Can a farmer who pays motor fuel tax on propane used exclusively for grain drying (not for operating vehicles on public highways) get a refund of that tax?

Plain-English summary

A farmer asked the Illinois Department of Revenue whether he could get a refund of the motor fuel tax he pays on propane, which he uses exclusively to dry grain (corn and beans) through a direct underground pipe to his dryer, rather than to operate any motor vehicle. The Department explained that motor fuel tax is imposed "on the privilege of operating motor vehicles upon the public highways, including toll roads, and recreational-type watercraft upon the waters of this State." Because propane used for grain drying isn't used to operate a vehicle on the highway, it generally is not charged motor fuel tax to begin with — it's typically taxed as a regular retail sale instead, and sales tax paid on a purchase is not refundable under this framework.

If motor fuel tax was in fact charged on the propane, a refund may be available, but only in limited circumstances and only with sufficient documentation. Because the farmer's claim would be treated as a claim for undyed diesel fuel, refunds are authorized only in the narrow situations listed in 86 Ill. Adm. Code 500.235(j) — for example, the nonhighway-use portion of fuel used by a commercial motor vehicle that is also used on public highways. Claims must show, with verifiable proof, the specific amount of fuel used for a nontaxable purpose, and must be filed within 2 years of the date the tax was paid.

What this means for you

Farmers and other nonhighway fuel users

If you buy propane, diesel, or other motor fuel for equipment that never touches a public highway (grain dryers, irrigation pumps, stationary engines, etc.), check whether you were actually charged motor fuel tax or ordinary sales tax on the purchase. Sales tax paid instead of motor fuel tax is not refundable through this process. If motor fuel tax was charged, you may be able to claim a refund, but you'll need to document the fuel purchase and show, in a way the Department can verify and itemize, that it was used for a nontaxable purpose.

Business owners and accountants handling fuel tax refund claims

Refund claims are filed with the Department on Form RMFT-11-A (Illinois Motor Fuel Tax Refund Claim), with propane calculated on Line 7 in Step 3. Claims for undyed diesel fuel are restricted to the specific circumstances enumerated in Section 13 of the Motor Fuel Tax Law and detailed in 86 Ill. Adm. Code 500.235(j), such as the nonhighway portion of fuel used by a commercial motor vehicle that also operates on public highways. Track purchase dates closely: claims for full reimbursement of tax paid on or after January 1, 2000 must be filed no later than 2 years after the date the tax was paid.

Tax professionals distinguishing GILs from PLRs

This letter is a General Information Letter (GIL), not a Private Letter Ruling (PLR). A PLR is binding on the Department for the specific taxpayer and facts presented, per 2 Ill. Adm. Code 1200.110. A GIL, issued under 2 Ill. Adm. Code 1200.120, only directs the taxpayer to relevant regulations and is not a statement of Department policy nor binding on the Department.

Common questions

Q: Is propane considered "motor fuel" under Illinois law?
A: Yes. The Department states propane is considered motor fuel, but motor fuel tax specifically taxes fuel used to operate motor vehicles on public highways (including toll roads) or recreational watercraft on state waters — not fuel used for other purposes like grain drying.

Q: If I paid sales tax (not motor fuel tax) on propane used for grain drying, can I get a refund?
A: No. The letter states that if you paid sales tax on the purchase of propane, you would not be entitled to a refund under this process. A refund is only possible if motor fuel tax was actually charged on the fuel.

Q: What must a refund claim include?
A: Claims must be made to the Department on the proper form (Form RMFT-11-A), supported by documentation of the fuel purchase and additional information about the specific nontaxable purpose. Under 86 Ill. Adm. Code 500.235(i), the Department approves claims only when the nontaxable-use portion can, as a practical matter, be calculated and itemized with proof.

Q: Are there special limits for undyed diesel fuel refund claims?
A: Yes. Refunds for undyed diesel fuel are authorized only in limited circumstances enumerated in Section 13 of the Motor Fuel Tax Law and detailed in 86 Ill. Adm. Code 500.235(j) — for instance, the nonhighway-use portion of fuel used by a commercial motor vehicle (as defined in 86 Ill. Adm. Code 500.100) that is also used on public highways.

Q: How long do I have to file a refund claim?
A: Section 13 of the Motor Fuel Tax Law provides that claims for full reimbursement of tax paid on or after January 1, 2000 must be filed no later than 2 years after the date the tax was paid by the claimant.

Citations and references

• 35 ILCS 505/13 (Motor Fuel Tax Law - refund/reimbursement for nontaxable use; 2-year statute of limitations)
• 86 Ill. Adm. Code 500.200(a) (motor fuel tax imposed on operating motor vehicles on public highways/watercraft)
• 86 Ill. Adm. Code 500.235 (documentation required to support a refund claim)
• 86 Ill. Adm. Code 500.235(i) (claims approved only when nontaxable use can be calculated and itemized)
• 86 Ill. Adm. Code 500.235(j) (limited circumstances for undyed diesel fuel refund claims)
• 86 Ill. Adm. Code 500.100 (definition of commercial motor vehicle)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letters not binding on the Department)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2023.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2023/ST-23-0005-GIL.pdf

Original ruling text

ST-23-0005-GIL 03/21/2023 MOTOR FUEL TAX
This letter discusses the requirements of refund claims for taxes paid on fuel
which was used for nontaxable purposes. 86 Ill. Adm. Code 500.235. (This is a
GIL.)
March 21, 2023

COMPANY
ADDRESS1
Dear Mr. XXX:
This letter is in response to your letter dated June 29, 2022, in which you
requested information. The Department issues two types of letter rulings. Private Letter
Rulings (“PLRs”) are issued by the Department in response to specific taxpayer
inquiries concerning the application of a tax statute or rule to a particular fact situation.
A PLR is binding on the Department, but only as to the taxpayer who is the subject of
the request for ruling and only to the extent the facts recited in the PLR are correct and
complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General
Information Letter (“GIL”) is to direct taxpayers to Department regulations or other
sources of information regarding the topic about which they have inquired. A GIL is not
a statement of Department policy and is not binding on the Department. See 2 Ill. Adm.
Code 1200.120. You may access our website at www.tax.illinois.gov to review
regulations, letter rulings and other types of information relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:

Attention IL Dept. of Revenue Legal Services,
I called the IL. Dept. of Revenue on 6-28-22 and talked to a lady
about gas tax refunds. I explained what I have going on and she gave me
the information to contact the legal dept.
I am a farmer in COUNTY, IL. and I have a 12,000 gal. propane
tank that I get filled by the truckload. It holds about 10,000 gal. because
we can’t fill a tank over 80%. I pay state tax on the propane, but it is used
exclusively for grain drying. There is a direct underground pipe to my
dryer to dry corn mostly, sometimes beans. I have grain bins that the
dryer fills of 140,000 bu. of storage.
I used to apply for a state gas tax refund when I had gas tractors
etc. I haven’t applied for it in quite a while because I went mostly to

NAME
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March 21, 2023
diesel. I talked to a farmer that said he applies for the gas refund for
propane once a year, sends copies of the invoices & gets the refund. With
you knowing my situation can I also apply for the gas tax refund on
propane?
The address of the drying set-up is ADDRESS2
There is no one living there, all communication would go to me
where I live:
COMPANY
ADDRESS1
If you need to send someone to see the set-up that would be fine. If you
want me to send pictures I could also do that.
Thank-you for your time & consideration;
DEPARTMENT’S RESPONSE:
After reviewing your letter, it appears you are seeking information regarding a
refund on tax paid for propane. Motor fuel tax is imposed “on the privilege of operating
motor vehicles upon the public highways, including toll roads, and recreational-type
watercraft upon the waters of this State.” 86 Ill. Adm. Code 500.200(a). Propane is
considered motor fuel. Generally, motor fuel tax is not charged on sales of propane for
the use you described. If you paid sales tax on the purchase of propane, you would not
be entitled to a refund. However, if you were charged motor fuel tax on the propane,
you may claim a refund in limited circumstances.
Claims for refund are governed by Section 13 of the Motor Fuel Tax Law (“Law”)
and Section 500.235 of the Department’s regulations. The Department will not approve
claims unless they are sufficiently documented by verifiable proof. Section 500.235
details the information required to support a claim (a copy of which is included). 86 Ill.
Adm. Code 500.235. Based on the information in your letter, you are requesting a
refund for propane and this claim would be made as undyed diesel fuel.
Section 13 of the Motor Fuel Tax Law (“Law”), 35 ILCS 505/13, provides that any
person other than a distributor or supplier who uses motor fuel (upon which the person
has paid the amount required under Section 2 of the Law) for any purpose other than
operating a motor vehicle upon the public highways or water shall be reimbursed and
repaid the amount so paid. Claims for reimbursement must be made to the Department
on forms provided by the Department, and must include documentation related to the
purchase of the fuel, along with additional information deemed necessary by the
Department regarding the specific purpose for which it was used. The specific
information required of claimants is found at Section 500.235 of the Department’s
regulations. As Section 500.235 notes, the Department will approve claims only when
they are based upon a showing that motor fuel was used for a nontaxable purpose and

NAME
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March 21, 2023
that the part for which refund is claimed can, as a practical matter, be calculated and
itemized. Only claims that are supported by proof of the amount of motor fuel not used
for a taxable purpose will be approved. See 86 Ill. Adm. Code 500.235 (i).
Claims for refunds of tax paid on the purchase of undyed diesel fuel are
authorized in only limited circumstances. These situations are enumerated in Section
13 of the Law and are more fully detailed in Section 500.235 (j). These provisions, for
instance, allow claims for undyed diesel fuel used by a commercial motor vehicle, as
defined in Section 500.100, for any purpose other than operating the commercial motor
vehicle on the public highways. These claims are authorized only for commercial motor
vehicles that are operated for both highway purposes and any purposes other than
operating such vehicles upon the public highways and are limited to the nonhighway
portion of the fuel used.
Please note that a statute of limitations applies to claims filed with the
Department. Section 13 of the Law provides that claims for full reimbursement for taxes
paid on or after January 1, 2000, must be filed not later than 2 years after the date on
which the tax was paid by the claimant.
The claim form used to file for refunds of motor fuel tax can be found on the
Department’s website at https://tax.illinois.gov/forms/excise/rmft-11-a---illinois-motorfuel-tax-refund-claim.html and I have also enclosed a copy of the form. Propane would
be calculated on Line 7 in Step 3.
I hope this information is helpful. If you require additional information, please
visit our website at www.tax.illinois.gov or contact the Department’s Taxpayer
Information Division at (217) 782-3336.

Very truly yours,

Kimberly Rossini
Associate Counsel
KAR:dlb
Enc.