What gallon-equivalent conversion factors did South Carolina Revenue Ruling 16-1 establish for CNG, LNG, and propane?

Plain-English summary

South Carolina Revenue Ruling 16-1 established how to convert compressed natural gas, liquefied natural gas, and liquefied propane gas into gallon equivalents when those fuels powered a motor vehicle and the motor fuel user fee applied.

The Department used these factors:

• Compressed natural gas (CNG): 126.67 cubic feet equaled one gallon of motor fuel. If dispensed through a mass-flow meter, 5.66 pounds equaled one gallon.
• Liquefied natural gas (LNG): 6.06 pounds equaled one diesel gallon equivalent.
• Liquefied propane gas: one physical gallon equaled 0.73 gallon of motor fuel.

These were measurement rules, not exemptions. The ruling said CNG and propane were alternative fuels and LNG was a substitute fuel subject to the regular motor fuel user fee or the backup user fee when used to propel motor vehicles.

RR 16-1 is no longer the controlling advisory opinion. SC Revenue Ruling 18-2 expressly superseded it and explained that the General Assembly had codified the conversion factors.

Historical fee treatment

At the time of RR 16-1, the ruling stated a 16-cent-per-gallon motor fuel user fee. It also described a 0.25-cent inspection fee and a 0.5-cent environmental impact fee for CNG and LNG, producing a historical total of 16.75 cents per gallon equivalent. It said those two additional fees did not apply to liquefied propane gas, leaving a historical 16-cent rate for propane.

Those are 2016 rates stated in the ruling, not current-rate guidance. Later legislation changed the motor fuel user fee, as reflected in RR 18-2.

Common questions

Q: Was CNG measured by an ordinary liquid gallon?

A: No. The ruling converted 126.67 cubic feet—or 5.66 pounds when mass-flow metered—to one gallon equivalent.

Q: How was LNG measured?

A: By weight: 6.06 pounds equaled one diesel gallon equivalent.

Q: Did one gallon of propane equal one taxable gallon?

A: No. One gallon of liquefied propane gas converted to 0.73 gallon of motor fuel under the ruling.

Q: When did the factors become effective?

A: RR 16-1 said the CNG and LNG factors were effective August 1, 2014, and the propane factor was effective January 1, 2016.

Q: Is RR 16-1 still the Department's operative guidance?

A: No. RR 18-2 expressly superseded it and restated the rules after statutory codification.

Citations and references

• S.C. Code Ann. Section 12-28-110 (alternative- and substitute-fuel definitions discussed in the ruling)
• S.C. Code Ann. Section 12-28-310 (motor fuel user fee)
• S.C. Code Ann. Section 12-28-970 (backup user fee)
• S.C. Code Ann. Section 12-28-2355 (inspection and environmental impact fees)
• SC Revenue Ruling #18-2 (later ruling that superseded RR #16-1)

Subject

Compressed Natural Gas, Liquefied Natural Gas, and Liquefied Propane Gas Conversion to Gallon Equivalents

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR16-1.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 12265, Columbia, South Carolina 29211

SC REVENUE RULING #16-1

SUBJECT:

Compressed Natural Gas, Liquefied Natural Gas, and Liquefied Propane
Gas Conversion to Gallon Equivalents
(Motor Fuel User Fee)

EFFECTIVE DATE: For Compressed Natural Gas and Liquefied Natural Gas, the conversion
factors set forth in this advisory opinion are effective August 1, 2014. 1
For Liquefied Propane Gas, the conversion factor set forth in this advisory
opinion is effective January 1, 2016. 2
REFERENCES:

S.C. Code Ann. Section 12-28-110 (2014)
S.C. Code Ann. Section 12-28-310 (2014)
S.C. Code Ann. Section 12-28-970 (2014)
S.C. Code Ann. Section 12-28-2355 (2014)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the public. It
is an advisory opinion issued to apply principles of tax law to a set of facts
or general category of taxpayers. It is the Department’s position until
superseded or modified by a change in statute, regulation, court decision,
or another Department advisory opinion.

QUESTION
What guidelines can the Department provide to assist in calculating the measure of the motor
fuel user fee on compressed natural gas, liquefied natural gas, and liquefied propane gas used in
a motor vehicle?

1

After several inquiries from the trucking industry, the Department established the conversion factors for
compressed natural gas and liquefied natural gas in August, 2014. This advisory opinion now represents the
Department’s official position concerning these conversion factors.
2
The Department recently established the conversion factor for liquefied propane gas. This advisory now represents
the Department’s official position concerning this conversion factor.

1

LAW AND DISCUSSION
Code Section 12-28-310 imposes the motor fuel user fee and reads, in part:
(A) Subject to the exemptions provided in this chapter, a user fee of sixteen cents a gallon
is imposed on:
…
(2) all diesel fuel, substitute fuels, or alternative fuels, or blended fuels containing diesel
fuel that are used or consumed in this State in producing or generating power for
propelling motor vehicles.
Code Section 12-28-970 imposes a “back-up” user fee on certain fuels and reads:
(A) A backup user fee equal to the user fee imposed by Section 12-28-310 is imposed and
must be administered in accordance with procedures established by the department on the
use on the highways of motor fuel subject to the user fee by an end user, including
operators of state and local government vehicles, American Red Cross vehicles, and buses,
and other persons exempted from the full federal highway tax, unless the person is
exempted otherwise under Section 12-28-710(12), upon the delivery in this State into the
fuel supply tank of a highway vehicle of:
…
(3) alternative fuels; or
(4) substitute fuel on which a user fee previously has not been imposed by this chapter.
(B) The ultimate vendor of motor fuel subject to the user fee is jointly and severally liable
for the user fee imposed by subsection (A) if the ultimate vendor knows or has reason to
know that the motor fuel, as to which the user fee imposed by this chapter has not been
paid, is or will be consumed in a nonexempt use.
Based on the above, when used in a motor vehicle compressed natural gas (an alternative fuel 3),
liquefied natural gas (a substitute fuel 4), and liquefied propane gas (an alternative fuel 5) are
subject to the motor fuel user fee under Code Section 12-28-310 or under the imposition of the
“back-up” user fee under Code Section 12-28-970.
In addition to the 16 cents per gallon rate imposed under Code Section 12-28-310, a .25 (onefourth) cent per gallon fee is imposed as an inspection fee pursuant to Code Section 12-282355(A) and a .5 (one-half) cent per gallon fee is imposed as an environmental impact fee under
3

See Code Section 12-28-110(1)
See Code Section 12-28-110(69)
5
See Code Section 12-28-110(1)
4

2

Code Section 12-28-2355(B). However, pursuant to Code Section 12-28-2380, the inspection
and environmental impact fees are not applicable to liquefied propane gas. Therefore, the total
user fee is imposed at a rate of 16.75 cents per gallon for both compressed natural gas and
liquefied natural gas and 16 cents per gallon for liquefied propane gas.
Since the motor fuel user fee is imposed on a per gallon basis, the Department has been asked to
provide guidance on the calculation of the motor fuel user fee for compressed natural gas,
liquefied natural gas, and liquefied propane gas used in a motor vehicle.
The Internal Revenue Service has developed a calculation to convert cubic feet, the measure of
compressed natural gas, into gallons for purposes of determining the federal excise tax on motor
fuel. The Internal Revenue Service imposes the federal excise tax on compressed natural gas on a
gasoline gallon equivalent in which 126.67 cubic feet of compressed natural gas equals one
gallon of gasoline for purposes of taxation.
Based on the above, the Department has determined that for the purpose of calculating the motor
fuel user fee on compressed natural gas that is used or consumed in South Carolina in producing
or generating power for propelling a motor vehicle, each 126.67 cubic feet of compressed natural
gas (or 5.66 lbs. if the compressed natural gas is dispensed via a mass flow meter) equals one
gallon of motor fuel.
Additionally, because liquefied natural gas is commonly used as a substitute for diesel it must be
converted to a diesel gallon equivalent. Accordingly, the Department has determined that the
diesel gallon equivalent for liquefied natural gas is 6.06 lbs.
The Department has determined that for the purpose of calculating the motor fuel user fee on
liquefied propane gas that is used or consumed in South Carolina in producing or generating
power for propelling a motor vehicle, each gallon of liquefied propane gas equals .73 of a gallon
of motor fuel.
For additional information please contact the Department’s Motor Fuel Section at (803) 8961990.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Rick Reames III
Rick Reames III, Director
February 3
, 2016
Columbia, South Carolina

3