Prepaid Sales Tax and Sales of Fuel (Publication 82)

Precollection of Sales Tax

If you are a wholesaler or supplier of certain fuels, you are required to collect a prepayment of a portion of the sales tax when you remove fuel at the terminal rack, enter the fuel into California, or sell the fuels at any point after removal from the terminal rack. If you are a retailer or other seller of fuel who has prepaid the sales tax to your suppliers, you can claim a credit for the prepaid tax you paid to your supplier when you file your sales and use tax returns.

Prepaid sales tax is imposed on each gallon of fuel removed, entered, or sold. The rate varies depending on the type of fuel involved and may be adjusted annually or more frequently if necessary. We will give you prior notification of any rate change. The prepayment rate does not affect the current sales and use tax rate on retail sales.

Fuels subject to the precollection provisions

Fuels subject to the requirement to precollect sales tax include:

• Gasoline and gasohol (motor vehicle fuel)
• Diesel, including dyed diesel
• Aircraft jet fuel

The following fuels are specifically excluded from the requirement to collect prepayments:

• Aviation gasoline used to propel an aircraft
• Liquefied petroleum gas
• Compressed or liquid natural gas
• Methanol and ethanol containing not more than 15 percent gasoline, diesel fuel, or kerosene

Please note: This publication summarizes the law and applicable regulations in effect when the publication was written, as noted above. However, changes in the law or in regulations may have occurred since that time. If there is a conflict between the text in this publication and the law, the decision will be based on the law and not on this publication.