Indiana – State to Impose a Gasoline Use Tax

SALT Report 2490 – The state of Indiana has enacted legislation that repeals the 7% sales tax on gasoline and replaces it with a gasoline use tax. The Department of Revenue will determine the rate of gasoline use tax, on a monthly basis, by multiplying the statewide average retail price per gallon of gasoline by 7%.

Under this Bill, the amount of use tax remitted monthly will be based on the retail price of gasoline during the previous month. The amount remitted will no longer be reconciled with the actual pump price, as is current practice.

Additionally, the Bill changes from 25% to 15% the amount the retail price of gasoline must change before a new use tax rate can be set. If the Department changes a use tax rate that has already been determined for the month because the statewide average retail price per gallon of gasoline has increased by more than 15%, the new rate will take effect no less than 10 days after publication of the newest rate..

Once the Bill goes into effect, all retail merchants will be required to take an inventory of the gasoline they have in storage as of July 1, 2014. Then, on or before August 1, 2014, the retail merchant will be required to remit use tax to the Department using the following method:

  • The number of gallons in storage on July 1, 2014, multiplied by
  • The gasoline use tax rate in effect on July 1, 2014

Collecting Use Tax

If a refiner or terminal operator purchases or ships gasoline to a non-qualified distributor, the refiner or terminal operator must collect gasoline use tax from the distributor at the time of purchase.

If a qualified distributor sells or ships gasoline to a retail merchant, the qualified distributor must collect gasoline use tax from the retail merchant.

If gasoline is delivered to a retail merchant for resale, and tax has not been paid, the refiner, terminal operator, or qualified distributor who makes the delivery must pay use tax to the Department.

If a purchase or shipment of gasoline is made to a distributor outside Indiana for shipment into and subsequent sale or use by the distributor in Indiana, the distributor will be required to pay use tax directly to the Department.

If a purchase or shipment is made within Indiana for shipment and subsequent sale outside Indiana, the purchase or shipment is exempt from the gasoline use tax payment requirements.

If a sale of gasoline is exempt from the gasoline use tax, the person that pays use tax to the retail merchant may file a claim for refund.

Remitting Use Tax

Qualified distributors, refiners, or terminal operators that sell gasoline to retail merchants in Indiana must remit the gasoline use tax for every gallon of gasoline sold. The tax must be remitted online based on the tax rate determined by the Department, regardless of the amount of gasoline use tax that has actually been collected.

In addition, all refiners, terminal operators, and qualified distributors must file an electronic report that details the amount of taxes owed and the gallons of gasoline sold or received during the preceding month. Failure to remit the tax or file the required returns or reports will result in the imposition of penalties.

Uncanceled Permits

Distributors, refiners, or terminal operators may receive gasoline in Indiana without paying the gasoline use tax if the person has an uncanceled permit to collect payments of gasoline use tax from purchasers and recipients of gasoline. All distributors who import gasoline into Indiana are required to obtain an uncanceled permit.

The provisions in Senate Bill 479 are effective July 1, 2014.

For Further Information

Indiana State Legislature – Senate Bill 479, Laws 2013