LR 2002-06 Motor Fuel Tax- Diesel Fuel Dyed to Ontario Specifications for Michigan Delivery

You have requested guidance as to the proper handling of diesel fuel that is dyed to Ontario specifications, and then imported, or sold for importation, into Michigan.

P.A. 2000, No. 403 imposes tax on diesel fuel removed from the bulk transfer/terminal system or imported from another state, country or province. Diesel fuel that is dyed in accordance with internal revenue service rules or pursuant to any other internal revenue service requirements, including any invisible marker requirements is exempt from the tax, unless it is used for taxable purposes. Use of diesel fuel dyed in accordance with federal regulations on the public roads and highways of the State is prohibited, unless an exception is provided.

Diesel fuel that is dyed in Ontario, to meet Ontario specifications, contains a dye concentration that is approximately half of the concentration required by the United States government. Altering dye injectors in Ontario is prohibited.

Diesel fuel that does not contain the required concentration of dye does not meet the definition of dyed diesel fuel under Act 403, and is subject to the Michigan motor fuel tax.

Suppliers and Permissive Suppliers

A Michigan licensed Supplier who removes Ontario dyed diesel fuel from its refinery or terminal in Canada, and delivers it by rail or truck to Michigan, remits the tax on its monthly Supplier tax return.

A Michigan licensed Permissive Supplier who sells Ontario dyed diesel fuel to a customer who intends to deliver the diesel fuel to Michigan, when the customer is not licensed for motor fuel tax purposes in Michigan, must collect and remit the tax for that customer.

Bonded and Occasional Importers

A person who purchases Ontario dyed diesel fuel that is subsequently delivered to Michigan, upon which the Michigan motor fuel tax has not been pre-paid to a licensed Supplier or Permissive Supplier, must be licensed as a Bonded or Occasional Importer.

A Bonded Importer remits monthly estimated payments with form 3819 on or before the 20th of the month following the month in which the transaction took place. A quarterly return is due in the 20th of the month following the close of a reporting quarter to reconcile the payments.

An Occasional Importer remits tax with form 3778 within 3 business days after the earlier of the date the taxable fuel enters Michigan, or the date a valid Import Verification Number is obtained from the Department. A quarterly return is due on the 20th of the month following the close of a reporting quarter to reconcile the payments.

Within 24 hours prior to importation, a Bonded or Occasional Importer must obtain an Import Verification Number from the Department. The number is obtained by calling 1-888-213-0676 toll-free, 24 hours a day, 7 days a week.

November 25, 2002
LR 2002-6
Donna Donovan
Director, Bureau of Tax Policy