California – BOE Discusses E85 Fuel

SALT Report 1142 – The California State Board of Equalization (BOE) has issued a notice on motor fuel taxes applicable to producers of E85 fuel.

Alcohol fuels are taxed as a use fuel, a motor vehicle fuel, or a diesel fuel depending on the volume of alcohol in the fuel blend and the type of fuel that is blended with the alcohol. Alcohol fuel containing no more than 15% gasoline or diesel fuel is subject to the use fuel tax, and blends containing more than 15% gasoline or diesel fuel are taxed as motor vehicle fuel or diesel fuel.

Use fuel vendors are responsible for reporting and paying the UFT on E85 delivered into the fuel tank of a motor vehicle. Use Fuel Tax Law section 8610 states that a vendor is, “any person who sells fuel in this state and places, or causes to be placed, the fuel into any receptacle on a motor vehicle from which fuel is supplied for the propulsion of the vehicle.”

A Vendor Use Fuel Tax Permit is required if you are selling E85 from a retail location. The vendor is required to collect and pay to the State Board of Equalization the $0.09 per gallon UFT on the full volume of E85 sold or dispensed from a retail pump.

In addition, the BOE addresses three frequently asked questions.

How is the percentage of ethanol in an ethanol fuel blend determined?

Denatured ethanol typically contains one to two percent petroleum but the actual MVF content of E85 may be as much as 17 percent. It should be noted that the 85/15 formula is intended solely to determine taxability of the blend and may or may not meet other regulatory specifications for E85.

Are below-the-rack blenders entitled to a refund of motor vehicle fuel tax paid on the MVFcomponent of E85?

When producing E85 below the rack, the MVFT should have been paid to the supplier on the MVF portion of the fuel included in the alcohol fuel blend at the time of purchase.

How should E85 be invoiced to customers?

E85 should be invoiced as E85 and not by its component products.  Any MVFT paid by the seller on the gasoline component of the blend can only be recouped by incorporating the MVFT into the base selling price of the E85 fuel.

The BOE also discusses prepaid sales tax required when motor vehicle fuel or diesel fuel is removed at the terminal rack or is sold after being removed from the terminal rack.

For Further Information:

California State Board of Equalization Special Notice L-286