Exempt Bus Operator & Government Entity
Diesel Fuel Exempt Bus Operator
An exempt bus operator includes any person who owns, operates, or controls an exempt bus operation.
Imposition of Tax — Diesel Fuel Exempt Bus Operator
For the privilege of operating buses on state highways and freeways, exempt bus operators must make a payment equal to one cent ($0.01) for each gallon of the refunded or exempt diesel fuel used in exempt bus operations in California. Additionally, exempt bus operators must pay the current diesel fuel tax rate for all ex-tax diesel fuel used on highways in nonexempt bus operations in California.
Responsibilities — Exempt Bus Operator
Exempt bus operators are required to:
- Apply for an exempt bus operator license through our online services with us.
- File your CDTFA-501-DB, Exempt Bus Operator Diesel Fuel Tax Return (Revenue & Taxation Code (R&TC) section 60205). Only dyed diesel and ex-tax undyed diesel can be reported on this form.
- Pay a tax of one cent for each gallon of diesel fuel used in an exempt bus operation (R&TC section 60502.2).
- Provide your vendor with CDTFA-231-DB, Certificate of Exempt Bus Operation, for purchases of diesel fuel to use for an exempt purpose.
Exempt Bus Operations
You qualify as an exempt bus operator if you are not a charter-party carrier of passengers, and registered as an exempt bus operator with us, and own, operate, or control any of the following:
- A transit district, transit authority, or local city transit system.
- A private company transporting people under contract or agreement with a public agency authorized to provide public transportation services, but only for diesel fuel consumed when operating under the agreement or contract.
- A passenger stage corporation licensed by the Public Utilities Commission (PUC) to operate exclusively in urban or suburban areas or between cities in close proximity for transportation of people for hire, compensation, or profit. The exemption does not apply to one-way routes that exceed 50 miles.
- A common carrier of passengers operating within the limits of a single city over a regular route, 98 percent of whose operations are exclusively within the limits of a single city, who does not qualify as a passenger stage corporation due to the 98 percent operation limitation.
- A school district, community college district, or county superintendent of schools owning, leasing, or operating buses for the purpose of transporting pupils to and from school and for other school or college activities involving pupils, including field trips and athletic contests.
- A private entity providing transportation services under contract or agreement for the purposes of transporting pupils to and from school and for other school or college activities involving pupils, including field trips and athletic contests, but only for diesel fuel consumed while operating under that contract or agreement.
Some of your operations may not be exempt; only the fuel delivered into the supply tank of buses used in exempt operations qualifies for the exemption.
Charter-Party Carrier of Passengers
Bus operations that are licensed as charter-party carriers by the Public Utilities Commission (PUC) do not qualify for exempt bus operator status.
Charter-party carriers of passengers are individuals engaged in the transportation of people by motor vehicle for compensation, whether in common or contract carriage, over any public highway in California.
The PUC code specifies that certain transportation services do not come under the definition of a charter-party carrier of passengers. If you are not a charter-party carrier of passengers because you provide specified transportation services per the PUC (see exempt bus operations, then you may qualify for the reduced tax rate on diesel fuel.
Exempt Bus Operations
The following are examples of exempt bus operations under Diesel Fuel Tax Law (DFTL) section 60039.
- Private entity under contract with a Regional Center.
- Private entity under contract with a public agency authorized to provide public transportation services.
- Private entity under contract with a school district, community college district, or county superintendent of schools to transport pupils.
- Private entity under contract with a transit district.
Nonexempt Bus Operations
The following examples do not qualify as exempt bus operations.
- Local public transit system operated by a county.
- Private entity bus operator under contract with a broker.
- Private entity rendering service as contract carriage.
- Privately owned school bus not operating under contract with a school district, community college district, or county superintendent of schools.
Public School Districts
A public school district licensed as an exempt bus operator may purchase ex-tax, undyed diesel fuel under a CDTFA-231-DB, Certificate of Exempt Bus Operation, or dyed diesel fuel for use in its exempt bus operation.
Sales of Undyed Diesel Fuel by School Districts to Other School Districts
If you are selling undyed diesel fuel to other school districts, you must have both:
- A seller's permit, and
- An ultimate vendor license.
As a public school district, you must pay the tax to your supplier for purchases of undyed diesel fuel that you know you will sell to other school districts. Purchasing diesel fuel tax-exempt under a certificate of exempt bus operations that you know you will sell to another school district is a misuse of an exemption certificate. See our Ultimate Vendor page for more information.
Sales of Undyed Diesel Fuel by a School District to a Separate Legal Entity—Not for Exempt Bus Operations
If you are making sales of tax-paid diesel fuel to a separate legal entity (for example, another school district not operating as an exempt bus operator or not for their exempt bus operations), then the cost of the diesel fuel tax would be included in your total sales. You cannot separately state the diesel fuel tax on any sales invoices, or it will result in excess tax reimbursement which must be paid to us.
No Credit Allowed on the Exempt Bus Operator Diesel Fuel Tax Return
You must claim the exemption at the time of purchase. You cannot take a credit on your Exempt Bus Operator Diesel Fuel Tax Return for tax paid on diesel fuel used in exempt bus operations.
If you purchase tax-paid diesel fuel that is used in exempt operations, you must ask your supplier to issue you a credit or refund. Your supplier, in turn, would file a claim for refund with us to recover the diesel fuel tax.
Certificate of Exempt Bus Operation
When purchasing diesel fuel for exempt use purposes, you must provide your supplier with CDTFA-231-DB, Certificate of Exempt Bus Operation.
- Your supplier will not charge diesel fuel tax on your purchase, in accordance with the instructions on the certificate.
- You will pay one cent per gallon diesel fuel tax for diesel fuel used for exempt bus operations. You must report and pay tax on the fuel when you file CDTFA-501-DB, Exempt Bus Operator Diesel Fuel Tax Return.
- Exemption certificates must be renewed annually with your vendor.
- If some of your bus operations do not qualify as exempt, you must indicate the exempt percentage on your exemption certificate.
- If you overstate your exempt percentage on your exemption certificate, you must report the ex-tax gallons used in nonexempt operations on your return and pay the tax.
- You must only buy undyed diesel fuel without payment of tax to the extent of your exempt operations.
- Diesel fuel purchases for nonexempt operations should be purchased with the tax paid to your supplier. An alternative to issuing a partial exemption certificate would be to purchase dyed diesel fuel, only for your exempt bus operations, rather than undyed diesel fuel.
- You must be licensed as a government entity or as an exempt bus operator to purchase dyed diesel fuel for use on the highway. You must remit the one cent per gallon tax or the current diesel fuel tax rate per gallon, as appropriate, on any dyed diesel fuel used on highways in your exempt bus operations. Penalties will be assessed for improper use of dyed diesel fuel.
If you use diesel fuel for a taxable purpose, you must report and pay tax at the current rate.
A government entity means this state and its political subdivisions, such as school districts or city municipalities, except for a political subdivision that is only an exempt bus operator.
As a licensed government entity, you are not exempt from the excise tax, however you are allowed to use dyed diesel fuel on the highway in your California registered highway vehicles.
- A government entity that has paid diesel fuel tax to a retail vendor shall be allowed a credit on its tax return for the tax paid to the retail vendor. (R&TC sections 60146, 60108, and 60205.5)
- This state and its political subdivisions are not exempt from the excise tax on diesel fuel.
Imposition of Tax — Government Entity
As a licensed government entity, you can use dyed diesel fuel on the highway in your California registered highway vehicles. You must pay the diesel fuel tax directly to your supplier for purchases of undyed diesel and must report tax due on the dyed diesel fuel used on the highway on CDTFA-501-DG, Government Entity Diesel Fuel Tax Return. A government entity that has paid diesel fuel tax to a retail vendor will be allowed a credit on its tax return for the tax paid.
Responsibilities — Government Entity
All government entities must:
- Apply for a government entity license with us to operate a diesel-powered highway vehicle upon California's highways when using diesel fuel that is not purchased tax-paid from a supplier or retail vendor.
- Pay the diesel fuel tax directly to the supplier on purchases of undyed diesel.
- File a CDTFA-501-DG (R&TC section 60205.5) and report tax due on the use of dyed diesel fuel on the highway.