Diesel Fuel Tax – Frequently Asked Questions (FAQs)

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About the Diesel Fuel Tax

The diesel fuel tax is paid by the person (supplier) who owns the diesel fuel when it is removed from a refinery or terminal rack in California or entered (imported) into California.

The tax is imposed upon each gallon of diesel fuel when it is:

  • Removed from the terminal rack,
  • Removed from the refinery rack,
  • Removed from the refinery via pipeline or vessel when the owner does not hold a valid diesel fuel supplier license with the CDTFA,
  • Imported into California via pipeline or vessel and the importer does not have a valid diesel fuel supplier license with the CDTFA, or the import is not via pipeline or vessel,
  • Removed or sold to a person who does not hold a valid diesel fuel supplier license with the CDTFA, and the diesel fuel was untaxed,
  • Blended diesel fuel removed or sold by the blender. The number of gallons of blended diesel fuel subject to the tax is the difference between the total number of gallons of blended diesel fuel removed or sold and the number of previously taxed diesel fuel gallons used to produce the blended diesel fuel.

The Diesel Fuel Tax Law also contains a backup tax imposed on diesel fuel when the tax was not previously paid, or has been refunded. The backup tax is imposed on any diesel fuel that contains dye, and any liquid on which tax has not been imposed, that is placed into the fuel tank of a diesel-powered highway vehicle, including diesel fuel for which a claim for refund has been allowed.

The diesel fuel tax revenue is deposited into the State Transportation Fund. Revenues from this program are used to construct and maintain public roads and mass transit systems.

Common Industry terms defined:

What is biodiesel?

Biodiesel is produced from a plant or animal fat or oil, such as soybean oil, through a process called "transesterification." Under California law, biodiesel, methyl esters, and other diesel fuel replacements that can be used in diesel-powered engines are defined as diesel fuel and taxed the same way as petroleum diesel fuel.

For further information regarding the application of the diesel fuel tax to biodiesel, visit our Motor Fuel – Biodiesel-Biofuel Frequently Asked Questions webpage.


What does blended diesel fuel mean?

Blended diesel fuel means a mixture of tax-paid diesel fuel and any other liquid on which tax has not been imposed (other than dyed diesel fuel). Blended diesel fuel also means any conversion of a liquid into diesel fuel. If you produce blended diesel fuel outside of a refinery or bulk transfer/terminal system, you are required to register as a supplier and pay the diesel fuel tax on the ex-tax portion of the blended diesel fuel you produce. (Revenue and Taxation Code section 60023)


What does bulk transfer mean?

Bulk transfer means any transfer of diesel fuel by pipeline or vessel. (Revenue and Taxation Code section 60029)


What does bulk transfer/terminal system mean?

You are an enterer if you are the importer of record (under federal customs law) with respect to diesel fuel. If the importer of record is acting as an agent, the person for whom the agent is acting is the enterer. If there is no importer of record of diesel fuel entered into this state, the owner of the diesel fuel at the time it is brought into this state is the enterer.


What is a diesel fuel user?

Diesel fuel users are persons, other than farmers or exempt bus operators, who purchase tax-paid diesel fuel and use it in a nontaxable manner.


What is dyed diesel fuel?

Dyed diesel fuel means diesel fuel that is dyed under United States Environmental Protection Agency (EPA) or the Internal Revenue Service (IRS) rules. Sales of dyed diesel fuel are exempt from the diesel fuel tax if the fuel meets the dyeing requirements of the United States EPA and the IRS. Except in limited circumstances, it is against the law to maintain or operate a motor vehicle on the highway in California with dyed diesel fuel in the supply tank. A penalty applies to any person who knowingly alters, or attempts to alter, the strength or composition of any dye or marker in dyed diesel fuel. (Revenue and Taxation Code section 60105 and section 60031)


What is dyed blended biodiesel fuel?

Dyed blended biodiesel fuel is tax-paid biodiesel fuel that is blended with ex-tax diesel fuel above the rack, which is removed as a dyed blended biodiesel fuel. For further information on dyed blended biodiesel fuel, see our November 2015 Special Notice, "Refund of Diesel Fuel Tax Paid Available to Suppliers of Dyed Blended Biodiesel Removed from the Rack."


What is an exempt bus operator?

You are an exempt bus operator if you own, operate, or control an exempt bus operation. (Revenue and Taxation Code section 60039 and section 60040)

An exempt bus operation consists of the following:

  1. Any transit district, transit authority, or city owning and operating a local transit system itself or through a wholly owned nonprofit corporation.
  2. Any private entity providing transportation services for the transportation of people under contract or agreement, except general franchise agreements, with a public agency authorized to provide public transportation services, only for diesel fuel consumed while providing services under those contracts or agreements entered into subsequent to January 1, 1979.
  3. Any passenger stage corporation subject to the jurisdiction of the Public Utilities Commission when the motor vehicles of the passenger stage corporation are exclusively operated in urban or suburban areas or between cities in close proximity for the transportation of persons for hire, compensation, or profit. However, the exemption is not extended to any line or lines operated by the passenger stage corporation that exceed 50 miles of one-way route mileage.
  4. Any common carrier of passengers operating exclusively on any line or lines within the limits of a single city between fixed termini or over a regular route, 98 percent of whose operations, as measured by total route mileage operated, are exclusively within the limits of a single city, and who by reason thereof is not a passenger stage corporation subject to the jurisdiction of the Public Utilities Commission.
  5. Any school district, community college district, or county superintendent of schools owning, leasing, or operating buses for the purpose of transporting pupils to and from school and for other school or college activities involving pupils, including, but not limited to, field trips and athletic contests.
  6. Any private entity providing transportation services for the purposes specified in paragraph (5) under contract or agreement with a school district, community college district, or county superintendent of schools, only for diesel fuel consumed while providing services under those contracts or agreements entered into subsequent to September 30, 1984.

"Exempt bus operation" does not include a charter-party carrier of passengers. The term "charter-party carrier of passengers" has the same meaning as that specified in Public Utilities Code section 5360 and shall further include those transportation services described in Public Utilities Code section 5353, subdivisions (a) and (e), if that transportation service is rendered as contract carriage and not as common carriage of passengers.


What is a government entity?

Government entity means this state and its political subdivisions except for a political subdivision that is only an exempt bus operator. A government entity must have a diesel fuel tax license to operate a diesel-powered highway vehicle upon the state's highways, unless all diesel fuel is purchased tax-paid from a supplier or retail vendor, and the tax-paid fuel is used solely to operate a diesel-powered vehicle within this state. (Revenue and Taxation Code section 60043)


What is an interstate user?

You are an interstate user if you use diesel fuel in the operation of a qualified motor vehicle in California and you operate the qualified motor vehicle within and outside California or the United States. (Revenue and Taxation Code section 60111)


What does pipeline operator mean?

You are a pipeline operator if you own, operate, or otherwise control a pipeline. (Revenue and Taxation Code section 60047.1)


What is a qualified motor vehicle?

Qualified motor vehicle means a motor vehicle used, designed, or maintained for transportation of persons or property that (a) has two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds or 11,797 kilograms, (b) has three or more axles regardless of weight, or (c) is used in combination, when the weight of that combination exceeds 26,000 pounds or 11,797 kilograms gross vehicle weight. Qualified motor vehicle does not include recreational vehicles. (Revenue and Taxation Code section 60112)


What does rack mean?

The rack is a mechanism used for delivering fuel from a refinery or terminal into a truck, trailer, railcar, or other means of non-bulk transfer. Diesel fuel tax is imposed when fuel is removed across the rack or imported below the rack. (Revenue and Taxation Code section 60006)


What does supplier mean?

Supplier includes any person who is any of the following (Revenue and Taxation Code section 60033):

Blender

Blenders produce or convert blended diesel fuel (including biodiesel) outside the bulk transfer/terminal system. (Revenue and Taxation Code section 60012)

Enterer (Importer)

Enterers are the importer of record (under federal customs law) with respect to diesel fuel. If the importer of record is acting as an agent, the person for whom the agent is acting is the enterer. If there is no importer of record of diesel fuel imported into California, the owner of the diesel fuel at the time it is brought into California is the enterer. (Revenue and Taxation Code section 60013)

Position Holder

Position holders hold inventory in diesel fuel, as reflected on the records of the terminal operator. A person holds the inventory position in diesel fuel when that person has a contractual agreement with the terminal operator for the use of storage facilities and terminaling services at a terminal with respect to the diesel fuel. "Position holder" includes a terminal operator that owns diesel fuel in its terminal. (Revenue and Taxation Code section 60010)

Refiner

Refiners own, operate, or otherwise control a refinery. (Revenue and Taxation Code section 60011)

Terminal Operator

Terminal operators own, operate, or otherwise control a terminal. A terminal operator is also included in the definition of a supplier. (Revenue and Taxation Code section 60009 and section 60033)

Throughputter

Throughputters own diesel fuel within the bulk transfer/terminal system (other than in a terminal) or are a position holder. (Revenue and Taxation Code section 60035)


What is a train operator?

Train operators own, operate, or control a train and are licensed as a railroad by a state or federal agency. You must obtain a license from the CDTFA in order to issue a CDTFA-231-PT, Fuel Tax Exemption Certificate for Diesel Fuel and Motor Vehicle Fuel Train Operators. (Revenue and Taxation Code section 60041)


What is an ultimate purchaser?

Ultimate purchasers use undyed diesel fuel for use on a farm for farming purposes or for use in an exempt bus operation. (Revenue and Taxation Code section 60037)


What is an ultimate vendor?

Ultimate vendors sell tax-paid undyed diesel fuel to the user of the diesel fuel (ultimate purchaser) for use on a farm for farming purposes or for use in an exempt bus operation without collecting the diesel fuel tax, under an exemption certificate. See section titled, Are there any exemptions from the diesel fuel tax? for further information regarding exemption certificates (Revenue and Taxation Code section 60036)


What is a vessel operator?

Vessel operators operate, or otherwise control, a vessel. (Revenue and Taxation Code section 60049.1)

Registration

Go to our online registration system and select "Register a business activity with CDTFA." Online registration is convenient, secure, and available 24 hours a day seven days a week. Visit our Information Needed to Get Started webpage for help to complete your application.

You may also register in person at one of our office locations by using a kiosk. If you have questions, please contact our Customer Service Center at 1-800-400-7115, Monday through Friday, 8:00 a.m. – 5:00 p.m. Pacific time, excluding state holidays.

If you are a supplier of both motor vehicle fuel and diesel fuel, you should register for both programs during the registration process.

A diesel fuel licensee may also need to obtain a Seller's Permit from the CDTFA. You will be able to register for all your licenses, permits, or accounts using CDTFA's online registration system.

The Governor's Office of Business and Economic Development (GO-Biz) offers extensive information on local, state, and federal permit requirements. Visit their website for a listing of its assistance centers.

Visit Calgold for help with permit and licensing requirements for other local, state, and federal authorities (for example, you may need to be registered with the Franchise Tax Board or the Employment Development Department).

Also, visit California's Tax Service Center, California's Tax Service Center You may also want to consult a tax professional for assistance on other agencies' requirements.

You should notify the CDTFA of any change of address, phone or fax number to ensure that returns, and information from the CDTFA are received timely. Use CDTFA-345-SP, Notice of Business Change, Special Taxes and Fees Accounts, to notify the CDTFA of changes.

If you have questions contact the CDTFA Customer Service Center at 1-800-400-7115 (TTY: 711) Monday through Friday (except state holidays) 8:00 a.m. to 5:00 p.m. (Pacific time), and select the option for "Special Taxes and Fees" or Email Your Tax Questions.

Collecting the Tax

In general, the provisions requiring the payment of diesel fuel taxes do not apply to the following:

More detail on the specifics of each of the exemptions listed above, are listed under the Diesel Fuel Tax Law, Chapter 3.

No. Do not include the diesel fuel tax amount in the calculation of your gross receipts.

Exemptions for diesel fuel tax are provided in the Diesel Fuel Tax Law Chapter 3 of the Revenue and Taxation Code.
In general, the provisions requiring the payment of diesel fuel taxes do not apply to the following:

More detail on the specifics of each of the exemptions listed above, are listed under the Diesel Fuel Tax Law, Chapter 3.

Exempt bus operators:
Exempt bus operators are required to apply for a license.

All diesel fuel used in an exempt bus operation is exempt from the diesel fuel tax. However, exempt bus operators must pay a tax of one cent for each gallon of exempt diesel fuel used in an exempt bus operation on their BOE-501-DB, Exempt Bus Operator Diesel Fuel Tax Return, for the privilege of operating buses on state highways and freeways. (Revenue and Taxation Code section 60502.2 and section 60205).

A public school district licensed as an exempt bus operator may purchase ex-tax, undyed diesel fuel under a CDTFA-231-DB, Certificate of Exempt Bus Operation, or dyed diesel fuel, for use in its exempt bus operation.

Government entities:
A government entity must apply for a license to operate a diesel-powered highway vehicle upon California's highways, unless all diesel fuel is purchased tax-paid from a supplier or retail vendor, and the tax-paid fuel is used solely to operate a diesel-powered highway vehicle within California. As a licensed government entity, you are allowed to use dyed diesel fuel on the highway in your California registered highway vehicles. You must pay the diesel fuel tax directly to your supplier on purchases of undyed diesel and must report on your BOE-501-DG, Government Entity Diesel Fuel Tax Return, tax due on the use of dyed diesel fuel used on the highway. A government entity that has paid diesel fuel tax to a retail vendor shall be allowed a credit on its tax return for the tax paid to the retail vendor. (Revenue and Taxation Code section 60146, section 60108, and section 60205.5)

Filing and Making a Payment

In general, the reports, or returns along with payment of tax, are due on the last day of the month following the close of the reporting period (e.g. October 31 for the month of September for a monthly filer). Your reporting basis (monthly, quarterly, or yearly) will be determined when you register.

Vessel, pipeline, terminal, and train operators are required to file monthly informational reports.

Interstate users file quarterly returns.

Ultimate vendors file a monthly CDTFA-770-DV, Diesel Fuel Ultimate Vendor Report/Claim for Refund form.

Motor fuels tax forms are required to be filed electronically with the CDTFA's Motor Fuels Online Filing Program. You may request an exemption from the Motor Fuels Online Filing by submitting an Efiling Exemption Request form. The form can be requested by sending an e-mail to our Motor Fuels staff. For more information on filing electronically, visit Motor Fuels Online Filing Program page.

No. If you are a supplier of both motor vehicle fuel and diesel fuel, you must file separate tax returns. The motor vehicle fuel tax and diesel fuel tax are administered under two separate programs. If you file informational reports as a pipeline, vessel, train, or terminal operator, you may report both motor vehicle fuel and diesel fuel on your informational report(s).

Motor Fuels Online Filing Program participants are required to make online payments for any amounts due. In addition to paying the diesel fuel tax online by the due date, you must also electronically file the return by the due date. If the due date falls on a Saturday, Sunday or state holiday, payments postmarked or received by the next business day will be considered timely. If no tax is owed, a return must still be submitted timely. A delinquent return, failure to pay by EFT, or a late transfer will result in penalty charges.

Diesel fuel accounts that are not Motor Fuels Online Filing Program participants have several options for paying any tax amount due. You can easily and conveniently make your payment online. Select the "Make a Payment" tab on our website. You can also pay by credit card or electronic funds transfer (EFT) at "Make a Payment," or by calling 1-855-292-8931 (for credit card payments). Please note that a service fee of 2.3% of the transaction amount will be charged and retained by the credit card processing vendor. The minimum fee is $1.00.

Motor Fuels Online Filing Program participants are required to make online payments for any amounts due.

If your estimated average monthly tax payment will be $20,000 or more, you will be required to pay the tax by Electronic Funds Transfer (EFT). You can elect to make tax payments through EFT on a voluntary basis by submitting form CDTFA-555-ST, Authorization Agreement for Electronic Funds Transfer.

In addition to paying the diesel fuel tax by EFT by the due date, you must also file the return by the due date. If no amount is owed, a return must still be submitted timely. A delinquent return, failure to pay by EFT, or a late transfer will result in penalty charges. For more information on the EFT program, click on the "Make a Payment" tab then select Electronic Funds Transfer (EFT) Information.

Records are required to be retained for a period of not less than four years from the time the tax is due unless the CDTFA authorizes in writing their destruction sooner.

Filing a Claim for Refund

See our Diesel Fuel Tax – Filing Claims for Refund page for special rules for filing diesel fuel tax claims for refund.

No. Although Revenue and Taxation Code section 60501 (a)(4)(A) provides a refund for taxes paid on diesel fuel used for purposes other than operating motor vehicles upon the public highways of this state, diesel fuel used in the regeneration process is considered an operational use.

For transactions occurring on and after April 1, 2016, safe-harbor percentages are presumed to be the percentages of diesel fuel used in the operation of auxiliary equipment on diesel power motor vehicles. Safe-harbor percentages must be applied to diesel fuel consumption by auxiliary equipment type. Off-highway use is included in the safe-harbor percentages. See Diesel Fuel Tax Regulation 1432 for a list of safe-harbor percentages.

There are special rules for filing diesel fuel tax claims for refund. See Filing and Making a Payment/Claiming a Refund or Credit for information regarding filing a claim for refund or taking a credit on your Supplier of Diesel Fuel Tax Return or visit "Filing Claims for Refund" and select the link that applies to you.