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2012 1040x

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2012 1040x

2012 1040x 2. 2012 1040x   Entertainment Table of Contents Directly-Related Test Associated TestMeetings at conventions. 2012 1040x 50% LimitExceptions to the 50% Limit What Entertainment Expenses Are Deductible?A meal as a form of entertainment. 2012 1040x Deduction may depend on your type of business. 2012 1040x Exception for events that benefit charitable organizations. 2012 1040x Food and beverages in skybox seats. 2012 1040x What Entertainment Expenses Are Not Deductible?Out-of-pocket expenses. 2012 1040x You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. 2012 1040x The rules and definitions are summarized in Table 2-1 . 2012 1040x You can deduct entertainment expenses only if they are both ordinary and necessary and meet one of the following tests. 2012 1040x Directly-related test. 2012 1040x Associated test. 2012 1040x Both of these tests are explained later. 2012 1040x An ordinary expense is one that is common and accepted in your trade or business. 2012 1040x A necessary expense is one that is helpful and appropriate for your business. 2012 1040x An expense does not have to be required to be considered necessary. 2012 1040x The amount you can deduct for entertainment expenses may be limited. 2012 1040x Generally, you can deduct only 50% of your unreimbursed entertainment expenses. 2012 1040x This limit is discussed later under 50% Limit. 2012 1040x Directly-Related Test To meet the directly-related test for entertainment expenses (including entertainment-related meals), you must show that: The main purpose of the combined business and entertainment was the active conduct of business, You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit at some future time. 2012 1040x Business is generally not considered to be the main purpose when business and entertainment are combined on hunting or fishing trips, or on yachts or other pleasure boats. 2012 1040x Even if you show that business was the main purpose, you generally cannot deduct the expenses for the use of an entertainment facility. 2012 1040x See Entertainment facilities under What Entertainment Expenses Are Not Deductible? later in this chapter. 2012 1040x You must consider all the facts, including the nature of the business transacted and the reasons for conducting business during the entertainment. 2012 1040x It is not necessary to devote more time to business than to entertainment. 2012 1040x However, if the business discussion is only incidental to the entertainment, the entertainment expenses do not meet the directly-related test. 2012 1040x Table 2-1. 2012 1040x When Are Entertainment Expenses Deductible? General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. 2012 1040x Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. 2012 1040x An ordinary expense is one that is common and accepted in your trade or business. 2012 1040x A necessary expense is one that is helpful and appropriate. 2012 1040x Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. 2012 1040x   Associated test Entertainment is associated with your trade or business, and Entertainment is directly before or after a substantial business discussion. 2012 1040x Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. 2012 1040x You cannot deduct expenses that are lavish or extravagant under the circumstances. 2012 1040x You generally can deduct only 50% of your unreimbursed entertainment expenses (see 50% Limit ). 2012 1040x You do not have to show that business income or other business benefit actually resulted from each entertainment expense. 2012 1040x Clear business setting. 2012 1040x   If the entertainment takes place in a clear business setting and is for your business or work, the expenses are considered directly related to your business or work. 2012 1040x The following situations are examples of entertainment in a clear business setting. 2012 1040x Entertainment in a hospitality room at a convention where business goodwill is created through the display or discussion of business products. 2012 1040x Entertainment that is mainly a price rebate on the sale of your products (such as a restaurant owner providing an occasional free meal to a loyal customer). 2012 1040x Entertainment of a clear business nature occurring under circumstances where there is no meaningful personal or social relationship between you and the persons entertained. 2012 1040x An example is entertainment of business and civic leaders at the opening of a new hotel or play when the purpose is to get business publicity rather than to create or maintain the goodwill of the persons entertained. 2012 1040x Expenses not considered directly related. 2012 1040x   Entertainment expenses generally are not considered directly related if you are not there or in situations where there are substantial distractions that generally prevent you from actively conducting business. 2012 1040x The following are examples of situations where there are substantial distractions. 2012 1040x A meeting or discussion at a nightclub, theater, or sporting event. 2012 1040x A meeting or discussion during what is essentially a social gathering, such as a cocktail party. 2012 1040x A meeting with a group that includes persons who are not business associates at places such as cocktail lounges, country clubs, golf clubs, athletic clubs, or vacation resorts. 2012 1040x Associated Test Even if your expenses do not meet the directly-related test, they may meet the associated test. 2012 1040x To meet the associated test for entertainment expenses (including entertainment-related meals), you must show that the entertainment is: Associated with the active conduct of your trade or business, and Directly before or after a substantial business discussion (defined later). 2012 1040x Associated with trade or business. 2012 1040x   Generally, an expense is associated with the active conduct of your trade or business if you can show that you had a clear business purpose for having the expense. 2012 1040x The purpose may be to get new business or to encourage the continuation of an existing business relationship. 2012 1040x Substantial business discussion. 2012 1040x   Whether a business discussion is substantial depends on the facts of each case. 2012 1040x A business discussion will not be considered substantial unless you can show that you actively engaged in the discussion, meeting, negotiation, or other business transaction to get income or some other specific business benefit. 2012 1040x   The meeting does not have to be for any specified length of time, but you must show that the business discussion was substantial in relation to the meal or entertainment. 2012 1040x It is not necessary that you devote more time to business than to entertainment. 2012 1040x You do not have to discuss business during the meal or entertainment. 2012 1040x Meetings at conventions. 2012 1040x   You are considered to have a substantial business discussion if you attend meetings at a convention or similar event, or at a trade or business meeting sponsored and conducted by a business or professional organization. 2012 1040x However, your reason for attending the convention or meeting must be to further your trade or business. 2012 1040x The organization that sponsors the convention or meeting must schedule a program of business activities that is the main activity of the convention or meeting. 2012 1040x Directly before or after business discussion. 2012 1040x   If the entertainment is held on the same day as the business discussion, it is considered to be held directly before or after the business discussion. 2012 1040x   If the entertainment and the business discussion are not held on the same day, you must consider the facts of each case to see if the associated test is met. 2012 1040x Among the facts to consider are the place, date, and duration of the business discussion. 2012 1040x If you or your business associates are from out of town, you must also consider the dates of arrival and departure, and the reasons the entertainment and the discussion did not take place on the same day. 2012 1040x Example. 2012 1040x A group of business associates comes from out of town to your place of business to hold a substantial business discussion. 2012 1040x If you entertain those business guests on the evening before the business discussion, or on the evening of the day following the business discussion, the entertainment generally is considered to be held directly before or after the discussion. 2012 1040x The expense meets the associated test. 2012 1040x 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. 2012 1040x (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal and entertainment expenses. 2012 1040x See Individuals subject to “hours of service” limits , later. 2012 1040x ) The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed. 2012 1040x Figure A summarizes the general rules explained in this section. 2012 1040x The 50% limit applies to business meals or entertainment expenses you have while: Traveling away from home (whether eating alone or with others) on business, Entertaining customers at your place of business, a restaurant, or other location, or Attending a business convention or reception, business meeting, or business luncheon at a club. 2012 1040x Included expenses. 2012 1040x   Expenses subject to the 50% limit include: Taxes and tips relating to a business meal or entertainment activity, Cover charges for admission to a nightclub, Rent paid for a room in which you hold a dinner or cocktail party, and Amounts paid for parking at a sports arena. 2012 1040x However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. 2012 1040x Figure A. 2012 1040x Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. 2012 1040x See Exceptions to the 50% Limit . 2012 1040x Please click here for the text description of the image. 2012 1040x Figure A. 2012 1040x Does the 50% limit apply to Your Expenses?TAs for Figure A are: Notice 87-23; Form 2106 instructions Application of 50% limit. 2012 1040x   The 50% limit on meal and entertainment expenses applies if the expense is otherwise deductible and is not covered by one of the exceptions discussed later. 2012 1040x   The 50% limit also applies to certain meal and entertainment expenses that are not business related. 2012 1040x It applies to meal and entertainment expenses you have for the production of income, including rental or royalty income. 2012 1040x It also applies to the cost of meals included in deductible educational expenses. 2012 1040x When to apply the 50% limit. 2012 1040x   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. 2012 1040x You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this publication. 2012 1040x Example 1. 2012 1040x You spend $200 for a business-related meal. 2012 1040x If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. 2012 1040x Your deduction cannot be more than $45 (50% × $90). 2012 1040x Example 2. 2012 1040x You purchase two tickets to a concert and give them to a client. 2012 1040x You purchased the tickets through a ticket agent. 2012 1040x You paid $200 for the two tickets, which had a face value of $80 each ($160 total). 2012 1040x Your deduction cannot be more than $80 (50% × $160). 2012 1040x Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. 2012 1040x Figure A can help you determine if the 50% limit applies to you. 2012 1040x Expenses not subject to 50% limit. 2012 1040x   Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. 2012 1040x 1 - Employee's reimbursed expenses. 2012 1040x   If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. 2012 1040x Accountable plans are discussed in chapter 6. 2012 1040x 2 - Self-employed. 2012 1040x   If you are self-employed, your deductible meal and entertainment expenses are not subject to the 50% limit if all of the following requirements are met. 2012 1040x You have these expenses as an independent contractor. 2012 1040x Your customer or client reimburses you or gives you an allowance for these expenses in connection with services you perform. 2012 1040x You provide adequate records of these expenses to your customer or client. 2012 1040x (See chapter 5 . 2012 1040x )   In this case, your client or customer is subject to the 50% limit on the expenses. 2012 1040x Example. 2012 1040x You are a self-employed attorney who adequately accounts for meal and entertainment expenses to a client who reimburses you for these expenses. 2012 1040x You are not subject to the directly-related or associated test, nor are you subject to the 50% limit. 2012 1040x If the client can deduct the expenses, the client is subject to the 50% limit. 2012 1040x If you (as an independent contractor) have expenses for meals and entertainment related to providing services for a client but do not adequately account for and seek reimbursement from the client for those expenses, you are subject to the directly-related or associated test and to the 50% limit. 2012 1040x 3 - Advertising expenses. 2012 1040x   You are not subject to the 50% limit if you provide meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. 2012 1040x For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit. 2012 1040x 4 - Sale of meals or entertainment. 2012 1040x   You are not subject to the 50% limit if you actually sell meals, entertainment, goods and services, or use of facilities to the public. 2012 1040x For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is not subject to the 50% limit. 2012 1040x 5 - Charitable sports event. 2012 1040x   You are not subject to the 50% limit if you pay for a package deal that includes a ticket to a qualified charitable sports event. 2012 1040x For the conditions the sports event must meet, see Exception for events that benefit charitable organizations under What Entertainment Expenses Are Deductible?, later. 2012 1040x Individuals subject to “hours of service” limits. 2012 1040x   You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. 2012 1040x The percentage is 80%. 2012 1040x   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. 2012 1040x Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. 2012 1040x Interstate truck operators and bus drivers who are under Department of Transportation regulations. 2012 1040x Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. 2012 1040x Certain merchant mariners who are under Coast Guard regulations. 2012 1040x What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. 2012 1040x Entertainment. 2012 1040x   Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. 2012 1040x Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips. 2012 1040x   Entertainment also may include meeting personal, living, or family needs of individuals, such as providing meals, a hotel suite, or a car to customers or their families. 2012 1040x A meal as a form of entertainment. 2012 1040x   Entertainment includes the cost of a meal you provide to a customer or client, whether the meal is a part of other entertainment or by itself. 2012 1040x A meal expense includes the cost of food, beverages, taxes, and tips for the meal. 2012 1040x To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. 2012 1040x    You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. 2012 1040x    Meals sold in the normal course of your business are not considered entertainment. 2012 1040x Deduction may depend on your type of business. 2012 1040x   Your kind of business may determine if a particular activity is considered entertainment. 2012 1040x For example, if you are a dress designer and have a fashion show to introduce your new designs to store buyers, the show generally is not considered entertainment. 2012 1040x This is because fashion shows are typical in your business. 2012 1040x But, if you are an appliance distributor and hold a fashion show for the spouses of your retailers, the show generally is considered entertainment. 2012 1040x Separating costs. 2012 1040x   If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. 2012 1040x You must have a reasonable basis for making this allocation. 2012 1040x For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. 2012 1040x Taking turns paying for meals or entertainment. 2012 1040x   If a group of business acquaintances takes turns picking up each others' meal or entertainment checks primarily for personal reasons, without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. 2012 1040x Lavish or extravagant expenses. 2012 1040x   You cannot deduct expenses for entertainment that are lavish or extravagant. 2012 1040x An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. 2012 1040x Expenses will not be disallowed just because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. 2012 1040x Allocating between business and nonbusiness. 2012 1040x   If you entertain business and nonbusiness individuals at the same event, you must divide your entertainment expenses between business and nonbusiness. 2012 1040x You can deduct only the business part. 2012 1040x If you cannot establish the part of the expense for each person participating, allocate the expense to each participant on a pro rata basis. 2012 1040x Example. 2012 1040x You entertain a group of individuals that includes yourself, three business prospects, and seven social guests. 2012 1040x Only 4/11 of the expense qualifies as a business entertainment expense. 2012 1040x You cannot deduct the expenses for the seven social guests because those costs are nonbusiness expenses. 2012 1040x Trade association meetings. 2012 1040x   You can deduct entertainment expenses that are directly related to and necessary for attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. 2012 1040x These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. 2012 1040x Entertainment tickets. 2012 1040x   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. 2012 1040x For example, you cannot deduct service fees you pay to ticket agencies or brokers or any amount over the face value of the tickets you pay to scalpers. 2012 1040x Exception for events that benefit charitable organizations. 2012 1040x   Different rules apply when the cost of a ticket to a sports event benefits a charitable organization. 2012 1040x You can take into account the full cost you pay for the ticket, even if it is more than the face value, if all of the following conditions apply. 2012 1040x The event's main purpose is to benefit a qualified charitable organization. 2012 1040x The entire net proceeds go to the charity. 2012 1040x The event uses volunteers to perform substantially all the event's work. 2012 1040x    The 50% limit on entertainment does not apply to any expense for a package deal that includes a ticket to such a charitable sports event. 2012 1040x Example 1. 2012 1040x You purchase tickets to a golf tournament organized by the local volunteer fire company. 2012 1040x All net proceeds will be used to buy new fire equipment. 2012 1040x The volunteers will run the tournament. 2012 1040x You can deduct the entire cost of the tickets as a business expense if they otherwise qualify as an entertainment expense. 2012 1040x Example 2. 2012 1040x You purchase tickets to a college football game through a ticket broker. 2012 1040x After having a business discussion, you take a client to the game. 2012 1040x Net proceeds from the game go to colleges that qualify as charitable organizations. 2012 1040x However, since the colleges also pay individuals to perform services, such as coaching and recruiting, you can only use the face value of the tickets in determining your business deduction. 2012 1040x Skyboxes and other private luxury boxes. 2012 1040x   If you rent a skybox or other private luxury box for more than one event at the same sports arena, you generally cannot deduct more than the price of a nonluxury box seat ticket. 2012 1040x   To determine whether a skybox has been rented for more than one event, count each game or other performance as one event. 2012 1040x For example, renting a skybox for a series of playoff games is considered renting it for more than one event. 2012 1040x All skyboxes you rent in the same arena, along with any rentals by related parties, are considered in making this determination. 2012 1040x   Related parties include: Family members (spouses, ancestors, and lineal descendants), Parties who have made a reciprocal arrangement involving the sharing of skyboxes, Related corporations, A partnership and its principal partners, and A corporation and a partnership with common ownership. 2012 1040x Example. 2012 1040x You pay $3,000 to rent a 10-seat skybox at Team Stadium for three baseball games. 2012 1040x The cost of regular nonluxury box seats at each event is $30 a seat. 2012 1040x You can deduct (subject to the 50% limit) $900 ((10 seats × $30 each) × 3 events). 2012 1040x Food and beverages in skybox seats. 2012 1040x   If expenses for food and beverages are separately stated, you can deduct these expenses in addition to the amounts allowable for the skybox, subject to the requirements and limits that apply. 2012 1040x The amounts separately stated for food and beverages must be reasonable. 2012 1040x You cannot inflate the charges for food and beverages to avoid the limited deduction for skybox rentals. 2012 1040x What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. 2012 1040x Club dues and membership fees. 2012 1040x   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. 2012 1040x This rule applies to any membership organization if one of its principal purposes is either: To conduct entertainment activities for members or their guests, or To provide members or their guests with access to entertainment facilities, discussed later. 2012 1040x   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. 2012 1040x You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. 2012 1040x Entertainment facilities. 2012 1040x   Generally, you cannot deduct any expense for the use of an entertainment facility. 2012 1040x This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. 2012 1040x   An entertainment facility is any property you own, rent, or use for entertainment. 2012 1040x Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort. 2012 1040x Out-of-pocket expenses. 2012 1040x   You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait, that you provided during entertainment at a facility. 2012 1040x These are not expenses for the use of an entertainment facility. 2012 1040x However, these expenses are subject to the directly-related and associated tests and to the 50% limit , all discussed earlier. 2012 1040x Expenses for spouses. 2012 1040x   You generally cannot deduct the cost of entertainment for your spouse or for the spouse of a customer. 2012 1040x However, you can deduct these costs if you can show you had a clear business purpose, rather than a personal or social purpose, for providing the entertainment. 2012 1040x Example. 2012 1040x You entertain a customer. 2012 1040x The cost is an ordinary and necessary business expense and is allowed under the entertainment rules. 2012 1040x The customer's spouse joins you because it is impractical to entertain the customer without the spouse. 2012 1040x You can deduct the cost of entertaining the customer's spouse. 2012 1040x If your spouse joins the party because the customer's spouse is present, the cost of the entertainment for your spouse is also deductible. 2012 1040x Gift or entertainment. 2012 1040x   Any item that might be considered either a gift or entertainment generally will be considered entertainment. 2012 1040x However, if you give a customer packaged food or beverages that you intend the customer to use at a later date, treat it as a gift. 2012 1040x   If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. 2012 1040x You can treat the tickets as either a gift or entertainment, whichever is to your advantage. 2012 1040x   You can change your treatment of the tickets at a later date by filing an amended return. 2012 1040x Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. 2012 1040x   If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. 2012 1040x You cannot choose, in this case, to treat the tickets as a gift. 2012 1040x Prev  Up  Next   Home   More Online Publications
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The 2012 1040x

2012 1040x 1. 2012 1040x   Fuel Taxes Table of Contents Definitions Information Returns Registration RequirementsAdditional information. 2012 1040x Gasoline and Aviation GasolineTaxable Events Gasoline Blendstocks Diesel Fuel and KeroseneTaxable Events Dyed Diesel Fuel and Dyed Kerosene Alaska and Feedstocks Back-up Tax Diesel-Water Fuel Emulsion Kerosene for Use in AviationTaxable Events Liability For Tax Surtax on any liquid used in a fractional ownership program aircraft as fuel Certificate for Commercial Aviation and Exempt UsesExempt use. 2012 1040x Reseller statement. 2012 1040x Other Fuels (Including Alternative Fuels)Taxable Events Compressed Natural Gas (CNG)Taxable Events Fuels Used on Inland WaterwaysFishing vessels. 2012 1040x Deep-draft ocean-going vessels. 2012 1040x Passenger vessels. 2012 1040x Ocean-going barges. 2012 1040x State or local governments. 2012 1040x Cellulosic or Second Generation Biofuel Not Used as Fuel Biodiesel Sold as But Not Used as Fuel Definitions Excise taxes are imposed on all the following fuels. 2012 1040x Gasoline, including aviation gasoline and gasoline blendstocks. 2012 1040x Diesel fuel, including dyed diesel fuel. 2012 1040x Diesel-water fuel emulsion. 2012 1040x Kerosene, including dyed kerosene and kerosene used in aviation. 2012 1040x Other Fuels (including alternative fuels). 2012 1040x Compressed natural gas (CNG). 2012 1040x Fuels used in commercial transportation on inland waterways. 2012 1040x Any liquid used in a fractional ownership program aircraft as fuel. 2012 1040x The following terms are used throughout the discussion of fuel taxes. 2012 1040x Other terms are defined in the discussion of the specific fuels to which they pertain. 2012 1040x Agri-biodiesel. 2012 1040x   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. 2012 1040x Approved terminal or refinery. 2012 1040x   This is a terminal operated by a registrant that is a terminal operator or a refinery operated by a registrant that is a refiner. 2012 1040x Biodiesel. 2012 1040x   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. 2012 1040x Blended taxable fuel. 2012 1040x   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. 2012 1040x 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. 2012 1040x Blender. 2012 1040x   This is the person that produces blended taxable fuel. 2012 1040x Bulk transfer. 2012 1040x   This is the transfer of taxable fuel by pipeline or vessel. 2012 1040x Bulk transfer/terminal system. 2012 1040x   This is the taxable fuel distribution system consisting of refineries, pipelines, vessels, and terminals. 2012 1040x 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. 2012 1040x Cellulosic biofuel. 2012 1040x   Cellulosic biofuel means any liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis that meets the registration requirements for fuels and fuel additives established by the EPA under section 211 of the Clean Air Act. 2012 1040x Cellulosic biofuel does not include any alcohol with a proof of less than 150 (without regard to denaturants). 2012 1040x For fuels sold or used after December 31, 2009, cellulosic biofuel does not include fuel of which more than 4% (determined by weight) is any combination of water and sediment, fuel of which the ash content is more than 1%, or fuel that has an acid number greater than 25. 2012 1040x Also see Second generation biofuel below. 2012 1040x Diesel-water fuel emulsion. 2012 1040x   A diesel-water fuel emulsion means an emulsion at least 14% of which is water. 2012 1040x The emulsion additive used to produce the fuel must be registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. 2012 1040x Dry lease aircraft exchange. 2012 1040x   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. 2012 1040x Enterer. 2012 1040x   This is the importer of record (under customs law) for the taxable fuel. 2012 1040x 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. 2012 1040x If there is no importer of record, the owner at the time of entry into the United States is the enterer. 2012 1040x Entry. 2012 1040x   Taxable 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. 2012 1040x This does not apply to fuel brought into Puerto Rico (which is part of the U. 2012 1040x S. 2012 1040x customs territory), but does apply to fuel brought into the United States from Puerto Rico. 2012 1040x Fractional ownership aircraft program and fractional program aircraft. 2012 1040x   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. 2012 1040x Measurement of taxable fuel. 2012 1040x   Volumes of taxable fuel can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit. 2012 1040x Other fuels. 2012 1040x   See Other Fuels (Including Alternative Fuels), later, and Alternative Fuel Credit and Alternative Fuel Mixture Credit in chapter 2. 2012 1040x Pipeline operator. 2012 1040x   This is the person that operates a pipeline within the bulk transfer/terminal system. 2012 1040x Position holder. 2012 1040x   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. 2012 1040x 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. 2012 1040x A terminal operator that owns taxable fuel in its terminal is a position holder. 2012 1040x Rack. 2012 1040x   This is a mechanism capable of delivering fuel into a means of transport other than a pipeline or vessel. 2012 1040x Refiner. 2012 1040x   This is any person that owns, operates, or otherwise controls a refinery. 2012 1040x Refinery. 2012 1040x   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. 2012 1040x However, this term does not include a facility where only blended fuel, and no other type of fuel, is produced. 2012 1040x For this purpose, blended fuel is any mixture that would be blended taxable fuel if produced outside the bulk transfer/terminal system. 2012 1040x Registrant. 2012 1040x   This is a taxable fuel registrant (see Registration Requirements, later). 2012 1040x Removal. 2012 1040x   This is any physical transfer of taxable fuel. 2012 1040x It also means any use of taxable fuel other than as a material in the production of taxable fuel or Other Fuels. 2012 1040x However, taxable fuel is not removed when it evaporates or is otherwise lost or destroyed. 2012 1040x Renewable diesel. 2012 1040x   See Renewable Diesel Credits in chapter 2. 2012 1040x Sale. 2012 1040x   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. 2012 1040x 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. 2012 1040x Second generation biofuel. 2012 1040x   This is any liquid fuel derived by, or from, qualified feedstocks, and meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U. 2012 1040x S. 2012 1040x C. 2012 1040x 7545). 2012 1040x It also includes certain liquid fuel which is derived by, or from, any cultivated algae, cyanobacteria, or lemna. 2012 1040x It is not alcohol of less than 150 proof (disregard any added denaturants). 2012 1040x See Form 6478 for more information. 2012 1040x State. 2012 1040x   This includes any state, any of its political subdivisions, the District of Columbia, and the American Red Cross. 2012 1040x An Indian tribal government is treated as a state only if transactions involve the exercise of an essential tribal government function. 2012 1040x Taxable fuel. 2012 1040x   This means gasoline, diesel fuel, and kerosene. 2012 1040x Terminal. 2012 1040x   This is a storage and distribution facility supplied by pipeline or vessel, and from which taxable fuel may be removed at a rack. 2012 1040x 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. 2012 1040x A terminal does not 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. 2012 1040x Terminal operator. 2012 1040x   This is any person that owns, operates, or otherwise controls a terminal. 2012 1040x Throughputter. 2012 1040x   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). 2012 1040x Vessel operator. 2012 1040x   This is the person that operates a vessel within the bulk transfer/terminal system. 2012 1040x However, vessel does not include a deep draft ocean-going vessel. 2012 1040x Information Returns Form 720-TO and Form 720-CS are information returns used to report monthly receipts and disbursements of liquid products. 2012 1040x A liquid product is any liquid transported into storage at a terminal or delivered out of a terminal. 2012 1040x For a list of products, see the product code table in the Instructions for Forms 720-TO and 720-CS. 2012 1040x The returns are due the last day of the month following the month in which the transaction occurs. 2012 1040x Generally, these returns can be filed on paper or electronically. 2012 1040x For information on filing electronically, see Publication 3536, Motor Fuel Excise Tax EDI Guide. 2012 1040x Publication 3536 is only available on the IRS website. 2012 1040x Form 720-TO. 2012 1040x   This information return is used by terminal operators to report receipts and disbursements of all liquid products to and from all approved terminals. 2012 1040x Each terminal operator must file a separate form for each approved terminal. 2012 1040x Form 720-CS. 2012 1040x   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. 2012 1040x Registration Requirements The following discussion applies to excise tax registration requirements for activities relating to fuels only. 2012 1040x See Form 637 for other persons who must register and for more information about registration. 2012 1040x Persons that are required to be registered. 2012 1040x   You are required to be registered if you are a: Blender; Enterer; Pipeline operator; Position holder; Refiner; Terminal operator; Vessel operator; Producer or importer of alcohol, biodiesel, agri-biodiesel, and renewable diesel; or Producer of cellulosic or second generation biofuel. 2012 1040x Persons that may register. 2012 1040x   You may, but are not required to, register if you are a: Feedstock user, Industrial user, Throughputter that is not a position holder, Ultimate vendor, Diesel-water fuel emulsion producer, Credit card issuer, or Alternative fuel claimant. 2012 1040x Ultimate vendors, credit card issuers, and alternative fuel claimants do not need to be registered to buy or sell fuel. 2012 1040x However, they must be registered to file claims for certain sales and uses of fuel. 2012 1040x See Form 637 for more information. 2012 1040x Taxable fuel registrant. 2012 1040x   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. 2012 1040x The term registrant as used in the discussions of these fuels means a taxable fuel registrant. 2012 1040x Additional information. 2012 1040x   See the Form 637 instructions for the information you must submit when you apply for registration. 2012 1040x Failure to register. 2012 1040x   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. 2012 1040x Gasoline and Aviation Gasoline Gasoline. 2012 1040x   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. 2012 1040x Gasoline includes any gasoline blend other than: Qualified ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from coal, including peat), Partially exempt ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from natural gas), or Denatured alcohol. 2012 1040x Gasoline also includes gasoline blendstocks, discussed later. 2012 1040x Aviation gasoline. 2012 1040x   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. 2012 1040x Taxable Events The tax on gasoline is $. 2012 1040x 184 per gallon. 2012 1040x The tax on aviation gasoline is $. 2012 1040x 194 per gallon. 2012 1040x When used in a fractional ownership program aircraft, gasoline also is subject to a surtax of $. 2012 1040x 141 per gallon. 2012 1040x See Surtax on any liquid used in a fractional ownership program aircraft as fuel, later. 2012 1040x Tax is imposed on the removal, entry, or sale of gasoline. 2012 1040x Each of these events is discussed later. 2012 1040x Also, see the special rules that apply to gasoline blendstocks, later. 2012 1040x If the tax is paid on the gasoline in more than one event, a refund may be allowed for the “second” tax paid. 2012 1040x See Refunds of Second Tax in chapter 2. 2012 1040x Removal from terminal. 2012 1040x   All removals of gasoline at a terminal rack are taxable. 2012 1040x The position holder for that gasoline is liable for the tax. 2012 1040x Two-party exchanges. 2012 1040x   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. 2012 1040x A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. 2012 1040x The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. 2012 1040x The exchange transaction occurs before or at the same time as removal across the rack by the receiving person. 2012 1040x The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. 2012 1040x The transaction is subject to a written contract. 2012 1040x Terminal operator's liability. 2012 1040x   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. 2012 1040x   However, a terminal operator meeting all the following conditions at the time of the removal will not be liable for the tax. 2012 1040x The terminal operator is a registrant. 2012 1040x The terminal operator has an unexpired notification certificate (discussed later) from the position holder. 2012 1040x The terminal operator has no reason to believe any information on the certificate is false. 2012 1040x Removal from refinery. 2012 1040x   The removal of gasoline from a refinery is taxable if the removal meets either of the following conditions. 2012 1040x It is made by bulk transfer and the refiner, the owner of the gasoline immediately before the removal, or the operator of the pipeline or vessel is not a registrant. 2012 1040x It is made at the refinery rack. 2012 1040x The refiner is liable for the tax. 2012 1040x Exception. 2012 1040x   The tax does not apply to a removal of gasoline at the refinery rack if all the following requirements are met. 2012 1040x The gasoline is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. 2012 1040x The gasoline is received at a facility operated by a registrant and located within the bulk transfer/terminal system. 2012 1040x The removal from the refinery is by railcar. 2012 1040x The same person operates the refinery and the facility at which the gasoline is received. 2012 1040x Entry into the United States. 2012 1040x   The entry of gasoline into the United States is taxable if the entry meets either of the following conditions. 2012 1040x It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. 2012 1040x It is not made by bulk transfer. 2012 1040x The enterer is liable for the tax. 2012 1040x Importer of record's liability. 2012 1040x   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. 2012 1040x   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. 2012 1040x The importer of record has an unexpired notification certificate (discussed later) from the enterer. 2012 1040x The importer of record has no reason to believe any information in the certificate is false. 2012 1040x Customs bond. 2012 1040x   The customs bond will not be charged for the tax imposed on the entry of the gasoline if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. 2012 1040x Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. 2012 1040x   The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline or the operator of the pipeline or vessel is not a registrant. 2012 1040x The position holder is liable for the tax. 2012 1040x The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. 2012 1040x However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. 2012 1040x Bulk transfers not received at approved terminal or refinery. 2012 1040x   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. 2012 1040x No tax was previously imposed (as discussed earlier) on any of the following events. 2012 1040x The removal from the refinery. 2012 1040x The entry into the United States. 2012 1040x The removal from a terminal by an unregistered position holder. 2012 1040x Upon removal from the pipeline or vessel, the gasoline is not received at an approved terminal or refinery (or at another pipeline or vessel). 2012 1040x   The owner of the gasoline when it is removed from the pipeline or vessel is liable for the tax. 2012 1040x However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. 2012 1040x The owner is a registrant. 2012 1040x The owner has an unexpired notification certificate (discussed later) from the operator of the terminal or refinery where the gasoline is received. 2012 1040x The owner has no reason to believe any information on the certificate is false. 2012 1040x The operator of the facility where the gasoline is received is liable for the tax if the owner meets these conditions. 2012 1040x The operator is jointly and severally liable if the owner does not meet these conditions. 2012 1040x Sales to unregistered person. 2012 1040x   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. 2012 1040x   The seller is liable for the tax. 2012 1040x However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. 2012 1040x   The seller is a registrant. 2012 1040x The seller has an unexpired notification certificate (discussed later) from the buyer. 2012 1040x The seller has no reason to believe any information on the certificate is false. 2012 1040x The buyer of the gasoline is liable for the tax if the seller meets these conditions. 2012 1040x The buyer is jointly and severally liable if the seller does not meet these conditions. 2012 1040x Exception. 2012 1040x   The tax does not apply to a sale if all of the following apply. 2012 1040x The buyer's principal place of business is not in the United States. 2012 1040x The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. 2012 1040x The seller is a registrant and the exporter of record. 2012 1040x The fuel was exported. 2012 1040x Removal or sale of blended gasoline. 2012 1040x   The removal or sale of blended gasoline by the blender is taxable. 2012 1040x See Blended taxable fuel under Definitions, earlier. 2012 1040x   The blender is liable for the tax. 2012 1040x The tax is figured on the number of gallons not previously subject to the tax on gasoline. 2012 1040x   Persons who blend alcohol with gasoline to produce an alcohol fuel mixture outside the bulk transfer/terminal system must pay the gasoline tax on the volume of alcohol in the mixture. 2012 1040x See Form 720 to report this tax. 2012 1040x You also must be registered with the IRS as a blender. 2012 1040x See Form 637. 2012 1040x   However, if an untaxed liquid is sold as taxed taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. 2012 1040x Notification certificate. 2012 1040x   The notification certificate is used to notify a person of the registration status of the registrant. 2012 1040x A copy of the registrant's letter of registration cannot be used as a notification certificate. 2012 1040x A model notification certificate is shown in the Appendix as Model Certificate C. 2012 1040x A notification certificate must contain all information necessary to complete the model. 2012 1040x   The certificate may be included as part of any business records normally used for a sale. 2012 1040x 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. 2012 1040x The registrant must provide a new certificate if any information on a certificate has changed. 2012 1040x Additional persons liable. 2012 1040x   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or Anyone who willfully causes the person to fail to pay the tax. 2012 1040x Gasoline Blendstocks Gasoline blendstocks may be subject to $. 2012 1040x 001 per gallon LUST tax as discussed below. 2012 1040x Gasoline includes gasoline blendstocks. 2012 1040x The previous discussions apply to these blendstocks. 2012 1040x However, if certain conditions are met, the removal, entry, or sale of gasoline blendstocks are taxed at $. 2012 1040x 001 per gallon or are not subject to the excise tax. 2012 1040x Blendstocks. 2012 1040x   Gasoline blendstocks are: Alkylate, Butane, Butene, Catalytically cracked gasoline, Coker gasoline, Ethyl tertiary butyl ether (ETBE), Hexane, Hydrocrackate, Isomerate, Methyl tertiary butyl ether (MTBE), Mixed xylene (not including any separated isomer of xylene), Natural gasoline, Pentane, Pentane mixture, Polymer gasoline, Raffinate, Reformate, Straight-run gasoline, Straight-run naphtha, Tertiary amyl methyl ether (TAME), Tertiary butyl alcohol (gasoline grade) (TBA), Thermally cracked gasoline, and Toluene. 2012 1040x   However, gasoline blendstocks do not include any product that cannot be used without further processing in the production of finished gasoline. 2012 1040x Not used to produce finished gasoline. 2012 1040x   Gasoline blendstocks not used to produce finished gasoline are not taxable (other than LUST) if the following conditions are met. 2012 1040x Removals and entries not connected to sale. 2012 1040x   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant. 2012 1040x Removals and entries connected to sale. 2012 1040x   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. 2012 1040x The person has an unexpired certificate (discussed later) from the buyer. 2012 1040x The person has no reason to believe any information in the certificate is false. 2012 1040x Sales after removal or entry. 2012 1040x   The sale of a gasoline blendstock that was not subject to tax on its nonbulk removal or entry, as discussed earlier, is taxable. 2012 1040x The seller is liable for the tax. 2012 1040x However, the sale is not taxable if, at the time of the sale, the seller meets the following requirements. 2012 1040x The seller has an unexpired certificate (discussed next) from the buyer. 2012 1040x The seller has no reason to believe any information in the certificate is false. 2012 1040x Certificate of buyer. 2012 1040x   The certificate from the buyer certifies the gasoline blendstocks will not be used to produce finished gasoline. 2012 1040x The certificate may be included as part of any business records normally used for a sale. 2012 1040x A model certificate is shown in the Appendix as Model Certificate D. 2012 1040x The certificate must contain all information necessary to complete the model. 2012 1040x   A certificate expires on the earliest of the following dates. 2012 1040x The date 1 year after the effective date (not earlier than the date signed) of the certificate. 2012 1040x The date a new certificate is provided to the seller. 2012 1040x The date the seller is notified that the buyer's right to provide a certificate has been withdrawn. 2012 1040x The buyer must provide a new certificate if any information on a certificate has changed. 2012 1040x   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. 2012 1040x Received at approved terminal or refinery. 2012 1040x   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. 2012 1040x The person is a registrant. 2012 1040x The person has an unexpired notification certificate (discussed earlier) from the operator of the terminal or refinery where the gasoline blendstocks are received. 2012 1040x The person has no reason to believe any information on the certificate is false. 2012 1040x Bulk transfers to registered industrial user. 2012 1040x   The removal of gasoline blendstocks from a pipeline or vessel is not taxable (other than LUST) if the blendstocks are received by a registrant that is an industrial user. 2012 1040x 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. 2012 1040x Credits or Refunds. 2012 1040x   A credit or refund of the gasoline tax may be allowable if gasoline is used for a nontaxable purpose or exempt use. 2012 1040x For more information, see chapter 2. 2012 1040x Diesel Fuel and Kerosene Generally, diesel fuel and kerosene are taxed in the same manner as gasoline (discussed earlier). 2012 1040x However, special rules (discussed later) apply to dyed diesel fuel and dyed kerosene, and to undyed diesel fuel and undyed kerosene sold or used in Alaska for certain nontaxable uses and undyed kerosene used for a feedstock purpose. 2012 1040x 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, and Transmix. 2012 1040x 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. 2012 1040x A liquid may possess this practical and commercial fitness even though the specified use is not the predominant use of the liquid. 2012 1040x 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. 2012 1040x Diesel fuel does not include gasoline, kerosene, excluded liquid, No. 2012 1040x 5 and No. 2012 1040x 6 fuel oils covered by ASTM specification D396, or F-76 (Fuel Naval Distillate) covered by military specification MIL-F-16884. 2012 1040x An excluded liquid is either of the following. 2012 1040x A liquid that contains less than 4% normal paraffins. 2012 1040x A liquid with all the following properties. 2012 1040x Distillation range of 125 degrees Fahrenheit or less. 2012 1040x Sulfur content of 10 ppm or less. 2012 1040x Minimum color of +27 Saybolt. 2012 1040x Transmix means a by-product of refined products created by the mixing of different specification products during pipeline transportation. 2012 1040x Kerosene. 2012 1040x   This means any of the following liquids. 2012 1040x One of the two grades of kerosene (No. 2012 1040x 1-K and No. 2012 1040x 2-K) covered by ASTM specification D3699. 2012 1040x Kerosene-type jet fuel covered by ASTM specification D1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8). 2012 1040x See Kerosene for Use in Aviation, later. 2012 1040x   However, kerosene does not include excluded liquid, discussed earlier. 2012 1040x   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. 2012 1040x Diesel-powered highway vehicle. 2012 1040x   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. 2012 1040x Specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation are generally not considered diesel-powered highway vehicles. 2012 1040x For more information about these vehicles and for information about vehicles not considered highway vehicles, see Off-Highway Business Use (No. 2012 1040x 2) in chapter 2. 2012 1040x Diesel-powered train. 2012 1040x   This is any diesel-powered equipment or machinery that rides on rails. 2012 1040x The term includes a locomotive, work train, switching engine, and track maintenance machine. 2012 1040x Taxable Events The tax on diesel fuel and kerosene is $. 2012 1040x 244 per gallon. 2012 1040x It is imposed on the removal, entry, or sale of diesel fuel and kerosene. 2012 1040x Each of these events is discussed later. 2012 1040x Only the $. 2012 1040x 001 LUST tax applies to dyed diesel fuel and dyed kerosene, discussed later. 2012 1040x If the tax is paid on the diesel fuel or kerosene in more than one event, a refund may be allowed for the “second” tax paid. 2012 1040x See Refunds of Second Tax in chapter 2. 2012 1040x Use in certain intercity and local buses. 2012 1040x   Dyed diesel fuel and dyed kerosene cannot be used in certain intercity and local buses. 2012 1040x A claim for $. 2012 1040x 17 per gallon may be made by the registered ultimate vendor (under certain conditions) or the ultimate purchaser for undyed diesel fuel or undyed kerosene sold for use in certain intercity or local buses. 2012 1040x An intercity or local bus is a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. 2012 1040x The bus must be engaged in one of the following activities. 2012 1040x Scheduled transportation along regular routes regardless of the size of the bus. 2012 1040x Nonscheduled transportation if the seating capacity of the bus is at least 20 adults (not including the driver). 2012 1040x A bus is available to the general public if the bus is available for hire to more than a limited number of persons, groups, or organizations. 2012 1040x Removal from terminal. 2012 1040x   All removals of diesel fuel and kerosene at a terminal rack are taxable. 2012 1040x The position holder for that fuel is liable for the tax. 2012 1040x Two-party exchanges. 2012 1040x   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. 2012 1040x A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. 2012 1040x The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. 2012 1040x The exchange transaction occurs before or at the same time as completion of removal across the rack by the receiving person. 2012 1040x The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. 2012 1040x The transaction is subject to a written contract. 2012 1040x Terminal operator's liability. 2012 1040x   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 diesel fuel or kerosene is dyed (discussed later). 2012 1040x   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. 2012 1040x 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. 2012 1040x The terminal operator is a registrant. 2012 1040x The terminal operator has an unexpired notification certificate (discussed under Gasoline) from the position holder. 2012 1040x The terminal operator has no reason to believe any information on the certificate is false. 2012 1040x Removal from refinery. 2012 1040x   The removal of diesel fuel or kerosene from a refinery is taxable if the removal meets either of the following conditions. 2012 1040x It is made by bulk transfer and the refiner, the owner of the fuel immediately before the removal, or the operator of the pipeline or vessel is not a registrant. 2012 1040x It is made at the refinery rack. 2012 1040x The refiner is liable for the tax. 2012 1040x Exception. 2012 1040x   The tax does not apply to a removal of diesel fuel or kerosene at the refinery rack if all the following conditions are met. 2012 1040x The diesel fuel or kerosene is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. 2012 1040x The diesel fuel or kerosene is received at a facility operated by a registrant and located within the bulk transfer/terminal system. 2012 1040x The removal from the refinery is by: Railcar and the same person operates the refinery and the facility at which the diesel fuel or kerosene is received, or For diesel fuel only, a trailer or semi-trailer used exclusively to transport the diesel fuel from a refinery (described in (1)) to a facility (described in (2)) less than 20 miles from the refinery. 2012 1040x Entry into the United States. 2012 1040x   The entry of diesel fuel or kerosene into the United States is taxable if the entry meets either of the following conditions. 2012 1040x It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. 2012 1040x It is not made by bulk transfer. 2012 1040x The enterer is liable for the tax. 2012 1040x Importer of record's liability. 2012 1040x   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. 2012 1040x   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. 2012 1040x The importer of record has an unexpired notification certificate (discussed under Gasoline) from the enterer. 2012 1040x The importer of record has no reason to believe any information in the certificate is false. 2012 1040x Customs bond. 2012 1040x   The customs bond will not be charged for the tax imposed on the entry of the diesel fuel or kerosene if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. 2012 1040x Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. 2012 1040x   The removal by bulk transfer of diesel fuel or kerosene from a terminal is taxable if the position holder for that fuel or the operator of the pipeline or vessel is not a registrant. 2012 1040x The position holder is liable for the tax. 2012 1040x The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. 2012 1040x However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. 2012 1040x Bulk transfers not received at approved terminal or refinery. 2012 1040x   The removal by bulk transfer of diesel fuel or kerosene from a terminal or refinery or the entry of diesel fuel or kerosene by bulk transfer into the United States is taxable if the following conditions apply. 2012 1040x No tax was previously imposed (as discussed earlier) on any of the following events. 2012 1040x The removal from the refinery. 2012 1040x The entry into the United States. 2012 1040x The removal from a terminal by an unregistered position holder. 2012 1040x Upon removal from the pipeline or vessel, the diesel fuel or kerosene is not received at an approved terminal or refinery (or at another pipeline or vessel). 2012 1040x   The owner of the diesel fuel or kerosene when it is removed from the pipeline or vessel is liable for the tax. 2012 1040x However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. 2012 1040x The owner is a registrant. 2012 1040x The owner has an unexpired notification certificate (discussed under Gasoline) from the operator of the terminal or refinery where the diesel fuel or kerosene is received. 2012 1040x The owner has no reason to believe any information on the certificate is false. 2012 1040x The operator of the facility where the diesel fuel or kerosene is received is liable for the tax if the owner meets these conditions. 2012 1040x The operator is jointly and severally liable if the owner does not meet these conditions. 2012 1040x Sales to unregistered person. 2012 1040x   The sale of diesel fuel or 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. 2012 1040x   The seller is liable for the tax. 2012 1040x However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. 2012 1040x The seller is a registrant. 2012 1040x The seller has an unexpired notification certificate (discussed under Gasoline) from the buyer. 2012 1040x The seller has no reason to believe any information on the certificate is false. 2012 1040x The buyer of the diesel fuel or kerosene is liable for the tax if the seller meets these conditions. 2012 1040x The buyer is jointly and severally liable if the seller does not meet these conditions. 2012 1040x Exception. 2012 1040x   The tax does not apply to a sale if all of the following apply. 2012 1040x The buyer's principal place of business is not in the United States. 2012 1040x The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. 2012 1040x The seller is a registrant and the exporter of record. 2012 1040x The fuel was exported. 2012 1040x Removal or sale of blended diesel fuel or kerosene. 2012 1040x   The removal or sale of blended diesel fuel or blended kerosene by the blender is taxable. 2012 1040x Blended taxable fuel produced using biodiesel is subject to the tax. 2012 1040x See Blended taxable fuel under Definitions, earlier. 2012 1040x   The blender is liable for the tax. 2012 1040x The tax is figured on the number of gallons not previously subject to the tax. 2012 1040x   Persons who blend biodiesel with undyed diesel fuel to produce and sell or use a biodiesel mixture outside the bulk transfer/terminal system must pay the diesel fuel tax on the volume of biodiesel in the mixture. 2012 1040x Generally, the biodiesel mixture must be diesel fuel (defined earlier). 2012 1040x See Form 720 to report this tax. 2012 1040x You also must be registered by the IRS as a blender. 2012 1040x See Form 637 for more information. 2012 1040x   However, if an untaxed liquid is sold as taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. 2012 1040x Additional persons liable. 2012 1040x   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax applies to: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty; or Anyone who willfully causes the person to fail to pay the tax. 2012 1040x Credits or Refunds. 2012 1040x   A credit or refund is allowable for the tax on undyed diesel fuel or undyed kerosene used for a nontaxable use. 2012 1040x For more information, see chapter 2. 2012 1040x Dyed Diesel Fuel and Dyed Kerosene Dyed diesel fuel and dyed kerosene are subject to $. 2012 1040x 001 per gallon LUST tax as discussed below, unless the fuel is for export. 2012 1040x The excise tax is not imposed on the removal, entry, or sale of diesel fuel or kerosene (other than the LUST tax) if all the following tests are met. 2012 1040x The person otherwise liable for tax (for example, the position holder) is a registrant. 2012 1040x In the case of a removal from a terminal, the terminal is an approved terminal. 2012 1040x The diesel fuel or kerosene satisfies the dyeing requirements (described next). 2012 1040x Dyeing requirements. 2012 1040x   Diesel fuel or kerosene satisfies the dyeing requirements only if it satisfies the following requirements. 2012 1040x It contains the dye Solvent Red 164 (and no other dye) at a concentration spectrally equivalent to at least 3. 2012 1040x 9 pounds of the solid dye standard Solvent Red 26 per thousand barrels of fuel or any dye of a type and in a concentration that has been approved by the Commissioner. 2012 1040x Is indelibly dyed by mechanical injection. 2012 1040x See section 6 of Notice 2005-80 for transition rules that apply until final regulations are issued by the IRS. 2012 1040x Notice required. 2012 1040x   A legible and conspicuous notice stating either: DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE or DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE must be: Provided by the terminal operator to any person that receives dyed diesel fuel or dyed kerosene at a terminal rack of that operator, and Posted by a seller on any retail pump or other delivery facility where it sells dyed diesel fuel or dyed kerosene for use by its buyer. 2012 1040x   The notice under item (1) must be provided by the time of the removal and must appear on all shipping papers, bills of lading, and similar documents accompanying the removal of the fuel. 2012 1040x   Any seller that fails to post the required notice under item (2) is presumed to know that the fuel will be used for a taxable use (a use other than a nontaxable use listed later). 2012 1040x That seller is subject to the penalty described next. 2012 1040x Penalty. 2012 1040x   A penalty is imposed on a person if any of the following situations apply. 2012 1040x Any dyed fuel is sold or held for sale by the person for a use the person knows or has reason to know is not a nontaxable use of the fuel. 2012 1040x Any dyed fuel is held for use or used by the person for a use other than a nontaxable use and the person knew, or had reason to know, that the fuel was dyed. 2012 1040x The person willfully alters, chemically or otherwise, or attempts to so alter, the strength or composition of any dye in dyed fuel. 2012 1040x The person has knowledge that a dyed fuel that has been altered, as described in (3) above, sells or holds for sale such fuel for any use for which the person knows or has reason to know is not a nontaxable use of the fuel. 2012 1040x   The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. 2012 1040x After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. 2012 1040x   This penalty is in addition to any tax imposed on the fuel. 2012 1040x   If the penalty is imposed, each officer, employee, or agent of a business entity who willfully participated in any act giving rise to the penalty is jointly and severally liable with that entity for the penalty. 2012 1040x   There is no administrative appeal or review allowed for the third and subsequent penalty imposed by section 6715 on any person except for: Fraud or a mistake in the chemical analysis, or Mathematical calculation of the penalty. 2012 1040x   If you are liable for the penalty, you may also be liable for the back-up tax, discussed later. 2012 1040x However, the penalty applies only to dyed diesel fuel and dyed kerosene, while the back-up tax may apply to other fuels. 2012 1040x The penalty may apply if the fuel is held for sale or use for a taxable use while the back-up tax does not apply unless the fuel is delivered into a fuel supply tank. 2012 1040x Exception to penalty. 2012 1040x   The penalty under item (3) will not apply in any of the following situations. 2012 1040x Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any undyed liquid and the resulting product meets the dyeing requirements. 2012 1040x Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any other liquid (other than diesel fuel or kerosene) that contains the type and amount of dye required to meet the dyeing requirements. 2012 1040x The alteration or attempted alteration occurs in an exempt area of Alaska. 2012 1040x See Removal for sale or use in Alaska, later. 2012 1040x Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with diesel fuel or kerosene not meeting the dyeing requirements and the blending occurs as part of a nontaxable use (other than export), discussed later. 2012 1040x Alaska and Feedstocks Tax of $. 2012 1040x 001 per gallon is imposed on: Undyed diesel fuel or undyed kerosene sold or used in Alaska for certain nontaxable uses (see Later sales on page 10). 2012 1040x Undyed kerosene used for feedstock purposes. 2012 1040x Removal for sale or use in Alaska. 2012 1040x   No tax is imposed on the removal, entry, or sale of diesel fuel or kerosene in Alaska for ultimate sale or use in certain areas of Alaska for certain nontaxable uses. 2012 1040x The removal or entry of any diesel fuel or kerosene is not taxed if all the following requirements are satisfied. 2012 1040x The person otherwise liable for the tax (position holder, refiner, or enterer): Is a registrant, Can show satisfactory evidence of the nontaxable nature of the transaction, and Has no reason to believe the evidence is false. 2012 1040x In the case of a removal from a terminal, the terminal is an approved terminal. 2012 1040x The owner of the fuel immediately after the removal or entry holds the fuel for its own use in a nontaxable use (discussed later) or is a qualified dealer. 2012 1040x   If all three of the requirements above are not met, then tax is imposed at $. 2012 1040x 244 per gallon. 2012 1040x   A qualified dealer is any person that holds a qualified dealer license from the state of Alaska or has been registered by the IRS as a qualified retailer. 2012 1040x Satisfactory evidence may include copies of qualified dealer licenses or exemption certificates obtained for state tax purposes. 2012 1040x Later sales. 2012 1040x   The excise tax applies to diesel fuel or kerosene sold by a qualified dealer after the removal or entry. 2012 1040x The tax is imposed at the time of the sale and the qualified dealer is liable for the tax. 2012 1040x However, the sale is not taxable (other than the LUST tax at $. 2012 1040x 001 per gallon) if all the following requirements are met. 2012 1040x The fuel is sold in Alaska for certain nontaxable uses. 2012 1040x The buyer buys the fuel for its own use in a nontaxable use or is a qualified dealer. 2012 1040x The seller can show satisfactory evidence of the nontaxable nature of the transaction and has no reason to believe the evidence is false. 2012 1040x Feedstock purposes. 2012 1040x   The $. 2012 1040x 001 per gallon LUST tax is imposed on the removal or entry of undyed kerosene if all the following conditions are met. 2012 1040x The person otherwise liable for tax (position holder, refiner, or enterer) is a registrant. 2012 1040x In the case of a removal from a terminal, the terminal is an approved terminal. 2012 1040x Either: The person otherwise liable for tax uses the kerosene for a feedstock purpose, or The kerosene is sold for use by the buyer for a feedstock purpose and, at the time of the sale, the person otherwise liable for tax has an unexpired certificate (described later) from the buyer and has no reason to believe any information on the certificate is false. 2012 1040x   If all of the requirements above are not met, then tax is imposed at $. 2012 1040x 244 per gallon. 2012 1040x   Kerosene is used for a feedstock purpose when it is used for nonfuel purposes in the manufacture or production of any substance other than gasoline, diesel fuel, or Other Fuels. 2012 1040x For example, kerosene is used for a feedstock purpose when it is used as an ingredient in the production of paint, but is not used for a feedstock purpose when it is used to power machinery at a factory where paint is produced. 2012 1040x A feedstock user is a person that uses kerosene for a feedstock purpose. 2012 1040x A registered feedstock user is a person that has been registered by the IRS as a feedstock user. 2012 1040x See Registration Requirements, earlier. 2012 1040x Later sales. 2012 1040x   The excise tax ($. 2012 1040x 244 per gallon) applies to kerosene sold for use by the buyer for a feedstock purpose (item (3)(b) above) if the buyer in that sale later sells the kerosene. 2012 1040x The tax is imposed at the time of the later sale and that seller is liable for the tax. 2012 1040x Certificate. 2012 1040x   The certificate from the buyer certifies the buyer is a registered feedstock user and the kerosene will be used by the buyer for a feedstock purpose. 2012 1040x The certificate may be included as part of any business records normally used for a sale. 2012 1040x A model certificate is shown in the Appendix as Model Certificate G. 2012 1040x Your certificate must contain all information necessary to complete the model. 2012 1040x   A certificate expires on the earliest of the following dates. 2012 1040x The date 1 year after the effective date (not earlier than the date signed) of the certificate. 2012 1040x The date the seller is provided a new certificate or notice that the current certificate is invalid. 2012 1040x The date the seller is notified the buyer's registration has been revoked or suspended. 2012 1040x   The buyer must provide a new certificate if any information on a certificate has changed. 2012 1040x Back-up Tax Tax is imposed on the delivery of any of the following into the fuel supply tank of a diesel-powered highway vehicle. 2012 1040x Any dyed diesel fuel or dyed kerosene for other than a nontaxable use. 2012 1040x Any undyed diesel fuel or undyed kerosene on which a credit or refund (for fuel used for a nontaxable purpose) has been allowed. 2012 1040x Any liquid other than gasoline, diesel fuel, or kerosene. 2012 1040x Generally, this back-up tax is imposed at a rate of $. 2012 1040x 244 per gallon. 2012 1040x Liability for tax. 2012 1040x   Generally, the operator of the vehicle into which the fuel is delivered is liable for the tax. 2012 1040x In addition, the seller of the diesel fuel or kerosene is jointly and severally liable for the tax if the seller knows or has reason to know that the fuel will be used for other than a nontaxable use. 2012 1040x Exemptions from the back-up tax. 2012 1040x   The back-up tax does not apply to a delivery of diesel fuel or kerosene for uses 1, 2, 6, 7, 12, 13, 14, and 15 listed under Definitions of Nontaxable Uses in chapter 2. 2012 1040x   In addition, since the back-up tax is imposed only on the delivery into the fuel supply tank of a diesel-powered vehicle or train, the tax does not apply to diesel fuel or kerosene used as heating oil or in stationary engines. 2012 1040x Diesel-Water Fuel Emulsion Diesel-water fuel emulsion means diesel fuel at least 14% of which is water and for which the emulsion additive is registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. 2012 1040x A reduced tax rate of $. 2012 1040x 198 per gallon is imposed on a diesel-water fuel emulsion. 2012 1040x To be eligible for the reduced rate, the person who sells, removes, or uses the diesel-water fuel emulsion must be registered by the IRS. 2012 1040x If the diesel-water fuel emulsion does not meet the requirements above, or if the person who sells, removes, or uses the fuel is not registered, the diesel-water fuel emulsion is taxed at $. 2012 1040x 244 per gallon. 2012 1040x Credits or refunds. 2012 1040x   The allowance for a credit or refund on a diesel-water fuel emulsion is discussed in chapter 2. 2012 1040x Kerosene for Use in Aviation Taxable Events Generally, kerosene is taxed at $. 2012 1040x 244 per gallon unless a reduced rate applies (see Diesel Fuel and Kerosene, earlier). 2012 1040x For kerosene removed directly from a terminal into the fuel tank of an aircraft for use in noncommercial aviation, the tax rate is $. 2012 1040x 219. 2012 1040x The rate of $. 2012 1040x 219 also applies if kerosene is removed into any aircraft from a qualified refueler truck, tanker, or tank wagon that is loaded with the kerosene from a terminal that is located within an airport. 2012 1040x The airport terminal does not need to be a secured airport terminal for this rate to apply. 2012 1040x However, the refueler truck, tanker, or tank wagon must meet the requirements discussed under Certain refueler trucks, tankers, and tank wagons, treated as terminals, later. 2012 1040x For kerosene removed directly into the fuel tank of an aircraft for use in commercial aviation, the rate of tax is $. 2012 1040x 044 per gallon. 2012 1040x For kerosene removed into an aircraft from a qualified refueler truck, tanker, or tank wagon, the $. 2012 1040x 044 rate applies only if the truck, tanker, or tank wagon is loaded at a terminal that is located in a secured area of the airport. 2012 1040x See Terminal located within a secured area of an airport, later. 2012 1040x In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. 2012 1040x For kerosene removed directly into the fuel tank of an aircraft for a use exempt from tax under section 4041(c) (such as use in an aircraft for the exclusive use of a state or local government), the rate of tax is $. 2012 1040x 001. 2012 1040x There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. 2012 1040x The kerosene must be removed from a qualifying refueler truck, tanker, or tank wagon loaded at a terminal located within a secured area of an airport. 2012 1040x See Terminal located within a secured area of an airport, later. 2012 1040x In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. 2012 1040x The position holder is liable for the $. 2012 1040x 001 per gallon tax. 2012 1040x For kerosene removed directly from a terminal into the fuel tank of an fractional ownership program aircraft after March 31, 2012, a surtax of $. 2012 1040x 141 per gallon applies. 2012 1040x Certain refueler trucks, tankers, and tank wagons treated as terminals. 2012 1040x   For purposes of the tax imposed on kerosene for use in aviation removed directly into the fuel tank of an aircraft for use in commercial aviation, certain refueler trucks, tankers, and tank wagons are treated as part of a terminal if the following conditions are met. 2012 1040x Such terminal is located within an area of an airport. 2012 1040x Any kerosene for use in aviation that is loaded in a refueler truck, tanker, or tank wagon at a terminal is for delivery into aircraft at the airport in which the terminal is located. 2012 1040x Except in exigent circumstances, such as those identified in Notice 2005-80, no vehicle registered for highway use is loaded with kerosene for use in aviation at the terminal. 2012 1040x The refueler truck, tanker, or tank wagon meets the following requirements: Has storage tanks, hose, and coupling equipment designed and used for fueling aircraft, Is not registered for highway use, and Is operated by the terminal operator or a person that makes a daily accounting to the terminal operator of each delivery of fuel from the refueler truck, tanker, or tank wagon. 2012 1040x Information reporting will be required by terminal operators regarding this provision. 2012 1040x Until the format of this information reporting is issued, taxpayers are required to retain records regarding the daily accounting, but are not required to report such information. 2012 1040x Terminal located within a secured area of an airport. 2012 1040x   See Notice 2005-4 and Notice 2005-80 for the list of terminals located within a secured area of an airport. 2012 1040x This list refers to fueling operations at airport terminals as it applies to the federal excise tax on kerosene for use in aviation, and has nothing to do with the general security of airports either included or not included in the list. 2012 1040x Liability For Tax If the kerosene is removed directly into the fuel tank of an aircraft for use in commercial aviation, the operator of the aircraft in commercial aviation is liable for the tax on the removal at the rate of $. 2012 1040x 044 per gallon. 2012 1040x However, the position holder is liable for the LUST tax for kerosene for use in aviation removed directly into the fuel tank of an aircraft for use exempt from tax under section 4041(c) (except foreign trade). 2012 1040x For example, for kerosene removed directly into the aircraft for use in military aircraft, the position holder is liable for the tax. 2012 1040x For the aircraft operator to be liable for the tax $. 2012 1040x 044 rate, the position holder must meet the following requirements: Is a taxable fuel registrant, Has an unexpired certificate (a model certificate is shown in the Appendix as Model Certificate K) from the operator of the aircraft, and Has no reason to believe any of the information in the certificate is false. 2012 1040x Commercial aviation. 2012 1040x   Commercial aviation is any use of an aircraft in the business of transporting persons or property by air for pay. 2012 1040x However, commercial aviation does not include any of the following uses. 2012 1040x Any use exclusively for the purpose of skydiving. 2012 1040x Certain air transportation by seaplane. 2012 1040x See Seaplanes under Transportation of Persons by Air in chapter 4. 2012 1040x Any use of an aircraft owned or leased by a member of an affiliated group and unavailable for hire by nonmembers. 2012 1040x For more information, see Aircraft used by affiliated corporations under Special Rules on Transportation Taxes in chapter 4. 2012 1040x Any use of an aircraft that has a maximum certificated takeoff weight of 6,000 pounds or less, unless the aircraft is operated on an established line. 2012 1040x For more information, see Small aircraft under Special Rules on Transportation Taxes in chapter 4. 2012 1040x Any use where the surtax on fuel used in a fractional ownership program aircraft is imposed. 2012 1040x See Surtax on any liquid used in a fractional ownership program aircraft as fuel below. 2012 1040x Surtax on any liquid used in a fractional ownership program aircraft as fuel Fuel used in a fractional ownership program aircraft (as defined below) after March 31, 2012, is subject to a surtax of $. 2012 1040x 141 per gallon. 2012 1040x The fractional ownership program manager is liable for the tax. 2012 1040x The surtax applies in addition to any other taxes imposed on the removal, entry, use, or sale of the fuel. 2012 1040x If the surtax is imposed, the following air transportation taxes do not apply. 2012 1040x Transportation of persons by air. 2012 1040x Transportation of property by air. 2012 1040x Use of international air travel facilities. 2012 1040x These taxes are described under Air Transportation Taxes, later. 2012 1040x A fractional ownership program aircraft flight is considered noncommercial aviation, for the rules for kerosene used in noncommercial aviation, see Kerosene for Use in Aviation above. 2012 1040x Fractional ownership aircraft program    is a program under which:  A single fractional ownership program manager provides fractional ownership program management services on behalf of the fractional owners; There are one or more fractional owners per fractional program aircraft, with at least one fractional program aircraft having more than one owner; For at least two fractional program aircraft, none of the ownership interests in the aircraft are less than the minimum fractional ownership interest or held by the program manager; There exists a dry-lease aircraft exchange arrangement among all of the fractional owners; and There are multi-year program agreements covering the fractional ownership, fractional ownership program management services, and dry-lease aircraft exchange aspects of the program. 2012 1040x Fractional program aircraft. 2012 1040x   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 Federal Aviation Administration under subpart K of part 91 title 14, Code of Federal Regulations, and is registered in the U. 2012 1040x S. 2012 1040x   Fractional program aircraft are not considered used for transportation of a qualified fractional owner, or on account of such qualified fractional owner when they are used for flight demonstration, maintenance or crew training. 2012 1040x In such situations, the flight is not commercial aviation. 2012 1040x Instead, the tax on the fuel used in the flight is imposed at the non-commercial aviation rate. 2012 1040x Fractional owner. 2012 1040x   Any person owning any interest (including the entire interest) in a fractional program aircraft. 2012 1040x Dry lease aircraft exchange. 2012 1040x   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. 2012 1040x Special rule relating to deadhead service. 2012 1040x   A fractional program aircraft will not be considered to be used on account of a qualified fractional owner when it is used in deadhead service and a person other than a qualified fractional owner is separately charged for such service. 2012 1040x More information. 2012 1040x   See section 4043 for more information on the surtax. 2012 1040x Certificate for Commercial Aviation and Exempt Uses A certificate is required from the aircraft operator: To support aircraft operator liability for tax on removal of kerosene for use in aviation directly into the fuel tank of an aircraft in commercial aviation, or For exempt uses. 2012 1040x Certificate. 2012 1040x   The certificate may be included as part of any business records normally used for a sale. 2012 1040x See Model Certificate K in the Appendix. 2012 1040x   A certificate expires on the earliest of the following dates. 2012 1040x The date 1 year after the effective date (not earlier than the date signed) of the certificate. 2012 1040x The date the buyer provides the seller a new certificate or notice that the current certificate is invalid. 2012 1040x The date the IRS or the buyer notifies the seller that the buyer's right to provide a certificate has been withdrawn. 2012 1040x   The buyer must provide a new certificate if any information on a certificate has changed. 2012 1040x   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. 2012 1040x Exempt use. 2012 1040x   The rate on kerosene for use in aviation is $. 2012 1040x 001 (LUST tax) if it is removed from any refinery or terminal directly into the fuel tank of an aircraft for an exempt use. 2012 1040x An exempt use includes kerosene for the exclusive use of a state or local government. 2012 1040x There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. 2012 1040x Flash title transaction. 2012 1040x   A position holder is not liable for tax if, among other conditions, it obtains a certificate (described above) from the operator of the aircraft into which the kerosene is delivered. 2012 1040x 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. 2012 1040x In this case, the position holder will be treated as having a certificate from the operator of the aircraft if: The aircraft operator puts the reseller's name, address, and EIN on the certificate in place of the position holder's information; and The reseller provides the position holder with a statement of the kerosene reseller. 2012 1040x Reseller statement. 2012 1040x   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: The reseller's name, address, and EIN; The position holder's name, address, and EIN; and A statement that the reseller has no reason to believe that any information in the accompanying aircraft operator's certificate is false. 2012 1040x Credits or Refunds. 2012 1040x   A claim may be made by the ultimate purchaser (the operator) for taxed kerosene for use in aviation used in commercial aviation (other than foreign trade) and noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia). 2012 1040x A claim may be made by a registered ultimate vendor for certain sales. 2012 1040x For more information, see chapter 2. 2012 1040x Other Fuels (Including Alternative Fuels) Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under section 4081. 2012 1040x Other Fuels include alternative fuels. 2012 1040x Alternative fuels are: Liquefied petroleum gas (LPG), “P Series” fuels, Compressed natural gas (CNG) (discussed later), Liquefied hydrogen, Any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, Liquid fuel derived from biomass, Liquefied natural gas (LNG), and Liquefied gas derived from biomass. 2012 1040x Liquefied petroleum gas includes propane, butane, pentane, or mixtures of those products. 2012 1040x Qualified methanol and ethanol fuels. 2012 1040x   Qualified ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from coal, including peat. 2012 1040x The tax rates are listed in the Instructions for Form 720. 2012 1040x Partially exempt methanol and ethanol fuels. 2012 1040x   A reduced tax rate applies to these fuels. 2012 1040x Partially exempt ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from natural gas. 2012 1040x The tax rates are listed in the Instructions for Form 720. 2012 1040x Motor vehicles. 2012 1040x   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. 2012 1040x They are propelled by a motor. 2012 1040x They are designed for carrying or towing loads from one place to another, regardless of the type of material or load carried or t