Agri-biodiesel.

Agri-biodiesel means biodiesel derived solely from virgin oils, including esters derived from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, and from animal fats.

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.

Biodiesel means the monoalkyl esters of long chain fatty acids derived from plant or animal matter that meet the registration requirements for fuels and fuel additives established by the Environmental Protection Agency (EPA) under section 211 of the Clean Air Act, and the requirements of the American Society of Testing Materials (ASTM) D6751.

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 hasn’t been imposed. This doesn't 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 hasn’t been imposed.

Blender.

This is the person that produces blended taxable fuel.

Bulk transfer.

This is the transfer of taxable fuel by pipeline or vessel.

Bulk transfer/terminal system.

This is the taxable 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 isn't in the bulk transfer/terminal system.

Diesel-water fuel emulsion.

A diesel-water fuel emulsion means an emulsion at least 14% of which is water. The emulsion additive used to produce the fuel must be registered by a U.S. manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003.

Dry lease aircraft exchange.

See Surtax on Any Liquid Used in a Fractional Ownership Program Aircraft as Fuel, later.

Enterer.

This is the importer of record (under customs law) for the taxable fuel. However, if the importer of record is acting as an agent, such as a customs broker, 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.

Taxable fuel is entered into the United States when it's brought into the United States and applicable customs law requires that it be entered for consumption, use, or warehousing. This doesn't 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.

Fractional ownership aircraft program and fractional program aircraft.

See Surtax on any liquid used in a fractional ownership program aircraft as fuel, later.

Measurement of taxable fuel.

Volumes of taxable fuel can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit.

Other fuels.

See Other Fuels (Including Alternative Fuels), later.

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 taxable 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 taxable fuel. A terminal operator that owns taxable 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 taxable fuel and from which taxable fuel may be removed by pipeline, by vessel, or at a rack. However, this term doesn't include a facility where only blended fuel, 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, later).

Removal.

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

Renewable diesel.

See Renewable Diesel Credits in chapter 2.

Sale.

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

Second generation biofuel.

This is any liquid fuel derived by, or from, qualified feedstocks, and meets the registration requirements for fuels and fuel additives established by the EPA under section 211 of the Clean Air Act (42 U.S.C. 7545). It also includes certain liquid fuel that is derived by, or from, any cultivated algae, cyanobacteria, or lemna. It isn't alcohol of less than 150 proof (disregard any added denaturants). See Form 6478 for more information.

State.

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

Taxable fuel.

This means gasoline, diesel fuel, and kerosene.

Terminal.

This is a storage and distribution facility supplied by pipeline or vessel, and from which taxable fuel may be removed at a rack. It doesn't 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 doesn't include any facility where finished gasoline, diesel fuel, or kerosene is stored if the facility is operated by a registrant and all such taxable 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 taxable 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 doesn't include a deep-draft ocean-going vessel.

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.

Persons that are required to be registered.

you're required to be registered if you're a:

Persons that may register.

You may, but aren’t required to, register if you're a:

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 hasn’t been revoked or suspended. The term “registrant” as used in the discussions of these fuels means a taxable fuel registrant.

Additional information.

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

Failure to register.

The penalty for failure to register if you must register, unless due to reasonable cause, is $10,000 for the initial failure, and then $1,000 each day thereafter you fail to register.

Gasoline.

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:

Aviation gasoline.

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.

Diesel fuel.

Diesel fuel means:

Excluded liquid.

An excluded liquid is either of the following:

Transmix.

Transmix means a by-product of refined products created by the mixing of different specification products during pipeline transportation.

Kerosene.

This means any of the following liquids.

However, kerosene doesn't 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.

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. Specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation aren’t generally considered diesel-powered highway vehicles. For more information about these vehicles and for information about vehicles not considered highway vehicles, see Off-highway business use (No. 2) in chapter 2.

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.

Credits or refunds.

The allowance for a credit or refund on a diesel-water fuel emulsion is discussed in chapter 2.

Commercial aviation.

Commercial aviation means any use of an aircraft in the business of transporting persons or property for compensation or hire by air, unless one of the following exemptions apply.

Foreign trade.

Foreign trade means fuel used in civil aircraft employed in foreign trade or trade between the United States and any of its possessions. The term “trade” includes the transportation of persons or property for hire and the making of the necessary preparations for such transportation. In the case of aircraft registered in a foreign country, the country must allow reciprocal benefits for aircraft registered in the United States.

Noncommercial aviation.

Noncommercial aviation means any use of an aircraft not described as commercial aviation.

Nontaxable use.

Nontaxable use means a use that is exempt from federal excise tax, excluding LUST tax. Aviation fuel used in foreign trade is exempt from federal excise tax, including LUST tax. Nontaxable uses include the following.

Registered commercial aviation operator.

Registered commercial aviation operator means a commercial aviation operator that is registered with the IRS with Form 637 activity letter “Y” that buys kerosene for its use in commercial aviation (other than foreign trade).

Secured airport terminal (SAT).

SAT means a terminal located within a secured area of an airport. Notice 2016-15 contains the criteria for a SAT designation. A list of SATs can be found at Terminal Control Locations Directory. A SAT designation relates only to fueling operations at airport terminals for purposes of federal excise taxes on kerosene for use in commercial aviation. The SAT designation doesn’t relate to, and isn’t based on, the general security of the airports or associated fuel terminals, regardless of whether the facility is included (or not included) in the list.

Qualified refueler trucks, tankers, and tank wagons treated as terminals (qualifying refueler).

For purposes of the tax imposed on kerosene for use in aviation, which is removed directly into the fuel tank of an aircraft for use in aviation, qualifying refuelers are treated as part of a terminal if all the following conditions are met:

Fractional program aircraft.

Any aircraft that, in any fractional ownership aircraft program, is listed as a fractional program aircraft in the management specifications issued to the manager of such program by the Federal Aviation Administration under subpart K of part 91, title 14, Code of Federal Regulations, and is registered in the United States.

Fractional program aircraft aren’t considered used for transportation of a qualified fractional owner or on account of such qualified fractional owner, when they're used for flight demonstration, maintenance, or crew training. In such situations, the flight isn't commercial aviation. Instead, the tax on the fuel used in the flight is imposed at the non-commercial aviation rate.

Fractional owner.

Any person owning any interest (including the entire interest) in a fractional program aircraft.

Dry lease aircraft exchange.

An agreement, documented by the written program agreements, under which the fractional program aircraft are available, on an as-needed basis without crew, to each fractional owner.

Special rule relating to deadhead service.

A fractional program aircraft won’t be considered to be used on account of a qualified fractional owner when it's used in deadhead service and a person other than a qualified fractional owner is separately charged for such service.

More information.

See section 4043 for more information on the surtax.

Certificate.

The certificate may be included as part of any business records normally used for a sale. See Model Certificate K in the Appendix.

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 the buyer uses the kerosene for use in aviation to which a certificate relates other than as stated in the certificate.

Nontaxable use.

The rate on kerosene for use in aviation is $.001 (LUST tax) if it's removed from any refinery or terminal directly into the fuel tank of an aircraft for a nontaxable use. A nontaxable use includes kerosene for the exclusive use of a state or local government. There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade.

Flash title transaction.

In a "flash title transaction," the position holder sells the kerosene to a wholesale distributor (reseller) that in turn sells the kerosene to the aircraft operator as the kerosene is being removed from a terminal into the fuel tank of an aircraft. A position holder isn't liable for tax if, among other conditions, it obtains a certificate from the operator of the aircraft into which the kerosene is delivered. In this case, the position holder will be treated as having a certificate from the operator of the aircraft if:

Reseller statement.

This is a statement that is signed under penalties of perjury by a person with authority to bind the reseller; is provided at the bottom or on the back of the certificate (or in an attached document); and contains:

Credits or payments.

If the aircraft operator doesn’t provide a certificate to the position holder, then the ultimate purchaser (the operator) may make a claim for the kerosene it uses in commercial aviation (other than foreign trade) and for nontaxable use (other than for exclusive use by a state or local government). A registered ultimate vendor may make a claim for certain sales if the ultimate purchaser waives its right to make a claim. For more information, see Kerosene for Use in Aviation, later.

Qualified methanol and ethanol fuels.

Qualified ethanol and methanol means any liquid at least 85% of which consists of alcohol produced from coal, including peat. The tax rates are listed in the Instructions for Form 720.

Partially exempt methanol and ethanol fuels.

A reduced tax rate applies to these fuels. Partially exempt ethanol and methanol means any liquid at least 85% of which consists of alcohol produced from natural gas. The tax rates are listed in the Instructions for Form 720.

Motor vehicles.

Motor vehicles include all types of vehicles, whether or not registered (or required to be registered) for highway use, that have both the following characteristics.

Inland and intracoastal waterways.

Inland and intracoastal waterways on which fuel consumption is subject to tax are specified in section 206 of the Inland Waterways Revenue Act of 1978, as amended. See Regulations section 48.4042-1(g) for a list of these waterways.

Commercial waterway transportation.

Commercial waterway transportation is the use of a vessel on inland or intracoastal waterways for either of the following purposes.

The operation of all vessels meeting either of these requirements is commercial waterway transportation regardless of whether the vessel is actually transporting property on a particular voyage. However, see Exemptions, later. The tax is imposed on fuel consumed in vessels while engaged in any of the following activities.

Liquid fuel.

Liquid fuel includes diesel fuel, Bunker C residual fuel oil, gasoline, and other fuels. The tax is imposed on liquid fuel actually consumed by a vessel's propulsion engine and not on the unconsumed fuel in a vessel's tank.

Dual use of liquid fuels.

The tax applies to all taxable liquid used as a fuel in the propulsion system of the vessel, regardless of whether the engine (or other propulsion system) is used for another purpose. The tax applies to all liquid fuel consumed by the propulsion engine even if it operates special equipment by means of a power take-off or power transfer. For example, the fuel used in the engine both to operate an alternator, generator, or pumps and to propel the vessel is taxable.

The tax doesn't apply to fuel consumed in engines not used to propel the vessel.

If you draw liquid fuel from the same tank to operate both a propulsion engine and a nonpropulsion engine, determine the fuel used in the nonpropulsion engine and exclude that fuel from the tax. The IRS will accept a reasonable estimate of the fuel based on your operating experience, but you must keep records to support your allocation.

Voyages crossing boundaries of the specified waterways.

The tax applies to fuel consumed by a vessel crossing the boundaries of the specified waterways only to the extent of fuel consumed for propulsion while on those waterways. Generally, the operator may figure the fuel so used during a particular voyage by multiplying total fuel consumed in the propulsion engine by a fraction. The numerator of the fraction is the time spent operating on the specified waterways and the denominator is the total time spent on the voyage. This calculation can't be used where it's found to be unreasonable.

Taxable event.

Tax is imposed on liquid fuel used in the propulsion system of a vessel.

The person who operates (or whose employees operate) the vessel in which the fuel is consumed is liable for the tax. If a vessel owner (or lessee) contracts with an independent contractor to operate the vessel, the independent contractor is the person liable for tax, regardless of who purchases the fuel. The tax is paid with Form 720. No tax deposits are required.

Exemptions.

Certain types of commercial waterway transportation are excluded from the tax.

Fishing vessels.

Fuel isn't taxable when used by a fishing vessel while traveling to a fishing site, while engaged in fishing, or while returning from the fishing site with its catch. A vessel isn't transporting property in the business of the owner, lessee, or operator by merely transporting fish or other aquatic animal life caught on the voyage.

However, the tax does apply to fuel used by a commercial vessel along the specified waterways while traveling to pick up aquatic animal life caught by another vessel and while transporting the catch of that other vessel.

Deep-draft ocean-going vessels.

Fuel isn't taxable when used by a vessel designed primarily for use on the high seas and that has a draft of more than 12 feet on the voyage. For each voyage, figure the draft when the vessel has its greatest load of cargo and fuel. A voyage is a round trip. If a vessel has a draft of more than 12 feet on at least one way of the voyage, the vessel satisfies the 12-foot draft requirement for the entire voyage.

Passenger vessels.

Fuel isn't taxable when used by vessels primarily for the transportation of persons. The tax doesn't apply to fuel used in commercial passenger vessels while being operated as passenger vessels, even if such vessels also transport property. Nor does it apply to ferryboats carrying passengers and their cars.

Ocean-going barges.

Fuel isn't taxable when used in tugs to move LASH (Lighter Aboard Ship) and SEABEE ocean-going barges released by their ocean-going carriers solely to pick up or deliver international cargoes.

However, it's taxable when any of the following conditions apply.

State or local governments.

No tax is imposed on the fuel used in a vessel operated by a state or local government in transporting property on official business. The ultimate use of the cargo must be for a function ordinarily carried out by governmental units. An Indian tribal government is treated as a state only if the fuel is used in the exercise of an essential tribal government function.

Qualified second generation biofuel production.

This is second generation biofuel that during the tax year:

Report the tax on Form 720. The rate of tax depends on the applicable rate used to figure the credit. No deposits are required.

Ultimate purchasers.

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

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

Claims by persons who paid the tax to the government.

Except for sales to nonprofit educational organizations and states and local governments, a credit or refund is allowable to the person that paid the tax to the government if the gasoline was sold to the ultimate purchaser (including an exporter) by either that person or by a retailer and the fuel was exported; used or sold for use as a supply for vessels or aircraft, including military aircraft, commercial fishing, and foreign trade; sold to a qualified blood collector organization; or used or sold for use in the production of other fuels. See Filing Claims, later.

Sales by registered ultimate vendors.

This is an ultimate vendor that sells gasoline or aviation gasoline to any of the following and that is purchased without the use of a credit card.

The registered ultimate vendor may make the claim if the ultimate purchaser didn’t use a credit card and waives its right to the credit or refund by providing the registered ultimate vendor with a certificate. A sample certificate is included as Model Certificate M in the Appendix. The registered ultimate vendor must have the certificate at the time the credit or refund is claimed.

The ultimate vendor must be registered by the IRS. See Registration Requirements, earlier.

Credit card purchases.

If gasoline and aviation gasoline are purchased with a credit card issued to a state or local government for its exclusive use (including essential government use by an Indian tribal government), or a nonprofit educational organization for its exclusive use, the person who extended credit to the ultimate purchaser (the credit card issuer) is treated as the person that paid the tax and makes the claim if the credit card issuer:

If the requirements above aren’t met by the credit card issuer, the credit card issuer must collect the tax from the ultimate purchaser and only the ultimate purchaser may make the claim.

How to make the claim.

If the claim is made by the credit card issuer see Form 720 Schedule C, or Schedule 8 (Form 8849).

Ultimate purchasers.

The following are nontaxable uses of diesel fuel and kerosene (defined earlier) for which a credit or refund may be allowable to an ultimate purchaser.

Blender claims.

The claim rate for undyed diesel fuel taxed at $.244 and used to produce a diesel-water fuel emulsion is $.046 per gallon of diesel fuel so used. The blender must be registered by the IRS in order to make the claim. The blender must attach a statement to the claim certifying that:

Ultimate purchasers.

Ultimate purchaser means a person who purchases kerosene for use in aviation. Generally, the ultimate purchaser is the aircraft operator.

Registered ultimate vendor.

Registered ultimate vendor means a person who sells kerosene for use in aviation to the ultimate purchaser and is registered as an ultimate vendor with an IRS Form 637 activity letter "UA," or "UV" for sales to a state or local government for its exclusive use.

Registered credit card issuer.

Registered credit card issuer means a person that issues credit cards for sales of taxable fuel to a state or local government for its exclusive use and is registered as a credit card issuer with the IRS Form 637 activity letter "CC."

Kerosene for use in commercial aviation (other than foreign trade).

An ultimate purchaser that purchases kerosene for use in commercial aviation on which tax was imposed at a rate higher than the commercial aviation rate of $.044 per gallon may make a claim for the difference between the rate that was imposed (either $.244 per gallon or $.219 per gallon) and $.044 per gallon.

The ultimate purchaser may file a claim for kerosene used in commercial aviation in which tax was originally imposed at a higher rate if the ultimate purchaser didn't provide a waiver to the ultimate vendor with respect to the claim. An ultimate purchaser doesn't need to be registered to support an ultimate purchaser claim for commercial aviation use. See Kerosene for use in aviation, nontaxable use (other than use by state or local government), later, for information about registered ultimate vendor claims.

Kerosene for use in aviation, nontaxable use (other than use by state or local government).

An ultimate purchaser, other than a state or local government, that purchases kerosene used in aviation for a nontaxable use, on which tax was imposed at a rate higher than the nontaxable use rate of $.001 per gallon (or $0 in the case of foreign trade), may make a claim for the difference between the rate that was imposed (either $.244 per gallon or $.219 per gallon) and $.001 per gallon (or $0 in the case of foreign trade). The ultimate purchaser may file a claim for nontaxable use of kerosene used in aviation if the ultimate purchaser didn't provide a waiver to the ultimate vendor with respect to the claim.

The following are the nontaxable uses of kerosene used in aviation for which an ultimate purchaser may make a claim.

See Kerosene for use in aviation, nontaxable use (other than use by state or local government), later, for information about registered ultimate vendor claims.

Kerosene for use in aviation by a state or local government.

A state or local government may generally not file an ultimate purchaser claim for nontaxable use of kerosene used in aviation. Generally, only a registered credit card issuer or a registered ultimate vendor may file a claim for kerosene sold for use in aviation to a state or local government for its exclusive use (including essential government use by an Indian tribal government).

State or local government credit card purchases.

If taxed kerosene for use in aviation is purchased with a credit card issued to a state or local government, then the person who extended credit to the state or local government (the credit card issuer) is treated as the person that paid the tax and may make the claim. In order for the credit card issuer to make the claim, the credit card issuer must be registered by the IRS with Form 637 activity letter "CC" and have the required certificate from the ultimate purchaser. A sample certificate is included as Model Certificate R in the Appendix. The credit card issuer must have the certificate at the time the claim is filed.

If the requirements above aren't met by the credit card issuer, then the credit card issuer must collect the tax from the ultimate purchaser (state or local government) and only the ultimate purchaser may make the claim.

State or local government purchases not made with a credit card.

If a state or local government purchases kerosene for use in aviation without the use of a credit card, the ultimate vendor is the only person that may make a claim. In order for the ultimate vendor to make the claim, the ultimate vendor must be registered by the IRS with Form 637 activity letter "UV" and have the required certificate from the ultimate purchaser. A sample certificate is included as Model Certificate P in the Appendix. The registered ultimate vendor must have the certificate at the time the claim is filed.

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 the Appendix as Model Certificate B. The report must contain all information needed to complete the model.

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

Optional reporting.

A first taxpayer's report isn't required for the tax imposed on:

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 isn't the owner at that time. If an optional report is filed, a copy should (but isn't 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 isn't required to) give the copy and the statement to the buyer. A model statement of subsequent seller is shown in the Appendix as Model Certificate A. 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 have filed Form 720 and paid the second tax before you file for a refund of that tax. You must make your claim for refund on Form 8849. Complete Schedule 5 (Form 8849) and attach it to your Form 8849. Don't 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.

Type of use table.

The first column of the table is the number you enter on Form 4136, Form 8849, or Form 720, Schedule C, for that type of use. For type of use 2, the mobile machinery parenthetical applies only to Form 8849 and Form 720.

On a farm for farming purposes (No. 1).

On a farm for farming purposes means fuel used in carrying on a trade or business of farming, on a farm in the United States, and for farming purposes.

Farm.

A farm includes livestock, dairy, fish, poultry, fruit, fur-bearing animals, and truck farms; orchards; plantations; ranches; nurseries; ranges; and feed yards for fattening cattle. It also includes structures such as greenhouses used primarily for the raising of agricultural or horticultural commodities. A fish farm is an area where fish are grown or raised — not merely caught or harvested.

Farming purposes.

As an owner, tenant, or operator, you use fuel on a farm for farming purposes if you use it in any of the following ways.

If any other person, such as a neighbor or custom operator, performs a service for you on your farm for any of the purposes listed in (1) or (2), you're considered to be the ultimate purchaser that used the fuel on a farm for farming purposes.

If doubt exists whether the owner, the tenant, or the operator of the farm bought the fuel, determine who bore the cost of the fuel. For example, if the owner of a farm and the tenant equally share the cost of gasoline that is used on a farm for farming purposes, each can claim a credit for the tax on one-half of the fuel used.

Custom application of fertilizer and pesticide.

Fuel used on a farm for farming purposes includes fuel used in the application of fertilizer, pesticides, or other substances, including aerial applications. Generally, the applicator is treated as having used the fuel on a farm for farming purposes. For aviation gasoline, the aerial applicator makes the claim as the ultimate purchaser. For kerosene used in aviation, the ultimate purchaser may make the claim or waive their right to make the claim to the registered ultimate vendor.

Fuel used between airfield and farm.

Fuel used by an aerial applicator for the direct flight between the airfield and one or more farms is treated as a farming purpose.

Fuel not used for farming.

Fuel isn't used on a farm for farming purposes if it's used in any of the following ways.

Off-highway business use (No. 2).

Off-highway business use means fuel used in a trade or business or in an income-producing activity other than as a fuel in a highway vehicle registered or required to be registered for use on public highways. The terms “highway vehicle,” “public highway,” and “registered” are defined below. Don't consider any use in a boat as an off-highway business use.

Off-highway business use includes fuels used in any of the following ways.

Generally, this use doesn't include nonbusiness use of fuel, such as use by minibikes, snowmobiles, power lawn mowers, chain saws, and other yard equipment.

Highway vehicle.

A highway vehicle is any self-propelled vehicle designed to carry a load over public highways, whether or not it's also designed to perform other functions. Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses, and highway-type trucks and truck tractors. A vehicle is a highway vehicle even though the vehicle's design allows it to perform a highway transportation function for only one of the following.

Vehicles not considered highway vehicles.

Generally, the following kinds of vehicles aren’t considered highway vehicles for purposes of the credit or refund of fuel taxes.

Public highway.

A public highway includes any road in the United States that isn't a private roadway. This includes federal, state, county, and city roads and streets.

Registered.

A vehicle is considered registered when it's registered or required to be registered for highway use under the law of any state, the District of Columbia, or any foreign country in which it's operated or situated. Any highway vehicle operated under a dealer's tag, license, or permit is considered registered. A highway vehicle isn't considered registered solely because a special permit allows the vehicle to be operated at particular times and under specified conditions.

Dual use of propulsion motor.

Off-highway business use doesn't include any fuel used in the propulsion motor of a registered highway vehicle even though that motor also operates special equipment by means of a power take-off or power transfer. It doesn't matter if the special equipment is mounted on the vehicle.

Use in separate motor.

Off-highway business use includes fuel used in a separate motor to operate special equipment, such as a refrigeration unit, pump, generator, or mixing unit. If you draw fuel from the same tank that supplies fuel to the propulsion motor, you must figure the quantity used in the separate motor operating the special equipment. You may make a reasonable estimate based on your operating experience and supported by your records.

You can use devices that measure the miles the vehicle has traveled (such as hubometers) to figure the gallons of fuel used to propel the vehicle. Add to this amount the fuel consumed while idling or warming up the motor before propelling the vehicle. The difference between your total fuel used and the fuel used to propel the vehicle is the fuel used in the separate motor.

Fuel lost or destroyed.

You can't treat fuel lost or destroyed through spillage, fire, or other casualty as fuel used in an off-highway business use.

Export (No. 3).

Export means fuel transported from the United States with the intention that the fuel remain in a foreign country or possession of the United States. Fuel isn't exported if it's in the fuel supply tank of a vehicle or aircraft.

In a boat engaged in commercial fishing (No. 4).

In a boat engaged in commercial fishing means fuel used in taking, catching, processing, or transporting fish, shellfish, or other aquatic life for commercial purposes, such as selling or processing the catch, on a specific trip basis. They include boats used in both fresh and saltwater fishing. They don't include boats used for both sport fishing and commercial fishing on the same trip.

In certain intercity and local buses (No. 5).

In certain intercity and local buses means fuel used in a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. The bus must be engaged in one of the following activities.

Available to the general public.

This means you offer service to more than a limited number of persons or organizations. If a bus operator normally provides charter operations through travel agencies but has buses available for chartering by the general public, this service is available to the general public. A bus doesn't qualify when its operator uses it to provide exclusive services to only one person, group, or organization. Also, intercity bus transportation doesn't include transporting students and employees of schools or intercity transportation in a qualified local bus.

In a qualified local bus (No. 6).

In a qualified local bus means fuel used in a bus meeting all the following requirements.

Intracity passenger land transportation.

This is the land transportation of passengers between points located within the same metropolitan area. It includes transportation along routes that cross state, city, or county boundaries if the routes remain within the metropolitan area.

Under contract.

A bus is under contract with a state or local government only if the contract imposes a bona fide obligation on the bus operator to furnish the transportation.

More than a nominal subsidy.

A subsidy is more than nominal if it's reasonably expected to exceed an amount equal to 3 cents multiplied by the number of gallons of fuel used in buses on subsidized routes. A company that operates its buses along subsidized and unsubsidized intracity routes may consider its buses qualified local buses only when the buses are used on the subsidized intracity routes.

In a school bus (No. 7).

In a school bus means fuel used in a bus engaged in the transportation of students or employees of schools. A school is an educational organization with a regular faculty and curriculum and a regularly enrolled body of students who attend the place where the educational activities occur.

For diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel (No. 8).

Diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train (not including off-highway business use) means undyed diesel fuel and undyed kerosene used:

In foreign trade (No. 9).

In foreign trade means fuel used in civil aircraft employed in foreign trade or trade between the United States and any of its possessions. The term trade includes the transportation of persons or property for hire and the making of the necessary preparations for such transportation. In the case of aircraft registered in a foreign country, the country must allow reciprocal benefits for aircraft registered in the United States.

Certain helicopter and fixed-wing aircraft uses (No. 10).

Includes:

Certain helicopter uses.

Certain helicopter uses means fuel used by a helicopter for any of the following purposes.

During a use described in items (1) and (2), the helicopter must not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to 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 aircraft uses.

Fixed-wing aircraft uses means fuel used by a fixed-wing aircraft for any of the following purposes.

Exclusive use by a qualified blood collector organization (No. 11).

Exclusive use by a qualified blood collector organization means fuel used by the qualified blood collector organization for its exclusive use in the collection, storage, or transportation of blood.

Qualified blood collector organization.

A qualified blood collector organization is one that is:

In a highway vehicle owned by the United States that isn't used on a highway (No. 12).

In a highway vehicle owned by the United States that isn't used on a highway means fuel used in a vehicle that wasn't used on public highways during the period covered by the claim. This use applies whether or not the vehicle is registered or required to be registered for highway use.

Exclusive use by a nonprofit educational organization (No. 13).

Exclusive use by a nonprofit educational organization means fuel used by an organization exempt from income tax under section 501(a) that meets both of the following requirements.

A nonprofit educational organization also includes a school operated by a church or other organization described in section 501(c)(3) if the school meets the above requirements.

Exclusive use by a state, political subdivision of a state, or the District of Columbia (No. 14).

Exclusive use by a state, political subdivision of a state, or the District of Columbia means fuel purchased by the state or local government for its exclusive use. A state or local government is any state, any political subdivision thereof, or the District of Columbia. An Indian tribal government is treated as a state only if the fuel is used in an activity that involves the exercise of an essential tribal government function. Gasoline, diesel fuel, and kerosene used by the American Red Cross is considered to be the use of these fuels by a state.

In an aircraft or vehicle owned by an aircraft museum (No. 15).

In an aircraft or vehicle owned by an aircraft museum means fuel used in an aircraft or vehicle that is owned by an organization that meets all the following requirements.

The aircraft or vehicle (such as a ground servicing vehicle for aircraft) must be used exclusively for the purposes described in item (3).

In military aircraft (No. 16).

In a military aircraft means fuel used in an aircraft owned by the United States or any foreign nation and constituting a part of its armed forces.

In commercial aviation (other than foreign trade).

See Commercial aviation, earlier, for the definition.

Use in a train.

Use in a train means fuel used in the propulsion engine of equipment or machinery that rides on rails. This includes use in a locomotive, work train, switching engine, and track maintenance machine.

Coordination with income tax credit.

Only one credit may be claimed for any amount of biodiesel or renewable diesel.

Biodiesel or renewable diesel mixture credit claimant.

Claimant produced a biodiesel mixture by mixing biodiesel with diesel fuel. Claimant produced a renewable diesel mixture by mixing renewable diesel with diesel fuel (other than renewable diesel).

The biodiesel used to produce the biodiesel mixture must meet the EPA’s registration requirements for fuels and fuel additives under section 211 of the Clean Air Act.

The person that produced and sold or used the mixture in their trade or business is the only person eligible to make this claim. The credit is based on the gallons of biodiesel or renewable diesel in the mixture.

Form 720, Claim requirements.

See the Instructions for Form 720 for the biodiesel or renewable diesel mixture claim requirements.

Alternative fuel credit claimant.

For the alternative fuel credit, the registered alternative fueler who (1) sold an alternative fuel at retail and delivered it into the fuel supply tank of a motor vehicle or motorboat; (2) sold an alternative fuel, delivered it in bulk for taxable use in a motor vehicle or motorboat, and received the required statement from the buyer; (3) used an alternative fuel (not sold at retail or in bulk as previously described) motor vehicle or motorboat; or (4) sold an alternative fuel used as a fuel in aviation is the only person eligible to make this claim.

Carbon capture requirement.

A credit for Fischer-Tropsch process liquid fuel derived from coal (including peat) can be claimed only if the fuel is derived from coal produced at a gasification facility that separates and sequesters at least 75% of the facility's total carbon dioxide emissions.

Alternative fuel credit.

The registered alternative fueler is the person eligible to make the claim. An alternative fueler is the person liable for tax on alternative fuel under the rules for taxable events for other fuels, or would be liable but for an exemption for nontaxable uses. An alternative fueler includes a person who sells for use or uses an alternative fuel in aviation.

Alternative fuel mixture credit claimant.

For the alternative fuel mixture credit, the registered alternative fueler that produced and sold or used the mixture as a fuel in their trade or business is the only person eligible to make this claim. The credit is based on the gallons of alternative fuel in the mixture. An alternative fuel mixture is a mixture of alternative fuel and section 4081 taxable fuel (gasoline, diesel fuel, or kerosene).

.For claims made on or after January 8, 2018, alternative fuel mixture means a mixture of taxable fuel and alternative fuel other than liquefied petroleum gas (LPG), compressed natural gas (CNG), liquefied natural gas (LNG), liquefied gas derived from biomass, or compressed gas derived from biomass..

Registration.

You must be registered by the IRS to be eligible to claim the section 6426 fuel credit. See Registration Requirements in chapter 1.

Credits for fuel provide incentive for U.S. production.

The section 6426 fuel credit may not be claimed for biodiesel or alternative fuel that is produced outside the United States for use as a fuel outside the United States. The United States includes any possession of the United States.

No credit for fuels derived from paper or pulp production.

Credit for alternative fuels and alternative fuel mixtures isn't available for any fuel derived from the production of paper or pulp.

Ultimate purchaser.

Ultimate purchasers may make claims for the nontaxable use of fuels on Form 4136; Schedule 1 (Form 8849); or Form 720, Schedule C, if reporting excise tax liability on that return. If you're an ultimate purchaser, you must keep the following records.

For more information about keeping records, see Publication 583, Starting a Business and Keeping Records, or chapter 1 of Publication 17, Your Federal Income Tax for Individuals.

Exceptions.

Registered ultimate vendor.

Registered ultimate vendors may make claims for certain sales of fuels on Form 720, Schedule C; Form 4136; or Schedule 2 (Form 8849) if reporting excise tax liability on that return. If you're a registered ultimate vendor, you must keep certain information pertaining to the sale of the fuel.

To make a claim, you must have sold the fuel at a tax-excluded price, repaid the tax to the buyer, or obtained the buyer's written consent to the allowance of the claim. you're required to have a valid certificate or waiver in your possession in order to make the claim.

In addition, you must have a registration number that hasn’t been revoked or suspended. See Form 637.

State use.

To make a claim as an ultimate vendor (state), you must have a UV registration number and the fuel can't be purchased with a credit card as explained below. If you sell undyed diesel fuel, undyed kerosene, or kerosene for use in aviation for use by a state or local government, you must keep the following information.

Nonprofit educational organization and state use.

To make a claim as an ultimate vendor (nonprofit educational organization or state), you must have a UV registration number and the fuel can't be purchased with a credit card as explained later. If you sell gasoline or aviation gasoline to a nonprofit educational organization for its exclusive use or to a state or local government for its exclusive use, you must keep the following information.

Blocked pump.

To make a claim as an ultimate vendor (blocked pump), you must have a UP registration number. If you sell undyed kerosene (other than kerosene for use in aviation) from a pump that qualifies as a blocked pump because it's locked by you after each sale and is unlocked by you at the request of the buyer, you must keep the following information for each sale of more than 5 gallons.

Certain intercity and local bus use.

To make a claim as an ultimate vendor of undyed diesel fuel or undyed kerosene used in certain intercity and local buses, you must have a UB registration number. You must keep the following information.

Kerosene for use in commercial aviation or noncommercial aviation.

To make a claim as an ultimate vendor of kerosene for use in commercial aviation (other than foreign trade) or noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia), you must have a UA registration number. See Kerosene for Use in Aviation, earlier, for a list of nontaxable uses. You must keep the following information.

Kerosene for use in nonexempt, noncommercial aviation.

To make a claim as an ultimate vendor of kerosene for use in nonexempt, noncommercial aviation, you must have a UA registration number. You must keep the following information.

Claims by credit card issuers.

For sales of gasoline, aviation gasoline, diesel fuel, kerosene, or kerosene for use in aviation that are purchased by an exempt user with the use of a credit card, the registered credit card issuer is the only person who can make the claim. An exempt user for this purpose is:

If gasoline is purchased without the use of a credit card, then the registered ultimate vendor of the gasoline may make the claim for refund or credit. However, if the gasoline is purchased with a credit card issued to a state, but the credit card issuer isn't registered by the IRS or doesn't meet the conditions described, the credit card issuer must collect the tax and the state may make the claim.

If diesel fuel, kerosene, or kerosene for use in aviation is purchased without the use of a credit card, the registered ultimate vendor may make the claim for refund or credit. A state isn't allowed to make a claim for these fuels. However, if the diesel fuel or kerosene is purchased with a credit card issued to a state, but the credit card issuer isn't registered by the IRS or doesn't meet the conditions described, the credit card issuer must collect the tax and the state may make the claim.

The claim from the credit card issuer must contain the following information as it applies to the fuel covered in the claim.

Taxpayer identification number.

To file a claim, you must have a taxpayer identification number. Your taxpayer identification number can be:

If you normally file only a U.S. individual income tax return (such as Form 1040 or 1040-NR), use your SSN or ITIN. You get an SSN by filing Form SS-5, Application for a Social Security Card, with the Social Security Administration. To get an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS.

If you operate a business, use your EIN. If you don't have an EIN, you may apply for one online. Go to IRS.gov/Businesses/Small and click on the “Employer ID Numbers (EINs)” link. You may also apply for an EIN by faxing or mailing Form SS-4, Application for Employer Identification Number, to the IRS.

Crude oil.

Tax is imposed on crude oil when it’s received at a U.S. refinery. The operator of the refinery is liable for the tax.

Tax is imposed on domestic crude oil that’s used before it's received at a U.S. refinery. However, the use of crude oil for extracting oil or natural gas on the premises where such crude oil was produced isn't taxable. The user is liable for the tax.

Imported petroleum products.

Tax is imposed on petroleum products when they enter the United States for consumption, use, or warehousing. The person entering the petroleum product into the country is liable for the tax, including the tax on imported crude oil, even if it's subsequently received at a U.S. refinery.

Tax is imposed only once on any imported petroleum product. So, the operator of a U.S. refinery that receives imported crude oil must establish that they’re not liable for the tax by establishing that the petroleum tax has already been imposed on the imported crude oil.

Taxable event.

Tax is imposed on an ODC when it's first used or sold by its manufacturer or importer. The manufacturer or importer is liable for the tax.

Use of ODCs.

You use an ODC if you put it into service in a trade or business or for the production of income. Also, an ODC 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 isn't a use of the ODC.

The creation of a mixture containing an ODC is treated as a taxable use of the ODC contained in the mixture. An ODC is contained in a mixture only if the chemical identity of the ODC isn't 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 on Form 6627. You can revoke this choice only with IRS consent.

The creation of a mixture for export or for use as a feedstock isn't 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 as the sample certificate set forth in Regulations section 52.4682-2(d)(5). The certificate may be included as part of the sales documentation. 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 (UN). To determine if a country has signed the Montreal Protocol, contact the UN at 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, see Form 637. Also, 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 same form as the sample certificate set forth in Regulations section 52.4682-5(d)(3). The tax benefit of this exemption is limited. For more information, see Regulations section 52.4682-5.

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 as use as a feedstock, but use of an ODC in a mixture doesn't 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 same form as the sample certificate set forth in Regulations section 52.4682-2(d)(2). Keep the certificate with your records.

Credits or refunds.

A credit or refund (without interest) of tax paid on ODCs may be claimed if a taxed ODC is:

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 EPA as proof that the ODCs were exported.

Regular method taxpayers.

For regular method taxpayers, the report must be filed by the due date of the Form 720 on which the tax would have been reported.

Alternative method taxpayers.

For alternative method taxpayers, the report must be filed by the due date of the Form 720 that includes an adjustment to the separate account for the uncollected tax. See Alternative method in
chapter 11.

Where to file.

Don't file the uncollected tax report with Form 720. Instead, mail the report to:

Local telephone service.

This includes 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 doesn't also provide access to a local telecommunications system.

Local-only service.

Local-only service is local telephone service as described above, provided under a plan that doesn't include long distance telephone service or that separately states the charge for local service on the bill to customers. Local-only service also includes any facility or services provided in connection with this service, even though these services and facilities may also be used with long-distance service.

Private communication service.

Private communication service isn't 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.

Teletypewriter exchange service.

This includes 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 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. Don't include in the tax base state or local sales or use taxes that are separately stated on the taxpayer's bill.

Partial payments.

The tax applies to each partial payment received when taxable articles are:

Fishing rods and fishing poles.

The tax on fishing rods and fishing poles (and component parts) is 10% of the sales price not to exceed $10 per article. The tax is paid by the manufacturer, producer, or importer.

Fishing tackle boxes.

The tax on fishing tackle boxes is 3% of the sales price. The tax is paid by the manufacturer, producer, or importer.

Electric outboard boat motors.

A tax of 3% of the sale price is imposed on the sale by the manufacturer of electric outboard motors. This includes any parts or accessories sold on or in connection with the sale of those articles.

Certain equipment resale.

The tax on the sale of sport fishing equipment is imposed a second time under the following circumstances. If the manufacturer sells a taxable article to any person, the manufacturer is liable for the tax. If the purchaser or any other person then sells it to a person who is related (discussed next) to the manufacturer, that related person is liable for a second tax on any subsequent sale of the article. The second tax, however, isn't imposed if the constructive sale price rules under section 4216(b) apply to the sale by the manufacturer.

If the second tax is imposed, a credit for tax previously paid by the manufacturer is available provided the related person can document the tax paid. The documentation requirement is generally satisfied only through submission of copies of actual records of the person that previously paid the tax.

Related person.

For the tax on sport fishing equipment, a person is a related person of the manufacturer if that person and the manufacturer have a relationship described in section 465(b)(3)(C).

Exemption for certain wooden arrows.

The tax doesn't apply to any shaft made of all natural wood with no laminations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished product) and used in the manufacture of any arrow that after its assembly meets both of the following conditions.

Tax rates.

The tax on underground-mined coal is the lower of:

.The tax rate for underground-mined coal from 1/1/2022 to 9/30/2022 were the lower of 50 cents a ton or 2% of the sale price..

The tax on surface-mined coal is the lower of:

.The tax rate for surface-mined coal from 1/1/2022 to 9/30/2022 were the lower of 25 cents a ton or 2% of the sales price..

Coal will be taxed at the 4.4% (2% if sold between 01/01/2022 and 09/30/2022) rate if the selling price is less than $25 a ton for underground-mined coal and less than $12.50 a ton for surface-mined coal. Apply the tax proportionately if a sale or use includes a portion of a ton.

Coal production.

Coal is produced from surface mines if all geological matter (trees, earth, rock) above the coal is removed before the coal is mined. Treat coal removed by auger and coal reclaimed from coal waste refuse piles as produced from a surface mine.

Treat coal as produced from an underground mine when the coal isn't produced from a surface mine. In some cases, a single mine may yield coal from both surface mining and underground mining. Determine if the coal is from a surface mine or an underground mine for each ton of coal produced and not on a mine-by-mine basis.

Determining tonnage or selling price.

The producer pays the tax on coal at the time of sale or use. In figuring the selling price for applying the tax, the point of sale is f.o.b. (free on board) mine or f.o.b. cleaning plant if you clean the coal before selling it. This applies even if you sell the coal for a delivered price. The f.o.b. mine or f.o.b. cleaning plant is the point at which you figure the number of tons sold for applying the applicable tonnage rate, and the point at which you figure the sale price for applying the 4.4% rate (2% if sold between 1/1/2022 and 9/30/2022).

The tax applies to the full amount of coal sold. However, the IRS allows a calculated reduction of the taxable weight of the coal for the weight of the moisture in excess of the coal's inherent moisture content. Include in the sale price any additional charge for a freeze-conditioning additive in figuring the tax.

Don't include in the sales price the excise tax imposed on coal.

Coal used by the producer.

The tax on coal applies if the coal is used by the producer in other than a mining process. A mining process means the same for this purpose as for percentage depletion. For example, the tax doesn't apply if, before selling the coal, you break it, clean it, size it, or apply any other process considered mining under the rules for depletion. In this case, the tax applies only when you sell the coal. The tax doesn't apply to coal used as fuel in the coal drying process since it's considered to be used in a mining process. However, the tax does apply when you use the coal as fuel or as an ingredient in making coke since the coal isn't used in a mining process.

You must use a constructive sale price to figure the tax under the 4.4% (2% if sold between 1/1/2022 and 9/30/2022) rate if you use the coal in other than a mining process. Base your constructive sale price on sales of a like kind and grade of coal by you or other producers made f.o.b. mine or cleaning plant. Normally, you use the same constructive price used to figure your percentage depletion deduction.

Blending.

If you blend surface-mined coal with underground-mined coal during the cleaning process, you must figure the excise tax on the sale of the blended, cleaned coal. Figure the tax separately for each type of coal in the blend. Base the tax on the amount of each type in the blend if you can determine the proportion of each type of coal contained in the final blend. Base the tax on the ratio of each type originally put into the cleaning process if you can't determine the proportion of each type of coal in the blend. However, the tax is limited to 4.4% (2% if sold between 1/1/2022 and 9/30/2022) of the sale price per ton of the blended coal.

Exemption from tax.

The tax doesn't apply to sales of lignite and imported coal. The only other exemption from the tax on the sale of coal is for coal exported as discussed next.

Exported.

The tax doesn't apply to the sale of coal if the coal is in the stream of export when sold by the producer and the coal is actually exported.

Coal is in the stream of export when sold by the producer if the sale is a step in the exportation of the coal to its ultimate destination in a foreign country. For example, coal is in the stream of export when:

Proof of export includes any of the following items.

Special rule, manufacturer's retail stores.

The excise tax on taxable tires is imposed at the time the taxable tires are delivered to the manufacturer-owned retail stores, not at the time of sale.

Tires on imported articles.

The importer of an article equipped with taxable tires is treated as the manufacturer of the tires and is liable for the taxable tire excise tax when the article is sold (except in the case of an automobile bus chassis or body with tires).

Tires exempt from tax.

The tax on taxable tires doesn't apply to the following items.

Qualifying intercity or local bus.

This is any bus used mainly (more than 50%) to transport the general public for a fee and that either operates on a schedule along regular routes or seats at least 20 adults (excluding the driver).

Qualifying school bus.

This is any bus substantially all the use (85% or more) of which is to transport students and employees of schools.

Credit or refund.

A credit or refund (without interest) is allowable on tax-paid tires if the tires have been:

Also, a credit or refund (without interest) is allowable on tax-paid tires sold by any person on, or in connection with, any other article that is sold or used in an activity listed above.

The person who paid the tax is eligible to make the claim.

Automobiles.

An automobile (including limousines) means any four-wheeled vehicle that is:

Vehicles not subject to tax.

For the gas guzzler tax, the following vehicles aren’t considered automobiles.

The manufacturer can sell a vehicle described in item (3) tax free only when the sale is made directly to a purchaser for the described emergency use and the manufacturer and purchaser (other than a state or local government) are registered.

Treat an Indian tribal government as a state only if the police or other law enforcement purposes are an essential tribal government function.

Model type.

Model type is a particular class of automobile as determined by EPA regulations.

Fuel economy.

Fuel economy is the average number of miles an automobile travels on a gallon of gasoline (or diesel fuel) rounded to the nearest 0.1 mile as figured by the EPA.

Imported automobiles.

The tax also applies to automobiles that don’t have a prototype-based fuel economy rating assigned by the EPA. An automobile imported into the United States without a certificate of conformity to U.S. emission standards and that has no assigned fuel economy rating must be either:

An imported automobile that has been converted to conform to an automobile already certified for sale in the United States may use the fuel economy rating assigned to that certified automobile.

A fuel economy rating isn't generally available for modified imported automobiles because the EPA doesn't require a highway fuel economy test on them. A separate highway fuel economy test would be required to devise a fuel economy rating (otherwise the automobile is presumed to fall within the lowest fuel economy rating category).

For more information about fuel economy ratings for imported automobiles, see Revenue Ruling 86-20 and Revenue Procedure 86-9 in Cumulative Bulletin 1986-1, and Revenue Procedure 87-10 in Cumulative Bulletin 1987-1.

Exemptions.

No one is exempt from the gas guzzler tax, including the federal government, state and local governments, qualified blood collector organizations, and nonprofit educational organizations. However, see Vehicles not subject to tax, earlier.

Form 6197.

Use Form 6197 to figure your tax liability for each quarter. Attach Form 6197 to your Form 720 for the quarter. See the Form 6197 instructions for more information and the one-time filing rules.

Credit or refund.

If the manufacturer paid the tax on a vehicle that is used or resold for an emergency use, the manufacturer can claim a credit or refund. For information about how to file for credits or refunds, see the Instructions for Form 720 or Form 8849.

Taxable use.

Any manufacturer (including a governmental entity) that uses a taxable vaccine before it's sold will be liable for the tax in the same manner as if the vaccine was sold by the manufacturer.

Credit or refund.

A credit or refund (without interest) is available if the vaccine is:

Conditions to allowance.

To claim a credit or refund, the person who paid the tax must have repaid or agreed to repay the tax to the ultimate purchaser of the vaccine or obtained the written consent of such purchaser to allowance of the credit or refund.

Electronic deposit requirement.

You must use electronic funds transfer to make excise tax deposits. Generally, electronic funds transfers are made using EFTPS. If you don’t want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make deposits on your behalf. Also, you may arrange for your financial institution to submit a same-day wire payment on your behalf.

EFTPS is a free service provided by the Department of Treasury. Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. To get more information about EFTPS or to enroll in EFTPS, visit www.eftps.gov or call 1-800-555-4477. Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started.

Depositing on time. For EFTPS deposits to be on time, you must submit the transaction at least 1 day before the date the deposit is due (by 8:00 p.m. Eastern time).

Same-day wire payment option.

If you fail to submit a deposit transaction on EFTPS by 8:00 p.m. Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Collection Service (FTCS). To use the same-day wire payment method, you will need to make arrangements with your financial institution ahead of time. Please check with your financial institution regarding availability, deadlines, and costs. Your financial institution may charge you a fee for payments made this way. To learn more about the information you will need to provide your financial institution to make a same-day wire payment, visit IRS.gov/Payments and click on Same-day wire.

Regular method.

The deposit of tax for a semimonthly period is due by the 14th day following that period. Generally, this is the 29th day of a month for the first semimonthly period and the 14th day of the following month for the second semimonthly period. If the 14th or the 29th day falls on a Saturday, Sunday, or legal holiday, you must make the deposit by the immediately preceding day that isn't a Saturday, Sunday, or legal holiday.

Alternative method (IRS Nos. 22, 26, 27, and 28).

Deposits of communications and air transportation taxes may be based on taxes included in amounts billed or tickets sold during a semimonthly period instead of on taxes actually collected during the period. Under the alternative method, the tax included in amounts billed or tickets sold during a semimonthly period is considered collected during the first 7 days of the second following semimonthly period. The deposit of tax is due by the third banking day after the seventh day of that period.

For an example of the alternative method, see the Instructions for Form 720.

Special rule for deposits of taxes in September.

See the Instructions for Form 720 for a special rule on deposits made in September.

Net tax liability.

Your net tax liability is your tax liability for the period minus any claims on Form 720, Schedule C for the period. You may figure your net tax liability for a semimonthly period by dividing your net liability incurred during the calendar month by two. If you use this method, you must use it for all semimonthly periods in the calendar quarter.