When did Florida diesel and pollutants taxes apply to B100 biodiesel and clear diesel sold for blending and export?

Plain-English summary

The Florida Department of Revenue concluded that diesel tax did not first arise when the taxpayer sold B100 biodiesel and clear diesel to its customer. It arose when the taxpayer created or produced taxable B100 at a facility below the bulk-transfer system, where no diesel tax had previously been paid.

The pollutants-tax result differed by product. Vegetable or nonpetroleum B100 did not meet the pollutants-tax definition, while undyed diesel was a taxable petroleum product. The ruling says the other applicable Chapter 206 taxes were due on both fuels when they left the bulk-transfer system or upon importation or production into Florida for storage at the taxpayer's unlicensed terminal facility.

The buyer planned to blend the fuels and ship them by rail to South Carolina. The ruling says tax was passed through and the buyer could seek a refund after export by proving exportation and payment of the destination state's tax.

What this means for you

Biodiesel producers

Track the point where B100 is produced or held outside the licensed bulk-transfer system. A later interstate sale does not necessarily mark the first Florida taxable event.

Fuel wholesalers and exporters

Separate diesel-fuel tax from pollutants tax. B100 and petroleum diesel received different pollutants-tax treatment even though other fuel taxes applied to both under the stated events.

Accountants and tax professionals

Maintain production, storage, blending, export, and destination-tax records. The refund path described in the ruling depended on evidence of export and destination-state tax payment.

Common questions

Q: Was B100 subject to Florida pollutants tax?
A: No, because it was vegetable or nonpetroleum based.

Q: Was undyed diesel subject to pollutants tax?
A: Yes.

Q: Did the later sale create the first diesel-tax event?
A: No. Production below the bulk-transfer system did.

Citations and references

• Fla. Stat. §§ 206.01, 206.41, 206.86, 206.87, 206.9925, 206.9931, 206.9935, and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 16B5-001

Original ruling text

Executive
Director
Leon M. Biegalski

QUESTIONS:

1. WHETHER DIESEL FUEL TAX SHOULD BE IMPOSED AT THE TIME OF THE
   SALE OF B100 BIODIESEL AND CLEAR DIESEL FUEL TO A CUSTOMER OR AT
   THE TIME OF THE BLENDING OF THE TWO FUELS.
2. WHETHER POLLUTANTS TAX SHOULD BE IMPOSED AT THE TIME OF THE
   SALE OF B100 BIODIESEL AND CLEAR DIESEL FUEL TO A CUSTOMER OR AT
   THE TIME OF THE BLENDING OF THE TWO FUELS.
   ANSWERS:
3. THE TRUE IMPOSITION OF TAX ON DIESEL DOES NOT OCCUR WHEN
   TAXPAYER SELLS FUEL TO A CUSTOMER, BUT IT DOES OCCUR WHEN THE
   TAXPAYER CREATES OR PRODUCES A TAXABLE PRODUCT BELOW THE
   BULK TRANSFER SYSTEM.
4. THE POLLUTANTS TAX IMPOSED BY SECTION 206.9935, F.S., WOULD BE DUE
   ON THE UNDYED DIESEL FUEL. THE POLLUTANTS TAX WOULD NOT BE DUE
   ON THE BIODIESEL (B100), BECAUSE IT IS A VEGETABLE OR
   NONPETROLEUM-BASED PRODUCT AND DOES NOT MEET THE DEFINITION
   OF A TAXABLE PRODUCT FOR POLLUTANTS TAX. THE OTHER APPLICABLE
   TAXES IMPOSED BY CHAPTER 206, FLORIDA STATUTES, ARE DUE ON THE
   UNDYED DIESEL FUEL AND THE BIODIESEL (B100) WHEN IT HAS LEFT THE
   BULK TRANSFER SYSTEM, OR UPON IMPORTATION, OR PRODUCTION, INTO
   FLORIDA BY TAXPAYER FOR STORAGE AT TAXPAYER’S FACILITY WHICH IS
   NOT A LICENSED TERMINAL FACILITY.
   November 10, 2016
   RE:

Technical Assistance Advisement 16B5-001
Points of Taxation for Production Facilities
Sections: 206.01, 206.41, 206.86, 206.87, 206.9925, 206.9931, 206.9935, F.S.
XXXX (Taxpayer)
FEIN: XXXX

Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
XXXX
Page 2
Dear XXXX:
This is in responses to your request dated XXXX, for a Technical Assistance Advisement (TAA)
pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding the taxability of
biodiesel produced in state. An examination of your letter has established that you have complied
with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department
is hereby granting your request for a TAA.
FACTS
Taxpayer is a XXXX and XXXX in Florida. Taxpayer has a bulk facility in Florida that is not
registered with the Internal Revenue Service (IRS), where biodiesel, undyed diesel, and dyed
diesel are stored. XXXX (XXXX) purchases and sells, among other products, biodiesel fuel.
XXXX has current terminal supplier, wholesaler, and pollutants licenses.
Taxpayer sold 23,995.7 gallons of B100 and 25 gallons of clear diesel fuel to XXXX, where
XXXX causes both fuels to be splashed blended and shipped from Florida by rail car to South
Carolina. Taxpayer charged XXXX the pollutants tax in the amount of .02071 cents per gallon,
as a separate line item, on the 23,995.7 gallons of B100. The fuel was loaded into a rail car at the
Taxpayer’s facilities where the B100 is produced.
REQUESTED ADVISEMNT
Taxpayer is seeking a binding TAA from the Department regarding the imposition of tax on a
transaction of B100 biodiesel and clear diesel fuel. Specifically, Taxpayer asks:
(1) Whether diesel fuel tax should be imposed at the time of the sale of B100 biodiesel and
clear diesel fuel to XXXX or at the time of the blending of the two fuels.
(2) Whether pollutants tax should be imposed at the time of the sale of B100 biodiesel and
clear diesel fuel to XXXX or at the time of the blending of the two fuels.
TAXPAYER POSITION #1
Taxpayer believes that diesel fuel tax should not be imposed on either the removal or sale of B100
biodiesel or clear diesel by the Taxpayer, or at the time of the blending of the B100 biodiesel and
clear diesel by XXXX. Taxpayer states that the transaction it engaged in does not require the
imposition of tax provided by s. 206.87, F.S., or of the backup tax imposed by s. 206.873, F.S.
LAW & DISCUSSION
Section 206.01, states in part:
(15) “Bulk transfer” means the shipment of fuel by pipeline or marine vessel between
terminals or from a refinery to a terminal

Technical Assistance Advisement
XXXX
Page 3
Section 206.86, states in part:
(1) “Diesel fuel” means all petroleum distillates commonly known as diesel #2, biodiesel,
or any other product blended with diesel or any product placed into the storage supply tank
of a diesel-powered motor vehicle.

(12) “Biodiesel” means any product made from nonpetroleum-based oils or fats which is
suitable for use in diesel-powered engines. Biodiesel is also referred to as alkyl esters.
Section 206.87(2), F.S., states in part the taxes specified in this section are imposed on the
following:
(2)(c) The entry of diesel fuel into this state for sale, consumption, use, or warehousing if
either of the following applies:

1. The entry is by bulk transfer and the enterer is not a licensed terminal supplier; or
2. The entry is not by bulk transfer.
   Within the Taxpayer’s analysis, an argument is made regarding each imposition of diesel fuel tax.
   Taxpayer states that the transaction with XXXX does not trigger any specific statutory points of
   taxation. However, prior to the transaction with XXXX, Taxpayer is holding taxable biodiesel
   fuel in a bulk storage facility that is outside of the bulk transfer system. As Taxpayer states, they
   are not registered as an IRS terminal and do not consider themselves a refinery. The moment
   Taxpayer creates nonpetroleum-based B100 in their facility a taxable instance has occurred. B100
   biodiesel is a 100% vegetable or nonpetroleum biodiesel product intended for fuel in dieselpowered vehicles or equipment. They have a created a taxable product where no taxes have
   previously been paid. Taxpayer should report these gallons each month on their receipt schedule
   on the Wholesaler’s return (form DR-309632)1. Diesel fuel taxes should be remitted as well for
   each gallon of biodiesel that was created or produced. In the transaction between the Taxpayer
   and XXXX, diesel fuel taxes would be passed down due to the fact that the Taxpayer does not
   have the authority to collect the destination state’s taxes. XXXX will then have the ability to file
   a refund claim once the fuel is shipped out of state and they provide evidence that they paid the
   destination state’s taxes.
   CONCLUSION
   The true imposition of tax on diesel does not occur when Taxpayer sells fuel to XXXX, but it does
   occur when the Taxpayer creates or produces a taxable product below the bulk transfer system.

1

Per the instructions on the DR-309632, biodiesel is defined as diesel and products labeled or marketed as biodiesel,
including 100% vegetable or animal based products known as “B100,” that have not been blended with petroleum
diesel. Biodiesel is taxed at the diesel fuel rate when produced in or imported into XXXX.

Technical Assistance Advisement
XXXX
Page 4
TAXPAYER POSITION #2
Taxpayer believes that pollutants tax should not be imposed on either the removal or sale of B100
biodiesel or clear diesel by the Taxpayer, or at the blending of the B100 biodiesel and clear diesel
by XXX.
LAW & DISCUSSION
Section 206.9925, F.S., states in part:
(4) “Petroleum product” means any refined liquid commodity made wholly or partially
from oil or gas, blends or mixtures of oil with one or more liquid products or byproducts
derived from oil or gas, or blends or mixtures of two or more liquid products derived from
oil or gas, and includes, but is not limited to, motor gasoline, gasohol, aviation gasoline,
naphtha-type jet fuel, kerosene-type get fuel, kerosene, distillate fuel oil, residual fuel oil,
motor oil and other lubricants, naphtha of less than 400 oF for petroleum feed, special
naphthas, road oil, still gas, unfinished oils, motor gas blending components, including
petroleum-derived ethanol when used for such purpose, and aviation gas blending
components.
Section 206.9931, F.S., states in part:
(4) All pollutants imported, produced, or sold in this state are presumed to be subject to the
taxes imposed by this part. Any person, except the final retail consumer, who has
purchased a pollutant for sale, use, consumption, or distribution in this state must document
that the taxes imposed by this part have been paid or must pay such taxes directly to the
department in accordance with subsection (2).
Section 206.9935, F.S., states in part:
(1) Tax For Coastal Protection.
(a)1. There is hereby levied an excise tax for the privilege of producing in, importing into,
or causing to be imported into this state pollutants for sale, use, or otherwise….

3. The tax shall be imposed on petroleum products and remitted to the department in the
   same manner as the motor fuel tax imposed pursuant to s. 206.41.

(2) Tax For Water Quality.
(a)1. There is hereby levied an excise tax for the privilege of producing in, importing into,
or causing to be imported into this state pollutants for sale, use, or otherwise.
3. The tax shall be imposed on petroleum products and remitted to the department in the
same manner as the motor fuel tax imposed pursuant to s. 206.41.

Technical Assistance Advisement
XXXX
Page 5
(3) Tax For Inland Protection.
(a)1. There is hereby levied an excise tax for the privilege of producing in, importing into,
or causing to be imported into this state pollutants for sale, use, or otherwise.

(4) For purposes of this section, the term “first sale” does not include exchanges or loans,
gallon-for-gallon, of petroleum products between licensed terminal suppliers before the
petroleum products have been sold or removed through the loading rack or transfers
between terminal facilities owned by the same taxpayer. The tax on petroleum products
first imported into this state by a licensed terminal supplier storing such petroleum products
in a terminal facility shall be imposed when the product is first removed through the loading
rack. The tax shall be remitted by the licensed terminal supplier who owned the petroleum
products immediately prior to removal of such petroleum products from storage.
Section 206.41, F.S., provides in part:
(6) Unless otherwise provided for by this chapter, the taxes specified in subsection (1) are
imposed on all of the following:
(a) The removal of motor fuel in this state from a terminal if the motor fuel is removed at
the rack.
(b) The removal of motor fuel in this state from any refinery if either of the following
applies:

1. The removal is by bulk transfer and the owner of the motor fuel immediately before the
   removal is not a licensed terminal supplier; or
2. The removal is at the refinery rack.
   (c) The entry of motor fuel into this state for sale, consumption, use, or warehousing if
   either of the following applies:
3. The entry is by bulk transfer and the enterer is not licensed as a terminal supplier or
   importer; or
4. The entry is not by bulk transfer.
   (d) The removal of motor fuel in this state to an unregistered person, unless there was a
   prior taxable removal, entry, or sale of the motor fuel.
   (e) The removal or sale of blended motor fuel in this state by the blender thereof. The
   number of gallons of blended motor fuel subject to tax is the difference between the total
   number of gallons of blended motor fuel removed or sold and the number of gallons of
   previously taxed motor fuel used to produce the blended motor fuel.
   Taxpayer sold two fuel products to XXXX: biodiesel (B100) and undyed diesel fuel. The two
   fuels were intended to be blended once XXXX took ownership of the fuels in their rail cars. Based
   on the transaction, pollutants tax is not due on the biodiesel. Product B100 is vegetable-based
   product and does not meet the definition of a taxable product for pollutants tax. Pollutants taxes
   are due on oil, gas, petroleum products, pollutants, and solvents. Undyed diesel fuel is considered
   to be a petroleum product. The imposition of pollutants tax on petroleum products is based on s.
   206.41, F.S. Taxes would have been imposed either prior to the Taxpayer’s ownership of the
   undyed diesel or the moment Taxpayer owned the fuel in their storage facility. If Taxpayer

Technical Assistance Advisement
XXXX
Page 6
purchased the undyed diesel from a terminal, pollutants taxes should have been paid to the terminal
supplier. All pollutants taxes would have been passed down to XXXX. XXXX can then apply for
a refund claim of the applicable taxes once evidence has been provided that the exportation
occurred. Taxpayer could have imported the undyed diesel fuel via the Importer’s license. Once
the undyed diesel entered into the state, pollutants tax would have been due, since the fuel was
held below the bulk transfer system. Again, all pollutants taxes would be passed down to XXXX
when the transaction occurred and XXXX would apply for a refund claim once they have evidence
an export has occurred.
CONCLUSION
The pollutants tax imposed by Section 206.9935, F.S., would be due on the undyed diesel fuel.
The pollutants tax would not be due on the biodiesel (B100), because it is a vegetable or
nonpetroleum-based product and does not meet the definition of a taxable product for pollutants
tax. The other applicable taxes imposed by Chapter 206, Florida Statutes, are due on the undyed
diesel fuel and the biodiesel (B100) when it has left the bulk transfer system, or upon importation,
or production, into Florida by Taxpayer for storage at Taxpayer’s facility which is not a licensed
terminal facility.
This response constitutes a Technical Assistance Advisement under Section 213.22, F.S., which is
binding on the Department only under the facts and circumstances described in the request for this
advice as specified in Section 213.22, F.S. Our response is predicated on those facts and the
specific situation summarized above. You are advised that subsequent statutory or administrative
rule changes, judicial interpretations or the statutes or rules, or changes to the facts, upon which
this advice is based, may subject similar future transactions to a different treatment than expressed
in this response.
You are further advised that this response, your request and related documents are public records
under Chapter 119, F.S., which are subject to disclosure to the public under the conditions of
Section 213.22, F.S. Your name, address, and other details, which might lead to identification of
the taxpayer, must be deleted before disclosure. In an effort to protect the confidentiality of such
information, we request you provide the undersigned with an edited copy of your request for
Technical Assistance Advisement, backup material and response within fifteen days of the date of
this advisement.
If you have any questions or concerns regarding this issue, you can contact me directly at 850717-7610.
Sincerely,

Michael Tay
Tax Law Specialist
Technical Assistance and Dispute Resolution
Record ID: 211002