[Federal Register Volume 61, Number 51 (Thursday, March 14, 1996)]
[Rules and Regulations]
[Pages 10450-10466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5586]
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DEPARTMENT OF THE TREASURY
26 CFR Parts 40, 42, 48, and 602
[TD 8659]
RIN 1545-AR92
Gasoline and Diesel Fuel Excise Tax; Registration Requirements
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations relating to the taxes
on gasoline and diesel fuel. This document also removes obsolete excise
tax regulations. The regulations reflect and implement certain changes
made by the Omnibus Budget Reconciliation Act of 1990 and the Omnibus
Budget Reconciliation Act of 1993 (the 1993 Act). The regulations
affect certain blenders, enterers, industrial users, refiners, terminal
operators, and throughputters. The regulations also affect certain
persons that sell, buy, or use diesel fuel for a nontaxable use.
EFFECTIVE DATE: These regulations are effective March 14, 1996.
FOR FURTHER INFORMATION CONTACT: Frank Boland (202) 622-3130 (not a
toll-free call).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information contained in these final regulations
have been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under
control number 1545-1418. Responses to this collection of information
are mandatory and are required to obtain certain credits or payments.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information
[[Page 10451]]
unless the collection of information displays a valid control number.
The estimated average annual reporting burden per respondent is .1
hour.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attn: IRS Reports Clearance Officer, PC:FP,
Washington, DC 20224, and to the Office of Management and Budget, Attn:
Desk Officer for the Department of the Treasury, Office of Information
and Regulatory Affairs, Washington, DC 20503.
Books and records relating to this collection of information must
be retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
The Diesel Fuel Regulations
Before 1994, the diesel fuel tax applied to sales of diesel fuel by
importers or producers (including registered wholesale distributors).
Because of concerns that this system fostered considerable tax evasion,
Congress made significant changes to the tax in the 1993 Act. Effective
January 1, 1994, tax is imposed on diesel fuel when it is removed at
the terminal rack, and diesel fuel may be removed tax free only if the
fuel contains a prescribed type and amount of dye. These changes made
the taxing point readily identifiable, required untaxed fuel to be
physically identified (that is, dyed), and reduced the number of
taxpayers.
Temporary regulations (TD 8496) relating to these changes (the
diesel fuel regulations) were published in the Federal Register on
November 30, 1993 (58 FR 63069), along with a notice of proposed
rulemaking (PS-52-93) cross-referencing the temporary regulations (58
FR 63131). Amendments to these temporary regulations (TD 8512) relating
to dye color and concentration were published in the Federal Register
on December 27, 1993 (58 FR 68304), along with a notice of proposed
rulemaking (PS-76-93) cross-referencing those amendments (58 FR 68338).
Written comments responding to the proposed diesel fuel regulations
were received and a public hearing was held on March 22, 1994. Final
regulations (TD 8550) relating to dye color and concentration were
published in the Federal Register on June 30, 1994 (59 FR 33656).
The Conforming Regulations
On October 19, 1994, the IRS published in the Federal Register (59
FR 52735) proposed regulations (PS-66-93) that generally consolidate
the rules relating to the gasoline tax and the diesel fuel tax into a
single set of rules applicable to both fuels (the conforming
regulations). The conforming regulations also proposed rules relating
to gasohol and compressed natural gas.
Written comments regarding the proposed conforming regulations were
received and a public hearing was held on January 11, 1995.
Final regulations (TD 8609) relating to gasohol and compressed
natural gas were published in the Federal Register on August 7, 1995
(60 FR 40079).
The Final Regulations
After consideration of written comments and comments made at the
public hearings, the proposed diesel fuel regulations and the proposed
conforming regulations are adopted as revised by this Treasury
decision. Comments and revisions are discussed below.
Significant Issues Raised in Comments and Changes Made in the Final
Regulations
Treatment of Kerosene
The temporary diesel fuel regulations provide that kerosene would
not be treated as diesel fuel before July 1, 1994, and invited comments
on the treatment of kerosene after June 30, 1994. Notice 94-72 (1994-2
C.B. 553) informed taxpayers that the IRS was reviewing this issue and
would not change the treatment of kerosene until the issuance of
further guidance. The IRS is continuing its review of this issue.
Accordingly, the final regulations do not treat kerosene as diesel
fuel.
Because kerosene is not treated as diesel fuel, a person that adds
kerosene to diesel fuel outside of the bulk transfer/terminal system
generally must pay tax on the added kerosene and must be registered by
the IRS.
Removal From Certain Refineries
The temporary diesel fuel regulations provide that tax is not
imposed on the removal of undyed diesel fuel from an approved refinery
for delivery to an approved terminal if the fuel is removed by rail
car, the refinery and the terminal are operated by the same taxable
fuel registrant, and the refinery is not served by pipeline or vessel.
One commentator noted that one of its refineries is not serviced by
pipeline, vessel, or rail. In response to this comment, the final
regulations expand this rule so that diesel fuel also may be removed
tax free from an approved refinery that is not served by pipeline,
vessel, or rail if the removal is by a trailer or semi-trailer and
additional prescribed conditions are met.
Notice Relating to Sales and Removals of Dyed Diesel Fuel
The temporary diesel fuel regulations provide that terminal
operators and others who sell dyed diesel fuel are responsible for
informing their customers that the dyed fuel cannot be used for a
taxable purpose and that a penalty may be imposed for taxable use (the
notice requirement). Any person that fails to comply with the notice
requirement is, for purposes of the penalty for misuse of dyed fuel
imposed by section 6714, presumed to know that the dyed diesel fuel
will not be used for a nontaxable use.
Under the final regulations, only terminal operators and certain
retail sellers will be subject to the notice requirement. A terminal
operator must comply with the notice requirement as one of the terms
and conditions of its registration.
Visual Inspection Devices
The temporary diesel fuel regulations do not require the use of
visual inspection devices and the final regulations continue this
policy. The IRS will continue to evaluate the need for regulations
addressing this issue. However, the use of visual inspection devices is
encouraged so that the buyers and sellers of diesel fuel may readily
determine whether the fuel may be used for a taxable use.
Back-Up Tax; Trains
A tax is imposed on the delivery of dyed diesel fuel into the fuel
supply tank of a diesel-powered train. Under the temporary diesel fuel
regulations, the operator of the train into which dyed fuel is
delivered is liable for the tax.
Several commentators noted that a prevalent practice in the
railroad industry is for one railroad's locomotives to be used to pull
freight on another's track and to be fueled by the railroad that owns
the track. In these situations, the identity of the operator is
unclear.
In response to these comments, the final regulations provide that
the person that delivers dyed diesel fuel into the fuel supply tank of
a train is liable for the tax under certain prescribed conditions.
[[Page 10452]]
Credits and Payments
Information To Be Submitted With Claims
If undyed diesel fuel is used in a nontaxable use, a credit or
payment is allowable to either (1) the ultimate purchaser or (2) in the
case of diesel fuel used on a farm for farming purposes or by a State
or local government, the registered ultimate vendor of the fuel. The
temporary diesel fuel regulations prescribe the information that must
be submitted to the IRS to support claims for these credits or
payments.
Several commentators asserted that the information requirements in
the diesel fuel temporary regulations are too burdensome. In response
to these comments, the final regulations reduce the paperwork
requirements for claimants by eliminating certain items from the list
of required submissions. However, the paperwork requirements may be
changed in the future if the IRS determines that additional information
is necessary for effective enforcement of the tax.
Notice 94-61
Notice 94-61 (1994-1 C.B. 371) announced that the temporary diesel
fuel regulations would be revised to clarify that (1) a registered
ultimate vendor is the only person allowed a credit or payment with
respect to diesel fuel used on a farm for farming purposes or by State
or local governments, and (2) a credit or payment generally is allowed
to a registered ultimate vendor who sells undyed diesel fuel to a
custom harvester for use on a farm for farming purposes. The final
regulations contain these revisions.
Undyed Diesel Fuel Mixed With Dyed Diesel Fuel
One condition for the allowance of a credit or payment under
section 6427 is that tax must have been imposed on the diesel fuel to
which the claim relates. Because untaxed diesel fuel is dyed, the
temporary diesel fuel regulations require each claim to be accompanied
by a statement that the diesel fuel covered by a claim did not contain
visible evidence of dye.
On rare occasions, however, an amount of taxed diesel fuel may
contain visible evidence of dye. This may occur, for example, when dyed
diesel fuel and undyed diesel fuel are mixed together by a fuel
marketer or user who accidentally delivers one type of fuel into a
storage tank that already contains the other type of fuel.
The final regulations provide that each claim must be accompanied
by a statement that tax has been imposed on the diesel fuel covered by
a claim. Generally, this requirement will be met by a claimant's
statement that the diesel fuel did not contain visible evidence of dye.
However, for claims involving taxed fuel that has been mixed with dyed
fuel, the claimant (that is, the ultimate purchaser or the registered
ultimate vendor) cannot make such a statement. For these claims, the
claimant must submit other evidence showing that the diesel fuel
covered by the claim has been subject to tax. This evidence might
include a statement from the person that produced the undyed/dyed fuel
mixture explaining how the mixing occurred or a statement from the
claimant (if the claimant did not produce the mixture) that explains
when and from whom the claimant acquired the mixture. As with all
claims, these claims are subject to review by the IRS before they are
allowed.
Section 6714--Penalty
Section 6714(a)(3) provides that if any person willfully alters, or
attempts to alter, the strength or composition of any dye or marking
done pursuant to section 4082 in any dyed fuel, then such person shall
pay a penalty in addition to the tax (if any).
Notice 94-21 (1994-1 C.B. 339) describes three situations in which
the section 6714(a)(3) penalty does not apply. The final regulations
incorporate the substance of the Notice. In addition, the final
regulations provide that the section 6714(a)(3) penalty does not apply
if dyed diesel fuel is blended with undyed diesel fuel and the blending
occurs as part of an exempt or partially exempt (that is, bus or train)
use. Thus, for example, the section 6714(a)(3) penalty does not apply
if dyed and undyed diesel fuel are blended together in the fuel supply
tank of a nonhighway vehicle such as a bulldozer or farm tractor.
Dye Injection Systems and Markers
The final regulations do not require the use of dye injection
systems or markers. These topics will be addressed in a future notice
of proposed rulemaking.
Effect on Other Documents
The following publications are obsolete as of March 14, 1996:
Rev. Rul. 72-213, 1972-1 C.B. 328.
Rev. Proc. 73-21, 1973-2 C.B. 471.
Notice 88-26, 1988-1 C.B. 495.
Notice 89-17, 1989-1 C.B. 647.
Notice 94-18, 1994-1 C.B. 338.
Notice 94-21, 1994-1 C.B. 339.
Notice 94-61, 1994-1 C.B. 371.
Notice 94-72, 1994-2 C.B. 553.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. It also has been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to
these regulations, and, therefore, a Regulatory Flexibility Analysis is
not required. Pursuant to section 7805(f) of the Internal Revenue Code,
the notices of proposed rulemaking preceding these regulations were
submitted to the Small Business Administration for comment on their
impact on small business.
Drafting Information. The principal author of these regulations
is Frank Boland, Office of Assistant Chief Counsel (Passthroughs and
Special Industries). However, other personnel from the IRS and
Treasury Department participated in their development.
List of Subjects
26 CFR Parts 40, 42, and 48
Excise taxes, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, under the authority of 26 U.S.C. 7805, chapter I is
amended as follows:
PART 40--EXCISE TAX PROCEDURAL REGULATIONS
Paragraph 1. The authority citation for part 40 is amended by
removing the entry for sections 40.6011(a)-1, 40.6011(a)-2, and
40.6011(a)-3T and adding entries in numerical order to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 40.6011(a)-1 also issued under 26 U.S.C. 6011(a).
Section 40.6011(a)-2 also issued under 26 U.S.C. 6011(a). * * *
Par. 2. Section 40.6011(a)-1(b) is amended by:
1. Redesignating the text of paragraph (b) following the heading as
paragraph (b)(1) and adding a heading for newly designated paragraph
(b)(1).
2. Adding paragraph (b)(2).
The additions read as follows:
Sec. 40.6011(a)-1 Returns.
* * * * *
(b) * * * (1) In general. * * *
[[Page 10453]]
(2) Certain persons liable for tax on taxable fuel. Effective
January 1, 1994, the district director may require a person to make a
return of tax for a monthly or semimonthly period in the manner
prescribed in paragraph (b)(1) of this section if the person--
(i) Is a bonded registrant (as defined in Sec. 48.4101-1(b) of this
chapter) at any time during the period;
(ii) Has been registered under section 4101 for less than one year
at the beginning of the period;
(iii) Meets the acceptable risk test of Sec. 48.4101-1(f)(3) of
this chapter by reason of Sec. 48.4101-1(f)(3)(i)(B) of this chapter at
any time during the period;
(iv) Has failed to comply with the applicable provisions of
Sec. 48.4101-1(h) of this chapter (relating to the terms and conditions
of registration);
(v) Is liable for tax under Sec. 48.4082-4(a) of this chapter
(relating to the back-up tax on diesel fuel) at any time during the
period; or
(vi) Is liable for tax under section 4081 (relating to the tax on
taxable fuel) at any time during the period and is not a taxable fuel
registrant at that time.
* * * * *
Sec. 40.6011(a)-3T [Removed]
Par. 3. Section 40.6011(a)-3T is removed.
PART 42--[REMOVED]
Par. 4. Part 42 is removed.
PART 48--MANUFACTURERS AND RETAILERS EXCISE TAXES
Par. 5. The authority citation for part 48 is amended by removing
the entries for sections 48.4081-4, 48.4082-1 and 48.4082-2T, 48.4101-
3T, 48.4101-4T, 48.6427-8T and 48.6427-9T, and adding entries in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 48.4081-4 also issued under 26 U.S.C. 4083(a)(2). * * *
Section 48.4082-1 also issued under 26 U.S.C. 4082.
Section 48.4082-2 also issued under 26 U.S.C. 4082.
Section 48.4101-1 also issued under 26 U.S.C. 4101(a).
Section 48.4101-2 also issued under 26 U.S.C. 4101(d). * * *
Section 48.6427-8 also issued under 26 U.S.C. 6427(n).
Section 48.6427-9 also issued under 26 U.S.C. 6427(n).
Par. 6. Section 48.0-1 is amended by removing from the fourth
sentence the language ``gasoline, diesel and aviation fuel,'' and
adding ``taxable fuel, aviation fuel,'' in its place.
Sec. 48.4041-0T [Removed]
Par. 7. Section 48.4041-0T is removed.
Par. 8. Section 48.4041-0 is added to read as follows:
Sec. 48.4041-0 Applicability of regulations relating to diesel fuel
after December 31, 1993.
Sections 48.4041-3 through 48.4041-17 do not apply to sales or uses
of diesel fuel after December 31, 1993. For rules relating to the
diesel fuel tax imposed by section 4041 after that date, see
Sec. 48.4082-4.
Secs. 48.4041-1 and 48.4041-2 [Removed]
Par. 9. Sections 48.4041-1 and 48.4041-2 are removed.
Sec. 48.4041-2T [Removed]
Par. 10. Section 48.4041-2T is removed.
Sec. 48.4041-21 [Amended]
Secs. 48.4041-15 through 48.4041-21 [Transferred]
Par. 11. Sections 48.4041-15 through 48.4041-21 are transferred
from subpart G to subpart F.
Sec. 48.4041-21 [Amended]
Par. 12. In the first sentence of Sec. 48.4041-21(c)(1), the
language ``Sec. 48.4082-4T(c)(1) through (5)(A) or (c) (6) through
(11)'' is removed and ``Sec. 48.4082-4(c)(1) through (c)(4)(i) or
(c)(5) through (c)(10)'' is added in its place.
Par. 13. The heading for subpart G is revised to read as follows:
Subpart G--Fuel Used on Inland Waterways
Par. 14. Section 48.4042-1 is amended as follows:
1. Paragraphs (b) and (e) are revised.
2. In the introductory text of paragraph (f)(1), the language
``(26)'' is removed and ``(27)'' is added in its place.
3. Paragraphs (g)(25) and (g)(26) are redesignated as paragraphs
(g)(26) and (g)(27), respectively, and a new paragraph (g)(25) is
added.
The revisions and additions read as follows:
Sec. 48.4042-1 Tax on fuel used in commercial waterway transportation.
* * * * *
(b) Amount of tax. For the amount of tax, see section 4042(b).
* * * * *
(e) Liquid fuel. For purposes of the tax imposed under this
section, liquid fuel means any liquid fuel including gasoline, diesel
fuel, special motor fuel, or Bunker C residual fuel oil.
* * * * *
(g) * * *
(25) Tennessee-Tombigbee Waterway: From its confluence with the
Tennessee River to the Warrior River at Demopolis, Alabama.
* * * * *
Par. 15. The heading for subpart H is revised to read as follows:
Subpart H--Motor Vehicles, Tires, Tubes, Tread Rubber, and Taxable
Fuel
Par. 16. Section 48.4064-1(e)(2) is amended by removing the
language ``Form 843'' and adding ``Form 8849 (or on such other form as
the Commissioner may designate)'' in its place.
Par. 17. The undesignated center heading preceding Sec. 48.4081-1
is revised to read as follows:
Taxable Fuel
Par. 18. Sections 48.4081-1, 48.4081-2 and 48.4081-3 are revised to
read as follows:
Sec. 48.4081-1 Taxable fuel; definitions.
(a) Overview. This section provides definitions for purposes of the
tax on taxable fuel imposed by section 4081.
(b) Definitions.
Approved terminal or refinery means a terminal or refinery that is
operated, respectively, by a taxable fuel registrant that is a terminal
operator, or by a taxable fuel registrant that is a refiner.
Blender means any person that produces blended taxable fuel.
Bulk transfer means any transfer of taxable fuel by pipeline or
vessel.
Bulk transfer/terminal system means the taxable fuel distribution
system consisting of refineries, pipelines, vessels, and terminals.
Thus, taxable fuel in a refinery, pipeline, vessel, or terminal is in
the bulk transfer/terminal system. Taxable fuel in the fuel supply tank
of any engine, or in any tank car, rail car, trailer, truck, or other
equipment suitable for ground transportation is not in the bulk
transfer/terminal system.
Bus means automobile bus.
Diesel-powered boat means any waterborne vessel of any size or
configuration that is propelled, in whole or in part, by a diesel-
powered engine.
Diesel-powered bus means any bus that is propelled by a diesel-
powered engine.
Diesel-powered highway vehicle means a highway vehicle, as defined
in Sec. 48.4041-8(b), that is propelled by a diesel-powered engine.
Diesel-powered train means any diesel-powered equipment or
machinery that rides on rails. Thus, for example, the term includes a
locomotive, work train, switching engine, and track maintenance
machine.
[[Page 10454]]
Enterer generally means the importer of record (under customs law)
with respect to the taxable fuel. However, if the importer of record is
acting as an agent (for example, the importer of record is a customs
broker engaged by the owner of the taxable fuel), the person for whom
the agent is acting is the enterer. If there is no importer of record
for taxable fuel entered into the United States, the owner of the
taxable fuel at the time it is brought into the United States is the
enterer.
Entry of taxable fuel into the United States occurs when--
(1) The taxable fuel is brought into the United States and
applicable customs law requires that the taxable fuel be entered into
the United States for consumption, use, or warehousing; or
(2) The taxable fuel is brought into the United States from Puerto
Rico and applicable customs law would require that the taxable fuel be
entered into the United States for consumption, use, or warehousing if
the taxable fuel were brought into the United States from somewhere
other than Puerto Rico.
Finished gasoline means all products (including gasohol (as defined
in Sec. 48.4081-6(b)(2))) that are commonly or commercially known or
sold as gasoline and are suitable for use as a motor fuel, other than
products that have an ASTM octane number of less than 75 as determined
by the motor method.
Gasoline means finished gasoline and gasoline blendstocks.
Industrial user means any person that receives gasoline blendstocks
by bulk transfer for its own use in the manufacture of any product
other than finished gasoline.
Position holder means, with respect to taxable fuel in a terminal,
the person that holds the inventory position in the taxable fuel, as
reflected on the records of the terminal operator. A person holds the
inventory position in taxable fuel when that person has a contractual
agreement with the terminal operator for the use of storage facilities
and terminaling services at a terminal with respect to the taxable
fuel. The term also includes a terminal operator that owns taxable fuel
in its terminal.
Rack means a mechanism for delivering taxable fuel from a refinery
or terminal into a truck, trailer, railroad car, or other means of
nonbulk transfer.
Refiner means any person that owns, operates, or otherwise controls
a refinery.
Refinery means a facility used to produce taxable fuel from crude
oil, unfinished oils, natural gas liquids, or other hydrocarbons and
from which taxable fuel may be removed by pipeline, by vessel, or at a
rack. However, the term does not include a facility where only blended
fuel or gasohol (as defined in Sec. 48.4081-6(b)(2)), and no other type
of taxable fuel, is produced. For this purpose blended fuel is any
mixture that, if produced outside the bulk transfer/terminal system,
would be blended taxable fuel.
Removal means any physical transfer of taxable fuel, and any use of
taxable fuel other than as a material in the production of taxable fuel
or special fuels (as defined in Sec. 48.4041-8(f)). However, taxable
fuel is not removed when it evaporates or is otherwise lost or
destroyed.
Sale means--
(1) The transfer of title to, or substantial incidents of ownership
in, taxable fuel (other than taxable fuel in a terminal) to the buyer
for a consideration, which may consist of money, services, or other
property; or
(2) The transfer of the inventory position in the taxable fuel in a
terminal if the transferee becomes the position holder with respect to
the taxable fuel.
State includes any State, any political subdivision of a State, the
District of Columbia, the American Red Cross, and, subject to the
limitations of section 7871, any Indian tribal government.
Taxable fuel means gasoline and diesel fuel.
Taxable fuel registrant means an enterer, industrial user, refiner,
terminal operator, or throughputter that is registered under section
4101.
Terminal means a taxable fuel storage and distribution facility
that is supplied by pipeline or vessel, and from which taxable fuel may
be removed at a rack. However, the term does not include any facility
at which gasoline blendstocks are used in the manufacture of products
other than finished gasoline and from which no gasoline is removed.
Terminal operator means any person that owns, operates, or
otherwise controls a terminal.
Throughputter means any person that--
(1) Owns taxable fuel within the bulk transfer/terminal system
(other than in a terminal); or
(2) Is a position holder.
Vessel means a waterborne taxable fuel transporting vessel.
(c) Blended taxable fuel, diesel fuel, and gasoline blendstocks;
definitions--(1) Blended taxable fuel--(i) In general. Except as
provided in paragraphs (c)(1)(ii) and (c)(iii) of this section, blended
taxable fuel means any mixture that is produced outside the bulk
transfer/terminal system and that consists of--
(A) Taxable fuel with respect to which tax has been imposed under
section 4041(a)(1) or 4081(a); and
(B) Any other liquid on which tax has not been imposed under
section 4081.
(ii) Exclusion; minor blending. A mixture described in paragraph
(c)(1)(i) of this section is not blended taxable fuel if, during the
calendar quarter in which the blender removes or sells the mixture, all
such mixtures removed or sold by the blender contain, in the aggregate,
less than 400 gallons of liquid described in paragraph (c)(1)(i)(B) of
this section.
(iii) Exclusion; gasohol. Blended taxable fuel does not include any
gasohol (as defined in Sec. 48.4081-6(b)(2)) if, disregarding the
alcohol, the gasohol is not blended taxable fuel and contains, in
addition to permitted amounts of liquids described in paragraph
(c)(1)(i)(B) of this section, only gasoline with respect to which--
(A) Tax was imposed under section 4081(a) at a rate described in
Sec. 48.4081-6(e) (relating to the gasohol production tax rate and the
gasohol tax rate); or
(B) A valid claim is made under section 6427(f).
(2) Diesel fuel. (i) Effective April 1, 1996, diesel fuel means any
liquid (other than gasoline) that, without further processing or
blending, is suitable for use as a fuel in a diesel-powered highway
vehicle, diesel-powered train, or diesel-powered boat. However, diesel
fuel does not include kerosene, No. 5 and No. 6 fuel oils (as described
in ASTM Specification D 396, which may be obtained from the American
Society for Testing and Materials, 100 Barr Harbor Drive, West
Conshohocken, PA 19428), or F-76 (Fuel Naval Distillate MIL-F-16884,
which may be obtained from Standardization Document Order Desk,
Building 4, Section D, 700 Robbins Avenue, Philadelphia, PA 19111).
(ii) Before April 1, 1996, diesel fuel means any liquid (other than
kerosene) that is commonly or commercially known or sold as a fuel that
is suitable for use in a diesel-powered highway vehicle, diesel-powered
train, or diesel-powered boat. A liquid meets this requirement if,
without further processing or blending, the liquid has practical and
commercial fitness for use in the propulsion engine of the highway
vehicle, train, or boat. A liquid may possess this practical and
commercial fitness even though the specified use is not the liquid's
predominant use. However, a liquid does not possess this practical and
commercial fitness solely by reason of its possible or rare use as a
fuel in the propulsion engine of a highway vehicle, train, or boat.
[[Page 10455]]
(iii) Cross reference. For the tax on blended taxable fuel, see
Sec. 48.4081-3(g). For the back-up tax on certain uses of liquids other
than diesel fuel, see Sec. 48.4082-4.
(3) Gasoline blendstocks--(i) In general. Except as provided in
paragraph (c)(3)(ii) of this section, gasoline blendstocks means--
(A) Alkylate;
(B) Butane;
(C) Butene;
(D) Catalytically cracked gasoline;
(E) Coker gasoline;
(F) Ethyl tertiary butyl ether (ETBE);
(G) Hexane;
(H) Hydrocrackate;
(I) Isomerate;
(J) Methyl tertiary butyl ether (MTBE);
(K) Mixed xylene (not including any separated isomer of xylene);
(L) Natural gasoline;
(M) Pentane;
(N) Pentane mixture;
(O) Polymer gasoline;
(P) Raffinate;
(Q) Reformate;
(R) Straight-run gasoline;
(S) Straight-run naphtha;
(T) Tertiary amyl methyl ether (TAME);
(U) Tertiary butyl alcohol (gasoline grade) (TBA);
(V) Thermally cracked gasoline;
(W) Toluene; and
(X) Transmix containing gasoline.
(ii) Exclusion. Gasoline blendstocks does not include any product
that cannot, without further processing, be used in the production of
finished gasoline. For example, a mixed hydrocarbon stream that is
produced in a natural gas processing plant is not a gasoline blendstock
if the stream cannot be used to produce finished gasoline without
further processing.
(d) Effective date. This section is effective January 1, 1994.
Sec. 48.4081-2 Taxable fuel; tax on removal at a terminal rack.
(a) Overview. This section provides the general rule that all
removals of taxable fuel at a terminal rack are subject to tax and the
position holder with respect to the fuel is liable for the tax.
(b) Imposition of tax. Except as provided in Sec. 48.4081-4
(relating to gasoline blendstocks) and Sec. 48.4082-1 (relating to dyed
diesel fuel), tax is imposed on the removal of taxable fuel from a
terminal if the taxable fuel is removed at the rack.
(c) Liability for tax--(1) In general. The position holder with
respect to the taxable fuel is liable for the tax imposed under
paragraph (b) of this section.
(2) Joint and several liability of terminal operator; unregistered
position holder--(i) In general. The terminal operator is jointly and
severally liable for the tax imposed under paragraph (b) of this
section if--
(A) The position holder with respect to the taxable fuel is a
person other than the terminal operator and is not a taxable fuel
registrant; and
(B) The terminal operator has not met the conditions of paragraph
(c)(2)(ii) of this section.
(ii) Conditions for avoidance of liability. A terminal operator is
not liable for tax under this paragraph (c)(2) if, at the time of the
removal, the terminal operator--
(A) Is a taxable fuel registrant;
(B) Has an unexpired notification certificate (as described in
Sec. 48.4081-5) from the position holder; and
(C) Has no reason to believe that any information in the
notification certificate is false.
(3) Joint and several liability of terminal operator; incorrect
information provided. The terminal operator is jointly and severally
liable for the tax imposed under paragraph (b) of this section if, in
connection with the removal of diesel fuel that is not dyed and marked
in accordance with Sec. 48.4082-1, the terminal operator provides any
person (including the position holder with respect to the fuel) with
any bill of lading, shipping paper, record, or similar document
indicating that the diesel fuel is dyed and marked in accordance with
Sec. 48.4082-1.
(4) Example. The following example illustrates this paragraph (c)
and Sec. 48.4082-1:
Example. (i) TO is a terminal operator and PH is the position
holder with respect to, and owner of, 8,000 gallons of diesel fuel
stored in TO's terminal. TO and PH are taxable fuel registrants.
When the fuel is removed from the terminal at the rack, the fuel is
not dyed and marked in accordance with Sec. 48.4082-1, and TO does
not provide any person with any paperwork indicating that the fuel
is dyed and marked. After the removal from the terminal, PH sells
the fuel to individuals for use as heating oil, a nontaxable use.
(ii) Because PH is the position holder of the fuel at the time
of the removal from the terminal, PH is liable for the tax imposed
by section 4081. The removal is subject to tax because the fuel is
not dyed and marked in accordance with Sec. 48.4082-1, and later use
of the fuel in a nontaxable use does not make the removal from the
terminal exempt from tax.
(iii) Because PH is a taxable fuel registrant and TO did not
provide any person with any paperwork indicating that the fuel is
dyed and marked, TO is not jointly and severally liable for tax
under paragraph (c) (2) or (3) of this section.
(d) Rate of tax. For the rate of tax generally, see section
4081(a). For the rate of tax on gasohol and on gasoline removed for
gasohol production, see Sec. 48.4081-6.
(e) Effective date. This section is effective January 1, 1994.
Sec. 48.4081-3 Taxable fuel; taxable events other than removal at the
terminal rack.
(a) Overview. Although tax is imposed when taxable fuel is removed
from the terminal at the rack, tax also is imposed in certain other
situations described in this section. For the back-up tax on the use of
dyed diesel fuel, see Sec. 48.4082-4.
(b) Tax on removal from a refinery--(1) Imposition of tax. Except
as provided in paragraph (b)(2) of this section (relating to an
exemption for certain refineries), Sec. 48.4081-4 (relating to gasoline
blendstocks), and Sec. 48.4082-1 (relating to dyed diesel fuel), tax is
imposed on the following removals from a refinery:
(i) A removal by bulk transfer if the refiner or the owner of the
taxable fuel immediately before the removal is not a taxable fuel
registrant.
(ii) A removal at the rack.
(iii) After September 30, 1995, a removal of a batch of gasohol
from an approved refinery by bulk transfer if the refiner treats itself
with respect to the removal as a person that is not registered under
section 4101. See Sec. 48.4101-1(a). For the rule providing that no
deposit is required in the case of the tax imposed under this paragraph
(b)(1)(iii), see Sec. 40.6302(c)-1(e)(4) of this chapter. For the rule
allowing inspections of facilities where gasohol is produced, see
section 4083.
(2) Exception for certain refineries. The tax imposed under
paragraph (b)(1)(ii) of this section does not apply to a removal of
taxable fuel if--
(i) The taxable fuel is removed from an approved refinery that is
not served by pipeline (other than a pipeline for the receipt of crude
oil) or vessel;
(ii) The taxable fuel is received at a facility that is operated by
a taxable fuel registrant and is located within the bulk transfer/
terminal system;
(iii) The removal from the refinery is by--
(A) Rail car; or
(B) In the case of diesel fuel, a trailer or semi-trailer that is
used exclusively for the transport service described in paragraphs
(b)(2)(i) and (b)(2)(ii) of this section;
(iv) In the case of taxable fuel removed by rail car, the facility
at which the fuel is received is operated by the same person that
operates the refinery from which the fuel was removed; and
(v) In the case of diesel fuel removed by a trailer or semi-
trailer, the facility at which the fuel is received is less than
[[Page 10456]]
20 miles from the refinery from which the diesel fuel was removed.
(3) Liability for tax. The refiner is liable for the tax imposed
under paragraph (b)(1) of this section.
(c) Tax on entry into the United States--(1)Imposition of tax.
Except as provided in Sec. 48.4081-4 (relating to gasoline blendstocks)
and Sec. 48.4082-1 (relating to dyed diesel fuel), a tax is imposed on
the entry of taxable fuel into the United States if--
(i) The entry is by bulk transfer and the enterer is not a taxable
fuel registrant; or
(ii) The entry is not by bulk transfer.
(2) Liability for tax. The enterer is liable for the tax imposed
under paragraph (c)(1) of this section.
(d) Tax on bulk transfers from a terminal by an unregistered
position holder--(1) Imposition of tax. A tax is imposed on the removal
by bulk transfer of taxable fuel from a terminal if the position holder
with respect to the taxable fuel is not a taxable fuel registrant.
(2) Liability for tax--(i) In general. The position holder with
respect to the taxable fuel is liable for the tax imposed under
paragraph (d)(1) of this section.
(ii) Joint and several liability of terminal operator. The terminal
operator is jointly and severally liable for the tax imposed under
paragraph (d)(1) of this section if--
(A) The position holder with respect to the taxable fuel is a
person other than the terminal operator; and
(B) The terminal operator has not met the conditions of paragraph
(d)(2)(iii) of this section.
(iii) Conditions for avoidance of liability. A terminal operator is
not liable for tax under this paragraph (d)(2) if, at the time of the
bulk transfer, the terminal operator--
(A) Is a taxable fuel registrant;
(B) Has an unexpired notification certificate (described in
Sec. 48.4081-5) from the position holder; and
(C) Has no reason to believe that any information in the
notification certificate is false.
(e) Tax on bulk transfers not received at an approved terminal or
refinery--(1) Imposition of tax. Except as provided in Sec. 48.4081-4
(relating to gasoline blendstocks) and Sec. 48.4082-1 (relating to dyed
diesel fuel), a tax on taxable fuel is imposed if--
(i) Taxable fuel is removed by bulk transfer from a refinery or
terminal, or entered by bulk transfer into the United States;
(ii) No tax was imposed on such removal or entry under paragraph
(b), (c), or (d) of this section; and
(iii) Upon removal from the pipeline or vessel, the taxable fuel is
not received at an approved terminal or refinery (or at another
pipeline or vessel).
(2) Liability for tax--(i) In general. The owner of the taxable
fuel when it is removed from the pipeline or vessel is liable for the
tax imposed under paragraph (e)(1) of this section if the owner has not
met the conditions of paragraph (e)(2)(ii) of this section.
(ii) Conditions for avoidance of liability. An owner of taxable
fuel is not liable for tax under paragraph (e)(2)(i) of this section
if, at the time the taxable fuel is removed from the pipeline or
vessel, the owner of the taxable fuel--
(A) Is a taxable fuel registrant;
(B) Has an unexpired notification certificate (described in
Sec. 48.4081-5) from the operator of the terminal or refinery where the
taxable fuel is received; and
(C) Has no reason to believe that any information in the
notification certificate is false.
(iii) Liability of the operator of the facility where the taxable
fuel is received. The operator of the facility where the taxable fuel
is received is liable for the tax imposed under paragraph (e)(1) of
this section if the owner of the taxable fuel has met the conditions of
paragraph (e)(2)(ii) of this section and is jointly and severally
liable for the tax if the owner has not met such conditions.
(f) Tax on sales within the bulk transfer/terminal system--(1)
Imposition of tax. Except as provided in paragraph (f)(2) of this
section and Sec. 48.4082-1 (relating to dyed diesel fuel), a tax is
imposed on the sale of taxable fuel located within the bulk transfer/
terminal system if the sale is to a person that is not a taxable fuel
registrant and tax has not been imposed on such taxable fuel under
Sec. 48.4081-2, or paragraph (b), (c), (d), or (e) of this section.
(2) Exception for certain sales of taxable fuel for export. The tax
imposed under paragraph (f)(1) of this section does not apply to a sale
of taxable fuel if--
(i) The buyer's principal place of business is not within the
United States;
(ii) The sale of the fuel occurs as the fuel is delivered into a
transport vessel;
(iii) The vessel has a capacity of at least 20,000 barrels of fuel;
(iv) The seller is a taxable fuel registrant and the exporter of
record of the fuel; and
(v) The fuel was exported in due course.
(3) Liability for tax--(i) In general. The seller of the taxable
fuel is liable for the tax imposed under paragraph (f)(1) of this
section if the seller has not met the conditions of paragraph
(f)(3)(ii) of this section.
(ii) Conditions for avoidance of liability. A seller is not liable
for tax under paragraph (f)(3)(i) of this section if, at the time of
the sale, the seller--
(A) Is a taxable fuel registrant;
(B) Has an unexpired notification certificate (described in
Sec. 48.4081-5) from the buyer; and
(C) Has no reason to believe that any information in the
certificate is false.
(iii) Liability of the buyer. The buyer of the taxable fuel is
liable for the tax imposed under paragraph (f)(1) of this section if
the seller of the taxable fuel has met the conditions of paragraph
(f)(3)(ii) of this section and is jointly and severally liable for the
tax if the seller has not met such conditions.
(4) Example. The following example illustrates this paragraph (f)
and the definition of the term sale in Sec. 48.4081-1:
Example. PH owns one million gallons of untaxed gasoline that is
stored in TO's terminal. PH also is the position holder with respect
to the gasoline. While the gasoline remains stored in the terminal,
PH transfers title to 200,000 gallons of the gasoline to A, a person
that is not a taxable fuel registrant. PH continues to hold the
inventory position on TO's records with respect to the one million
gallons. Because PH continues as the position holder with respect to
the gasoline, the transfer of title to the gasoline from PH to A is
not a sale of gasoline. Because this transfer of title from PH to A
is not a sale of gasoline, the tax imposed under paragraph (f) of
this section does not apply to the transfer.
(g) Tax on removal or sale of blended taxable fuel by the blender--
(1) Imposition of tax. A tax is imposed on the removal or sale of
blended taxable fuel by the blender thereof. Tax is computed on the
difference between the total number of gallons of blended taxable fuel
removed or sold and the number of gallons of previously taxed taxable
fuel used to produce the blended taxable fuel. For this purpose, the
alcohol in gasohol is treated as previously taxed taxable fuel.
(2) Liability for tax. The blender is liable for the tax imposed
under paragraph (g)(1) of this section.
(3) Example. The following example illustrates the provisions of
this paragraph (g) and the definition of the term blended taxable fuel
in Sec. 48.4081-1(c):
Example. (i) X, a gasoline wholesale distributor, buys 9,500
gallons of gasoline at a terminal rack. The gasoline is delivered
into a tank trailer. The position holder is liable for tax under
Sec. 48.4081-2 when the gasoline is removed at the rack. X then goes
to another location where 500 gallons of alcohol (a substance not
subject to tax under section 4081) are delivered into the tank
[[Page 10457]]
trailer already containing the 9,500 gallons of gasoline. The
gasoline and alcohol are splash blended as X drives to X's retail
service station where X pumps the blended gasoline into a storage
tank for sale to consumers.
(ii) X is a blender within the meaning of Sec. 48.4081-1 because
X has produced blended taxable fuel, as defined in Sec. 48.4081-1,
by mixing the 9,500 gallons of gasoline on which tax has been
imposed under Sec. 48.4081-2(b) with 500 gallons of alcohol, a
substance not subject to tax under section 4081. The 10,000 gallon
mixture is not gasohol because it does not satisfy the alcohol-
content requirement described in Sec. 48.4081-6(b)(2). X, the
blender, is liable for the tax imposed under this paragraph (g) on
the blended gasoline. The tax is imposed when the blended gasoline
is removed from the tank trailer at the retail station. Tax on the
blended mixture is computed on 500 gallons, the number of gallons
not previously subject to tax under section 4081.
(h) Rate of tax. For the rate of tax generally imposed under this
section, see section 4081(a). For the rate of tax on gasohol and on
gasoline removed or entered for gasohol production, see Sec. 48.4081-6.
(i) Effective date. This section is effective January 1, 1994.
Par. 19. Section 48.4081-4 is amended as follows:
1. The heading for Sec. 48.4081-4 is revised.
2. In paragraph (a), the language ``to produce gasoline'' is
removed and ``to produce finished gasoline'' is added in its place.
3. In paragraph (b)(1)(i), the language ``gasoline registrant'' is
removed and ``taxable fuel registrant'' is added in its place.
4. In paragraph (b)(1)(ii), the language ``gasoline (as defined in
Sec. 48.4081-1(i)(1))'' is removed and ``finished gasoline'' is added
in its place.
5. In paragraphs (b)(2)(i) and (c)(1), the language ``gasoline
registrant'' is removed each place it appears and ``taxable fuel
registrant'' is added in its place.
6. The language ``and'' is added following the semicolon at the end
of paragraph (c)(2).
7. Paragraph (c)(3) is revised.
8. Paragraph (c)(4) is removed.
9. In paragraph (d), the language ``gasoline registrant'' is
removed and ``taxable fuel registrant'' is added in its place.
10. In paragraphs (e)(2) and (e)(3), the language ``production of
gasoline'' is removed each place it appears and ``production of
finished gasoline'' is added in its place.
11. In paragraph (e)(3), the language ``to produce gasoline'' is
removed each place it appears, and ``to produce finished gasoline'' is
added in its place.
12. In paragraph (f), the language ``1993'' is removed and ``1994''
is added in its place.
The revisions read as follows:
Sec. 48.4081-4 Gasoline; special rules for gasoline blendstocks.
* * * * *
(c) * * *
(3) Has no reason to believe that any information in the
certificate is false.
* * * * *
Par. 20. Section 48.4081-5 is amended as follows:
1. The heading for Sec. 48.4081-5 is revised to read as follows:
Sec. 48.4081-5 Taxable fuel; notification certificate of taxable fuel
registrant.
2. In paragraph (a), the first sentence in paragraph (b)(1)
introductory text, and paragraph (b)(2), the language ``gasoline'' is
removed each place it appears and ``taxable fuel'' is added in its
place.
3. In paragraph (b)(3), the language ``or letter of registration''
is added after ``Form 637'' in the heading and after ``(Form 637)'' in
the text.
4. In paragraph (c), the language ``1993'' is removed and ``1994''
is added in its place.
Par. 21. The heading for Sec. 48.4081-6 is revised to read as
follows:
Sec. 48.4081-6 Gasoline; gasohol.
Sec. 40.4081-7 [Amended]
Par. 22. Section 48.4081-7 is amended as follows:
1. In paragraph (c)(2), two new listings are added at the end of
the listings in line 5 of the taxpayer's report:
``__________ Removal at the terminal rack __________ Removal or
sale by the blender''
2. In paragraph (c)(4)(i)(A) and the first sentence of paragraph
(c)(4)(iii), the language ``Sec. 48.4081-1(r))'' is removed and
``Sec. 48.4081-1))'' is added in its place.
Par. 23. Section 48.4081-8 is revised to read as follows:
Sec. 48.4081-8 Taxable fuel; measurement.
(a) In general. For purposes of the tax imposed by section 4081,
gallons of taxable fuel may be measured on the basis of--
(1) Actual volumetric gallons;
(2) Gallons adjusted to 60 degrees Fahrenheit; or
(3) Any other temperature adjustment method approved by the
Commissioner.
(b) Effective date. This section is effective January 1, 1994.
Secs. 48.4081-10T, 48.4081-11T, and 48.4081-12T [Removed]
Par. 24. Sections 48.4081-10T through 48.4081-12T are removed.
Par. 25. Section 48.4082-1 is revised to read as follows:
Sec. 48.4082-1 Diesel fuel tax; exemption.
(a) Exemption. Tax is not imposed by section 4081 on the removal,
entry, or sale of any diesel fuel if--
(1) The person otherwise liable for tax is a taxable fuel
registrant;
(2) In the case of a removal from a terminal, the terminal is an
approved terminal; and
(3) The diesel fuel satisfies the dyeing and marking requirements
of paragraphs (b), (c), and (d) of this section.
(b) Dyeing requirements. Diesel fuel satisfies the dyeing
requirement of this paragraph (b) only if it contains--
(1) The dye Solvent Red 164 (and no other dye) at a concentration
spectrally equivalent to at least 3.9 pounds of the solid dye standard
Solvent Red 26 per thousand barrels of diesel fuel; or
(2) Any dye of a type and in a concentration that has been approved
by the Commissioner.
(c) Marking requirements. [Reserved]
(d) Time for adding the dye and marker. [Reserved]
(e) Effective date. This section is effective March 14, 1996.
Secs. 48.4082-2T, 48.4082-3T, 48.4082-4T and 48.4083 [Removed]
Par. 26. Sections 48.4082-2T, 48.4082-3T, 48.4082-4T, and 48.4083
are removed.
Par. 27. Sections 48.4082-2, 48.4082-3, 48.4082-4, and 48.4083-1
are added to read as follows:
Sec. 48.4082-2 Diesel fuel tax; notice required with respect to dyed
diesel fuel.
(a) In general. A legible and conspicuous notice stating: DYED
DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE must be
posted by a seller on any retail pump or other delivery facility where
it sells dyed diesel fuel for use by its buyer. Any seller that fails
to post the required notice on any retail pump or other delivery
facility where it sells dyed diesel fuel is, for purposes of the
penalty imposed by section 6714, presumed to know that the fuel will
not be used for a nontaxable use.
(b) Cross reference; terminal operators. For the requirement that
terminal operators provide a notice with respect to dyed diesel fuel,
see Sec. 48.4101-1(h)(3) (relating to terms and conditions of
registration for terminal operators).
(c) Effective date. This section is effective January 1, 1994.
[[Page 10458]]
Sec. 48.4082-3 Diesel fuel; visual inspection devices. [Reserved]
Sec. 48.4082-4 Diesel fuel; back-up tax.
(a) Imposition of tax--(1) In general. Tax is imposed by section
4041 on the delivery into the fuel supply tank of the propulsion engine
of a diesel-powered highway vehicle (other than a diesel-powered bus)
or diesel-powered boat of--
(i) Any diesel fuel on which tax has not been imposed by section
4081;
(ii) Any diesel fuel on which a credit or payment has been allowed
under section 6427; or
(iii) Any liquid other than gasoline or diesel fuel.
(2) Liability for tax--(i) In general. The operator of the highway
vehicle or boat into which the fuel is delivered is liable for the tax
imposed under paragraph (a)(1) of this section.
(ii) Joint and several liability of the seller. The seller of the
fuel is jointly and severally liable for the tax imposed under
paragraph (a)(1) of this section if the seller knows or has reason to
know that the fuel will not be used in a nontaxable use.
(3) Rate of tax. The rate of tax is the rate imposed on diesel fuel
by section 4081(a).
(b) Tax on diesel fuel; buses and trains--(1) In general.Tax is
imposed by section 4041 on the delivery into the fuel supply tank of
the propulsion engine of a diesel-powered bus or a diesel-powered train
of--
(i) Any diesel fuel on which tax has not been imposed by section
4081;
(ii) Any diesel fuel on which a credit or payment has been allowed
under section 6427; or
(iii) Any liquid other than gasoline or diesel fuel.
(2) Liability for tax--(i) In general. Except as provided in
paragraph (b)(2)(ii) of this section, the operator of the bus or train
into which the fuel is delivered is liable for the tax imposed under
paragraph (b)(1) of this section.
(ii) Special rule for certain train operators. The person that
delivers the fuel into the fuel supply tank of a train, rather than the
train operator, is liable for the tax imposed under paragraph (b)(1) of
this section if, at the time of the delivery--
(A) The deliverer of the fuel and the operator of the train are
both registered as train operators under Sec. 48.4101-1; and
(B) A written agreement between the deliverer of the fuel and the
operator requires the deliverer to pay the tax imposed under paragraph
(b)(1) of this section.
(3) Rate of tax--(i) Buses--(A) In general. The rate of tax under
paragraph (b)(1) of this section is the sum of the rates described in
sections 4041(a)(1)(C)(iii)(I) and 4041(d)(1) (the bus rate) if the bus
is used to furnish (for compensation) passenger land transportation
available to the general public and either such transportation is
scheduled and along regular routes or the seating capacity of the bus
is at least 20 adults (not including the driver). 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.
(B) Other uses. The rate of tax under paragraph (b)(1) of this
section is the rate of tax imposed on diesel fuel by section 4081(a) if
the bus is used for a purpose other than that described in paragraph
(b)(3)(i)(A) of this section.
(ii) Trains. The rate of tax under paragraph (b)(1) of this section
is the rate prescribed in section 4041 for diesel fuel sold for use in
a train (the train rate).
(4) Cross reference. For the registration requirement relating to
certain bus and train operators, see Sec. 48.4101-1(c)(2).
(c) Exemptions. The taxes imposed under paragraphs (a) and (b) of
this section do not apply to a delivery of any liquid for--
(1) Use on a farm for farming purposes as that term and related
terms are defined in Sec. 48.6420-4 (a) through (g);
(2) The exclusive use of a State;
(3) Use described in section 4041(h) (relating to use in a vehicle
owned by an aircraft museum);
(4) Use in a boat employed in--
(i) The business of commercial fishing;
(ii) The business of transporting persons or property for
compensation or hire; or
(iii) Any other trade or business, unless the boat is used in any
activity of a type generally considered to constitute entertainment,
amusement, or recreation (within the meaning of section 274(a)(1)(A)
and the regulations under that section);
(5) Use in a bus while the bus is engaged in the transportation of
students and employees of schools (as defined in the last sentence of
section 4221(d)(7)(C));
(6) Use in a qualified local bus (as defined in section
6427(b)(2)(D)) while the bus is engaged in furnishing (for
compensation) intracity passenger land transportation that is available
to the general public and is scheduled and along regular routes;
(7) Use in a highway vehicle that--
(i) Is not registered (and is not required to be registered) for
highway use under the laws of any State or foreign country; and
(ii) Is used in the operator's trade or business or in an activity
of the operator described in section 212 (relating to the production of
income);
(8) The exclusive use of a nonprofit educational organization, as
defined in Sec. 48.4221-6(b);
(9) Use in a highway vehicle that is owned by the United States and
is not used on the highway; or
(10) Use in any boat operated by the United States for the
exclusive use of the United States or any vessel of war of any foreign
nation, as described in Sec. 48.4221-4(b)(5).
(d) Effective date. This section is effective January 1, 1994.
Sec. 48.4083-1 Taxable fuel; administrative authority.
(a) In general--(1) Authority to inspect. Officers or employees of
the IRS designated by the Commissioner, upon presenting appropriate
credentials and a written notice to the owner, operator, or agent in
charge, are authorized to enter any place and to conduct inspections in
accordance with paragraphs (a) through (c) of this section.
(2) Reasonableness. Inspections will be performed in a reasonable
manner and at times that are reasonable under the circumstances, taking
into consideration the normal business hours of the place to be
entered.
(b) Place of inspection--(1) In general. Inspections may be at any
place at which taxable fuel is (or may be) produced or stored or at any
inspection site where evidence of activities described in section
6714(a) may be discovered. These places may include, but are not
limited to--
(i) Any terminal;
(ii) Any fuel storage facility that is not a terminal;
(iii) Any retail fuel facility; or
(iv) Any designated inspection site.
(2) Designated inspection sites. A designated inspection site is
any State highway inspection station, weigh station, agricultural
inspection station, mobile station, or other location designated by the
Commissioner to be used as a fuel inspection site. A designated
inspection site will be identified as a fuel inspection site.
(c) Scope of inspection--(1) Inspection. Officers or employees may
physically inspect, examine or otherwise search any tank, reservoir, or
other container that can or may be used for the production, storage, or
transportation of fuel, fuel dyes, or fuel markers. Inspection may also
be made of any equipment used for, or in connection with, production,
storage, or
[[Page 10459]]
transportation of fuel, fuel dyes, or fuel markers. This includes any
equipment used for the dyeing or marking of fuel. This also includes
books and records, if any, that are maintained at the place of
inspection and are kept to determine excise tax liability under section
4081.
(2) Detainment. Officers or employees may detain any vehicle,
train, or boat for the purpose of inspecting its fuel tanks and storage
tanks. Detainment will be either on the premises under inspection or at
a designated inspection site. Detainment may continue for such
reasonable period of time as is necessary to determine the amount and
composition of the fuel.
(3) Removal of samples. Officers or employees may take and remove
samples of fuel in such quantities as are reasonably necessary to
determine the composition of the fuel.
(d) Refusal to submit to inspection--(1) Imposition of penalty. Any
person that refuses to allow an inspection will be fined $1,000 for
each refusal. This penalty is in addition to any other penalty or tax
that may be imposed upon that person or any other person liable for tax
under section 4081 or penalty under section 6714.
(2) Assessment of penalty. This penalty is an assessable penalty
and is assessed in accordance with section 6671.
(e) Effective date. This section is effective January 1, 1994.
Par. 28. The undesignated center heading preceding Sec. 48.4101-1
is removed.
Par. 29. Section 48.4101-1 is revised to read as follows:
Sec. 48.4101-1 Registration.
(a) In general. (1) This section provides rules relating to
registration under section 4101 for purposes of the federal excise tax
on taxable fuel imposed by sections 4041(a)(1) and 4081 and the credit
or payment allowed to registered ultimate vendors of diesel fuel under
section 6427.
(2) A person is registered under section 4101 only if the district
director has issued a registration letter to the person and the
registration has not been revoked or suspended.
(3) A refiner that is registered under section 4101 may, with
respect to the bulk removal of any batch of gasohol from its refinery,
treat itself as a person that is not registered. See Sec. 48.4081-
3(b)(1)(iii).
(4) Each business unit that has, or is required to have, a separate
employer identification number is treated as a separate person. Thus,
two business units (for example, a parent corporation and a subsidiary
corporation, or a proprietorship and a related partnership), each of
which has a different employer identification number, are two persons.
(5) A registration in effect on December 31, 1993, with respect to
the tax on gasoline or diesel fuel is subject to the district
director's review, and to revocation or suspension, under the standards
set forth in this section, but remains in effect until the earlier of--
(i) The effective date of a registration issued under paragraph
(g)(3) of this section; or
(ii) The effective date of the revocation or suspension of the
registration under paragraph (i) of this section.
(b) Definitions--(1) Applicant. An applicant is a person that has
applied for registration under paragraph (e) of this section.
(2) Bonded registrant. A bonded registrant is a person that has
given a bond to the district director under paragraph (j) of this
section as a condition of registration.
(3) Gasohol bonding amount. The gasohol bonding amount is the
product of--
(i) The rate of tax applicable to later separation, as described in
Sec. 48.4081-6(f)(1)(iii); and
(ii) The total number of gallons of gasoline expected to be bought
at the gasohol production tax rate by the gasohol blender during a
representative 6-month period (as determined by the district director).
(4) Penalized for a wrongful act. A person has been penalized for a
wrongful act if the person has--
(i) Been assessed any penalty under chapter 68 of the Internal
Revenue Code (or similar provision of the law of any State) for
fraudulently failing to file any return or pay any tax, and the penalty
has not been wholly abated, refunded, or credited;
(ii) Been assessed any penalty under chapter 68 of the Internal
Revenue Code, such penalty has not been wholly abated, refunded, or
credited, and the district director determines that the conduct
resulting in the penalty is part of a consistent pattern of failing to
deposit, pay, or pay over a substantial amount of tax;
(iii) Been convicted of a crime under chapter 75 of the Internal
Revenue Code (or similar provision of the law of any State), or of
conspiracy to commit such a crime, and the conviction has not been
wholly reversed by a court of competent jurisdiction;
(iv) Been convicted, under the laws of the United States or any
State, of a felony for which an element of the offense is theft, fraud,
or the making of false statements, and the conviction has not been
wholly reversed by a court of competent jurisdiction;
(v) Been assessed any tax under section 4103 and the tax has not
been wholly abated, refunded, or credited; or
(vi) Had its registration under section 4101 or 4222 revoked.
(5) Related person. A related person is a person that--
(i) Directly or indirectly exercises control over an activity of
the applicant if the activity is described in paragraph (c)(1) or (d)
of this section;
(ii) Owns, directly or indirectly, five percent or more of the
applicant;
(iii) Is under a duty to assure the payment of a tax for which the
applicant is responsible;
(iv) Is a member, with the applicant, of a group of organizations
(as defined in Sec. 1.52-1(b) of this chapter) that would be treated as
a group of trades or businesses under common control for purposes of
Sec. 1.52-1 of this chapter; or
(v) Distributed or transferred assets to the applicant in a
transaction in which the applicant's basis in the assets is determined
by reference to the basis of the assets in the hands of the distributor
or transferor.
(6) Registrant. A registrant is a person that the district director
has, in accordance with paragraph (g)(3) of this section, registered
under section 4101 and whose registration has not been revoked or
suspended.
(c) Persons required to be registered--(1) In general. A person is
required to be registered under section 4101 if the person is a--
(i) Blender;
(ii) Enterer;
(iii) Refiner;
(iv) Terminal operator; or
(v) Position holder.
(2) Bus and train operators. Every operator of a bus or train is
required to be registered under section 4101 at any time it incurs any
liability for tax under section 4041 at the bus rate (as described in
Sec. 48.4082-4(b)(3)(i)) or the train rate (as described in
Sec. 48.4082-4(b)(3)(ii)).
(3) Consequences of failing to register. For the criminal penalty
imposed for failure to register, see section 7232. For the civil
penalty imposed for failure to register, see section 7272.
(d) Persons that may, but are not required to, be registered. A
person may, but is not required to, be registered under section 4101 if
the person is a--
(1) Gasohol blender;
(2) Industrial user;
(3) Throughputter that is not a position holder; or
(4) Ultimate vendor of diesel fuel.
[[Page 10460]]
(e) Application instructions. Application for registration under
section 4101 must be made in accordance with the instructions for Form
637 (or such other form as the Commissioner may designate).
(f) Registration tests--(1) In general--(i) Persons other than
ultimate vendors. Except as provided in paragraph (f)(1)(ii) of this
section, the district director will register an applicant only if the
district director determines that the applicant meets the following
three tests (collectively, the registration tests):
(A) The activity test of paragraph (f)(2) of this section.
(B) The acceptable risk test of paragraph (f)(3) of this section.
(C) The adequate security test of paragraph (f)(4) of this section.
(ii) Ultimate vendors. The district director will register an
applicant as an ultimate vendor of diesel fuel only if the district
director--
(A) Determines that the applicant meets the activity test of
paragraph (f)(2) of this section; and
(B) Is satisfied with the filing, deposit, payment, and claim
history for all federal taxes of the applicant and any related person.
(2) The activity test. An applicant meets the activity test of this
paragraph (f)(2) only if the district director determines that the
applicant--
(i) Is, in the course of its trade or business, regularly engaged
as an operator of a bus or train or in the characteristic activity of a
person described in paragraph (c)(1) or (d) of this section; or
(ii) Is likely to be (because of such factors as the applicant's
business experience, financial standing, or trade connections), in the
course of its trade or business, regularly engaged as an operator of a
bus or train or in the characteristic activity of a person described in
paragraph (c)(1) or (d) of this section within a reasonable time after
becoming registered under section 4101.
(3) Acceptable risk test--(i) In general. An applicant meets the
acceptable risk test of this paragraph (f)(3) only if--
(A) Neither the applicant nor a related person has been penalized
for a wrongful act; or
(B) Even though the applicant or a related person has been
penalized for a wrongful act, the district director determines, after
review of evidence offered by the applicant, that the registration of
the applicant does not create a significant risk of nonpayment or late
payment of the tax imposed by sections 4041(a)(1) and 4081.
(ii) Significant risk of nonpayment or late payment of tax. In
making the determination described in paragraph (f)(3)(i)(B) of this
section, the district director may consider factors such as the
following:
(A) The time elapsed since the applicant or related person was
penalized for a wrongful act.
(B) The present relationship between the applicant and any related
person that was penalized for any wrongful act.
(C) The degree of rehabilitation of the person penalized for any
wrongful act.
(D) The amount of bond given by the applicant. In this regard, the
district director may accept a bond under paragraph
(j) of this section, without regard to the limits on the amount of
the bond set by paragraph (j)(2) of this section.
(4) Adequate security test--(i) In general. An applicant meets the
adequate security test of this paragraph (f)(4) only if the district
director determines that the applicant has both adequate financial
resources and a satisfactory tax history, or the applicant gives the
district director a bond (under the provisions of paragraph (j) of this
section).
(ii) Adequate financial resources--(A) In general. An applicant has
adequate financial resources only if the district director determines
that the applicant is financially capable of paying--
(1) Its expected tax liability under sections 4041(a)(1) and 4081
for a representative 6-month period (as determined by the district
director);
(2) In the case of a terminal operator, the expected tax liability
under section 4081 of persons other than the terminal operator with
respect to taxable fuel removed at the racks of its terminals during a
representative 1-month period (as determined by the district director);
and
(3) In the case of a gasohol blender, the gasohol bonding amount.
(B) Basis for determination. The determination under this paragraph
(f)(4)(ii) must be based on financial information such as the
applicant's income statement, balance sheet or bond ratings, or other
information related to the applicant's financial status.
(iii) Satisfactory tax history. An applicant has a satisfactory tax
history only if the district director is satisfied with the filing,
deposit, and payment history for all federal taxes of the applicant and
any related person.
(g) Action on the application by the district director--(1) Review
of application. The district director may investigate the accuracy and
completeness of any representations made by an applicant, request any
additional relevant information from the applicant, and inspect the
applicant's premises during normal business hours without advance
notice.
(2) Denial. If the district director determines that an applicant
does not meet all of the applicable registration tests described in
paragraph (f) of this section, the district director must notify the
applicant, in writing, that its application for registration is denied
and state the basis for the denial.
(3) Approval. If the district director determines that an applicant
meets all of the applicable registration tests described in paragraph
(f) of this section, the district director must register the applicant
under section 4101 and issue the applicant a letter of registration
containing the effective date of the registration. The effective date
of the registration must be no earlier than the date on which the
district director signs the letter of registration. A copy of an
application for registration (Form 637) is not a letter of
registration.
(h) Terms and conditions of registration--(1) Affirmative duties.
Each registrant must--
(i) Make deposits, file returns, and pay taxes required by the
Internal Revenue Code and the regulations;
(ii) Keep records sufficient to show the registrant's tax liability
under sections 4041(a)(1) and 4081 and payments or deposits of such
liability;
(iii) Make all information reports required under section 4101(d)
and Sec. 48.4101-2;
(iv) Make available for inspection on demand by the Internal
Revenue Service during normal business hours records relevant to a
determination of tax liability under sections 4041(a)(1) and 4081; and
(v) Notify the district director of any change (such as a change in
ownership) in the information the registrant submitted in connection
with its application for registration, or previously submitted under
this paragraph (h)(1)(v), within 10 days after the change occurs.
(2) Prohibited actions. A registrant may not--
(i) Sell, lease or otherwise allow another person to use its
registration;
(ii) Make any false statement to the district director in
connection with a submission under paragraph (h)(1) or (h)(3) of this
section;
(iii) Make any false statement on, or violate the terms of--
(A) A notification certificate of a taxable fuel registrant (as
described in Sec. 48.4081-5(b)); or
(B) A certificate of a registered gasohol blender (as described in
Sec. 48.4081-6(c)(2)).
(3) Additional terms and conditions for terminal operators--(i)
Notice
[[Page 10461]]
required with respect to dyed diesel fuel. A legible and conspicuous
notice stating: DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR
TAXABLE USE must be provided by each terminal operator to any person
that receives dyed diesel fuel at a terminal rack of that operator.
This notice must be provided by the time of the removal and must appear
on all shipping papers, bills of lading, and similar documents that are
provided by the terminal operator to accompany the removal of the fuel.
(ii) Records to be maintained relating to removals of diesel fuel.
Each terminal operator must keep the following information with respect
to each rack removal of diesel fuel at each terminal it operates:
(A) The bill of lading or other shipping document.
(B) The record of whether the fuel was dyed and marked in
accordance with Sec. 48.4082-1.
(C) The volume and date of the removal.
(D) The identity of the person, such as a common carrier, that
physically received the fuel.
(E) Any other information required by the Commissioner.
(iii) Records to be maintained relating to dye. With respect to
each of its terminals, a terminal operator must keep records relating
to dye inventories and usage.
(iv) Retention of information. In addition to any other requirement
relating to the retention of records, the terminal operator must--
(A) Maintain the information described in paragraph (h)(3)(ii) of
this section at the terminal from which the removal occurred for at
least 3 months after the removal to which it relates; and
(B) Maintain the information described in paragraph (h)(3)(iii) of
this section at the terminal where the dye was received for at least 3
months after the receipt.
(v) Prohibition on providing incorrect information. In connection
with the removal of diesel fuel that is not dyed and marked in
accordance with Sec. 48.4082-1, a terminal operator may not provide any
person (including the position holder with respect to the fuel) with
any bill of lading, shipping paper, or similar document indicating that
the diesel fuel is dyed and marked in accordance with Sec. 48.4082-1.
(i) Adverse actions by the district director against a registrant--
(1) Mandatory revocation or suspension. The district director must
revoke or suspend the registration of any registrant if the district
director determines that the registrant, at any time--
(i) Does not meet one or more of the applicable registration tests
under paragraph (f) of this section and has not corrected the
deficiency within a reasonable period of time after notification by the
district director;
(ii) Has used its registration to evade, or attempt to evade, the
payment of any tax imposed by section 4041(a)(1) or 4081, or to
postpone or in any manner to interfere with the collection of any such
tax, or to make a fraudulent claim for a credit or payment;
(iii) Has aided or abetted another person in evading, or attempting
to evade, payment of any tax imposed by section 4041(a)(1) or 4081, or
in making a fraudulent claim for a credit or payment; or
(iv) Has sold, leased, or otherwise allowed another person to use
its registration.
(2) Remedial action permitted in other cases. If the district
director determines that a registrant has, at any time, failed to
comply with the terms and conditions of registration under paragraph
(h) of this section, made a false statement to the district director in
connection with its application for registration or retention of
registration, or otherwise used its registration in a manner that
creates a significant risk of nonpayment or late payment of tax, then
the district director may--
(i) Revoke or suspend the registrant's registration;
(ii) In the case of a registrant other than an ultimate vendor,
require the registrant to give a bond under the provisions of paragraph
(j) of this section as a condition of retaining its registration; and
(iii) In the case of a registrant other than an ultimate vendor,
require the registrant to file monthly or semimonthly returns under
Sec. 40.6011(a)-1(b) of this chapter as a condition of retaining its
registration.
(3) Action by the district director to revoke or suspend a
registration. If the district director revokes or suspends a
registration, the district director must so notify the registrant in
writing and state the basis for the revocation or suspension. The
effective date of the revocation or suspension may not be earlier than
the date on which the district director notifies the registrant.
(j) Bonds--(1) Form. Each bond given to the district director as a
condition of registration under paragraph (f)(4)(i) or (i)(2)(ii) of
this section must be executed in the form prescribed by the district
director. Each bond must be--
(i) A public debt obligation of the United States Government;
(ii) An obligation the principal and interest of which are
unconditionally guaranteed by the United States Government;
(iii) A bond executed by a surety company listed in Department of
the Treasury Circular 570 as an acceptable surety or reinsurer of
federal bonds (a surety bond); or
(iv) Any other bond with security (including liens under section
4101(b)(1)(B)) considered acceptable by the district director.
(2) Amount of bond. A bond given under this paragraph (j) must be
in an amount that the district director determines will ensure timely
collection of the taxes imposed by sections 4041(a)(1) and 4081, taking
into account the applicant's financial capabilities, tax history, and
expected liability under sections 4041(a)(1) and 4081. The district
director may increase or decrease the amount of the required bond to
take into account changes in the applicant's financial capabilities,
tax history, and expected liability under sections 4041(a)(1) and 4081.
However, in no case may the amount of the bond be greater than the
amount that the district director determines is equal to--
(i) The applicant's expected tax liability under sections
4041(a)(1) and 4081 for a representative 6-month period (as determined
by the district director);
(ii) In the case of a terminal operator, the expected tax liability
of persons other than the terminal operator under section 4081 with
respect to taxable fuel removed at the racks of its terminals
(determined as if all removals of taxable fuel were taxable) during a
representative 1-month period (as determined by the district director);
and
(iii) In the case of a gasohol blender, the gasohol bonding amount.
(3) Collection of taxes from a bond. If a bonded registrant does
not pay the amount of tax it incurs under section 4041(a)(1) or 4081 by
the time prescribed in section 6151 for paying that tax, the district
director may collect the amount of the unpaid tax (including penalties
and interest with respect to that tax) from the bonded registrant's
bond.
(4) Termination of bonds--(i) Surety bonds. A surety on a bond may
give written notice to the district director and the bonded registrant
that the surety desires to be relieved of liability under the bond
after a certain date, which date must be at least 60 days after the
receipt of the notice by the district director. The surety will be
relieved of any liability that the bonded registrant incurs after the
date named in the notice. However, the surety remains liable for the
amount
[[Page 10462]]
of tax that the bonded registrant incurred under sections 4041(a)(1)
and 4081 during the term of the bond and for penalties and interest
with respect to that tax.
(ii) Other bonds. A bond (other than a surety bond) given to the
district director may be returned to the bonded registrant only after
the earlier of--
(A) The district director's determination that the bonded
registrant has paid all taxes that the bonded registrant incurred under
sections 4041(a)(1) and 4081 during the period covered by the bond and
any penalties and interest with respect to the taxes;
(B) The expiration of the period for assessment of the taxes that
the bonded registrant incurred under sections 4041(a)(1) and 4081 taxes
during the period covered by the bond, as determined under the
provisions of subchapter A of chapter 66 of the Internal Revenue Code;
or
(C) The date that the district director receives from the
registrant a substitute bond given under this paragraph (j).
(5) Determination that bond is no longer required. If the district
director determines that the bonded registrant meets the adequate
security test of paragraph (f)(4) of this section without a bond, the
registrant is to be released from the obligation to give a bond as a
condition of registration under section 4101.
(k) Cross references. For a rule relating to the filing of monthly
and semimonthly returns by certain persons that are registered under
section 4101, see Sec. 40.6011(a)-1(b)(2) of this chapter. For rules
relating to the tax on taxable fuel, see Secs. 48.4081-1 through
48.4083-1. For rules relating to claims by registered ultimate vendors,
see Sec. 48.6427-9.
(l) Effective dates. (1) Except as otherwise provided in this
paragraph (l), this section is applicable as of January 1, 1994.
(2) Paragraph (c)(1) of this section (relating to persons required
to be registered) is applicable as of January 1, 1995.
(3) Paragraph (h)(3)(iii) of this section (relating to certain
recordkeeping requirements) is applicable as of July 1, 1996.
Par. 30. Section 48.4101-2 is added to read as follows:
Sec. 48.4101-2 Information reporting.
(a) In general--(1) Taxable fuel registrants. Each taxable fuel
registrant must make a return showing--
(i) The name and registration number (if any) of each person that
is a position holder at each terminal it operates;
(ii) The amount of taxable fuel received at each terminal it
operates;
(iii) The identity of each position holder with respect to--
(A) All rack removals of taxable fuel from each terminal it
operates, and the volume and dates of the removals; and
(B) In the case of rack removals of diesel fuel, whether the fuel
was dyed and marked at the operator's terminal in accordance with
Sec. 48.4082-1;
(iv) The amount of taxable fuel stored at each terminal it
operates;
(v) The destination (by state) of all taxable fuel removed at a
terminal rack of each terminal it operates, to the extent such
information has been provided to the registrant;
(vi) The name and registration number (if any) of the operator of
each terminal at which it is a position holder;
(vii) The volume and date of the removal with respect to all rack
removals of taxable fuel for which it is the position holder;
(viii) In the case of nonbulk removals and entries of gasoline
blendstocks for which it would be liable for tax but for the special
rule in Sec. 48.4081-4(c), the name and registration number of each
operator of each refinery and terminal where the gasoline blendstocks
are received;
(ix) The name and registration number (if any) of each person to
which it sells (within the meaning of Sec. 48.4081-1) taxable fuel
located in the bulk transfer/terminal system;
(x) The name and registration number of each person from which it
receives a certificate described in Sec. 48.4081-6(c) (relating to
certificate of registered gasohol blender);
(xi) With respect to any liability incurred under Sec. 48.4081-3(e)
(relating to tax on bulk transfers not received at an approved terminal
or refinery)--
(A) The date on which the removal of the taxable fuel from a
pipeline or vessel gave rise to the liability; and
(B) The location of the taxable fuel at the time of the removal;
and
(xii) Any other information required by the Commissioner.
(2) Gasohol blenders. Each registered gasohol blender must make a
return showing, with respect to each batch of gasohol it produced from
gasoline it bought at the gasohol production tax rate--
(i) The name and registration number of the person that sold it the
gasoline;
(ii) The date and location of the purchase of the gasoline;
(iii) The volume of the gasoline;
(iv) The name, address, and employer identification number of the
person that sold it the alcohol;
(v) The date and location of the purchase of the alcohol;
(vi) The volume and type of the alcohol; and
(vii) Any other information required by the Commissioner.
(3) Pipeline and vessel operators. Each operator of a pipeline or
vessel that makes a bulk transfer of taxable fuel to a terminal or
refinery must make a return showing--
(i) The location of the terminal or refinery where the taxable fuel
was delivered;
(ii) The date of the delivery; and
(iii) Any other information required by the Commissioner.
(b) Form and time of return. Each return required under this
section must be made at the time and in the form required by the
Commissioner.
(c) Consequences for failure to make a return. For the consequences
for failing to make an information return required by this section, see
Sec. 48.4101-1(i) (relating to adverse actions against a registrant)
and section 6721 (relating to a penalty for failure to file an
information return).
(d) Effective date. This section is applicable as of April 1, 1996.
Secs. 48.4101-2T, 48.4101-3, 48.4101-3T, and 48.4101-4T [Removed]
Par. 31. Sections 48.4101-2T, 48.4101-3, 48.4101-3T, and 48.4101-4T
are removed.
Par. 32. Section 48.4102-1 is amended as follows:
1. Paragraph (a) is revised.
2. Paragraph (b)(1) is amended by removing the language ``on the
sale or use of gasoline or lubricating oil, respectively,''.
3. Paragraph (b)(2) is amended by removing ``gasoline or
lubricating oil'' each place it appears and adding ``taxable fuel or
aviation fuel'' in its place.
The revision reads as follows:
Sec. 48.4102-1 Inspection of records by State or local tax officers.
(a) Inspection of records maintained by taxpayer. The records that
a taxpayer is required to keep with respect to the taxes imposed by
section 4081 or 4091 must be open to inspection by any officer of any
State or political subdivision thereof, or of the District of Columbia,
who is charged with the enforcement or collection of any tax on taxable
fuel or aviation fuel.
* * * * *
Sec. 48.4221 [Removed]
Par. 33. Section 48.4221 is removed.
Par. 34. Section 48.4221-1 is amended as follows:
1. Paragraph (a) is revised.
2. Paragraph (b)(2)(iv) is amended by adding ``and'' at the end.
3. Paragraph (b)(2)(v) is revised.
[[Page 10463]]
4. Paragraphs (b)(2)(vi) through (b)(2)(xii) are removed.
5. Paragraph (b)(3) is removed and paragraphs (b)(4) and (b)(5) are
redesignated as paragraphs (b)(3) and (b)(4), respectively.
The revised provisions read as follows:
Sec. 48.4221-1 Tax-free sales; general rule.
(a) Application of regulations under section 4221--(1) In general.
The regulations under section 4221 provide rules under which the
manufacturer, producer, or importer of an article subject to tax under
chapter 32 (or the retailer of an article subject to tax under
subchapter A or C of chapter 31) may sell the article tax free under
section 4221.
(2) Limitations. The following restrictions must be taken into
account in applying the regulations under section 4221:
(i) The exemptions under section 4221 (a)(4) and (a)(5) do not
apply to the tax imposed by section 4064 (gas guzzler tax).
(ii) The exemptions under section 4221 do not apply to the tax
imposed by section 4081 (gasoline and diesel fuel tax).
(iii) The exemptions under section 4221 do not apply to the tax
imposed by section 4091 (aviation fuel tax). For rules relating to tax-
free sales of aviation fuel, see section 4092 and the regulations
thereunder.
(iv) The exemptions under section 4221 do not apply to the tax
imposed by section 4121 (coal tax).
(v) The exemptions under section 4221 (a)(3) through (a)(5) do not
apply to the tax imposed by section 4131 (vaccine tax). In addition,
the exemption under section 4221(a)(2) applies to the vaccine tax only
to the extent provided in Sec. 48.4221-3(e) (relating to tax-free sales
of vaccine for export).
(vi) The exemptions under section 4221(a) apply only in those cases
where the exportation or use referred to is to occur before any other
use.
(b) * * *
(2) * * *
(v) Section 4221(e)(3) relating to the sale of tires used on
intercity, local, or school buses (see Sec. 48.4221-8).
* * * * *
Par. 35. Section 48.4221-2 is amended by:
1. Removing from the first sentence of paragraph (a)(1) the
language ``(other than a tire or inner tube taxable under section 4071,
which are given special treatment under sections 4221(e) (2) and (4),
and Secs. 48.4221-7 and 48.4221-8)'' and adding ``(other than a tire
taxable under section 4071, which is given special treatment under
section 4221(e)(2) and Sec. 48.4221-7)'' in its place.
2. Removing paragraph (a)(2) and redesignating paragraph (a)(3) as
paragraph (a)(2).
3. Revising paragraph (b).
The revision reads as follows:
Sec. 48.4221-2 Tax-free sale of articles to be used for, or resold
for, further manufacture.
* * * * *
(b) Circumstances under which an article is considered to have been
sold for use in further manufacture. (1) An article shall be treated as
sold for use in further manufacture if the article is sold for use by
the buyer as material in the manufacture or production of, or as a
component part of, another article taxable under chapter 32 of the
Internal Revenue Code.
(2) An article is used as material in the manufacture or production
of, or as a component of, another article if it is incorporated in, or
is a part or accessory of, the other article when the other article is
sold by the manufacturer. In addition, an article is considered to be
used as material in the manufacture of another article if it is
consumed in whole or in part in testing such other article. However, an
article that is consumed in the manufacturing process other than in
testing, so that it is not a physical part of the manufactured article,
is not considered to have been used as material in the manufacture of,
or as a component part of, another article.
* * * * *
Par. 36. Section 48.4221-5 is amended as follows:
1. Paragraph (c)(1) is amended by:
a. Removing the first sentence.
b. Removing the language ``If a State or local government is not
registered, the'' and adding ``The'' in its place in the new first
sentence.
2. In paragraph (d), the first sentence is amended by:
a. Removing the language ``(whether on the basis of a registration
number or an exemption certificate)''.
b. Removing the language ``(such as gasoline that is'' and adding
``(such as tires that are'' in its place.
Secs. 48.4221-8, 48.4221-9, 48.4221-10 [Removed]
Par. 37. Sections 48.4221-8, 48.4221-9, and 48.4221-10 are removed.
Sec. 48.4221-11 [Redesignated as Sec. 48.4221-8]
Par. 38. Section 48.4221-11 is redesignated as Sec. 48.4221-8.
Sec. 48.4221-12 [Removed]
Par. 39. Section 48.4221-12 is removed.
Par. 40. In Sec. 48.4222(a)-1, paragraphs (a) and (b) are revised
to read as follows:
Sec. 48.4222(a)-1 Registration.
(a) General rule. Except as provided in Sec. 48.4222(b)-1, tax-free
sales under section 4221 may be made only if the manufacturer, first
purchaser, and second purchaser, as the case may be, have been
registered by the Internal Revenue Service.
(b) Application instructions. Application for registration under
section 4222 must be made in accordance with instructions for Form 637
(or such other form as the Commissioner may designate).
* * * * *
Par. 41. In Sec. 48.4222(b)-1, paragraph (a) is revised to read as
follows:
Sec. 48.4222(b)-1 Exceptions to the requirement for registration.
(a) State and local governments. The Internal Revenue Service will
not register State or local governments under section 4222. To
establish the right to sell articles tax free to a State or local
government, the manufacturer must obtain the information described in
Sec. 48.4221-5(c).
* * * * *
Sec. 48.4222(d)-1 [Amended]
Par. 42. Section 48.4222(d)-1 is amended by:
1. Removing paragraphs (a), (b), and (c).
2. Redesignating paragraph (d) as paragraph (a).
3. Removing paragraphs (e) and (f).
4. Redesignating paragraph (g) as paragraph (b).
Sec. 48.6206-1 [Removed]
Par. 43. Section 48.6206-1 is removed.
Sec. 48.6416(b)(2)-2 [Amended]
Par. 44. In Sec. 48.6416(b)(2)-2, paragraphs (g) through (k) are
removed.
Sec. 48.6416(g)-1 [Removed]
Par. 45. Section 48.6416(g)-1 is removed.
Sec. 48.6421-3 [Amended]
Par. 46. In Sec. 48.6421-3, paragraph (d)(2) is amended by removing
from the first sentence the language ``Form 843'' and adding ``Form
8849 (or on such other form as the Commissioner may designate)'' in its
place.
Secs. 6424-0 through 48.6424-6 [Removed]
Par. 47. Sections 48.6424-0 through 48.6424-6 are removed.
[[Page 10464]]
Sec. 48.6427-3 [Amended]
Par. 48. In Sec. 48.6427-3, paragraph (d)(2) is amended by removing
from the first sentence the language ``Form 843'' and adding ``Form
8849 (or on such other form as the Commissioner may designate)'' in its
place.
Sec. 48.6427-7 [Amended]
Par. 49. In Sec. 48.6427-7, paragraph (g)(4) is amended by removing
the language ``Form 843 (Claim)'' and adding ``Form 8849 (or such other
form as the Commissioner may designate)'' in its place.
Par. 50. Sections 48.6427-8 and 48.6427-9 are added to read as
follows:
Sec. 48.6427-8 Claims by ultimate purchasers with respect to diesel
fuel taxed after December 31, 1993.
(a) Overview. This section provides the rules for obtaining a
credit or payment with respect to undyed diesel fuel that was taxed
after December 31, 1993, and that was used in a nontaxable use (other
than on a farm for farming purposes or by a State). A credit or payment
for undyed diesel fuel used on a farm for farming purposes or by a
State is allowable only to a registered ultimate vendor under the rules
of Sec. 48.6427-9.
(b) Conditions to allowance of credit or payment--(1) In general.
Except as provided in section 6427(l)(5), a claim for credit or payment
with respect to diesel fuel is allowable under section 6427(l) only
if--
(i) Tax was imposed by section 4081 on the diesel fuel to which the
claim relates;
(ii) The claimant produced or bought the fuel and did not resell it
in the United States;
(iii) The claimant has filed a timely claim for a credit or payment
that contains the information required under paragraph (d) of this
section;
(iv) The fuel was not bought under a certificate described in
Sec. 48.6427-9(e)(2) (relating to certificate of farmer or State to
support claim of ultimate vendor);
(v) The fuel was not used on a farm for farming purposes (as
defined in Sec. 48.6420-4) or by a State; and
(vi) The fuel was either--
(A) Used in a use described in Sec. 48.4082-4 (c)(3) through
(c)(10);
(B) Exported;
(C) Used other than as a fuel in a propulsion engine of a diesel-
powered highway vehicle or diesel-powered boat;
(D) Used as a fuel in a propulsion engine of a diesel-powered
train; or
(E) Used as a fuel in the propulsion engine of a diesel-powered bus
if the bus was used in a use described in section 6427(b)(1) (after the
application of section 6427(b)(3)).
(2) Examples. The following examples illustrate this paragraph (b).
Example 1. (i) In September 1996, F bought 250 gallons of undyed
diesel fuel. In October 1996, F used 200 gallons of the fuel in a
farm tractor. This use qualifies as use on a farm for farming
purposes (as defined in Sec. 48.6420-4). The farm tractor is not a
diesel-powered highway vehicle (as defined in Sec. 48.4081-1(h)). F
used the remaining 50 gallons to heat F's residence. F filed a
complete and timely claim for a credit relating to the 250 gallons.
(ii) A credit or payment is not allowable to F with respect to
the 200 gallons of diesel fuel used in the farm tractor. Even though
this fuel was used other than as a fuel in a propulsion engine of a
diesel-powered highway vehicle (thus meeting the condition in
paragraph (b)(1)(vi)(C) of this section), the condition in paragraph
(b)(1)(v) of this section is not satisfied because the fuel was used
on a farm for farming purposes.
(iii) A credit is allowable to F with respect to the 50 gallons
F used for heating purposes because the conditions in paragraph
(b)(1) of this section have been met. F used this fuel other than as
a fuel in a propulsion engine of a diesel-powered highway vehicle
and the use of the fuel for residential heating is not use on a farm
for farming purposes.
Example 2. (i) In September 1996, W, a wholesale distributor,
sold 3,500 gallons of diesel fuel on which tax has been imposed to
C, a construction company located in the United States. W's selling
price to C did not include an amount equal to the federal excise tax
on the fuel. C used the fuel other than as a fuel in a propulsion
engine of a diesel-powered highway vehicle or diesel-powered boat.
Both W and C file a complete and timely claim for a credit relating
to the fuel.
(ii) Because W resold the fuel in the United States, the
condition of paragraph (b)(1)(ii) of this section is not met. Thus,
W is not allowed a credit or payment with respect to the fuel.
(iii) C is eligible for a credit or payment with respect to the
fuel because the conditions to allowance in paragraph (b)(1) of this
section have been met. The conditions to allowance do not include a
requirement that C buy the fuel at a price that includes the amount
of the tax.
(c) Form of claim. Each claim for an income tax credit under this
section must be made on Form 4136 (or on such other form as the
Commissioner may designate) in accordance with the instructions for
that form. Each claim for a payment under this section must be made on
Form 8849 (or on such other form as the Commissioner may designate) in
accordance with the instructions for that form.
(d) Content of claim. Each claim for a credit or payment under this
section must contain the following information with respect to all the
diesel fuel covered by the claim:
(1) The total number of gallons covered by the claim.
(2) A statement by the claimant that tax has been imposed on the
diesel fuel covered by the claim.
(3) The use made of the diesel fuel covered by the claim described
by reference to specific categories listed in paragraph (b)(1)(vi) of
this section (such as use in a boat employed in commercial fishing or
the exclusive use of a nonprofit educational organization).
(4) If the diesel fuel covered by the claim was exported, a
declaration that the claimant has proof of exportation (as described in
Sec. 48.4221-3(d)(1)).
(5) A declaration that the claimant has in its possession the name
and address of the person(s) that sold the diesel fuel to the claimant
and the date(s) of the purchase(s).
(e) Time and place for filing claim. For rules relating to the time
for filing a claim under section 6427, see section 6427(i). A claim
under this section is not filed unless it contains all the information
required by paragraph (d) of this section and is filed at the place
required by the form.
(f) Effective date. This section is effective January 1, 1994,
except for paragraph (b)(1)(v) of this section, which is effective for
diesel fuel bought by ultimate purchasers after June 30, 1994.
Sec. 48.6427-9 Claims by registered ultimate vendors with respect to
diesel fuel taxed after December 31, 1993.
(a) Overview. This section provides the rules for obtaining a
credit or payment with respect to undyed diesel fuel that was taxed
after December 31, 1993, and that was used on a farm for farming
purposes or by a State.
(b) Definitions. (1) An ultimate vendor, as used in this section,
is a person that sells undyed diesel fuel to--
(i) The owner, tenant, or operator of a farm for use by such person
on a farm for farming purposes (as defined in Sec. 48.6420-4);
(ii) A person other than the owner, tenant, or operator of a farm
for use by such person for any of the purposes described in
Sec. 48.6420-4(d) (relating to cultivating, raising, or harvesting); or
(iii) Any State for its exclusive use.
(2) A registered ultimate vendor is--
(i) An ultimate vendor that is registered under section 4101 as an
ultimate vendor; or
(ii) With respect to a claim filed before January 1, 1995, an
ultimate vendor that is registered as a producer of diesel fuel on
December 31, 1993, if the registration has not been revoked or
suspended.
(c) Conditions to allowance of credit or payment. A claim for a
credit or payment with respect to diesel fuel is
[[Page 10465]]
allowable under section 6427(l)(5) only if--
(1) Tax was imposed by section 4081 on the diesel fuel to which the
claim relates;
(2) The claimant sold the diesel fuel to--
(i) The owner, tenant, or operator of a farm for use by such person
on a farm for farming purposes (as defined in Sec. 48.6420-4);
(ii) A person other than the owner, tenant, or operator of a farm
for use by such person for any of the purposes described in
Sec. 48.6420-4(d) (relating to cultivating, raising, or harvesting); or
(iii) Any State for its exclusive use;
(3) The claimant is a registered ultimate vendor; and
(4) The claimant has filed a timely claim for a credit or payment
that contains the information required under paragraph (e) of this
section.
(d) Form of claim. Each claim for an income tax credit under this
section must be made on Form 4136 (or on such other form as the
Commissioner may designate) in accordance with the instructions for
that form. Each claim for a payment under this section must be made on
Form 8849 (or on such other form as the Commissioner may designate) in
accordance with the instructions for that form.
(e) Content of claim--(1) In general. Each claim for credit or
payment under this section must contain the following information with
respect to all the diesel fuel covered by the claim:
(i) The total number of gallons covered by the claim.
(ii) A statement by the claimant that tax has been imposed on the
diesel fuel covered by the claim.
(iii) The claimant's registration number.
(iv) The name and taxpayer identification number of each person
that bought diesel fuel from the claimant in a transaction described in
paragraph (c)(2) of this section and the number of gallons that the
claimant sold to that person.
(v) A statement that the claimant--
(A) Has not included the amount of the tax in its sales price of
the diesel fuel and has not collected the amount of tax from its buyer;
(B) Has repaid the amount of the tax to the ultimate purchaser of
the fuel; or
(C) Has obtained the written consent of its buyer to the allowance
of the claim.
(vi) For claims relating to sales by the claimant after March 31,
1994, a statement that the claimant has in its possession an unexpired
certificate described in paragraph (e)(2) of this section and the
claimant has no reason to believe any information in the certificate is
false.
(vii) For claims relating to sales by the claimant before April 1,
1994, either the statement described in paragraph (e)(1)(vi) of this
section or a statement that--
(A) The claimant has in its possession an unexpired exemption
certificate relating to tax-free sales of diesel fuel for use on a farm
for farming purposes or for the exclusive use of a State;
(B) The certificate was received from the buyer before January 1,
1994; and
(C) The claimant has no reason to believe any information in the
certificate is false.
(2) Certificate--(i) In general. The certificate to be provided to
the ultimate vendor consists of a statement that is signed under
penalties of perjury by a person with authority to bind the buyer, is
in substantially the same form as the model certificate provided in
paragraph (e)(2)(ii) of this section, and contains all information
necessary to complete such model certificate. A new certificate must be
given if any information in the current certificate changes. The
certificate may be included as part of any business records normally
used to document a sale. The certificate expires on the earlier of the
following dates:
(A) The date one year after the effective date of the certificate.
(B) The date a new certificate is provided to the seller.
(ii) Model certificate.
Certificate of Farming Use or State Use
(To support vendor's claim for a credit or payment under section
6427 of the Internal Revenue Code.)
----------------------------------------------------------------------
----------------------------------------------------------------------
Name, address, and employer identification number of vendor
The undersigned buyer (``Buyer'') hereby certifies the following
under penalties of perjury:
Buyer will use the diesel fuel to which this certificate
relates--(check one)
______ On a farm for farming purposes (as defined in Sec. 48.6420-
4(c) of the Manufacturers and Retailers Excise Tax Regulations) and
Buyer is the owner, tenant, or operator of the farm on which the
fuel will be used;
______ On a farm (as defined in Sec. 48.6420-4(c)) for any of the
purposes described in paragraph (d) of that section (relating to
cultivating, raising, or harvesting) and Buyer is a person that is
not the owner, tenant, or operator of the farm on which the fuel
will be used; or
______ For the exclusive use of a State or local government, or the
District of Columbia.
This certificate applies to the following (complete as
applicable):
If this is a single purchase certificate, check here ______ and
enter:
1. Invoice or delivery ticket number ______
2. ______ (number of gallons)
If this is a certificate covering all purchases under a
specified account or order number, check here ______ and enter:
1. Effective date ______
2. Expiration date ______ (period not to exceed 1 year after the
effective date)
3. Buyer account or order number ______
Buyer will provide a new certificate to the vendor if any
information in this certificate changes.
If Buyer uses the diesel fuel to which this certificate relates
for a purpose other than stated in the certificate Buyer will be
liable for tax.
Buyer understands that the fraudulent use of this certificate
may subject Buyer and all parties making such fraudulent use of this
certificate to a fine or imprisonment, or both, together with the
costs of prosecution.
----------------------------------------------------------------------
Printed or typed name of person signing
----------------------------------------------------------------------
Title of person signing
----------------------------------------------------------------------
Name of Buyer
----------------------------------------------------------------------
Employer identification number
----------------------------------------------------------------------
Address of Buyer
----------------------------------------------------------------------
Signature and date signed
(f) Time and place for filing claim. For rules relating to the time
for filing a claim under section 6427, see section 6427(i). A claim
under this section is not filed unless it contains all the information
required by paragraph (e) of this section and is filed at the place
required by the form.
(g) Effective date. This section is effective January 1, 1994.
Secs. 48.6427-8T and 48.6427-9T [Removed]
Par. 51. Sections 48.6427-8T and 48.6427-9T are removed.
Sec. 48.6675-1 [Removed]
Par. 52. Section 48.6675-1 is removed.
Par. 53. Section 48.6714-1 is added to read as follows:
Sec. 48.6714-1 Penalty for misuse of dyed diesel fuel.
(a) In general. If any person willfully alters, or attempts to
alter, the strength or composition of any dye or marking done pursuant
to Sec. 48.4082-1 in any dyed fuel, then section 6714(a)(3) provides
that such person shall pay a penalty in addition to any tax. The
penalty imposed by section 6714(a)(3) will not apply in the following
cases:
(1) Diesel fuel that satisfies the dyeing and marking requirements
of Sec. 48.4082-1 (b) and (c) is blended with any undyed liquid and the
resulting product satisfies the dyeing and marking requirements of
Sec. 48.4082-1 (b) and (c).
[[Page 10466]]
(2) Diesel fuel that satisfies the dyeing and marking requirements
of Sec. 48.4082-1 (b) and (c) is blended with any other liquid (other
than diesel fuel) that contains the type and amount of dye and marker
required for diesel fuel dyed and marked in accordance with
Sec. 48.4082-1 (b) and (c).
(3) Diesel fuel that is dyed one color in accordance with
Sec. 48.4082-1(b) is blended with diesel fuel that is dyed another
color in accordance with Sec. 48.4082-1(b).
(4) Diesel fuel that does not satisfy the dyeing and marking
requirements of Sec. 48.4082-1 (b) and (c) is blended with diesel fuel
that satisfies the dyeing and marking requirements of Sec. 48.4082-1
(b) and (c) and the blending occurs as part of a use described in
Sec. 48.4082-4(c) or Sec. 48.6427-8(b)(vi) (C), (D), or (E).
(b) Effective date. This section is effective January 1, 1994.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 54. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Par. 55. In Sec. 602.101, paragraph (c) is amended as follows:
1. Removing the following entries from the table:
Sec. 602.101 OMB Control numbers.
* * * * *
(c) * * *
------------------------------------------------------------------------
Current OMB
CFR part or section where identified and described control
number
------------------------------------------------------------------------
* * * * *
42.5(b)................................................. 1545-1206
* * * * *
48.4041-2T.............................................. 1545-0143
* * * * *
48.4082-2T.............................................. 1545-1418
48.4101-1............................................... 1545-0023
1545-0725
1545-0014
48.4101-2T.............................................. 1545-0725
48.4101-3T.............................................. 1545-1418
48.4101-4T.............................................. 1545-1418
* * * * *
48.6427-8T.............................................. 1545-1418
48.6427-9T.............................................. 1545-1418
* * * * *
------------------------------------------------------------------------
2. Adding entries in numerical order to the table to read as
follows:
Sec. 602.101 OMB Control numbers.
* * * * *
(c) * * *
------------------------------------------------------------------------
Current OMB
CFR part or section where identified and described control
number
------------------------------------------------------------------------
* * * * *
48.4082-2............................................... 1545-1418
48.4101-1............................................... 1545-1418
48.4101-2............................................... 1545-1418
* * * * *
48.6427-8............................................... 1545-1418
48.6427-9............................................... 1545-1418
* * * * *
------------------------------------------------------------------------
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: December 18, 1995.
Leslie Samuels.
Assistant Secretary of the Treasury.
[FR Doc. 96-5586 Filed 3-13-96; 8:45 am]
BILLING CODE 4830-01-P