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Business Taxes Law Guide—Revision 2024

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Diesel Fuel Tax Law

Revenue and Taxation Code

Division 2. Other Taxes
Part 31. Diesel Fuel Tax Law

Chapter 3. Exemptions.


CHAPTER 3. EXEMPTIONS.

60100. Exemptions. (a) The provisions of this part requiring the payment of taxes do not apply to any of the following:

(1) The removal from a terminal or refinery of, or the entry or sale of, any diesel fuel if all of the following apply:

(A) The person otherwise liable for tax is a diesel fuel registrant.

(B) In the case of a removal from a terminal, the terminal is an approved terminal.

(C) The diesel fuel satisfies the dyeing and marking requirements of Section 60101.

(2) Any entry or removal from a terminal or refinery of taxable diesel fuel transferred in bulk to a refinery or terminal if the persons involved (including the terminal operator) are registered.

(3) The removal of diesel fuel if all of the following apply:

(A) The diesel fuel is removed by railroad car from an approved refinery and is received at an approved terminal.

(B) The refinery and the terminal are operated by the same diesel fuel registrant.

(C) The refinery is not served by pipeline (other than a pipeline for the receipt of crude oil) or vessel.

(4) Diesel fuel which, pursuant to the contract of sale, is required to be shipped and is shipped to a point outside of this state by a supplier by means of any of the following:

(A) Facilities operated by the supplier.

(B) Delivery by the supplier to a carrier, customs broker, or forwarding agent, whether hired by the purchaser or not, for shipment to the out-of-state point.

(C) Delivery by the supplier to any vessel clearing from a port of this state for a port outside of this state and actually exported from this state in the vessel.

(5) Backup tax does not apply to delivery of diesel fuel into the fuel tank of a diesel-powered highway vehicle as provided in Section 60058 for any of the following:

(A) Use on a farm for farming purposes.

(B) Use in an exempt bus operation.

(C) Use in a diesel-powered highway vehicle that is operated off the highway.

(D) Use in a diesel-powered highway vehicle that is owned and operated by a government entity.

(E) Use by the United States and its agencies and instrumentalities.

(6) Diesel fuel sold by credit card certified by the United States Department of State to any consulate officer or consulate employee of a foreign government who is not engaged in any private occupation for gain within this state, who uses the diesel fuel in a motor vehicle which is registered with the United States Department of State, and whose government has done either of the following:

(A) Entered into a treaty with the United States providing for the exemption of its representatives from national, state, and municipal taxes.

(B) Granted a similar exemption to representatives of the United States.

(7) Diesel fuel sold by a supplier to a train operator for use in a diesel-powered train or for other off-highway use and the supplier has on hand an exemption certificate from the train operator.

(8) Diesel fuel sold by a supplier to the United States and its agencies and instrumentalities.

(b) For purposes of this section:

(1) "Carrier" means a person or firm engaged in the business of transporting for compensation property owned by other persons, and includes both common and contract carriers.

(2) "Forwarding agent" means a person or firm engaged in the business of preparing property for shipment or arranging for its shipment.

History—Stats. 1995, Ch. 34, in effect June 30, 1995, but operative July 1, 1995, added subparagraphs (D) and (E) to paragraph (5) of, and added paragraph (8) to, Subdivision (a). Stats. 1995, Ch. 555, in effect January 1, 1996, deleted "in this state" after "apply to delivery" in subdivision (a)(5).

60101. Dyed fuel exemption. (a) Diesel fuel that is required to be dyed satisfies the dyeing requirement of this part if it meets the dyeing requirements of the United States Environmental Protection Agency and the Internal Revenue Service, including, but not limited to, requirements respecting type, dosage, and timing.

(b) Marking shall meet the marking requirements of the Internal Revenue Service.

(c) No person shall operate or maintain a motor vehicle on any public highway in this state with dyed diesel fuel in the fuel supply tank. This subdivision does not apply to uses of dyed diesel fuel on the highway that are lawful under the Internal Revenue Code or regulations promulgated thereunder, if the person is registered as a qualified highway vehicle operator, exempt bus operator, or government entity.

History—Stats. 1995, Ch. 34, in effect June 30, 1995, but operative July 1, 1995, added Subdivision (c). Stats. 1996, Ch. 1087, in effect January 1, 1997, substituted "that" for "which" after "on the highway" and added ", or if the … an interstate user" after "or government entity" in the second sentence of subdivision (c). Stats. 2001, Ch. 429 (AB 309), in effect January 1, 2002, added "qualified" after "registered as a" in the second sentence of subdivision (c). Stats. 2006, Ch. 364 (AB 3076), in effect January 1, 2007, deleted ",or if the person is an intercity bus operator, as defined in Section 60046, who is registered as an interstate user under this part" after "or government entity" in the second sentence of subdivision (c).

60102. Dyed fuel notice. Notice is required with respect to dyed diesel fuel. In general, a notice stating: "DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE" shall be:

(a) Provided by the terminal operator to any person that receives dyed diesel fuel at a terminal rack of that terminal operator.

(b) Provided by any seller of dyed diesel fuel to its buyer if the diesel fuel is located outside the bulk transfer/terminal system and is not sold from a retail pump posted in accordance with the requirements of subdivision (c).

(c) Posted by a seller on any retail pump where it sells dyed diesel fuel for use by its buyer.

60103. Form of notice. The form of notice required under subdivisions (a) and (b) of Section 60102, shall be provided by the time of the removal or sale and shall appear on shipping papers, bills of lading, and invoices accompanying the sale or removal of the dyed diesel fuel.

60104. Failure to post notice. [Repealed by Stats. 1997, Ch. 620 (SB 1102), in effect January 1, 1998.]

60105. Dyed diesel fuel penalties. (a) A penalty applies to any person who does any of the following:

(1) Sells or holds for sale dyed diesel fuel for any use that the person knows or has reason to know is a taxable use of the diesel fuel.

(2) Holds for use or uses dyed diesel fuel for a use other than a nontaxable use and that person knew, or had reason to know, that the diesel fuel was so dyed.

(3) Knowingly alters, or attempts to alter, the strength or composition of any dye or marker in any dyed diesel fuel.

(4) Fails to provide or post the required notice with respect to any dyed diesel fuel. The failure to provide or post the required notice creates a presumption that the person so failing knows the diesel fuel will be used for a taxable use.

(b) The amount of the penalty for each violation specified in subdivision (a) is the greater of:

(1) Ten dollars ($10) for every gallon of diesel fuel involved or

(2) The product of one thousand dollars ($1,000), and the total number of penalties, including the penalty currently being determined, imposed by this section on the person (or a related person or any predecessor of that person or related person).

(c) If a penalty is imposed under this section on any business entity, each officer, employee, or agent of the entity, who participated in any act giving rise to the penalty shall be jointly and severally liable with the entity for the penalty.

History—Added by Stats. 1997, Ch. 620 (SB 1102), in effect January 1, 1998. Stats. 2001, Ch. 429 (AB 309), in effect January 1, 2002, added "the greater of:" after "in subdivision (a) is" in subdivision (b); added paragraph number designation (1) before "Ten dollars"; substituted "Ten" for "ten" in paragraph (1); added paragraph number designation (2) before "The product of"; added "The product of" before "one thousand dollars", deleted "whichever is greater. The penalty shall be increased for subsequent violations by multiplying the penalty amount by the number of prior violations" after "($1,000)" and added "and the total number of penalties, … (or a related person or any predecessor of that person or related person)" after "($1,000)" to paragraph (2).

60106. Train operator exemption. Any sale of diesel fuel to a train operator claimed as exempt from taxes under paragraph (7) of subdivision (a) of Section 60100 shall be supported by an exemption certificate executed by the purchaser in a form as prescribed by the board. The supplier shall retain the certificate in his or her records in support of the exemption.

60106.1. Train operator; exemption certificate. In order to issue an exemption certificate as provided in Section 60106, the train operator shall obtain a permit from the board. Every application for a permit shall be made upon a form prescribed by the board and shall set forth the name under which the applicant transacts or intends to transact business, the location of his or her place or places of business, and such other information as the board may require. The application shall be signed by the owner if a natural person; in the case of an association or partnership, by a member or partner; in the case of a corporation, by an executive officer or some person specifically authorized by the corporation to sign the application.

60106.2. Exemption certificate; purchaser liability. If a purchaser gives a Section 60106 exemption certificate to a supplier that the diesel fuel purchased will be used in a manner or for a purpose entitling the supplier to regard the removal as exempt from the taxes as provided in paragraph (7) of subdivision (a) of Section 60100 and sells the diesel fuel or uses the diesel fuel in some other manner or for some other purpose, the purchaser shall be liable for payment of the tax under Chapter 2 (commencing with Section 60050) of this part. The tax, applicable penalties, and interest shall become due and payable and shall be ascertained and determined in the same manner as the backup tax under Section 60361.5.

History—Stats. 2001, Ch. 429 (AB 309), in effect January 1, 2002, deleted "as if the purchaser were a supplier of the diesel fuel at the time of that sale or use" after "(commencing with Section 60050) of this part" in the first sentence, and added the second sentence.

60106.3. Misuse of exemption certificate. (a) Any person, including any officer or employee of a corporation, who gives a Section 60106 exemption certificate for diesel fuel that he or she knows at the time of purchase is not to be used by him or her or the corporation in the manner or for the purpose entitling the exemption for the purpose of evading payment to the supplier of the amount of the tax applicable to the transaction is guilty of a misdemeanor punishable as provided in Section 60706 or a felony punishable as provided in Section 60707.

(b) Any person, including any officer or employee of a corporation, who gives a certificate for diesel fuel pursuant to Section 60106 that he or she knows at the time of purchase is not to be used by him or her or the corporation in the manner or for the purpose entitling the exemption is liable to the state for the amount of tax that would be due if he or she had not given that certificate. In addition to the tax, the person shall be liable to the state for a penalty of 25 percent of the tax or one thousand dollars ($1,000), whichever is greater, for each certificate issued for personal gain or to evade the payment of taxes.

History—Stats. 2001, Ch. 429 (AB 309), in effect January 1, 2002, substituted "one thousand dollars ($1,000)" for "five hundred dollars ($500)" after "of the tax or" and substituted "certificate issued" for "purchase made" after "is greater, for each" in the second sentence of subdivision (b).

60107. Train operator report. (a) For the privilege of purchasing diesel fuel exempt from taxes under paragraph (7) of subdivision (a) of Section 60100, each train operator must make a report to the board showing:

(1) The name and permit number of the supplier from whom it purchased undyed diesel fuel and the number of gallons of undyed diesel fuel purchased that is exempt from the tax.

(2) Any other information required by the board.

(b) Each train operator shall prepare and file with the board a report in the form as prescribed by the board, which may include, but not be limited to, electronic media showing the information in subdivision (a) during each quarterly reporting period. The report shall be filed with the board on or before the last day of the calendar month following the close of the quarterly period to which it relates. To facilitate the administration of this part, the board may require the filing of these reports for other than quarterly periods. Reports shall be authenticated in a form or pursuant to methods as may be prescribed by the board.

(c) The board may revoke the train operator's permit provided for in Section 60106.1 due to the filing of inaccurate or improper reports.

(d) All of the administrative provisions of this part relating to a supplier shall be applicable to a train operator.

History—Stats. 2001, Ch. 429 (AB 309), in effect January 1, 2002, added subdivision (d). Stats. 2002, Ch. 459 (AB 1936), in effect January 1, 2003, deleted "on forms prescribed by the board" after "with the board" and added "in the form … electronic media" after "a report" in the first sentence of, and added the fourth sentence to, subdivision (b).

60108. Government entity payment. Notwithstanding the exemption provided for in subparagraph (D) of paragraph (5) of subdivision (a) of Section 60100, any government entity using diesel fuel exempt from tax under subparagraph (D) of paragraph (5) of subdivision (a) of Section 60100 shall, for the privilege of operating diesel-powered highway vehicles on highways in this state, make a payment equal to the tax specified in Section 60050 for each gallon of exempt diesel fuel used. The payments required by this subdivision shall be paid to the State Board of Equalization in the manner prescribed by the board, and the payments shall be treated as a tax for all purposes of this part.

History—Added by Stats. 1995, Ch. 34, in effect June 30, 1995, but operative July 1, 1995.