Publication 510 - Excise Taxes For 2005 - Department Of Treasury (Page 16 of 47) in pdf

If you are liable for the penalty, you may also

In addition, since the back-up tax is imposed

3. To operate, manage, conserve, improve,

be liable for the back-up tax, discussed later.

or maintain your farm and its tools and

only on the delivery into the fuel supply tank of a

However, the penalty applies only to dyed diesel

equipment.

diesel-powered vehicle or train, the tax does not

fuel and dyed kerosene, while the back-up tax

apply to diesel fuel or kerosene used as heating

4. To handle, dry, pack, grade, or store any

may apply to other fuels. The penalty may apply

oil or in stationary engines.

raw agricultural or horticultural commodity

if the fuel is held for sale or use for a taxable use

(as provided below).

while the back-up tax does not apply unless the

Nontaxable Uses

5. To plant, cultivate, care for, or cut trees or

fuel is delivered into a fuel supply tank.

to prepare (other than sawing logs into

Exception to penalty. The penalty under

The following are nontaxable uses of diesel fuel

lumber, chipping, or other milling) trees for

item (3) will not apply in any of the following

and kerosene.

market, but only if the planting, etc., is inci-

situations.

dental to your farming operations (as pro-

•

1. Use on a farm for farming purposes (dis-

Diesel fuel or kerosene meeting the dye-

vided below).

cussed later).

ing requirements (described earlier) is

Diesel fuel or kerosene is treated as used on

blended with any undyed liquid and the

2. Exclusive use by a state (defined earlier

a farm for farming purposes if it is bought by a

resulting product meets the dyeing re-

under Definitions).

person other than the owner, tenant, or operator

quirements.

of the farm and used on the farm for any of the

3. Use in a vehicle owned by an aircraft mu-

•

Diesel fuel or kerosene meeting the dye-

purposes in item (1) or (2).

seum.

ing requirements (described earlier) is

Item (4) applies only if more than one-half of

4. Use in a school bus (discussed later).

blended with any other liquid (other than

the commodity so treated during the tax year

diesel fuel or kerosene) that contains the

was produced on the farm. Commodity refers to

5. Use in a qualified local bus (discussed

type and amount of dye required to meet

a single raw product. For example, apples would

later).

the dyeing requirements.

be one commodity and peaches another. The

6. Use in a highway vehicle that:

•

more-than-one-half test applies separately to

The alteration or attempted alteration oc-

each commodity.

curs in an exempt area of Alaska. See

a. Is not registered (and is not required to

Item (5) applies if the operations are minor in

Sale or use in Alaska, earlier.

be registered) for highway use under

nature when compared to the total farming oper-

•

the laws of any state or foreign country,

Diesel fuel or kerosene meeting the dye-

ations.

and

ing requirements (described earlier) is

Not used for farming purposes. Diesel

blended with diesel fuel or kerosene not

b. Is used in the operator’s trade or busi-

fuel or kerosene is not used for farming pur-

meeting the dyeing requirements and the

ness or for the production of income.

poses if it is used in any of the following ways.

blending occurs as part of a nontaxable

•

use (other than export), discussed later.

7. Exclusive use by a nonprofit educational

Off the farm, such as on the highway or in

organization, as discussed earlier under

noncommercial aviation, even if the fuel is

Communications Tax.

used in transporting livestock, feed, crops,

Back-Up Tax

or equipment.

8. Use in a highway vehicle owned by the

•

Tax is imposed on the delivery of any of the

United States that is not used on a high-

For personal use, such as mowing the

following into the fuel supply tank of a

lawn.

way.

diesel-powered highway vehicle or train.

•

In processing, packaging, freezing, or can-

9. Exported.

•

Any dyed diesel fuel or dyed kerosene for

ning operations.

10. Use other than as a fuel in a propulsion

other than a nontaxable use.

•

In processing crude gum into gum spirits

engine of a diesel-powered highway vehi-

•

Any undyed diesel fuel or undyed ker-

of turpentine or gum resin or in processing

cle (such as home heating oil).

osene on which a credit or refund (for fuel

maple sap into maple syrup or maple

11. Use as a fuel in a propulsion engine of a

used for a nontaxable purpose) has been

sugar.

diesel-powered train (subject to back-up

allowed.

tax, discussed earlier).

•

Any liquid other than gasoline, diesel fuel,

Buses. Diesel fuel or kerosene used in a

or kerosene.

school bus or in a qualified local bus is used for a

Used on a farm for farming purposes. Die-

nontaxable use and is not subject to excise tax.

Generally, this back-up tax is imposed at a

sel fuel or kerosene is used on a farm for farming

School bus. A school bus is a bus engaged

rate of $.244 per gallon. However, see

purposes only if used in carrying on a trade or

in the transportation of students and employees

Form 720 for the diesel-powered train rate.

business of farming, on a farm in the United

of schools. A school is an educational organiza-

States, and for farming purposes.

tion with a regular faculty and curriculum and a

Liability for tax. Generally, the operator of the

Farm. A farm includes livestock, dairy, fish,

regularly enrolled body of students who attend

vehicle or train into which the fuel is delivered is

poultry, fruit, fur-bearing animals, and truck

the place where the educational activities occur.

liable for the tax. In addition, the seller of the

farms, orchards, plantations, ranches, nur-

diesel fuel or kerosene is jointly and severally

Qualified local bus. A qualified local bus is

series, ranges, and feedyards for fattening cat-

liable for the tax if the seller knows or has reason

a bus meeting all the following tests.

tle. It also includes structures such as

to know that the fuel will be used for other than a

•

greenhouses used primarily for raising agricul-

It is engaged in furnishing (for compensa-

nontaxable use. Generally, a seller of diesel fuel

tural or horticultural commodities. A fish farm is

tion) intracity passenger land transporta-

or kerosene is not liable for tax on fuel delivered

an area where fish are grown or raised — not

tion available to the general public.

into the fuel supply tank of a train. However, the

merely caught or harvested.

person that delivers the fuel into the fuel supply

•

It operates along scheduled, regular

tank of a train, rather than the train operator, is

Farming purposes. Diesel fuel or kerosene

routes.

liable for the tax if, at the time of delivery, the

is used on a farm for farming purposes if it is

•

It has a seating capacity of at least 20

deliverer and the train operator are both regis-

bought by the owner, tenant, or operator of the

adults (excluding the driver).

tered by the IRS as train operators and a written

farm and used for any of the following purposes.

agreement between them requires the deliverer

•

It is under contract with (or receiving more

to pay the tax.

1. To cultivate the soil, or to raise or harvest

than a nominal subsidy from) any state or

any agricultural or horticultural commodity.

local government to furnish that transpor-

Exemptions from the back-up tax. The

tation.

back-up tax does not apply to a delivery of diesel

2. To raise, shear, feed, care for, train or

fuel or kerosene for uses (1) through (8) listed

manage livestock, bees, poultry, fur-bear-

Intracity passenger land transportation means

under Nontaxable Uses, next.

ing animals, or wildlife.

land transportation of passengers between

Page 16

Publication 510 - Excise Taxes For 2005 - Department Of Treasury Page 16

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