Iowa Motor Fuel Tax Information
The point of taxation for motor fuel in Iowa is the terminal rack or supplier level. All fuel leaving the pipeline distribution system must have the tax paid. Only dyed diesel fuel used for off-highway purposes and fuel exported outside of Iowa will be sold tax-free.
FUEL CATEGORIES
Tax is imposed on two categories of fuel:
Ethanol blended gasoline
Ethanol blended gasoline is defined as motor fuel which has been blended with alcohol distilled from cereal grains, the end product containing at least 10 percent alcohol.
Example:
To make a properly blended 8,000 gallons of ethanol blended gasoline, the blend requires:
7,200 gallons of gasoline + 800 gallons of alcohol = 8,000 gallons of ethanol blended gasoline
E85 gasoline is ethanol blended gasoline that contains a minimum percentage of between 70% and 85% by volume of ethanol.
Biofuel
"Biofuel" means an oxygenated product derived from soybean oil, vegetable oil, or animal fats that can be used in diesel engines or aircraft. Biofuel may be a blend with diesel fuel or it may be one hundred percent soybean oil, vegetable oil or animal fats. Any biofuel product is taxed as a special fuel.
TYPES OF LICENSES
Supplier
A person who:
"Supplier" also includes a person who does not meet the jurisdictional connection to this state but voluntarily agrees to act as a supplier for purposes of collecting and reporting the motor fuel or special fuel tax.
Note: A retail dealer or wholesaler who merely blends alcohol with gasoline or biodiesel with diesel before the sale or distribution of the product or a terminal operator who merely handles, in a terminal, motor fuel or special fuel consigned to the terminal operator does not qualify as a supplier.
Importer
A person who imports untaxed motor fuel or non-dyed special fuel in bulk or transports loads into the state by truck, rail or barge.
Restrictive Supplier
A person not licensed as an importer but who imports untaxed motor fuel or non-dyed special fuel into this state in amounts of less than 4,000 gallons in tank wagons or in small tanks.
Blender
A person who owns and blends alcohol with gasoline to produce ethanol blended gasoline at a non-terminal location. A blender is also a person who blends two or more special fuel products at a non-terminal location where the tax has not been paid on all of the products blended.
Examples:
Gas + Alcohol = gasohol or ethanol blended gasoline
Diesel + Soy Oil = biodiesel
Exporter
A person who acquires fuel in this state for export to another state. This person must be licensed in the state the fuel is exported to, so the tax can be paid to that state.
Eligible purchaser
A distributor of motor fuel or special fuel who elects to make delayed tax payments to a licensed supplier by EFT.
Eligible purchaser end user
An end user of special fuel who has purchased a minimum of 240,000 gallons of special fuel in each of the preceding two years who elects to make delayed payments to a licensed supplier by EFT.
Licensed compressed natural gas (CNG) and liquefied petroleum gas (LPG) dealer
A person in the business of handling untaxed compressed natural gas or liquefied petroleum gas who delivers any part of the fuel into a fuel supply tank of any motor vehicle.
Licensed compressed natural gas (CNG) and liquefied petroleum gas (LPG) user
A person who dispenses compressed natural gas or liquefied petroleum gas for highway or aircraft use, upon which the special fuel tax has not been previously paid, from fuel sources owned and controlled by the person into the fuel supply tank of a motor vehicle or commercial vehicle owned or controlled by the person.
Storage Facility
A motor fuel, alcohol, or special fuel storage and distribution facility
(IRS registered terminal or non-terminal) which fuel is delivered into, stored within, withdrawn
from or sold from. This includes ethanol plants (see section on ethanol plants) and biodiesel plants.
Transportation (Common Carrier or Contract Carrier)
A person involved in the movement of motor fuel or special fuel imported into the state, who is not the owner of the motor fuel or special fuel.
Environmental Protection Charge
Petroleum deposited into certain non-exempt underground and some aboveground storage tanks are subject to the Environmental Protection Charge (EPC). Depositors must obtain an EPC permit before introducing petroleum into these tanks in Iowa . There is no charge for an EPC permit.
To learn more about the EPC, review the Environmental Protection Charge booklet (#78-544).
REPORTING TAXABLE GROSS GALLONS
The only method of determining gallons of any purchase or sale of motor fuel or special fuel and distillate fuel is on a gross volume basis.
A temperature-adjusted or other method may not be used except as it applies to liquefied petroleum gas and the sale or exchange of petroleum products between petroleum refineries.
OBTAINING A LICENSE APPLICATION
Motor Fuel License Application (pdf)
or write to:
The Iowa Department of Revenue
Fuel Tax Unit
P.O. Box 10456
Des Moines , Iowa 50306-0456To have the form faxed to you, call 1-800-572-3943 or 515-281-4139.
MOTOR FUEL AND SPECIAL FUEL
Who collects/remits the tax?
For motor fuel and special fuel (except LPG and CNG), the tax attaches when the fuel is "withdrawn from terminal." Withdrawn from terminal means physical movement from a supplier to a distributor or eligible end user or from an alcohol manufacturer to a non-terminal location, and includes an importer going out of state and obtaining fuel from a terminal and bringing the fuel into the state, and a restrictive supplier bringing fuel into the state even though not purchased directly from a terminal. Exchange of product by suppliers while in the distribution channel is not to be considered withdrawn from terminal. The tax is payable to the department by the supplier, restrictive supplier, importer, blender, or any other person who possesses taxable fuel upon which the tax has not been paid.
LPG and CNG: These fuels are not taxed until the use is determined. Tax attaches to LPG and CNG when:
Exemptions
Motor fuel or undyed special fuel, except LPG or CNG, sold for export to a person holding a valid Iowa exporters license is exempt from the fuel tax. The fuel is considered sold for export only if the bill of lading or manifest indicates that the destination of the fuel withdrawn from the terminal is outside the state of Iowa . Dyed diesel fuel used for off-highway purposes is also exempt from fuel tax.
LPG and CNG sold by dealers from highway storage may be sold tax free provided it is sold for one of the following uses:
When LPG or CNG is sold from highway storage for any of the above purposes, an exemption certificate must be prepared and retained by the seller. The exemption certificate must include the date, seller's name and license number, invoice number, use of the fuel, type of vehicle or container, and the name, address, and signature of the purchaser.
All other sales must include the Iowa fuel tax.
This chart below only covers the movement of alcohol from an Iowa Ethanol plant to an IRS gasoline terminal, for export outside of Iowa or for sale in Iowa.
Sale for Export -- If an Ethanol Plant is selling for export out of Iowa , whether through a middleman or not, there is no Iowa fuel tax collected or due to state of Iowa. The out-of-state purchaser needs an Iowa exporters license.
Sale in Iowa to Non-Terminal Location --If the middle scenario shown above exists, the ethanol plant is required to collect and pay Iowa fuel tax under a supplier license.
Sale for IRS Gasoline Terminal – If an Ethanol plant is selling ethanol bound for an IRS gasoline terminal, then no Iowa fuel tax is due at this point. The Iowa fuel tax is imposed when it is withdrawn from the IRS terminal. Persons with alcohol storage in the IRS terminal and those who own the alcohol in the IRS terminal up to and including withdrawal will be required to be registered as a storage facility and file with the department.
If the middleman or marketer or broker has no ownership of the product when leaving the ethanol plant or later, they do not need a license if the Ethanol Plant is reporting all transactions properly. If the middleman or marketer or broker does take ownership of product, then two options are available:
1. No license needed if the ethanol plant is reporting all transactions with all detail properly.
2. If due to proprietary or other contractual arrangements, the ethanol plant does not know all detail to report, then the marketer must have a storage facility license and file a schedule of receipts of all loads of ethanol or E85 received and a schedule of disbursements for all loads of ethanol or E85 sold.
Other persons in the middle scenario above such as a bulk plant, jobber, retailer or consumer who may later own this ethanol do not normally need a license or file returns or schedules since the Iowa fuel tax should have been charged and collected as required. However, if no Iowa fuel tax is charged and collected; they can be held liable for the tax.
The following Iowa fuel tax licenses are or may be required:
Other requirements for storage facility and supplier licenses:
An ethanol plant may also be a producer of E10 or E85. They could either sell the E10 or E85 acting like a wholesaler or sell as a retailer directly to the final consumer. Ethanol plants would report these sales of E10 and E85 on their supplier license and pay the appropriate Iowa fuel tax to the department (fuel tax due on untaxed portion of the sale). Ethanol plants should have purchased the gasoline portion (in addition to the denaturant portion) of the ethanol with Iowa fuel tax paid. If Iowa fuel tax paid on the gasoline portion was greater than the rate charged to the consumer, the ethanol plant would be entitled to an excess tax paid on ethanol refund. This is separate from the denaturant refund. Refund Claim Form 82-006 (pdf), along with worksheet 82-012 (pdf) (Excess tax paid on Gasohol) or 82-013 (pdf) (Excess tax paid on E85), must be filed to claim this refund. If the ethanol plant also produces and sells E10 or E85, their schedule of receipts should include all the fuel purchased to make the E10 or E85.
Alcohol Manufacturer (B) sells unfinished alcohol (no denaturant and not fuel ready) to another alcohol manufacturer (C) for further processing. C puts the alcohol somewhere in the middle of their process to further refine the alcohol, then later adds the denaturant to produce ethanol. B reports the alcohol sales under their storage facility license on a schedule of disbursements with product code 123 (alcohol). This is a nontaxable sale. C reports this alcohol under their storage facility license on schedule of receipts with product code 123 (alcohol). These are also nontaxable.
REFUNDS
Refunds are allowable for the tax paid on motor fuel and undyed special fuel in the following situations:
Agricultural Production: Farmers, ranchers, greenhouses and other similar businesses using motor fuel or undyed special fuel in agricultural or livestock production.
Federal Government: The United States , its agencies and instrumentalities. This includes the Red Cross, Project Head Start, Federal Land Banks and Federal Land Bank Associations.
State Government: The State of Iowa , its agencies and political subdivisions.
Other Political Subdivisions: An entity that (a) has a specific geographic area, and (b) has public officials elected at public elections, and (c) has taxing power, and (d) benefits the general public, and (e) is approved by the State of Iowa . This includes counties, cities, and schools. The refund is not available to agencies or instrumentalities of a political subdivision, but rather only to the agencies and political subdivisions of the state of Iowa.
Benefited Fire Districts: If the fuel is used for public purposes.
Urban Transit System: Bus systems that transport passengers without discrimination, primarily on the streets of cities, and meet the requirements of the Iowa Department of Transportation. Also included is a company operating a taxicab service under contract with an Iowa urban transit system.
Regional Transit System: A public transit system serving one county, or all or part of a multi-county area, whose boundaries correspond to the regional planning areas designated by the governor or approved by the Iowa Department of Revenue.
Native American Tribe: Native American Tribes who purchase and use fuel for tribal purposes on their own Indian Country and/or Native American Tribes who sell directly to their tribal members on their own Indian Country.
Contract Carrier: A carrier who has a contract with a public school under Iowa Code section 285.5 for transporting students.
Commercial Fishing: Licensed and operating under an owner's certificate issued pursuant to Iowa Code section 482.4; for fuel used in watercraft.
Home Heating: Motor fuel or undyed special fuel used in home heating.
Extraction and Processing of Natural Deposits: Motor fuel or undyed special fuel used for extraction and processing of natural deposits.
Denaturing Alcohol: Motor fuel or undyed special fuel used for denaturing alcohol.
Refrigeration Units (reefers): Motor fuel and undyed special fuel used in refrigeration units.
Pumping Credits (dry products): Motor fuel or undyed special fuel placed in the supply tank of a motor vehicle when the motor is used as a power source for off-loading.
Pumping Credits (wet products): Motor fuel or undyed special fuel placed in the supply tank of a motor vehicle when the motor is used as a power source for off-loading.
Off Road: Motor fuel and undyed special fuel in unlicensed vehicles not operated on public highways.
Racing Fuel: Fuel used to power vehicles used in racing.
Export of Tax Paid Fuel: Distributors only. Motor fuel or undyed special fuel purchased tax-paid and sold in smaller quantities (less than transport load) to consumers outside the state.
Idle Time: Motor fuel or undyed special fuel used when the engine is running but not propelling or operating the vehicle.
Power Takeoff: Motor fuel or undyed special fuel used for powering auxiliary equipment that is powered by the power takeoff.
Ready Mix: Motor fuel or undyed special fuel placed in the fuel supply tank of the vehicle; refund on 30 percent; accurate records must be maintained.
Solid Waste: Off-loading. Motor fuel or undyed special fuel placed in the fuel supply tank of the vehicle; refund on 30 percent; accurate records must be maintained.
Refund Agent: A person requesting a refund for idle time, power takeoff, refrigeration units, pumping credits, or transport diversions may designate another person as an agent to file the claim and receive the refund. See the previous definitions for the following: Reefer Unit, Pumping Credits (dry products), Pumping Credits (wet products), Idle Time, Power Takeoff.
Transport Diversions: Transport loads of motor fuel or undyed special fuel which are sold tax-paid with an Iowa destination and later diverted to a point outside the state.
Casualty Losses: Fuel lost or destroyed through fire, explosion, lightning, flood, storm, leakage, theft or other casualty.
Special Fuel Blending Errors: This type of claim is similar to a casualty loss in that it relates to contamination of undyed special fuel. If dyed special fuel is inadvertently mixed with tax-paid undyed special fuel - to the extent that the undyed fuel must be converted to exempt dyed fuel by having additional dye added - the tax is refundable on the undyed special fuel.
Excess Tax Paid on Gasohol: This type of claim arises when tax is paid on both the alcohol and gasoline portions of the blend, and tax is paid on the gasoline at the higher gasoline rate.
Excess Tax Paid on E85: This type of claim arises when tax is paid on both the alcohol and gasoline portions of the blend, and tax is paid on the alcohol and/or gasoline at a rate greater or equal to 19¢ per gallon.
There is no refund if the fuel is used in aircraft or pleasure boats.
COMMON REFUND QUESTIONS:
Question: How do I apply for a refund permit?
Answer: Complete an application (pdf).
The refund permit remains in effect until revoked, canceled, or until the
permit becomes invalid.
Question: Why do I need to complete a refund permit application form?
Answer: You must complete and return the permit application if you wish to receive an Iowa motor fuel tax refund. Refunds cannot be applied for or issued until your application is approved.
Question: Do I need to obtain a refund permit?
Answer: No. If you qualify, there are two options available where no refund permit is needed. These options are:
Question: How do I claim a credit on my income tax return?
Answer: You can claim a credit against your income taxes by completing form IA 4136 and attaching it to your year-end income tax return. Both individuals and corporations can take advantage of this method. However, the income tax credit is not available for refunds relating to casualty losses, transport diversions, pumping credits, blending errors, idle time, power takeoffs, reefer units, export by distributors, excess tax paid on gasohol and excess tax paid on E-85. If you are using diesel fuel for an exempt purpose, buy dyed fuel whenever possible. A credit can be claimed on an income tax return for a period up to three years.
The income tax credit cannot be claimed for any year in which a motor fuel refund claim has been filed.
Question: Do I need to send the invoices in?
Answer: No, unless asked to submit the invoices. You are required to keep them for three years.
Question: Are there limitations on when I may file refund claims?
Answer: Yes. Claims must be filed within three years of the invoice date. In addition, claims should not be made for amounts under $60. If the $60 minimum is not met within the allowed time frames, a credit may be taken on the income tax return by using form IA 4136. A refund of less than $60 will be allowed if the claimant is not required to file an income tax return or if the type of refund is not allowed to be taken as a credit on an income tax return.
Question: If I choose to apply for a motor fuel tax refund permit, how will I file refund claims?
Answer: For most types of claims, you will be given a toll-free telephone number and password information allowing you to provide the details of your refund claim to an operator. An information package along with your permit number will be forwarded to you upon approval of your application. Please allow 4 - 6 weeks for processing of your application. Claims relating to transport diversions, casualty losses, blending errors and excess tax paid on gasohol or E-85 must still be filed on paper. Obtain forms here .
Question: What requirements are needed for Idle Time or Power Takeoff?
Answer: To file idle time or power takeoff claims, you must have a pre-approved study on file with the department explaining how you intend to compute the credit. For more information about idle time and power takeoff claims, call (515) 242-6033. For help with other claim types, call (515) 281-3114 (from Des Moines or outside Iowa ), 1-800-367-3388 (from elsewhere in Iowa , Omaha , Rock Island , Moline ), or contact us by e-mail .
Question: What invoice dates can be used when calling in refund claims?
Answer: Due to differences in tax rates from year to year these dates may not overlap July 1 of any year. In other words, these dates must fall on or between the time period from July 1 of a particular year to June 30 of the following year. If you have some invoices prior to and some after, separate claims must be filed.
Question: Is fuel subject to sales tax?
Answer: Motor fuel and special fuel are exempt from sales tax when used on the highway or in watercraft or aircraft if the fuel tax has been paid and no refund of the fuel tax has been allowed. When a fuel tax refund is allowed, the sales tax is deducted from the refund unless it is used for a purpose that is exempt from sales tax.
In some instances, the amount of sales tax which would be due may exceed the amount of fuel tax refund allowed. This can happen because the fuel tax rate is a flat amount per gallon and is not impacted by the price of the fuel. On the other hand, sales tax is based on the price paid for the fuel, so as the price goes up, the sales tax also goes up. If this situation occurs, taxpayers may elect to not claim the fuel tax refund, since if they did, they would owe the difference between the sales tax and the fuel tax refund.
Dyed diesel would normally be subject to sales tax, unless the purchaser qualifies for a sales tax exemption.
The following examples apply to invoice dates after July 1, 2008. The price per gallon is for illustrative purposes only.
Example A: 10,000 gallons of diesel fuel purchased at $1.50 per gallon.
Purchase Price: 10,000 X $1.50 = $15,000
Iowa Fuel Tax Paid: 10,000 gallons X 22.5 cents per gallon = $2,250
Net Cost of Fuel: ($1.50 - $0.225) X 10,000 = $12,750
Sales Tax (6%): $12,750 X 0.06 = $765
Net Refund: $2,250 - $765 = $1,485
Example B: 10,000 gallons of diesel fuel purchased at $4.50 per gallon.
Purchase Price: 10,000 X $4.50 = $45,000
Iowa Fuel Tax Paid: 10,000 gallons x 22.5 cents per gallon = $2,250
Net Cost of Fuel: ($4.50 - $0.225) X 10,000 = $42,750
Sales Tax (6%): $42,750 X 0.06 = $2,565
Net Refund: $2,250 - $2,565 = [$315]
The sales tax exceeds the fuel tax refund. If the fuel tax refund claim is filed, $315 sales tax is owed to the Department. If no claim is filed, no sales tax is due.
Note: If the fuel is used for a purpose that is exempt from sales tax, such as agricultural production, the full $2,250 fuel tax refund would be allowed in both examples A and B.
FILING RETURNS, SCHEDULES, REPORTS AND PAYING TAXES
Returns, schedules and reports are required to be filed electronically online through eFile & Pay .
Fuel Tax has three electronic filing methods. Online (tax return only), Schedule upload or EDI (schedules only). See eFile & Pay presentations for further instructions.
Filers that have less than 5,000 gallons of fuel per month may file the return online using eFile & Pay. You will log into eFile & Pay and key in your total gallons. Schedules of Disbursements and Receipts are not required.
Filers with 5,000 gallons of fuel or more per month are required by rule to file their schedules using Schedule Upload or EDI. Before you can file you must call 515/242-6033 or 515/281-6447 to set a flag for the correct filing method. Filing the schedules will automatically create the tax return with the Department.
Schedule Upload: You will upload Schedules of Disbursements and Receipts on eFile & Pay. You can use the Schedule Upload Template (Excel format), or use your own system.
EDI: You will need to follow the Iowa Motor Fuel EDI Implementation Guide v1.01 (pdf). You will upload Schedules of Disbursements and Receipts on eFile & Pay.
If the due date falls on a Saturday, Sunday or legal holiday, the next business day will become the due date.
Paying taxes electronically
Payment is required to be made electronically for all Motor Fuel License holders,
including LPG.
Electronic payment options:
Applying your payment
Any payments received will be applied first to the penalty, then to the interest,
and the balance, if any, to the tax due.
Extension of time to file
The department may grant an extension for the filing of any required return or tax payment.
The request for extension must be in writing before the due date of the return or remittance. The request must include an explanation justifying the extension. The extension period cannot exceed 30 days.
PENALTIES AND INTEREST
Failure to timely file a return
A penalty of 10 percent will be added to the tax due for failure to timely file a return if at least 90 percent of the correct amount of tax is not paid by the due date. The penalty can only be waived under limited circumstances.
For each month the required tax is not paid, interest accrues on the unpaid tax at a rate prescribed by law from the due date of the return until payment is received. For purposes of computing interest, each fraction of a month constitutes a whole month. Where the failure to file penalty and one of the other penalties are applicable, the failure to file penalty shall take precedence. No penalty is assessed for late filed reports if no tax is due; however, recurring instances of failure to file reports timely or failure to pay tax timely will result in the imposition of a bond requirement or revocation of the permit.
Failure to timely pay the tax due
A penalty of 5 percent will be added to the tax if at least 90 percent of the correct amount of tax is not paid by the due date. The penalty can only be waived under limited circumstances. For each month the required tax is not paid, interest accrues on the unpaid tax at a rate prescribed by law from the due date of the return until payment is received. For purposes of computing interest, each fraction of a month constitutes a whole month. Recurring instances of failure to file reports timely or failure to pay tax timely will result in the imposition of a bond requirement or revocation of the permit.
Failure to pay electronically
A penalty of 5 percent will be added to the tax due if the payment is not received electronically through ePay or ACH credit as required.
Failure to use the required method of filing
Fuel and LPG tax returns, schedules and reports must be filed through the eFile & Pay
system. If not, a penalty of 5 percent of the amount of tax due will be added.
Failure to file a transportation, terminal or nonterminal storage
facility report
A penalty of $100 for the first violation, and an additional $100 for each
subsequent violation occurring within the same calendar year, is imposed for
failure to file the required transportation, terminal or nonterminal storage
facility reports.
Penalty for improper receipt of refund
If a person files an incorrect refund claim, in addition to the excess amount of the claim, a penalty of 10 percent shall be added to the amount by which the amount claimed and refunded exceeds the amount actually due. If a person knowingly files a fraudulent refund claim with the intent to evade the tax, the penalty shall be 75 percent in lieu of the 10 percent.
BONDS AND PERSONAL RESPONSIBILITY FOR THE TAX
When necessary and advisable to secure payment of tax, the department may require a bond of any license holder. The department generally requires a bond on a new applicant only if the applicant has established an unfavorable filing or remittance record on a previous license or if the department feels the applicant's financial status is such that timely payment of taxes is questionable.
If the license holder is a corporation, an officer of the corporation may assume personal responsibility for the payment of the fuel tax.
RECORDS REQUIRED
The following records must be kept for three years by licensees:
Storage Facility records...
MOTOR FUEL ITEMS AVAILABLE ON THE IDR WEB SITE:
QUESTIONS?
Postal Mail:
Taxpayer Services
Iowa Department of Revenue
P.O. Box 10457
Des Moines IA 50306-0457Or call:
1-800-367-3388 ( Iowa , Omaha , Rock Island/Moline)
515-281-3114 (local, out of state)TDD - Deaf and hearing assistance
515-242-5942
Questions About eFile & Pay?
E-mail or Call:
1-866-503-3453 (toll free)
1-515-281-8453
TO RECEIVE IOWA TAX FORMS
Fax:
1-800-572-3943 (in Iowa )
515-281-4139 (local, out of state)Call:
1-800-532-1531 (in Iowa )
515-281-7239 (local, out of state)
OTHER MOTOR FUEL RELATED QUESTIONS
Where do I get my retail pump calibrated or obtain labels for it?
Please contact:
Iowa Department of Agriculture
Weights and Measures Division
515-281-5716
Where do I get my storage tanks (above and below ground) registered and inspected
and more information on EPC?
Please contact:
Iowa Department of Natural Resources
1-800-942-1000
515-281-8693
Where do I get information about the International Fuel Tax Agreement (IFTA)?
Please contact:
Iowa Department of Transportation
Motor Carrier Services
515-237-3224
updated October 10, 2008