How Retailers Can Claim a Refund of Federal Taxes

on Kerosene Sold for Non-Taxable Purposes

    Under IRS regulations, a kerosene retailer may in certain cases purchase taxed, clear kerosene at the terminal, sell the kerosene to its retail customers tax-free, and then apply for a refund of the 24.4-cents-per-gallon federal excise tax on behalf of its retail kerosene customers.

    To make a claim for a refund you must meet the following requirements:

    - You must be registered with the IRS as a "637-UP" ("ultimate vendor from a blocked pump"). Click here for the 6-page application form you must file with the IRS, and instructions for completing this form.

    - You must ensure that (1) the kerosene is for nontaxable use, (2) the kerosene is sold from a "blocked pump" is at a fixed location, (3) the blocked pump is identified with a legible and conspicuous notice stating, "UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY," and (4) the kerosene cannot reasonably be used to dispense fuel into the fuel supply tank of a diesel-powered highway vehicle or train.

    A "blocked pump," under IRS regulations, is a fuel dispenser that due to the physical limitations - such as a short hose or a cement barrier - cannot be used to fuel a vehicle.

    As an alternative, a blocked pump may be locked by the vendor after each sale and unlocked by the vendor in response to a request by a customer for undyed kerosene for use other than as a fuel in a diesel-powered highway vehicle or train. To make a claim with regard to kerosene sold from this latter type of blocked pump, the vendor must obtain the name and address of anyone who buys more than five gallons of kerosene in a single sale, record the date and amount of sale to each customer, and retain these records for a minimum of three years.

   IRS Publication 378, "Fuel Tax Credits and Refunds," provides detailed instructions on ways to apply for a refund on the federal excise tax.