Diesel Fuel Tax – Biofuels Frequently Asked Questions (FAQs)Open All Close All
Taxation of biofuels is governed by the California Diesel Fuel Tax Law and is administered by the California Department of Tax and Fee Administration (CDTFA). This page provides answers to frequently asked questions about the application of the diesel fuel tax to biofuels, including biodiesel, renewable diesel, straight vegetable oil (SVO), and waste vegetable oil (WVO).
Biofuels are transportation fuels that are made from biomass materials and meet the definition of diesel fuel for California diesel fuel tax purposes. Biodiesel is one of the most popular biofuels. These fuels are usually blended with petroleum fuels (gasoline and diesel fuel), but they can also be used on their own.
Biodiesel is a fuel made fully or partially from vegetable oils or animal fats. It is produced by combining a vegetable oil or animal fat with an alcohol, such as methanol or ethanol, in the presence of a chemical catalyst to produce mono-alkyl esters and glycerin using a process called transesterification which introduces oxygen into the fuel. Biodiesel does not contain any petroleum, but can be blended at any level with petroleum diesel fuel to create a blended biodiesel fuel.
Renewable diesel is made of non-petroleum renewable resources such as animal fats, vegetable oils, and greases. Renewable diesel differs from biodiesel in how it is processed. Renewable diesel is processed similar to the way petroleum diesel is produced, which makes it chemically the same as petroleum diesel. Renewable diesel is hydrotreated and does not contain oxygen.
Raw vegetable oil is not the same as biodiesel. Raw vegetable oil (SVO or WVO, etc.) that is sold for, or used in, powering a diesel-powered highway vehicle must be reported to the CDTFA, and the diesel fuel tax must be remitted on the sale.
Yes. Under Revenue and Taxation Code (R&TC) section 60022, Diesel fuel means any liquid that is commonly or commercially known or sold as a fuel suitable for use in a diesel-powered highway vehicle. Biofuels are included in this definition.
The sale and production of biofuels normally occurs below the rack so the points of taxation are at the time of entry (import) into the state or upon the conversion and/or blending of a liquid into diesel fuel. The entry of biofuel is taxable to the enterer upon entry into California.
The IRS does not treat B100 as taxable diesel fuel because the federal definition of diesel fuel excludes from tax a category of liquids called Excluded Liquids, which includes liquids with less than 4% natural paraffins. Even though B100 is a liquid suitable for use in a diesel powered highway vehicle, it does not contain natural paraffins and therefore is not considered taxable diesel fuel by the IRS.
California law does not contain an excluded liquid provision. Therefore, B100 is diesel fuel subject to tax for California tax purposes.
Raw vegetable oil, whether it is SVO (virgin oil, fresh, uncooked) or WVO (used cooking oil, grease, fryer oil, including tallow fats), that is sold for or used in powering a diesel-powered highway vehicle in California, is subject to the California diesel fuel tax in the same manner as biodiesel or petroleum-based diesel fuel.
California diesel fuel taxes pay for the construction and maintenance of state and local roads and highways. The taxes apply to all diesel fuel used on roads and highways, whether the fuel is sold, given away, or made for your own use.
View the current Tax Rates.
Yes, in California biofuels are considered diesel fuel and are taxed at the diesel fuel tax rate.
In general, you must register with us if you do any of the following in California:
- Manufacture or produce biofuels.
- Blend biofuels with petroleum diesel.
- Sell, or import biofuels from another state or country, that has not been previously taxed as diesel fuel in California.
- Use biofuels that have not been previously taxed as diesel fuel to power a vehicle driven on the roads or highways.
- Process or filter SVO or WVO for use in a diesel-powered highway vehicle.
From the CDTFA's homepage select the Register button to get started.
You may also register in person at one of our office locations by use of a kiosk or forms available upon request. If you have questions, please contact our Customer Service Center at 1-800-400-7115, (CRS: 711). Customer service representatives are available weekdays from 7:30 a.m. – 5:00 p.m. (Pacific time), except state holidays.
If you sell both diesel fuel and motor vehicle fuel, you should register for both programs during the registration process.
A diesel fuel licensee may also need to obtain a Seller's Permit from the CDTFA. You will be able to register for applicable fuel tax licenses and a sales and use tax permit using CDTFA's online registration system.
There is no fee for the license.
Yes, you will be required to report on either a monthly, quarterly, or yearly basis. The CDTFA 501-DD, Supplier of Diesel Fuel Tax Return, is due on the last day of the month, following the close of your reporting period. For example, the return for year 2018 is due on January 31, 2019. You must file your return even if you have nothing to report for the period.
See CDTFA-810-FTE, Instructions for Preparing Motor Fuels Schedules, Special Notes section, for Special Rules for Biodiesel.
The tax is imposed when the biofuels are imported into California, removed from a California biofuel production facility or terminal rack, or blended with tax-paid diesel fuel below the rack. If you are producing your own biofuels, the tax is imposed when you put the fuel into the tank of your vehicle or sell it to another person for use to power a diesel-powered highway vehicle. You must report this fuel on your CDTFA-501-DD, Supplier of Diesel Fuel Tax Return for the period during which the transaction(s) took place.
The exemptions that apply to diesel fuel also apply to biofuels. Farmers, exempt bus operators, and train operators may issue exemption certificates to their suppliers. Other exemptions include sales to the Unites States (including its agencies and instrumentalities) and certain off highway uses. For further information regarding exemptions and refunds of diesel fuel tax, see Diesel Fuel Tax Regulations 1430 through 1436.
How do I claim a credit on my CDTFA-501-DD, Supplier of Diesel Fuel Tax Return, for tax paid biodiesel blended with diesel fuel and removed as dyed blended biodiesel fuel?
In general, the Diesel Fuel Tax Law does not allow for refunds of tax paid on diesel fuel converted to dyed diesel fuel. However, R&TC section 60501 (b) specifically allows for a refund for the tax that was paid on biodiesel fuel removed from an approved terminal as dyed blended biodiesel fuel, to the extent a supplier can show that the tax on that biodiesel fuel has been paid by the same supplier. To claim the credit, report the tax-paid biodiesel portion of the dyed blended biodiesel fuel removed on disbursement Schedule 13M, Tax-Paid Fuel Removed From a Terminal. Transactions may be summarized by day, week, or month. Report the full quantity of dyed biodiesel fuel blends on Schedule 6F, Reportable Products Removed Not Subject to Tax. Credit for tax-paid fuel removed is only available for fuel that has not previously been subject to refund or credit. Please note, credit for terminal removals of tax-paid fuel claimed on Schedule 13M must be supported by receipts of tax-paid fuel, into the same terminal. These receipts must be reported on Schedule 1A, Fuel Purchased Tax-Paid.
You must maintain records to support the gallons claimed as being the tax-paid biodiesel portion of the dyed blended biodiesel fuel. You may be asked to supply supporting documentation for your claim for refund or credit. Supporting documentation may include, but is not limited to:
- Purchase invoice(s) showing the tax-paid biodiesel
- Proof that a dyed blended biodiesel fuel was produced, to a volume that equals or exceeds the volume necessary to support the diesel fuel tax refund
- Records supporting the disposition of the fuel produced
This credit is available for the tax-paid biodiesel portion of dyed blended biodiesel fuel removed from a terminal rack on and after January 1, 2016.
Dyed diesel fuel must meet the dyeing requirements under EPA or the IRS rules. A penalty applies to any person who knowingly alters, or attempts to alter, the strength or composition of any dye or marker in any dyed diesel fuel. You may not blend clear diesel fuel (of any kind, including biodiesel or renewable diesel) with dyed diesel fuel. Therefore, you would not be eligible for a refund on any tax paid on diesel fuel that you blend with dyed diesel fuel and you may not charge your customer the diesel fuel tax on any dyed diesel fuel sales.
In addition to being a supplier of diesel fuel and being required to file a, CDTFA-501-DD, Supplier of Diesel Fuel Tax Return you may be required to register for a California Seller's Permit and collect and remit the sales and use tax to the CDTFA.
For more information please read Publication 96, Biodiesel and California Tax. Publication 96 addresses common questions regarding the application of diesel fuel tax as well as the sales and use tax on biofuels, including biodiesel, SVO, and WVO transactions in California. For additional information you may call the CDTFA's Customer Service Center at 1-800-400-7115 (CRS:711) and select the option for Special Taxes and Fees. Customer service representatives are available weekdays from 7:30 a.m. to 5:00 p.m. (Pacific time), except state holidays.