006.09.1 R1-19-4-1006. Federal Excise Tax - Motor Fuel
AR ADC 006.09.1 R1-19-4-1006Arkansas Administrative Code
Ark. Admin. Code 006.09.1 R1-19-4-1006
006.09.1 R1-19-4-1006. Federal Excise Tax - Motor Fuel
Federal excise taxes are levied on the sale of gasoline and diesel fuel. A general exemption exists for State government entities, including agencies, boards, commissions, constitutional offices, colleges and universities.
Updates, additional information and instructions on federal excise taxes may be found in the Internal Revenue Service (IRS) Publication 378 (Fuel Tax Credits and Refunds) and Publication 510 (Excise Taxes). These documents may be found on the IRS web site at http://www.irs.gov/
GASOLINE AND/OR GASOHOL
State agencies and institutions may avoid payment of fuel taxes by taking advantage of the tax exemption on Gasoline and/or Gasohol (Alternatives 1 and 2) or request a refund of tax paid under Alternative 3.
Alternative 1 - “Preferred Vendor”
The preferred method is to utilize the Wright Express fuel cards for all individual gasoline purchases for all agencies and institutions who report under the State's primary Tax Identification Number (TIN). The Office of State Procurement has established an account with Wright Express as the “ultimate vendor” for all agencies reporting under the State's primary TIN. All agencies under the State's primary TIN may get a fuel card, and the excise taxes will have been deducted from the bill monthly when presented for payment. This is the preferred method because the agency does not have to file any forms to receive the excise tax credit.
An ultimate vendor, as defined in the Internal Revenue Code (IRC) section 6416(a)(4, is treated as the person (and the only person) who paid the excise tax and thus is eligible for refund of excise tax on tax-excluded sales of gasoline to State and local governments for the State or local governments' exclusive use, but only if such ultimate vendor is registered under IRC section 4101.
Alternative 2
If the vendor is not registered under IRC section 4101, the purchasing State agency or institution may notify the fuel supplier of the State's exempt status and request that the amount due be reduced through a credit memo or credit entry on the vendor's invoice. This specific identification of the gross, excise tax and net amount on the vendor's invoice will satisfy the requirement prescribed by the IRS. The entity that actually paid the tax to the government is eligible for the refund if it purchases tax-paid gasoline and subsequently sells it at a tax-excluded price directly to a State or local government. A certificate, as described in Internal Revenue Bulletin Notice 2005-80, must be secured from the State or local government by the entity who paid the tax.
This is the preferred method for utilizing the exemption when fuel is purchased in bulk from a fuel supplier or by use of gasoline credit cards other than ones issued by Wright Express under the State's primary TIN. A blank certificate that the State agency or institution is required to provide to the person who paid the tax is found at Addendum P1-19-4-1006. The certificate should be completed and signed by the agency or institution head. The certification should be presented to the vendor, whether a credit card company or a bulk dealer.
Alternative 3
As an alternative to a tax-excluded purchase of gasoline, a State or local government is eligible to file its own claim for refund on the tax-paid purchase of gasoline. Under IRC section 6421(c), if gasoline is sold to any person for a purpose including a sale to a State or local government, the Federal government shall pay (without interest) to such person an amount equal to the product of the number of gallons of gasoline sold multiplied by the rate at which tax was imposed on such gasoline by IRC section 4081. As stated under Treas. Regs. § 48.6421-3(ii), a claim for payment of a governmental unit or exempt organization described in § 48.6421-1(c) or § 48.6421-2(c) must be filed no later than three (3) years following the close of its taxable year.
If excise tax is paid, the State may receive refunds of the tax paid by filing Form 8849 which can be found at http://www.irs.gov./. If this method of claiming the exemption is used, detailed records must be maintained to support the amounts claimed and should include the following:
Claims must be filed quarterly if the amount of the claim is $750.00 or more. If the amount of the claim is less than $750.00, the amount may be carried forward and filed in a succeeding quarter when the cumulative amount of excise taxes to be claimed exceeds $750.00. If you cannot file a claim for at least $750.00 after the fourth calendar quarter, the form must be filed as an “annual” claim after the end of the year. All claims must be filed no later than three (3) years following the close of the taxable year in which taxes were paid.
The claim information must be submitted to the Office of State Procurement to file as only one Form 8849 per tax identification number may be filed. Once Form 8849 is filed with the IRS, they will refund the amount of excise taxes paid to the agency. The receipt is to be treated as a “refund to expenditure” because the Federal government as the taxing authority is both the ultimate receiver of the tax and ultimate refunding agent. The receipt, when properly recorded, will restore the appropriation in the amount of such receipt.
DIESEL
The refund provision for sales of undyed diesel fuel to a State or local government for the State or local government's exclusive use can be found under Treas. Regs. § 48.6427-9. A registered ultimate vendor must obtain a properly executed exemption certificate from the State or local government. See P1-19-4-1006, “Sample Exemption Certificate.”
Note that, unlike gasoline refunds, there is no provision for a State or local government to receive refund or credit of diesel fuel tax paid to its supplier. The only way to avoid tax is through a tax excluded purchase from a registered ultimate vendor.
As an alternative to the purchase of undyed diesel fuel, the State may purchase tax-free dyed diesel fuel for its exclusive use. Submission of an exemption certificate to the State's supplier is not required for the purchase of dyed diesel fuel. An executed certificate may be requested from DFA-OA. This certificate will suffice for all State agencies utilizing the State's primary TIN. Those offices and institutions not using the State's TIN may complete the blank Certification Statement shown as addendum P1-19-4-1006.
Current with amendments received through February 15, 2024. Some sections may be more current, see credit for details.
Ark. Admin. Code 006.09.1 R1-19-4-1006, AR ADC 006.09.1 R1-19-4-1006
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