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TAXATION OF KEROSENE

ISSUE: On July 1,1998, a new federal excise of 24.4 cents per gallon will be imposed on kerosene.

BACKGROUND: Congress enacted the kerosene tax last year as part of the Taxpayer Relief Act of 1997. The law requires that kerosene be taxed or dyed (for non-taxable use). The law was enacted to prevent untaxed kerosene from being used as a taxable diesel fuel. Under the law, 811, terminals that sell kerosene must offer both clear taxable kerosene and dyed non-taxable kerosene by July 1, 1998. However. Congress recently voted to give terminal operators until July 1, 2000July 1, 2000, to comply with this provision (the bill is expected to be signed shortly). The tax is still scheduled to take effect on July 1, 1998.

TAX RATE: 24.4 cents per gallon

EFFECTIVE DATE: 12:01 a.m., July 1, 1998

FLOOR STOCKS: All floor stocks, in quantities over 2000 gallons. held as of July 1,1998, will be taxed at the applicable tax rate.

CREDITS & REFUNDS: The credit end refund procedure for kerosene Is the same as for diesel credit and refunds. Petroleum marketers selling clear taxable kerosene to farmers and state and local governments may apply for the credit or refund under the ultimate vendor regulations. Residential users of clear taxable kerosene, must apply for the refund or credit themselves. However, the credit or refund on retail sales of clear taxable kerosene intended for a non-taxable use, may be collected by petroleum marketers under existing ultimate vendor rules provided such sales are from a "blocked pump". The IRS considers a blocked pump to be one that is not capable of dispensing kerosene Into a motor vehicle.

 

SUPPLY: Terminal operators have Indicated that both clear taxable kerosene and dyed non-taxable kerosene will be available where demand Is sufficient, by July 1, 1998.

IRS RULES: IRS rules regarding taxation, credit, refunds and pump requirements are due out before July 1, 1998.


SUBJECT: Kerosene Tax & Dye provision of the Taxpayer Relief Act of 1997

DATE: April 28, 1998

Attached is a summary of the law that will raise many questions from dealers and consumers.

At this moment we do not believe that the dye used for untaxed kerosene will cause any problems in the operation of unvented wick type kerosene heaters and Monitor Heating Systems .

Our concerns are principally the supply of GOOD quality dyed kerosene. With the dye the consumer will not be able to tell the quality of the fuel delivered to his home. Kerosene, #1 oil, #2 oil used for off road (non-taxed) purposes will be dyed. We have to rely on the integrity of the oil dealer for the quality of fuel sold.

Please contact me with any specific information you may have regarding supply of Kerosene in your area. We need to work together to lessen the down side affects of this bad legislation.

You can send your thoughts directly to:

Representative Bill Archer

1236 Longworth

House Office Building

Washington, D. C. 20515-4307

Phone - 202-225-2571

Fax - 202-225-4381

Of course, let your Congressmen and Senators know how this will impact your business.

 

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LAST UP DATE ON: 01/15/2015