Excise Taxes on Fuel

There is a tax incentive for tariffs paid on alternative fuel sold for use or used as fuel to operate a motor vehicle.

Natural Gas

Propane

Compressed or liquefied gas derived from biomass

P-Series fuel

Liquid fuel derived from coal through Fischer-Tropsch process

The credit is for $0.50 per gallon for tariffs paid on the purchase of the following alternative fuels:

Excise Taxes on Fuel Credit

For propane and natural gas sold after December 31, 2015, the tax credit is based on the gasoline gallon equivalent (GGE) or diesel gallon equivalent (DGE). One GGE equals 5.75 pounds (lbs.) of propane and 5.66 lbs. of compressed natural gas for taxation purposes. One DGE is equal to 6.06 lbs. of liquefied natural gas.

Taxpayers must be liable for reporting and paying the federal excise tax on the sale or use of the fuel in a motor vehicle.

Eligible entities must be registered with the Internal Revenue Service (IRS). Taxpayers must use the credit to offset the entity’s alternative fuel tax liability; any excess over this fuel tax liability may be claimed as a direct payment from the IRS. The credit is refundable to the extent that it exceeds tariffs on these fuels.

Not-for-profit and governmental entities that dispense qualified fuel from an on-site fueling station for use in vehicles qualify for the incentive.