face amount is not a dollar amount, see section 49.4251–4 of the regulations.

Installation charges.

The tax does not apply to payments received for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment. However, the tax does apply to payments for the repair or replacement of those items incidental to ordinary maintenance.

Answering services.

The tax does not apply to amounts paid for a private line, an answering service, and a one-way paging or message service if they do not provide access to a local telephone system and the privilege of telephonic communication as part of the local telephone system.

Mobile radio telephone service.

The tax does not apply to payments for a two-way radio service that does not provide access to a local telephone system.

Coin-operated telephones.

The tax for local telephone service does not apply to payments made for services by inserting coins in public coin-operated telephones. The tax for toll telephone service also does not apply if the charge is less than 25 cents. But the tax applies if the coin-operated telephone service is furnished for a guaranteed amount. Figure the tax on the amount paid under the guarantee plus any fixed monthly or other periodic charge.

Telephone-operated security systems.

The tax does not apply to amounts paid for telephones used only to originate calls to a limited number of telephone stations for security entry into a building. In addition, the tax does not apply to any amounts paid for rented communication equipment used in the security system.

News services.

The tax on toll telephone service and teletypewriter exchange service does not apply to charges for the following news services.

This exemption applies to payments received for messages from one member of the news media to another member (or to or from their bona fide correspondents). For the exemption to apply, the charge for these services must be billed in writing to the person paying for the service and that person must certify in writing that the services are used for an exempt purpose.

Services not exempted.

The tax applies to amounts paid by members of the news media for local telephone service. Toll telephone service in connection with celebrities or special guests on talk shows is subject to the tax.

Common carriers and communications companies.

The tax on toll telephone service does not apply to WATS (wide area telephone service) used by common carriers, telephone and telegraph companies, or radio broadcasting stations or networks in their business. A common carrier is one holding itself out to the public as engaged in the business of transportation of persons or property for compensation and offering its services to the public generally.

Military personnel serving in a combat zone.

The tax on toll telephone services does not apply to telephone calls originating in a combat zone that are made by members of the U.S. Armed Forces serving there if the person receiving payment for the call receives a properly executed exemption certificate. The signed and dated exemption certificate must contain all the following information.

This exemption also applies to members of the Armed Forces serving in a qualified hazardous duty area. A qualified hazardous duty area includes an area only while the special pay provision is in effect for that area.

For information about areas designated a combat zone or qualified hazardous duty area, see Publication 3, Armed Forces' Tax Guide.

International organizations and the American Red Cross.

The tax does not apply to communication services furnished to an international organization or to the American National Red Cross.

Nonprofit hospitals.

The tax does not apply to telephone services furnished to income tax-exempt nonprofit hospitals for their use. Also, the tax does not apply to amounts paid by these hospitals to provide local telephone service in the homes of their personnel who must be reached during their off-duty hours.

Nonprofit educational organizations.

The tax does not apply to payments received for services and facilities furnished to a nonprofit educational organization for its use. A nonprofit educational organization is one that satisfies all the following requirements.

This includes a school operated by an organization exempt under section 501(c)(3) of the Internal Revenue Code if the school meets the above qualifications.

Federal, state, and local government.

The tax does not apply to communication services provided to the government of the United States, the government of any state or its political subdivisions, the District of Columbia, or the United Nations. Treat an Indian tribal government as a state for the exemption from the communications tax only if the services involve the exercise of an essential tribal government function.

Exemption certificate.

Any form of exemption certificate will be acceptable if it includes all the information required by the Internal Revenue Code and Regulations. File the certificate with the provider of the communication services.

The following users that are exempt from the communications tax do not have to file an annual exemption certificate after they have filed the initial certificate to claim an exemption from the communications tax.

The federal government does not have to file any exemption certificate.

All other organizations must furnish exemption certificates when required.

Percentage tax.

A tax of 7.5% applies to amounts paid for taxable transportation of persons by air. Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service.

Mileage awards.

The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses.

Generally, the percentage tax does not apply to amounts paid for mileage awards where the mileage awards cannot, under any circumstances, be redeemed for air transportation that is subject to the tax. Until regulations are issued, the following rules apply to mileage awards.

Domestic-segment tax.

The domestic-segment tax is a flat dollar amount for each segment of taxable transportation for which an amount is paid. However, see Rural airports, later. A segment is a single takeoff and a single landing. The domestic-segment tax is $3.00 per segment that begins during 2003.

Charter flights.

If an aircraft is chartered, the domestic-segment tax for each segment of taxable transportation is figured by multiplying the tax by the number of passengers transported on the aircraft.

Rural airports.

The domestic-segment tax does not apply to a segment to or from a rural airport. An airport is a rural airport for a calendar year if it satisfies both the following requirements.

Revenue Procedure 98–18 in Cumulative Bulletin 1998–1 is the most recent list of rural airports published by the IRS. An updated list can be found on the Department of Transportation web site at www.bts.gov/oai/rural.html.

Taxable transportation.

Taxable transportation is transportation by air that meets either of the following tests.

Round trip.

A round trip is considered two separate trips. The first trip is from the point of departure to the destination. The second trip is the return trip from that destination.

Uninterrupted international air transportation.

This means transportation entirely by air that does not begin and end in the United States or in the 225-mile zone if there is not more than a 12-hour scheduled interval between arrival and departure at any station in the United States. For a special rule that applies to military personnel, see Exemptions from tax, later.

Transportation between the continental U.S. and Alaska or Hawaii.

This transportation is partially exempt from the tax on transportation of persons by air. The tax does not apply to the part of the trip between the point at which the route of transportation leaves or enters the continental United States (or a port or station in the 225-mile zone) and the point at which it enters or leaves Hawaii or Alaska. Leaving or entering occurs when the route of the transportation passes over either the United States border or a point 3 nautical miles (3.45 statute miles) from low tide on the coast line, or when it leaves a port or station in the 225-mile zone. Therefore, this transportation is subject to the percentage tax on the part of the trip in U.S. airspace, the domestic-segment tax for each domestic segment, and the tax on the use of international air travel facilities, discussed later.

Transportation within Alaska or Hawaii.

The tax on transportation of persons by air applies to the entire fare paid in the case of flights between any of the Hawaiian Islands, and between any ports or stations in the Aleutian Islands or other ports or stations elsewhere in Alaska. The tax applies even though parts of the flights may be over international waters or over Canada, if no point on the direct line of transportation between the ports or stations is more than 225 miles from the United States (Hawaii or Alaska).

Package tours.

The air transportation taxes apply to “complimentary” air transportation furnished solely to participants in package holiday tours. The amount paid for these package tours includes a charge for air transportation even though it may be advertised as “free.” This rule also applies to the tax on the use of international air travel facilities, discussed later.

Liability for tax.

The person paying for taxable transportation is liable for the tax and, ordinarily, the person receiving the payment collects the tax, files the returns, and pays the tax over to the government. However, if payment is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation provided for under that order must collect the tax.

A travel agency that is an independent broker and sells tours on aircraft that it charters must collect the transportation tax, file the returns, and pay the tax over to the government. However, a travel agency that sells tours as the agent of an airline must collect the tax and remit it to the airline for the filing of returns and for the payment of the tax over to the government.

The fact that the aircraft does not use public or commercial airports in taking off and landing has no effect on the tax. But see Certain helicopter uses, later.

For taxable transportation that begins and ends in the United States, the tax applies regardless of whether the payment is made in or outside the United States.

If the tax is not paid when payment for the transportation is made, the air carrier providing the initial segment of the transportation that begins or ends in the United States becomes liable for the tax.

Exemptions from tax.

The tax on transportation of persons by air does not apply in the following situations. See also Special Rules on Transportation Taxes, later.

Military personnel on international trips.

When traveling in uniform at their own expense, United States military personnel on authorized leave are deemed to be traveling in uninterrupted international air transportation (defined earlier) even if the scheduled interval between arrival and departure at any station in the United States is actually more than 12 hours. However, such personnel must buy their tickets within 12 hours after landing at the first domestic airport and accept the first available accommodation of the type called for by their tickets. The trip must begin or end outside the United States and the 225-mile zone.

Certain helicopter uses.

The tax does not apply to air transportation by helicopter if the helicopter is used for any of the following purposes.

However, during a use described in items (1) and (2), the tax applies if the helicopter takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. For item (1), treat each flight segment as a separate flight.

Fixed-wing air ambulance.

The tax does not apply to air transportation by fixed-wing aircraft if used for emergency medical services. The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services.

Skydiving.

The tax does not apply to any air transportation exclusively for the purpose of skydiving.

Bonus tickets.

The tax does not apply to free bonus tickets issued by an airline company to its customers who have satisfied all requirements to qualify for the bonus tickets. However, the tax applies to amounts paid by customers for advance bonus tickets when customers have traveled insufficient mileage to fully qualify for the free advance bonus tickets.

Exemptions from tax.

The tax on transportation of property by air does not apply in the following situations. See also Special Rules on Transportation Taxes, later.

Cropdusting and firefighting service.

The tax does not apply to amounts paid for cropdusting or aerial firefighting service.

Exportation.

The tax does not apply to payments for transportation of property by air in the course of exportation (including to United States possessions) by continuous movement, as evidenced by the execution of Form 1363, Export Exemption Certificate. See Form 1363 for more details.

Certain helicopter and fixed-wing air ambulance uses.

The tax does not apply to amounts paid for the use of helicopters in construction to set heating and air conditioning units on roofs of buildings, to dismantle tower cranes, and to aid in construction of power lines and ski lifts.

The tax also does not apply to air transportation by helicopter or fixed-wing aircraft for the purpose of providing emergency medical services. The fixed-wing aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services.

Skydiving.

The tax does not apply to any air transportation exclusively for the purpose of skydiving.

Excess baggage.

The tax does not apply to excess baggage accompanying a passenger on an aircraft operated on an established line.

Alaska and Hawaii.

For transportation of property to and from Alaska and Hawaii, the tax in general does not apply to the portion of the transportation that is entirely outside the continental United States (or the 225-mile zone if the aircraft departs from or arrives at an airport in the 225-mile zone). But the tax applies to flights between ports or stations in Alaska and the Aleutian Islands, as well as between ports or stations in Hawaii. The tax applies even though parts of the flights may be over international waters or over Canada, if no point on a line drawn from where the route of transportation leaves the United States (Alaska) to where it reenters the United States (Alaska) is more than 225 miles from the United States.

Liability for tax.

The person paying for taxable transportation is liable for the tax and, ordinarily, the person engaged in the business of transporting property by air for hire receives the payment, collects the tax, files the returns, and pays the tax over to the government.

If tax is not paid when a payment is made outside the United States, the person furnishing the last segment of taxable transportation collects the tax from the person to whom the property is delivered in the United States.

Aircraft used by affiliated corporations.

The taxes do not apply to payments received by one member of an affiliated group of corporations from another member for services furnished in connection with the use of an aircraft. However, the aircraft must be owned or leased by a member of the affiliated group and cannot be available for hire by a nonmember of the affiliated group. Determine whether an aircraft is available for hire by a nonmember of an affiliated group on a flight-by-flight basis.

An affiliated group of corporations, for this rule, is any group of corporations connected with a common parent corporation through 80% or more of stock ownership.

Small aircraft.

The taxes do not apply to transportation furnished by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less. However, the taxes do apply if the aircraft is operated on an established line. “Operated on an established line” means the aircraft operates with some degree of regularity between definite points.

Consider an aircraft to be operated on an established line if it is operated on a charter basis between two cities also served by that carrier on a regularly scheduled basis.

Mixed load of persons and property.

If a single amount is paid for air transportation of persons and property, the payment must be allocated between the amount subject to the tax on transportation of persons and the amount subject to the tax on transportation of property. The allocation must be reasonable and supported by adequate records.

Measurement of taxable fuel.

Volumes of taxable fuel (gasoline, diesel fuel, and kerosene) can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit.

Form 720–TO.

This information return is used by terminal operators to report receipts and disbursements of all liquid products to and from all approved terminals. Each terminal operator must file a separate form for each approved terminal.

Form 720–CS.

This information return must be filed by bulk transport carriers (barges, vessels, and pipelines) who receive liquid product from an approved terminal or deliver liquid product to an approved terminal.

Liquid product.

A liquid product is any liquid transported into storage at a terminal or delivered out of a terminal. For a list of products, see the product code table in the Instructions for Forms 720–TO and 720–CS.

Persons that must register.

You must be registered if you are any of the following persons.

In addition, bus and train operators must be registered if they use dyed diesel fuel in their buses or trains and they incur liability for tax at the bus or train rate.

Persons that may register.

You may, but are not required to, register if you are any of the following persons.

Ultimate vendors do not need to be registered to buy or sell diesel fuel or kerosene. However, they must be registered for filing certain claims for the excise tax on these fuels.

Taxable fuel registrant.

This is an enterer, an industrial user, a refiner, a terminal operator, or a throughputter who received a Letter of Registration under the excise tax registration provisions and whose registration has not been revoked or suspended. The term taxable fuel means gasoline, diesel fuel, and kerosene. The term registrant as used in the discussions of these fuels means a taxable fuel registrant.

Additional information.

See the Form 637 instructions for the information you must submit when you apply for registration.

Conditions to allowance of refund.

A claim for refund of the tax is allowed only if all the following conditions are met.

Reporting requirements.

Generally, the person that paid the first tax must file a “First Taxpayer's Report” with its Form 720 for the quarter to which the report relates. A model first taxpayer's report is shown in Appendix C as Model Certificate A. Your report must contain all information needed to complete the model.

By the due date for filing the Form 720, you must send a separate copy of the report to the following address.

Write “EXCISE – FIRST TAXPAYER'S REPORT” across the top of that copy.

Optional reporting.

A first taxpayer's report is not required for the tax imposed on any of the following taxable events.

However, if the person liable for the tax expects that another tax will be imposed on that fuel, that person should (but is not required to) file a first taxpayer's report.

Providing information.

The first taxpayer must give a copy of the report to the buyer of the fuel within the bulk transfer/terminal system or to the owner of the fuel immediately before the first tax was imposed, if the first taxpayer is not the owner at that time. If an optional report is filed, a copy should (but is not required to) be given to the buyer or owner.

A person that receives a copy of the first taxpayer's report and later sells the fuel within the bulk transfer/terminal system must give the copy and a “Statement of Subsequent Seller” to the buyer. If the later sale is outside the bulk transfer/terminal system and that person expects that another tax will be imposed, that person should (but is not required to) give the copy and the statement to the buyer. A model statement of subsequent seller is shown in Appendix C as Model Certificate B. The statement must contain all information necessary to complete the model.

If the first taxpayer's report relates to fuel sold to more than one buyer, copies of that report must be made when the fuel is divided. Each buyer must be given a copy of the report.

Refund claim.

You must make your claim for refund on Form 8849. Complete Schedule 5 (Form 8849) and attach it to your Form 8849. You must have filed Form 720 and paid the second tax before you file for a refund of that tax. Do not include this claim with a claim under another tax provision. You must not have included the second tax in the price of the fuel and must not have collected it from the purchaser. You must submit the following information with your claim.

Approved terminal or refinery.

This is a terminal operated by a registrant that is a terminal operator or a refinery operated by a registrant that is a refiner.

Biodiesel.

This is a liquid composed of monoalkyl esters of long chain fatty acids derived from vegetable oils or animal fats that is covered by ASTM specification D 6751.
Biodiesel does not contain any paraffins.

Blended taxable fuel.

This means any taxable fuel produced outside the bulk transfer/terminal system by mixing taxable fuel on which excise tax has been imposed and any other liquid on which excise tax has not been imposed. This does not include a mixture removed or sold during the calendar quarter if all such mixtures removed or sold by the blender contain less than 400 gallons of a liquid on which the tax has not been imposed. Blended taxable fuel does not include gasohol that receives an excise tax benefit.

Blender.

This is the person that produces blended taxable fuel.

Bulk transfer.

This is the transfer of fuel by pipeline or vessel.

Bulk transfer/terminal system.

This is the fuel distribution system consisting of refineries, pipelines, vessels, and terminals. Fuel in the supply tank of any engine, or in any tank car, railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer/terminal system.

Enterer.

This is the importer of record for the fuel. However, if the importer of record is acting as an agent, the person for whom the agent is acting is the enterer. If there is no importer of record, the owner at the time of entry into the United States is the enterer.

Entry.

Fuel is entered into the United States when it is brought into the United States and applicable customs law requires that it be entered for consumption, use, or warehousing. This does not apply to fuel brought into Puerto Rico (which is part of the U.S. customs territory), but does apply to fuel brought into the United States from Puerto Rico.

Pipeline operator.

This is the person that operates a pipeline within the bulk transfer/terminal system.

Position holder.

This is the person that holds the inventory position in the fuel in the terminal, as reflected in the records of the terminal operator. You hold the inventory position when you have a contractual agreement with the terminal operator for the use of the storage facilities and terminaling services for the fuel. A terminal operator that owns the fuel in its terminal is a position holder.

Rack.

This is a mechanism capable of delivering fuel into a means of transport other than a pipeline or vessel.

Refiner.

This is any person that owns, operates, or otherwise controls a refinery.

Refinery.

This is a facility used to produce fuel from crude oil, unfinished oils, natural gas liquids, or other hydrocarbons and from which fuel may be removed by pipeline or vessel or at a rack. However, this term does not include a facility where only blended fuel or gasohol, and no other type of fuel, is produced. For this purpose, blended fuel is any mixture that would be blended taxable fuel if produced outside the bulk transfer/terminal system.

Registrant.

This is a taxable fuel registrant (see Registration Requirements, earlier).

Removal.

This is any physical transfer of fuel. It also means any use of fuel other than as a material in the production of taxable or special fuels. However, fuel is not removed when it evaporates or is otherwise lost or destroyed.

Sale.

For fuel not in a terminal, this is the transfer of title to, or substantial incidents of ownership in, fuel to the buyer for money, services, or other property. For fuel in a terminal, this is the transfer of the inventory position if the transferee becomes the position holder for that fuel.

State.

This includes any state, any of its political subdivisions, the District of Columbia, and the American Red Cross. Treat an Indian tribal government as a state only if transactions involve the exercise of an essential tribal government function.

Terminal.

This is a storage and distribution facility supplied by pipeline or vessel, and from which fuel may be removed at a rack. It does not include a facility at which gasoline blendstocks are used in the manufacture of products other than finished gasoline if no gasoline is removed from the facility. A terminal does not include any facility where finished gasoline, undyed diesel fuel, or undyed kerosene is stored if the facility is operated by a registrant and all such fuel stored at the facility has been previously taxed upon removal from a refinery or terminal.

Terminal operator.

This is any person that owns, operates, or otherwise controls a terminal.

Throughputter.

This is any person that is a position holder or that owns fuel within the bulk transfer/terminal system (other than in a terminal).

Vessel operator.

This is the person that operates a vessel within the bulk transfer/terminal system. However, vessel does not include a deep draft ocean-going vessel.

Gasoline.

This means finished gasoline and gasoline blendstocks. Finished gasoline means all products (including gasohol) that are commonly or commercially known or sold as gasoline and are suitable for use as a motor fuel. The product must have an octane rating of 75 or more. Gasoline blendstocks are discussed later.

Aviation gasoline.

This 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-5572.

Removal from terminal.

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

Terminal operator's liability.

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.

Removal from refinery.

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

The refiner is liable for the tax.

Exception.

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

Entry into the United States.

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

The enterer is liable for the tax.

Removal from a terminal by unregistered position holder.

The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline 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.

Bulk transfers not received at approved terminal or refinery.

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.

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 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.

Sales to unregistered person.

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 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.

Exception.

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

Removal or sale of blended gasoline.

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.

Notification certificate.

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 Appendix C as Model Certificate C. Your 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.

Additional persons liable.

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

Blendstocks.

The following are gasoline blendstocks.

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

Not used to produce finished gasoline.

Gasoline blendstocks not used to produce finished gasoline are not taxable if the following conditions are met.

Removals and entries not connected to sale.

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

Removals and entries connected to sale.

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.

Sales after removal or entry.

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.

Certificate of buyer.

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 Appendix C as Model Certificate D. Your certificate must contain all information necessary to complete the model.

A certificate expires on the earliest of the following dates.

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.

Received at approved terminal or refinery.

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.

Bulk transfers to registered industrial user.

The removal of gasoline blendstocks from a pipeline or vessel is not taxable 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.

Claims by wholesale distributors.

A credit or refund is allowable to a gasoline wholesale distributor who buys gasoline at a price that includes the excise tax and then sells it to the ultimate purchaser (including an exporter) for a purpose listed in the previous list. A wholesale distributor is any person who makes retail sales of gasoline at 10 or more retail motor fuel outlets or sells gasoline to producers, retailers, or users who purchase in bulk quantities and accept delivery into bulk storage tanks. A wholesale distributor is not a producer or importer.

The wholesale distributor must have sold the gasoline at a tax-excluded price and obtained a certificate of ultimate purchaser or proof of exportation.

The wholesale distributor must complete Schedule 4 (Form 8849) and attach it to Form 8849 to make a claim for refund for gasoline sold to an ultimate purchaser for a purpose listed earlier.

By signing the Form 8849, the gasoline wholesale distributor certifies that it:

Claims by persons who paid the tax to the government.

A credit or refund is allowable to the person that paid the tax to the government if the gasoline was sold to the user (including an exporter) by either that person or by a retailer for a purpose listed earlier. A credit or refund also is allowable to that person if the gasoline was sold to the user by a wholesale distributor and either of the following is true.

By signing the claim, the person that paid the tax certifies that it:

Claims by the ultimate purchaser.

A credit or refund is allowable to the ultimate purchaser of taxed gasoline used for a nontaxable use. See Publication 378 for more information about these claims.

Gasohol.

Gasohol is a mixture of gasoline and alcohol that satisfies the alcohol-content requirements immediately after the mixture is produced. Alcohol includes ethanol and methanol. Generally, this includes ethanol used to produce ethyl tertiary butyl ether (ETBE) and methanol produced from methane gas formed in waste disposal sites. However, alcohol produced from petroleum, natural gas, coal (including peat), or any derivative or product of these items, and alcohol less than 190 proof do not qualify as alcohol for these rules.

Alcohol-content requirements.

To qualify as gasohol, a mixture must contain a specific amount of alcohol by volume, without rounding. Figure the alcohol content on a batch-by-batch basis. There are three types of gasohol.

Any mixture that contains less than 5.59% alcohol is not gasohol.

If the mixture is produced within the bulk transfer/terminal system, such as at a refinery, determine whether the mixture is gasohol when the taxable removal or entry of the mixture occurs.

If the mixture is produced outside the bulk transfer/terminal system, determine whether the mixture is gasohol immediately after the mixture is produced. If you splash blend a batch in an empty tank, figure the volume of alcohol (without adjustment for temperature) by dividing the metered gallons of alcohol by the total metered gallons of alcohol and gasoline as shown on each delivery ticket. However, if you add metered gallons of gasoline and alcohol to a tank already containing more than 0.5% of its capacity in a liquid, include the alcohol and non-alcohol fuel contained in that liquid in figuring the volume of alcohol in that batch.

Batches containing at least 9.8% alcohol.

If a mixture contains at least 9.8% but less than 10% alcohol, part of the mixture is considered to be 10% gasohol. To figure that part, multiply the number of gallons of alcohol in the mixture by 10. The other part of the mixture is excess liquid that is subject to the rules on failure to blend, discussed later.

Batches containing at least 7.55% alcohol.

If a mixture contains at least 7.55% but less than 7.7% alcohol, part of the mixture is considered to be 7.7% gasohol. To figure that part, multiply the number of gallons of alcohol in the mixture by 12.987. The other part of the mixture is excess liquid subject to the rules on failure to blend, discussed later.

Batches containing at least 5.59% alcohol.

If a mixture contains at least 5.59% but less than 5.7% alcohol, part of the mixture is considered to be 5.7% gasohol. To figure that part, multiply the number of gallons of alcohol in the mixture by 17.544. The other part of the mixture is excess liquid that is subject to the rules on failure to blend, discussed later.

Gasohol blender.

A gasohol blender is any person that regularly produces gasohol outside of the bulk transfer/terminal system for sale or use in its trade or business. A “registered gasohol blender” is a person that has been registered by the IRS as a gasohol blender. See Registration Requirements, earlier.

Tax on gasoline.

The tax on gasoline removed or entered for the production of gasohol depends on the type of gasohol that is to be produced. The rates apply to the tax imposed on the removal at the terminal rack or from the refinery, or on the nonbulk entry into the United States (as discussed under Gasoline, earlier). The rates for gasoline used to produce gasohol containing ethanol are shown on Form 720. The rates for gasoline used to produce gasohol containing methanol are shown in the instructions for Form 720.

Requirements.

The reduced rates apply if the person liable for the tax (position holder, refiner, or enterer) is a registrant and:

Certificate.

The certificate from the buyer certifies that the gasoline will be used to produce gasohol within 24 hours after purchase. The certificate may be included as part of any business records normally used for a sale. A copy of the registrant's letter of registration cannot be used as a gasohol blender's certificate. A model certificate is shown in Appendix C as Model Certificate E. Your certificate must contain all information necessary to complete the model.

A certificate expires on the earliest of the following dates.

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

Tax on gasohol.

The tax on the removal or entry of gasohol depends on the type of gasohol. The rates for gasohol containing ethanol are shown on Form 720. The rates for gasohol containing methanol are shown in the instructions for Form 720.

Later separation.

If a person separates gasoline from gasohol on which a reduced tax rate was imposed, that person is treated as the refiner of the gasoline. Tax is imposed on the removal or sale of the gasoline. This tax rate is the difference between the regular tax rate for gasoline and the tax rate imposed on the prior removal or entry of the gasohol. The person that owns the gasohol when the gasoline is separated is liable for the tax.

Failure to blend.

Tax is imposed on the removal, entry, or sale of gasoline on which a reduced rate of tax was imposed if the gasoline was not blended into gasohol, or was blended into gasohol taxable at a higher rate. This tax is the difference between the tax that should have applied and the tax actually imposed. If the gasoline was not sold, the person liable for this tax is the person that was liable for the tax on the entry or removal. If the gasoline was sold, the person that bought the gasoline in connection with the taxable removal or entry is liable for this tax.

Diesel fuel.

The term diesel fuel means any liquid that, without further processing or blending, is suitable for use as a fuel in a diesel-powered highway vehicle or train. Diesel fuel does not include gasoline, kerosene, excluded liquid, No. 5 and No. 6 fuel oils covered by ASTM specification D 396, or F-76 (Fuel Naval Distillate) covered by military specification MIL-F-16884.

An excluded liquid is either of the following.

Kerosene.

This means any of the following liquids.

However, kerosene does not include excluded liquid, discussed earlier.

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.

Aviation-grade kerosene.

This is 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).

Diesel-powered highway vehicle.

This is any self-propelled vehicle designed to carry a load over public highways (whether or not also designed to perform other functions) and propelled by a diesel-powered engine. Generally, do not consider as diesel-powered highway vehicles specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation. For more information about these vehicles and for information about vehicles not considered highway vehicles, see Publication 378.

Diesel-powered train.

This is any diesel-powered equipment or machinery that rides on rails. The term includes a locomotive, work train, switching engine, and track maintenance machine.

Removal from terminal.

All removals of undyed diesel fuel or undyed kerosene at a terminal rack are taxable. The position holder for that fuel is liable for the tax.

Terminal operator's liability.

The terminal operator is jointly and severally liable for the tax if the terminal operator provides any person with any bill of lading, shipping paper, or similar document indicating that undyed diesel fuel or undyed kerosene is dyed (discussed later).

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 will not be liable for the tax in this situation if, at the time of the removal, the following conditions are met.

Removal from refinery.

The removal of undyed diesel fuel or undyed kerosene from a refinery is taxable if the removal meets either of the following conditions.

The refiner is liable for the tax.

Exception.

The tax does not apply to a removal of undyed diesel fuel or undyed kerosene at the refinery rack if all the following conditions are met.

Entry into the United States.

The entry of undyed diesel fuel or undyed kerosene into the United States is taxable if the entry meets either of the following conditions.

The enterer is liable for the tax.

Removal from a terminal by unregistered position holder.

The removal by bulk transfer of undyed diesel fuel or undyed kerosene from a terminal is taxable if the position holder for that fuel 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.

Bulk transfers not received at approved terminal or refinery.

The removal by bulk transfer of undyed diesel fuel or undyed kerosene from a terminal or refinery or the entry of undyed diesel fuel or undyed kerosene by bulk transfer into the United States is taxable if the following conditions apply.

The owner of the undyed diesel fuel or undyed kerosene 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 operator of the facility where the undyed diesel fuel or undyed kerosene 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.

Sales to unregistered person.

The sale of undyed diesel fuel or undyed kerosene 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 buyer of the undyed diesel fuel or undyed kerosene 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.

Exception.

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