Farmers and contractors are often eligible for a partial refund of the federal excise tax on certain fuels – although any type of business could qualify.
A federal excise tax is imposed on gasoline ($.184 per gallon), clear diesel fuel ($.244 per gallon) and clear kerosene ($.244 per gallon). If you use these types of fuels in your business, you may be entitled to a refund of the excise tax you pay when purchasing these fuels.
The amount of these taxes may be credited or refunded if these fuels are used in many types of off-road uses. Common off-road uses include use as heating oil, in stationary engines, in non-highway vehicles and in separate engines mounted on highway vehicles.
Generally, refunds of $750 or more may be claimed quarterly on Form 8849, Claim for Refund of Excise Taxes. Alternatively, refunds may be claimed as income tax credit on Form 4136, Credit for Federal Tax Paid on Fuel.
Note that a credit or refund is not allowable for the following:
- Any use in the propulsion engine of a registered highway vehicle, even if the vehicle is used off the highway.
- Any fuel that is lost or destroyed through fire, spillage or evaporation.
- Any use of dyed diesel fuel or dyed kerosene. In fact, you may be subject to a penalty if you use dyed fuel as a fuel in a registered diesel-powered highway vehicle
It’s important to keep records to support your claim at your principal place of business. These records should establish the following:
- Number of gallons used during the period covered by the claim
- Dates of purchase
- Names and addresses of suppliers and amounts bought from each in the period covered by the claim
- Purposes for which you used the fuel
- Number of gallons used for each purpose