Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 260 - Motor Fuel and Undyed Special Fuel › Rule 701-260.4 - Blended Fuel Taxation-nonterminal Location

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Responsibilities of all blenders
				at nonterminal locations.
A person who blends ethanol blended gasoline
				or biodiesel blended fuel at a nonterminal location must obtain a blender's
				license. Blending ethanol with gasoline, or blending biodiesel with
				petrodiesel, may result in additional tax due or an allowable refund depending
				on the ethanol content of the mixture and the tax paid on its components. The
				blender must make payment to the department for the additional tax due. The
				blender must obtain a refund permit to receive a refund of the overpayment of
				tax on the blended product.
EXAMPLE 1. A blender blends three parts ethanol with 17 parts
				  gasoline to create E-15. The E-15 is taxed as ethanol blended gasoline, and the
				  blender may be due a refund for excess tax paid on the gasoline used.
EXAMPLE 2. A blender blends one part biodiesel with four
				  parts petrodiesel to create B-20. The B-20 is taxed as B-11 or higher, and the
				  blender may be due a refund for excess tax paid on the petrodiesel used.
EXAMPLE 3. A blender blends one part biodiesel with 19 parts
				  petrodiesel to create B-5. The B-5 is taxed as diesel other than B-11 or
				  higher, and the blender may owe additional tax to the department on the
				  biodiesel used.
EXAMPLE 4. A blender blends one part B-20 with five parts B-2
				  to create B-5. The B-5 is taxed as diesel other than B-11 or higher, and the
				  blender may owe additional tax to the department on the B-20
				  used.
(2)
Blenders
				of ethanol blended gasoline.
a. A
				blender who owns the ethanol (supplier) being used to blend with gasoline must
				purchase the gasoline from a supplier and pay the appropriate tax to the
				supplier. The blender must obtain a blender's license and compute the tax due
				on the total gallons of blended product and make payment to the department for
				the additional amount due. For purposes of the following example, the tax rate
				for gasoline is presumed to be 30¢ per gallon and the tax rate for ethanol
				blended gasoline E-15 or higher is presumed to be 24¢ per gallon. The
				actual tax rates for the appropriate period are shown in subrule 68.2(1).
EXAMPLE:
EXAMPLE:
Blender purchases 7,000 gallons tax-paid gasoline
							 (7,000 x .30) =
$2,100.00
Blender adds 3,000 gallons untaxed
							 ethanol
$.00
Total tax paid on products
$2,100.00
Total tax due on 10,000 gallons ethanol blended
							 gasoline E-15 or higher (10,000 x .24) =
$2,400.00
Additional Amount Due
$300.00
b. A
				blender who purchases ethanol and gasoline from a supplier must pay tax on both
				the ethanol purchased and the gasoline purchased. The blender must obtain a
				refund permit to receive a refund of the overpayment of tax on the blended
				product. For purposes of the following example, the tax rate for gasoline is
				presumed to be 30¢ per gallon and the tax rate for ethanol blended
				gasoline E-15 or higher is presumed to be 24¢ per gallon. The actual tax
				rates for the appropriate period are shown in subrule 68.2(1).
EXAMPLE:
Blender purchases 7,000 gallons tax-paid gasoline
							 (7,000 Ã— .30) =
$2,100.00
Blender purchases 3,000 gallons tax-paid ethanol
							 (3,000 Ã— .24) =
$720.00
Total tax paid on products
$2,820.00
Total tax due on 10,000 gallons ethanol blended
							 gasoline E-15 or higher (10,000 Ã— .24) =
$2,400.00
Amount of Refund Allowable
$420.00
c. A
				blender who purchases ethanol and gasoline from any source must pay tax on both
				the ethanol purchased and the gasoline purchased. The blender must obtain a
				blender's license and compute the tax due on the total gallons of blended
				product and make payment to the department for the additional amount due. For
				purposes of the following example, the tax rate for gasoline is presumed to be
				30¢ per gallon, the tax rate for ethanol is presumed to be 24¢ per
				gallon, and the tax rate for ethanol blended gasoline E-10 is presumed to be
				30¢ per gallon. The actual tax rates for the appropriate period are shown
				in subrule 68.2(1).
EXAMPLE:
EXAMPLE:
Blender purchases 7,200 gallons tax-paid gasoline
							 (7,200 x .30) =
$2,160.00
Blender purchases 800 gallons tax-paid ethanol (800 x
							 .24) =
$192.00
Total tax paid on products
$2,352.00
Total tax due on 8,000 gallons ethanol blended
							 gasoline E-10 (8,000 x .30) =
$2,400.00
Amount of Refund Allowable
$48.00
d. A
				blender who purchases ethanol blended gasoline E-10 to E-14 and ethanol blended
				gasoline E-15 or higher from a supplier must pay tax on both the ethanol
				blended gasoline E-10 to E-14 purchased and the ethanol blended gasoline E-15
				purchased. The blender must obtain a refund permit to receive a refund of the
				overpayment of tax on the blended product. For purposes of the following
				example, the tax rate for E-10 to E-14 purchased is presumed to be 30¢ per
				gallon and the tax rate for ethanol blended gasoline E-15 or higher is presumed
				to be 24¢ per gallon. The actual tax rates for the appropriate period are
				shown in subrule 68.2(1).
EXAMPLE:
Blender purchases 7,000 gallons tax-paid ethanol
							 blended gasoline E-10 to E-14 (7,000 Ã— .30) =
$2,100.00
Blender purchases 3,000 gallons tax-paid ethanol
							 blended gasoline E-15 or higher (3,000 Ã— .24) =
$720.00
Total tax paid on products
$2,820.00
Total tax due on 10,000 gallons ethanol blended
							 gasoline E-15 or higher (10,000 Ã— .24) =
$2,400.00
Amount of Refund Allowable
$420.00
e.
				Ethanol blended gasoline E-15 or higher-blending errors.
Where a blending error occurs and an insufficient amount of
				  ethanol has been blended with gasoline so that the mixture fails to qualify as
				  ethanol blended gasoline E-15 or higher, a 1 percent tolerance applies in
				  determining the tax on the blended product as described in this
				  paragraph:
(1) If the amount of the
				ethanol erroneously blended with gasoline is at least 14 percent of the total
				blended product by volume, the ethanol and gasoline blended product is
				considered ethanol blended gasoline E-15 or higher and there is no penalty or
				assessment of additional tax.
(2)
				If the amount of ethanol erroneously blended with gasoline is less than 14
				percent of the total blended product by volume, the total blend of gasoline and
				ethanol is subject to tax as ethanol blended gasoline E-10 to E-14 at the
				prevailing rate of tax.
(3) This
				paragraph applies only if a blender intends to produce ethanol blended gasoline
				E-15 or higher. If a blender does not intend to produce ethanol blended
				gasoline when blending ethanol and gasoline, and the mixture contains less than
				14 percent ethanol by volume, no error has occurred and the mixture is subject
				to tax as ethanol blended gasoline E-10 to E-14.
(4) The following formulas are used to
				compute blending errors:
Actual gasoline + actual ethanol = total gallons of blended
				  product
Total gallons of blended product Ã— .14 = required
				  ethanol
(5) Examples. The
				following factors are assumed for all examples:
The blender in each example intends to blend ethanol blended
				  gasoline E-15 or higher. Figures are rounded to the nearest whole gallon;
				  ethanol blended gasoline E-15 or higher is taxed at 24¢ per gallon;
				  gasoline is taxed at 30¢ per gallon. The actual tax rates for the
				  appropriate period are shown in subrule 68.2(1). Penalty and interest charges
				  are not computed in the examples.
EXAMPLE 1:
Actual gasoline
= 8,500 gal.
Actual alcohol
= 1,500 gal.
Total blended product
= 10,000 gal.
10,000 x .14
= 1,400 gal. required ethanol
The actual ethanol (1,500 gallons) is more than the required
				  ethanol (1,400 gallons), which means that the tax is applied according to
				  subparagraph 68.4(2)
"e"
(1) as follows:
10,000 gal. of blended product Ã— .24
= $2,400 tax on ethanol blended gasoline E-15 or
							 higher
EXAMPLE 2:
Actual gasoline
= 9,200 gal.
Actual alcohol
= 800 gal.
Total blended product
= 10,000 gal.
10,000 x .14
= 1,400 gal. required ethanol
The actual ethanol (800 gallons) is less than the required
				  ethanol (1,400 gallons), which means that the entire blend is considered
				  gasoline and the tax is applied according to subparagraph
				  68.4(2)
"e"
(2) as follows:
10,000 gal. of blended product Ã— .30
= $3,000 tax on gasoline