Why can't wholesalers claim a bad debt deduction?

Suppliers are required to act as creditors for the motor fuel taxes on sales to approved eligible purchasers. The bad debt deduction results when an approved eligible purchaser defaults in the payment of motor fuel taxes to a supplier on a deferred payment agreement. Wholesalers are not required to extend credit through deferred payment agreements. Wholesalers can choose not to extend credit to customers or can rescind offers of credit to collect the taxes due.

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When is a blenders license required?

The Department is currently licensing only those who are blending a taxable product with an untaxed product. These licensing requirements could change if the department determines that licensing is necessary for those blending two or more taxable products as well as those blending two or more non-taxable products.

What is blending?

Blending means the mixing of one or more petroleum products with or without another product and the is capable of being used in the generation of power for a motor vehicle, an airplane, or a marine vessel.

If I blend an additive with diesel fuel, do I need to be licensed as a blender?

Complete a Motor Fuel Tax License Application and attach an explanation of the type of products and quantities you are blending. The Department will determine if you need a blender's license and will notify you of the determination.

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How do I handle my accounts that have cards for tax-free purchases?

The cards can be used for unlimited quantities of tax-free purchases of dyed diesel fuel. If the customer is purchasing undyed diesel fuel for non-highway purposes, the sale must be 100 gallons or less to be sold tax-free and claimed as a refund. Any sale of undyed diesel fuel in excess of 100 gallons per transaction is taxable, unless specifically provided for in the act as sales to exempt persons.

I sell undyed diesel fuel to customers using a Fuleman card. Can I claim a refund for exempt sales?

No. The Fuelman system reimburses you at the 15 cent per gallon tax rate; therefore, Fuelman will claim a refund.

If a farmer pays the tax on undyed diesel fuel used for non-taxable purposes, can the statement from the cardlock system be submitted with the refund claim in lieu of invoices?

Yes, if the statement gives sufficient information to verify to the department that the tax has been paid.

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Does the customer at a retail station always have to pay the tax on undyed diesel fuel pumped into non-highway equipment?

Only if the sale exceeds 100 gallons. A retail diesel dealer can make tax-free sales of undyed diesel fuel in quantities of 100 gallons or less per transaction for non-highway purposes and claim a refund.

Can I make an exempt sale of undyed diesel fuel for 200 gallons to one customer if I issue two sales invoices?

No. If the sale is for more than 100 gallons, tax must be charged and the customer must file for a refund. The seller is responsible for the tax.

Can a fuel vendor claim a refund for sales to a retailer of undyed diesel fuel to be used or sold for tax exempt purposes?

All undyed diesel fuel sold to a retail dealer must include the 15-cent per gallon tax. Sales of dyed diesel fuel to retailers are tax exempt.

What happens if I fuel a fleet of trucks at a customer's location and I also fill multiple reefer tanks for the same customer at the same time?

Sales into the trucks are taxable. Each sale into a truck needs to be documented. Each reefer unit will be considered a separate transaction qualifying for a tax-free sale of 100 gallons or less. The invoice must indicate tax was not charged for delivery into the reefer fuel tanks.

Are 55-gallon drums of undyed kerosene sold by a fuel vendor exempt?

Yes, if a single 55-gallon drum is sold for non-highway purposes and is properly documented. Multiple drum sales are taxable if the total gallons exceed 100. A refund can be claimed on the Claim for Refund of Motor Fuel Tax Form for non-highway purposes and is properly documented. Multiple drum sales are taxable if the total gallons exceed 100.

How do I account for diesel fuel used for pedal truck flushes when changing from dyed fuel to clear fuel and vice versa?

A refund can be claimed on the Claim for Refund of Motor Fuel Tax Form for your exempt use.

Do I account for diesel fuel used for pedal truck flushes when changing from dyed fuel to clear fuel and vice versa?

Yes. Reasonable documentation such as a logbook is required in an audit situation.

I have customers that use a cardlock system. The system is programmed to sell them tax-free undyed diesel fuel. Can they still do that?

Only if each sale of undyed diesel fuel sold for non-taxable purposes is for 100 gallons or less.

If a farmer uses a card lock system for 10 purchases in the same month of tax-free undyed diesel fuel for non-highway use and each purchase is for 100 gallons or less, will it be a problem?

No.

Where in the Act is the 100-gallon limit for exempt sales?

Section 38 of the Act.

Do you need an exemption certificate for sales of undyed diesel fuel of 100 gallons or less?

No, if you are invoicing each tax-free sale properly and retain a copy of the invoice for audit purposes. A properly prepared invoice shall show:

• the date
• customer name and address
• number of exempt gallons sold
• the type of non-taxable use for the fuel, and
• be signed by the customer.

Is a schedule required to report individual exempt sales of undyed diesel fuel for 100 gallons or less?

Yes, a report of sales must be attached to the claim. It is necessary to show individual transactions.

Can a retail diesel dealer claim a refund for sales of undyed K-1 kerosene?

Yes. A refund can be claimed on a Claim for Refund of Motor Fuel Tax Form for sales of undyed K-1 kerosene of 100 gallons or less.

Can a motor carrier come in to a retail station and fill up a reefer unit with undyed diesel fuel (usually under 50 gallons) tax free?

Yes, if the retail diesel dealer properly prepares and maintains the required sales invoices. The invoice must indicate that tax was not charged for delivery into the separate reefer unit.

Do sales of undyed K-1 kerosene from blocked pumps require the same documentation?

No. Reporting requirements are different for sales of undyed K-1 kerosene through blocked pumps. Sales from blocked pumps do not require individual invoices. A diesel retailer must maintain adequate records (daily meter readings or daily sales summaries) to support the claimed volume of exempt sales.

Can I sell undyed diesel fuel in bulk for home heating?

Yes, however, if the sale is for 100 gallons or more, you must charge your customer the tax and the customer can apply for a refund.

Can I make tax-free sales of undyed diesel fuel to state and local government?

Yes. You must pay the tax at the time of purchase and file a claim for refund. However, if the governmental unit pays with a third party credit card, the deduction may not be taken. The issuer of the third party credit card must bill the governmental entity without the tax and file a refund claim.

Sales invoice documentation of the tax-free sales must be maintained. The tax-free sales to state and local governmental units are not subject to the 100-gallon limitation. The deduction is found in Section 34 of the Act.

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What kind of documentation is required for exempt sales?

Invoicing requirements remain the same, except for the 100-gallon limitation on the tax-free sale of undyed diesel fuel for non-taxable purposes. Examples of proper invoicing are in the old Retail Dealer's manual. Although the manual needs to be updated to reflect Public Act 403, the invoice requirements will be very similar.

When a truck pulls up to a retail pump with non-highway equipment on it, I usually give one invoice for the total purchase. Can I still do this?

The retail diesel dealer can issue one invoice but must record the sale as two separate transactions. The undyed diesel fuel placed in the non-highway equipment cannot exceed 100 gallons or the tax must be charged.

The invoices from our parent company do not break out the taxes. The prices shown include the taxes. Will that be a problem?

The invoice requirements specifically state that the tax must be shown as a separate item.

When I sell undyed diesel fuel for exempt purposes (100 gallons or less per sale), what documentation is required?

Invoices must be prepared in duplicate, with the original invoice furnished to the purchaser and a copy retained by the seller for four years. Properly prepared invoice must include the following:

• Seller name, address, taxpayer account number
• Date of sale, name of purchaser
• Type of fuel sold , number of gallons, price per gallon

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What happens if my diesel fuel is accidentally dyed?

The fuel may be returned to the supplier. A refund for the Michigan motor fuel tax is provided for in Section 40 of the Act, unless an insurance company reimburses the cost of the tax loss. To request a refund, submit a letter explaining the circumstances of the accidental dying and proof that the claim was denied by your insurance company.

Are there any exceptions for using dyed diesel fuel on the highway?

Yes. The following are exempt and may use dyed diesel fuel on the highway:

• A motor vehicle owned and operated or leased and operated by the federal, state or local government
• A motor vehicle used exclusively by the Red Cross.
• An implement of husbandry.
• A passenger vehicle that has a capacity of 10 or more and that operates over regularly traveled routes expressly provided for in 1 or more of the following that applies to the passenger vehicle:
  • A certificate of authority issued by the state transportation dept or...
  • A municipal franchise, license, permit, agreement or grant

If I buy dyed diesel fuel from Wisconsin or Canada, do I pay the 15-cents per gallon Michigan tax?

Yes. After 3/31/01 terminals outside of Michigan must charge the Michigan tax on dyed diesel fuel sold for delivery in Michigan unless dyed to U.S. standards. Imports of dyed diesel fuel from Canada must be dyed to U. S. standards to be exempt.

If I sell dyed #2 diesel fuel through a retail pump, what tax do I charge?

All dyed fuel is sold to the retailer tax exempt and should be sold tax exempt for non-highway use. Dyed diesel fuel should not be sold for highway use unless one of the exceptions listed above applies.

Is low sulfur dyed diesel fuel taxable?

By definition dyed diesel fuel is exempt from the tax. There is no distinction made between low and high sulfur.

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Do farmers have the right to claim an exemption for non-taxable use on purchases of undyed diesel fuel into bulk storage?

The law does not provide for an exemption on the purchase of undyed diesel fuel by farmers. Farmers must pay the tax on all undyed diesel fuel and file for a refund for their non-highway use unless the purchase is for 100 gallons or less. They can also choose to use dyed diesel fuel and not pay the tax.

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I currently use my own computer schedule when I file my returns. Can I continue to do that?

Yes, but because all of the forms are changing, your schedule must be resubmitted to the Department for approval prior to its use.

Are forms to claim a refund available on the web?

No. You can call 517-636-4600 and request a form be sent to you. Once you file the form, future pre-identified forms are automatically sent to you.

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If I import from Wisconsin into my bulk plant in Michigan, pay the Michigan tax on the fuel, and then sell the fuel to customers back in Wisconsin, how do I get a refund of the Michigan tax?

As a licensed exporter you may file a claim for refund for the Michigan tax paid.

Must a wholesaler be licensed as an exporter to export fuel from a Michigan bulk plant to another state?

Yes.

Why is an import verification number required?

The import verification number is required by the Act for imports from outside of the country. It provides advance notice of an import. Payment of the tax is required within three days. The telephone number to obtain an import verification number is 1-888-213-0676. This number is accessible 24 hours a day, 7 days a week.

When I import fuel into Michigan, do I need to get a diversion number for each load I bring in?

Only when the bill of lading shows a destination state that is different from the state where the fuel is actually delivered. If the bill of lading shows the correct state, you do not need to call for a diversion number.

If I purchase fuel in Michigan for export to another state and then divert part of the fuel for delivery in Michigan, do I need to get a diversion number?

Yes. The diversion number must be on the shipping document given to the purchaser and be obtained prior to the diversion. To obtain a diversion number, call 1-888-367-1600. This phone number is accessible 24 hours a day, 7 days a week.

Can I obtain a diversion number after the fact?

No. Public Act 403 requires that the diversion number be obtained prior to the actual diversion. The diversion number must be written on the shipping paper. Loads and vehicles can be confiscated if the shipping paper does not have a diversion number.

Will I need a tankwagon import license in addition to the Transporter license?

Yes, if you import product upon which Michigan tax has not been paid, it is for your own account and it is from bulk storage in another state.

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What do you mean by a blocked or locked pump?

A blocked pump prevents sales to highway vehicles by placement of barricades around the pump, a short hose or other mechanical means. A locked pump is not physically inaccessible but must be unlocked by an employee.

Does a wholesaler sell undyed K-1 kerosene exempt to a retailer if the retailer is selling from a blocked pump?

No. All undyed diesel fuel (including K-1 kerosene) is taxable when sold to a retailer. The retailer can file a claim for refund for qualified blocked pump sales.

Are sales of kerosene sold to crop dusters exempt?

No. If the kerosene is purchased and labeled as aviation fuel, the seller must have an aviation fuel registrant certificate issued by the Department and collect the 3 cents per gallon aviation fuel tax. All fuel must be described as aviation fuel on the bill of lading. A list of aviation registrants is available on the Treasury Web site.

If I make a sale of 110 gallons of undyed kerosene to a farmer, what tax do I charge?

Charge 15 cents per gallon.

Does the definition of diesel fuel now include kerosene and K-1 kerosene?

Yes.

I sell undyed kerosene to my home-heating customers in amounts over 100 gallons. Do I have to charge them tax?

Yes. The end user can file a refund claim form for a refund of the tax paid.

When can they file for a refund?

A refund claim can be filed as often as the claimant desires. Additional information on refund claims is available on the Treasury Web site, Motor Fuel Tax Refund.

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Is methanol taxable?

Methanol is not taxable unless blended with gasoline or sold for a taxable purpose.

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Will everyone delivering home heating fuel qualify for the 15% refund on attached equipment?

Based on a study previously submitted to the Department, the allowable percentage for power take off equipment to load or unload a product has been set at 7.5%. This percentage will apply to PTO equipment used to pump home heating fuel. This refund does not apply to vehicles that unload using gravity feed.

Does the 15% refund apply to idling time?

No.

How does the end user get a refund for purchases for a retailer of tax-paid quantities of undyed diesel fuel over 100 gallons that were for non-highway purpose?

The end user needs to file a refund claim.

How do I get a refund claim for customers?

Your customer may request a refund claim form on the Treasury Web site or by calling (517) 636-4600. Once a refund claim is filed, a pre-identified claim form will automatically be sent to the customer. The end user needs to file a refund claim.

Does the 15% attached equipment refund apply to both gas and diesel?

No. The 15% refund applies to diesel fuel only.

How do I claim the 15% refund?

You need to file a refund claim form.

How is the 15% calculated?

The refund is computed on 15% of the fuel placed in the unit.

I have an IFTA decal. How do I get the latest tax rates for the jurisdiction that I travel in?

You can obtain the latest tax rate information by visiting the IFTA, Inc. Web site. Tax Rates are also available at www.michigan.gov/businesstaxes under the IFTA/Motor Carrier Taxes link.

Will farmers apply for refunds if they purchase undyed diesel fuel for non-highway use upon which the tax has been paid?

Yes. They will have to apply for a refund on a refund claim form.

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How will a seller of gasoline at retail get a refund for exempt sales of gasoline to the government and what will be required to get a refund?

You must file a refund claim. Invoices are required, however the department will accept a computer-generated statement in lieu of individual invoices if all information required to determine eligibility and calculate the refund is included. Prior to filing a claim a sample must be provided to the department for approval.

If I use gasoline for non-highway purposes, do I need the original invoice to get a refund?

Yes.

Can the form to request a refund claim be duplicated and given to customers?

Yes. The form can be duplicated and your customers can call, mail or fax the information, or submit it through the Internet. The claim forms themselves cannot be duplicated.

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In other states there are provisions that tanks must be labeled undyed and dyed. Is there a law regarding labels?

Retail pumps must be labeled stating that dyed fuel is not to be used for highway purposes.

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Do shipping papers need to be retained at the retail site or can they be kept at the office?

The Act requires that the shipping papers be retained at the delivery location for a period of 30 days. The shipping papers must be kept at either location for at least 4 years.

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Is a list of supplier licensees available?

Yes, Suppliers with the State of Michigan.

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Do I charge a Marine dealer 15 cents tax on dyed diesel fuel?

No, under the law dyed diesel fuel is exempt. There is no prohibition for using dyed diesel fuel in pleasure boats. If the marina sells the dyed diesel fuel for use in a pleasure boat, the tax must be paid on the marine return.

If a marina buys undyed diesel fuel, what tax do I charge?

The tax is 15 cents per gallon. The Marine dealer will report sales on his return and claim credit where applicable.

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