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Motor Fuel FAQs
Motor Fuel FAQs
Bad Debt Deduction- Suppliers Only
Why can't wholesalers claim a bad debt deduction?
Suppliers are required to act as creditors for the motor fuel taxes on sales to approved eligible purchasers. The bad debt deduction results when an approved eligible purchaser defaults in the payment of motor fuel taxes to a supplier on a deferred payment agreement. Wholesalers are not required to extend credit through deferred payment agreements. Wholesalers can choose not to extend credit to customers or can rescind offers of credit to collect the taxes due.
Blenders
When is a blenders license required?
The Department is currently licensing only those who are blending a taxable product with an untaxed product. These licensing requirements could change if the department determines that licensing is necessary for those blending two or more taxable products as well as those blending two or more non-taxable products.
What is blending?
Blending means the mixing of one or more petroleum products that renders it capable of being used in the generation of power for a motor vehicle, an airplane, or a marine vessel.
If I blend an additive with diesel fuel, do I need to be licensed as a blender?
Complete a Motor Fuel Tax License Application and attach an explanation of the type of products and quantities you are blending. The Department will determine if you need a blender's license and will notify you of the determination
Bulk Storage
On January 1, 2017, will I be required to pay the rate increase for motor fuel previously purchased and currently stored in my bulk storage tanks?
Yes. Per MCL 207.1010, the owner of motor fuel held in bulk storage where motor fuel tax has previously been paid to the supplier at the lower rate would owe the difference between the previous rate paid and the increase in the tax rate. The owner of the motor fuel is required to fill out form number 4010 and remit any additional motor fuel tax that may be owed to the Department. If you have any questions in regards to this additional tax, you may contact the Discovery unit at the Michigan Department of Treasury at 517-636-4120.
Card Lock Systems
How do I handle my accounts that have cards for tax-free purchases?
The cards can be used for unlimited quantities of tax-free purchases of dyed diesel fuel. If the customer is purchasing undyed diesel fuel for non-highway purposes, the sale must include the current motor fuel tax rate per gallon and the customer may apply for a refund with the department for the tax that was paid. MCL 207.1038 which allowed for purchases of undyed diesel fuel of 100 gallons or less to be sold tax-free by retailers for non-taxable purposes was repealed effective January 1, 2017. Any sale of undyed diesel fuel is taxable, unless specifically provided for in the act as sales to exempt persons.
I sell undyed diesel fuel to customers using a Fuelman card. Can I claim a refund for exempt sales?
No. The Fuelman system reimburses you at the current motor fuel tax rate; therefore, Fuelman will claim a refund.
If a farmer pays the tax on undyed diesel fuel used for non-taxable purposes, can the statement from the cardlock system be submitted with the refund claim in lieu of invoices?
Yes, if the statement gives sufficient information to verify to the department that the tax has been paid.
Diesel Retailer / Fuel Vendors
Does the customer at a retail station always have to pay the tax on undyed diesel fuel pumped into non-highway equipment?
Yes. The customer must pay the tax and claim a refund with the department for undyed diesel fuel used for a non-highway purpose.
Can I make an exempt sale of undyed diesel fuel for 200 gallons to one customer if I issue two sales invoices?
No. The customer must pay the tax and they may claim a refund with the department for undyed diesel fuel used for a non-highway purpose.
Can a fuel vendor claim a refund for sales to a retailer of undyed diesel fuel to be used or sold for tax exempt purposes?
No. All undyed diesel fuel sold to a retail dealer must include the current motor fuel tax rate. Sales of dyed diesel fuel to retailers are tax exempt.
What happens if I fuel a fleet of trucks at a customer's location and I also fill multiple reefer tanks for the same customer at the same time?
Sales into the trucks are taxable. Each sale into a truck needs to be documented. Each reefer unit will be considered a separate transaction and the tax must be paid on the fuel placed into the reefer unit. The reefer unit gallons would qualify for a refund of the tax paid for non-highway purpose. The invoice must indicate which sales were for the trucks and which were for the reefer fuel tanks.
Are 55-gallon drums of undyed kerosene sold by a fuel vendor exempt?
No. If the customer is purchasing undyed kerosene for non-highway purposes, the sale must include the current motor fuel tax rate per gallon and the customer may apply for a refund with the department for the tax that was paid. MCL 207.1038 which allowed for purchases of undyed diesel fuel of 100 gallons or less to be sold tax-free by retailers for non-taxable purposes was repealed effective January 1, 2017 (kerosene falls under the definition of diesel fuel under the Motor Fuel Tax Act). Any sale of undyed kerosene is taxable, unless specifically provided for in the act as sales to exempt persons. A refund may be claimed on the Claim for Refund of Motor Fuel Tax Form for non-highway purposes and if properly documented. Contact Special Taxes Division, Statutory Refund Unit at 517-636-4600 to request the Statutory Claim for Refund Form.
How do I account for diesel fuel used for pedal truck flushes when changing from dyed fuel to clear fuel and vice versa?
A refund can be claimed on the Claim for Refund of Motor Fuel Tax Form for your exempt use. Contact Special Taxes Division, Statutory Refund Unit at 517-636-4600 to request the Statutory Claim for Refund Form.
Do I account for diesel fuel used for pedal truck flushes when changing from dyed fuel to clear fuel and vice versa?
Yes. Reasonable documentation such as a logbook is required in an audit situation.
I have customers that use a cardlock system. The system is programmed to sell them tax-free undyed diesel fuel. Can they still do that?
Only if the sale is exempt under the act, then they may still continue to sell to those customers tax free and claim a refund with the department.
If a farmer uses a card lock system for 10 purchases in the same month of tax-free undyed diesel fuel for non-highway use and each purchase is for 100 gallons or less, will it be a problem?
Yes it would be. If the farmer is purchasing undyed diesel fuel for non-highway purposes, the sale must include the current motor fuel tax rate per gallon and the farmer may apply for a refund with the department for the tax that was paid. MCL 207.1038 which allowed for purchases of undyed diesel fuel of 100 gallons or less to be sold tax-free by retailers for non-taxable purposes was repealed effective January 1, 2017. Any sale of undyed diesel fuel is taxable, unless specifically provided for in the act as sales to exempt persons.
Can a retail diesel dealer claim a refund for sales of undyed K-1 kerosene?
No. If the customer is purchasing undyed kerosene for non-highway purposes, the sale must include the current motor fuel tax rate per gallon and the customer may apply for a refund with the department for the tax that was paid. MCL 207.1038 which allowed for purchases of undyed diesel fuel of 100 gallons or less to be sold tax-free by retailers for non-taxable purposes was repealed effective January 1, 2017 (kerosene falls under the definition of diesel fuel under the Motor Fuel Tax Act). Any sale of undyed kerosene is taxable, unless specifically provided for in the act as sales to exempt persons. A refund may be claimed on the Claim for Refund of Motor Fuel Tax Form for non-highway purposes and if properly documented. Contact Special Taxes Division, Statutory Refund Unit at 517-636-4600 to request the Statutory Claim for Refund Form.
Can a motor carrier come in to a retail station and fill up a reefer unit with undyed diesel fuel (usually under 50 gallons) tax free?
No. If the customer is purchasing undyed diesel fuel for non-highway purposes, the sale must include the current motor fuel tax rate per gallon and the customer may apply for a refund with the department for the tax that was paid. MCL 207.1038 which allowed for purchases of undyed diesel fuel of 100 gallons or less to be sold tax-free by retailers for non-taxable purposes was repealed effective January 1, 2017. Any sale of undyed diesel fuel is taxable, unless specifically provided for in the act as sales to exempt persons.
Can I sell undyed diesel fuel in bulk for home heating?
Yes, however, if the customer is purchasing undyed diesel fuel for non-highway purposes, the sale must include the current motor fuel tax rate per gallon and the customer may apply for a refund with the department for the tax that was paid.
Can I make tax-free sales of undyed diesel fuel to state and local government?
Yes. You must pay the tax at the time of purchase and file a claim for refund. However, if the governmental unit pays with a third party credit card, the deduction may not be taken. The issuer of the third party credit card must bill the governmental entity without the tax and file a refund claim. Sales invoice documentation of the tax-free sales must be maintained. The deduction is found in Section 34 of the Act.
Documentation Required - Exempt Sales of Diesel Fuels
What kind of documentation is required for exempt sales?
Invoicing requirements remain the same. Examples of proper invoicing are in the old Retail Dealer's manual. Although the manual needs to be updated to reflect Public Act 403, the invoice requirements will be very similar.
When a truck pulls up to a retail pump with non-highway equipment on it, I usually give one invoice for the total purchase. Can I still do this?
The retail diesel dealer can issue one invoice but must record the sale as two separate transactions. The undyed diesel fuel placed in the non-highway equipment must be listed separate from the truck transaction on the invoice and the current motor fuel tax rate must be charged for both transactions. The customer may apply for a refund with the department for the tax that was paid on the fuel used in the non-highway equipment.
The invoices from our parent company do not break out the taxes. The prices shown include the taxes. Will that be a problem?
The invoice requirements specifically state that the tax must be shown as a separate item.
When I sell undyed diesel fuel for exempt purposes, what documentation is required?
Invoices must be prepared in duplicate, with the original invoice furnished to the purchaser and a copy retained by the seller for four years. Properly prepared invoice must include the following:
Seller name, address, taxpayer account number
Date of sale, name of purchaser
Type of fuel sold, number of gallons, price per gallon
Dyed Diesel
What happens if my diesel fuel is accidentally dyed?
The fuel may be returned to the supplier. A refund for the Michigan motor fuel tax is provided for in Section 40 of the Act 403, unless an insurance company reimburses the cost of the tax loss. To request a refund, submit a letter explaining the circumstances of the accidental dying and proof that the claim was denied by your insurance company.
Are there any exceptions for using dyed diesel fuel on the highway?
Yes. The following are exempt and may use dyed diesel fuel on the highway:
- A motor vehicle owned and operated or leased and operated by the federal, state or local government
- A motor vehicle used exclusively by the Red Cross
- An implement of husbandry
- A passenger vehicle that has a capacity of 10 or more and that operates over regularly traveled routes expressly provided for in 1 or more of the following that applies to the passenger vehicle:
- A certificate of authority issued by the state transportation department or...
- A municipal franchise, license, permit, agreement or grant
If I buy dyed diesel fuel from Wisconsin or Canada, do I pay the current motor fuel tax rate per gallon Michigan tax?
Yes. After 3/31/01 terminals outside of Michigan must charge the Michigan tax on dyed diesel fuel sold for delivery in Michigan unless dyed to U.S. standards. Imports of dyed diesel fuel from Canada must be dyed to U. S. standards to be exempt
If I sell dyed #2 diesel fuel through a retail pump, what tax do I charge?
All dyed fuel is sold to the retailer tax exempt and should be sold tax exempt for non-highway use. Dyed diesel fuel should not be sold for highway use unless one of the exceptions listed above applies.
Is low sulfur dyed diesel fuel taxable?
By definition dyed diesel fuel is exempt from the tax. There is no distinction made between low and high sulfur.
Farmers
Do farmers have the right to claim an exemption for non-taxable use on purchases of undyed diesel fuel into bulk storage?
The law does not provide for an exemption on the purchase of undyed diesel fuel by farmers. Farmers must pay the tax on all undyed diesel fuel and file for a refund for their non-highway use. They can also choose to use dyed diesel fuel and not pay the tax.
Forms / Schedules
I currently use my own computer schedule when I file my returns. Can I continue to do that?
Yes, but because all of the forms are changing, your schedule must be resubmitted to the Department for approval prior to its use.
Are forms to claim a refund available on the web?
You may submit a claim for refund by going to the following link once you are registered within the MIMATS system:
MiMATS e-Services (michigan.gov)
Import / Export
If I import from Wisconsin into my bulk plant in Michigan, pay the Michigan tax on the fuel, and then sell the fuel to customers back in Wisconsin, how do I get a refund of the Michigan tax?
As a licensed exporter you may file a claim for refund for the Michigan tax paid.
Must a wholesaler be licensed as an exporter to export fuel from a Michigan bulk plant to another state?
Yes.
Why is an import verification number required?
The import verification number is required by the Public Act 403 for imports from outside of the country. It provides advance notice of an import. Payment of the tax is required within three days. The telephone number to obtain an import verification number is 1-888-213-0676. This number is accessible 24 hours a day, 7 days a week.
When I import fuel into Michigan, do I need to get a diversion number for each load I bring in?
Only when the bill of lading shows a destination state that is different from the state where the fuel is actually delivered. If the bill of lading shows the correct state, you do not need to call for a diversion number.
If I purchase fuel in Michigan for export to another state and then divert part of the fuel for delivery in Michigan, do I need to get a diversion number?
Yes. The diversion number must be on the shipping document given to the purchaser and be obtained prior to the diversion. To obtain a diversion number, you must register at https://fueltrac.us. This system is accessible 24 hours a day, 7 days a week.
Can I obtain a diversion number after the fact?
No. Public Act 403 requires that the diversion number be obtained prior to the actual diversion. The diversion number must be written on the shipping paper. Loads and vehicles can be confiscated if the shipping paper does not have a diversion number.
Will I need a tankwagon import license in addition to the Transporter license?
Yes, if you import product upon which Michigan tax has not been paid, it is for your own account and it is from bulk storage in another state.
K-1 Kerosene
What do you mean by a blocked or locked pump?
A blocked pump prevents sales to highway vehicles by placement of barricades around the pump, a short hose or other mechanical means. A locked pump is not physically inaccessible but must be unlocked by an employee.
Does a wholesaler sell undyed K-1 kerosene exempt to a retailer if the retailer is selling from a blocked pump?
No. All undyed diesel fuel (including K-1 kerosene) is taxable when sold to a retailer. The retailer can file a claim for refund for qualified blocked pump sales.
Are sales of kerosene sold to crop dusters exempt?
No. If the kerosene is purchased and labeled as aviation fuel, the seller must have an aviation fuel registrant certificate issued by the Department and collect the 3 cents per gallon aviation fuel tax. All fuel must be described as aviation fuel on the bill of lading. A list of aviation registrants is available on the Treasury Web site.
If I make a sale of 110 gallons of undyed kerosene to a farmer, what tax do I charge?
Charge the current motor fuel tax rate per gallon.
Does the definition of diesel fuel now include kerosene and K-1 kerosene?
Yes.
I sell undyed kerosene to my home-heating customers in amounts over 100 gallons. Do I have to charge them tax?
Yes. The end user can file a refund claim form for a refund of the tax paid.
When can they file for a refund?
A refund claim can be filed as often as the claimant desires. Additional information on refund claims is available on the Treasury Web site, Motor Fuel Tax Refund.
Refunds - Diesel Fuel
Do I have to be a member of an association to qualify for Motor Fuel Tax Refund?
No, you don’t need to be a member of an association to qualify for a Motor Fuel Tax Refund. You may submit a claim for refund by going to the following link once you are registered within the MIMATS system:
MiMATS e-Services (michigan.gov)
Who qualifies for a job site wrecker refund?
An end user operating a diesel commercial vehicle that has a wrecker license plate issued by the State of Michigan may qualify for this claim.
Will everyone delivering home heating fuel qualify for the 15% refund on attached equipment?
Based on a study previously submitted to the Department, the allowable percentage for power take off equipment to load or unload a product has been set at 7.5%. This percentage will apply to PTO equipment used to pump home heating fuel. This refund does not apply to vehicles that unload using gravity feed.
Does the 15% refund apply to idling time?
No.
How does the end user get a refund for purchases for a retailer of tax-paid quantities of undyed diesel fuel over 100 gallons that were for non-highway purpose?
The end user needs to file a refund claim.
How do I get a refund claim for customers?
Your customer may submit a claim for refund by going to the following link once they are registered within the MIMATS system:
MiMATS e-Services (michigan.gov)
Does the 15% attached equipment refund apply to gas, diesel, and alternative fuel?
Yes. The 15% refund applies to all three fuel categories.
How do I claim the 15% refund?
You need to file a refund claim form.
How is the 15% calculated?
The refund is computed on 15% of the fuel placed in the unit.
I have an IFTA decal. How do I get the latest tax rates for the jurisdiction that I travel in?
You can obtain the latest tax rate information by visiting the IFTA, Inc. Web site. Tax Rates are also available at www.michigan.gov/businesstaxes under the IFTA/Motor Carrier Taxes link.
Will farmers apply for refunds if they purchase undyed diesel fuel for non-highway use upon which the tax has been paid?
Yes. Farmers may submit a claim for refund by going to the following link once they are registered within the MIMATS system:
MiMATS e-Services (michigan.gov)
Refunds - Gasoline
How will a seller of gasoline at retail get a refund for exempt sales of gasoline to the government and what will be required to get a refund?
You must file a refund claim. Invoices are required, however the department will accept a computer-generated statement in lieu of individual invoices if all information required to determine eligibility and calculate the refund is included. Prior to filing a claim a sample must be provided to the department for approval.
If I use gasoline for non-highway purposes, do I need the original invoice to get a refund?
Yes.
Retail Pumps
In other states there are provisions that tanks must be labeled undyed and dyed. Is there a law regarding labels?
Retail pumps must be labeled stating that dyed fuel is not to be used for highway purposes.
Shipping Papers
Do shipping papers need to be retained at the retail site or can they be kept at the office?
The Act requires that the shipping papers be retained at the delivery location for a period of 30 days. The shipping papers must be kept at either location for at least 4 years.
Web Sites
Is a list of Michigan licensed suppliers, exporters and aviation fuel registrants available?
Yes, the list is available on the Motor Fuel page.
Marine Fuel (Waterways Tax) - Natural Resources Act Amendments
Do I charge a Marine dealer the current motor fuel tax rate on dyed diesel fuel?
No, under the law dyed diesel fuel is exempt. There is no prohibition for using dyed diesel fuel in pleasure boats. If the marina sells the dyed diesel fuel for use in a pleasure boat, the tax must be paid on the marine return.
If a marina buys undyed diesel fuel, what tax do I charge?
The tax is the current motor fuel tax rate per gallon. The Marine dealer will report sales on his return and claim credit where applicable.
Licensing
I sold my business that held a motor fuel license. Can the license be transferred to the new owner of the business?
No. Motor fuel licenses cannot be transferred. The new owner must apply for a new license with the Department if the new owner is still engaging in a business activity that requires a license under the Motor Fuel Tax Act.
Alternative Fuel
What types of fuel are considered alternative fuels?
Alternative fuels include but are not limited to: Compressed Natural Gas (CNG), Liquefied Natural Gas (LNG), Liquefied Petroleum Gas (LPG), Hydrogen, Hydrogen Compressed Natural Gas (Hythane). Alternative fuels do not include motor fuel, electricity, leaded racing fuel, or an excluded liquid.
May I use my current LPG Dealer license to sell alternative fuels?
No. All LPG dealer licenses issued prior to December 31, 2016 will automatically be discontinued effective December 31, 2016. You must become relicensed if you intend to continue your current activity.
What types of alternative fuel licenses are there?
- Alternative Fuel Dealer
- Alternative Fuel Commercial User
What type of activity requires an alternative fuel dealer license?
Effective January 1, 2017 you must become licensed as an alternative fuel dealer if you are in the business of selling alternative fuel at retail and you “use” alternative fuel.
What does it mean to “use” alternative fuel?
“Use” means any of the following:
- selling or delivering alternative fuel not otherwise subject to the tax, either by placing the alternative fuel into a permanently attached fuel supply tank of a motor vehicle or exchanging or replacing of the supply tank of a motor vehicle
- delivery of alternative fuel into storage, devoted exclusively to be consumed in motor vehicles on the public roads or highways of this state
- withdrawing alternative fuel from the cargo tank of a truck, trailer or semi-trailer for the operation of a motor vehicle on the public roads or highways of this state, whether used in vapor or liquid form
What type of activity requires an alternative fuel commercial user license?
Effective January 1, 2017 you must be licensed if you are a commercial or other business enterprise that is a consumer or end user of alternative fuel that propels a motor vehicle on the public roads of this state.
Do I have to renew my alternative fuel license annually?
You are not required to renew an alternative fuel license. It is valid unless it is suspended, canceled, revoked for cause by the department, or discontinued by the licensee.
How much does it cost to obtain my alternative Fuel license?
The cost for an Alternative Fuel Dealer license is $500.00 and the cost for an Alternative Fuel Commercial User license is $50.00.
How often do I file my Alternative Fuel Dealer Return?
LPG Dealer returns were filed quarterly however, Alternative Fuel Dealer returns are filed monthly.
How often do I file my Alternative Fuel Commercial User Return?
LPG Dealer returns were filed quarterly however, Alternative Fuel Commercial User returns are filed monthly.
What fuel types are reported on my Alternative Fuel Dealer or Alternative Fuel Commercial User return?
Alternative Fuel includes but is not limited to natural gas, compressed natural gas (CNG), liquefied natural gas (LNG), liquefied petroleum gas (LPG), hydrogen, hydrogen compressed natural gas or hythane. Alternative fuels do not include motor fuel, electricity, leaded racing fuel, or an excluded liquid.
Do I have to file my Alternative Fuel Dealer or Alternative Fuel Commercial User return if I have no activity?
Yes, you must file even if no tax is due.
I have sold clear diesel fuel to my customers without the motor fuel tax in the past when the clear diesel fuel is being used for a non-taxable purpose and when it was 100 gallons or less. Can I continue to sell clear diesel fuel to them without the motor fuel tax?
No. Effective January 1, 2017, MCL 207.1038 is repealed and sales of clear diesel fuel from retail diesel dealers must include the motor fuel tax to consumers using the fuel for non-taxable purposes. The consumer can apply for a refund directly with the Department for the tax paid to the retail diesel dealer for clear diesel fuel used for a non-taxable purpose.
The retail diesel dealer may claim a refund for all sales made before January 1, 2017 without the motor fuel tax not more than 18 months after the date the motor fuel was purchased.