Publication 378: Fuel Tax Credits and Refunds; Fuels

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Table of Contents

Federal excise taxes are imposed on certain fuels. This chapter lists the nontaxable uses (defined in chapter 2) of each fuel for which a credit or refund of the excise tax may be allowed to an ultimate purchaser. It also covers the credit or refund allowed for gasohol blending and for certain sales by registered ultimate vendors of undyed diesel fuel and undyed kerosene.

The ultimate purchaser of compressed natural gas and special motor fuels other than liquefied petroleum gas used in buses, discussed later, generally does not use taxed fuel for a nontaxable use and no credit or refund would be allowable. These fuels are described in Publication 510.

Type of use table.

The nontaxable uses listed under each fuel are from Table 1–1. The first column of the table is the number you enter on Form 4136 (Nos. 1–11) or Form 8849 (Nos. 1–16) for that type of use.

Table 1–1. Type of Use Table

No.	Type of Use (See Chapter 2 for definition of terms)
1	On a farm for farming purposes
2	Off-highway business use (for business use other than in a highway vehicle registered or required to be registered for highway use)
3	Export
4	In a boat engaged in commercial fishing
5	In certain intercity and local buses
6	For diesel fuel in a qualified local bus
7	In a bus transporting students and employees of schools (school buses)
8	For diesel fuel and kerosene used other than as a fuel in the propulsion engine of a train or diesel-powered highway vehicle (but not off-highway business use)
9	In foreign trade
10	Certain helicopter and fixed-wing air ambulance uses
11	For aviation fuel used other than as a fuel in the propulsion engine of an aircraft
12	In a highway vehicle owned by the United States that is not used on a highway
13	Exclusive use by a nonprofit educational organization
14	Exclusive use by a state, political subdivision of a state, or the District of Columbia
15	In an aircraft or vehicle owned by an aircraft museum
16	In military aircraft

Gasoline and Gasohol

Gasoline means all products (including gasohol) 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. It includes gasoline blendstocks, discussed in Publication 510. Aviation gasoline is discussed below.

Gasohol means 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 that is less than 190 proof, do not qualify as alcohol for these rules. See Publication 510 for a complete discussion of gasohol.

Nontaxable Uses

The following are the uses of gasoline and gasohol for which a credit or refund may be allowable to an ultimate purchaser.

On a farm for farming purposes (credit only).
Off-highway business use.
Export.
In a boat engaged in commercial fishing.
In an intercity or local bus.
In a school bus.
In a highway vehicle owned by the United States that is not used on a highway.
Exclusive use by a nonprofit educational organization.
Exclusive use by a state, political subdivision of a state, or the District of Columbia.
In an aircraft or vehicle owned by an aircraft museum.

A gasohol blender is any person that regularly produces gasohol outside of the bulk transfer/terminal system for sale or use in the blender's trade or business. A gasohol blender may be allowed a credit or refund for part of the excise tax imposed on gasoline the blender uses to produce gasohol.

The amount you may claim is based on the gallons of gasoline used to make gasohol. You cannot take a refund or credit if the gasoline was taxed at a reduced rate. See Publication 510 for a complete discussion of gasohol.

Aviation gasoline 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.

The following are the uses of aviation gasoline for which a credit or refund may be allowable to an ultimate purchaser.

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. A liquid is suitable for this use if the liquid has practical and commercial fitness for use in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. A liquid may possess this practical and commercial fitness even though the specified use is not the liquid´s predominant use. However, a liquid does not possess this practical and commercial fitness solely by reason of its possible or rare use as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered 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.

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.

The following are the uses of undyed diesel fuel for which a credit or refund may be allowable to an ultimate purchaser.

The following are the uses of undyed kerosene for which a credit or refund may be allowable to an ultimate purchaser.

Only a registered ultimate vendor (defined below), can claim a credit or refund for:

No credit or refund is allowable for any use of dyed diesel fuel and dyed kerosene. You buy these fuels excise tax free. See Publication 510 for more information about dyed fuels.

The following are the sales for which a credit or refund may be allowable to the registered ultimate vendor only.

Blocked pump.

A blocked pump is a fuel pump that meets all the following requirements.

It is used to make retail sales of undyed kerosene for use by the buyer in any nontaxable use.
It is at a fixed location.
It is identified with a legible and conspicuous notice stating, “UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY.”
It meets either of the following conditions.
1. It cannot reasonably be used to dispense fuel directly into the fuel supply tank of a diesel-powered highway vehicle or train.
2. It is locked by the vendor after each sale and unlocked by the vendor only in response to a buyer's request for undyed kerosene for use other than as a fuel in a diesel-powered highway vehicle or train.

Aviation fuel means any liquid, other than gasoline or diesel fuel, that is suitable for use as a fuel in an aircraft.

The following are the uses of aviation fuel for which a credit or refund may be allowable to an ultimate purchaser.

Liquefied petroleum gas (LPG) includes propane, butane, and pentane, or mixtures of those gases.

The following are the uses of LPG for which a credit or refund may be allowable to an ultimate purchaser.