When Do You Need to Pay the Federal Fuel Tax?


Quick Answer

Federal fuel tax, in addition to state and local fuel tax, is paid at the time of the fuel purchase. The taxes are incorporated into the total purchase price per gallon charged at the time of delivery.

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Full Answer

The Internal Revenue Service provides a refund in the form of a tax credit, of the federal excise tax for any liquid fuel used exclusively by any state or political subdivision of a governmental entity. This includes the District of Columbia.

A qualifying entity acquires a certificate allowing for the tax-free purchase of fuel. The fuel distributor maintains records of certificates, invoices and orders for submission when claiming the refund. When qualifying fuel purchases are made using credit, the company extending the credit maintains the records and receives the refund for the tax exemption.

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