Department of the Treasury Division of Taxation SPECIAL NOTICE MOTOR FUELS TAX ACT JULY 1, 2010

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1 Chris Christie Gvernr Kim Guadagn Lieutenant Gvernr Department f the Treasury Divisin f Taxatin Andrew P. Sidamn-Eristff State Treasurer Michael Bryan Acting Directr f Taxatin SPECIAL NOTICE MOTOR FUELS TAX ACT JULY 1, 2010 Chapter 22, P.L. 2010, the Mtr Fuels Tax Act, effective July 1, 2010, as amended, and perative beginning January 1, 2011, repeals prir Mtr Fuels legislatin in rder t make sweeping changes in the licensing, reprting, and the impsitin and cllectin f the Mtr Fuels Taxes. In general, the new legislatin means A friendlier envirnment fr businesses Fewer licensees, thus fewer expenses Fewer reprts t file, thus fewer accunting expenses A simplified means f cllecting the tax Fewer licensees mean fewer types f custmers and Fewer distinctins regarding the lcatin f pick ups, which means Fewer accunting expenses Increased enfrcement Dyed Fuel inspectins Rapid identificatin f prblems Increased penalties fr vilatins f the Law Frms and applicatins will be available n the Divisin f Taxatin s website, As the frms becme available n the website, please lk them ver and refer t the instructins fr specifics. The Divisin has an accunt dedicated t address cncerns r questins regarding the new legislatin. fuel.tax@treas.state.nj.us fr a prmpt respnse

2 Highlights f the New Law There are n rate changes. Gasline and gasline blends are taxed at 10½ per galln Diesel and diesel blends are taxed at 13½ per galln. Aviatin fuels destined fr General Aviatin Airprts are taxed at an additinal 2 per galln. The changes affect sme reprting f the Petrleum Prducts Grss Receipts Tax, but the rate fr Mtr Fuels remains at 4 per galln. LPG used as a mtr fuel is taxed at 5¼ per galln. Taxing at the rack The tax is due frm the Cnsumer, but it is remitted t the State by the Supplier, r in rare cases, by the Distributr. The Tax is pre-cllected by the Supplier befre ging all the way dwn the supply chain. Since the industry is accustmed t paying the tax n the 20 th f each mnth, the Law allws fr delayed payment t the Supplier. Rather than paying the mment the fuel passes the rack, a Supplier can delay cllectin f the tax until the 20 th, and then remit it t the State n the 22 nd. When a delayed payment agreement is in place, if the Distributr frwards the payment late, the Distributr, nt the Supplier, faces penalties and interest. If a Distributr btains fuel frm ut f state, and the supplier is nt licensed, then the Distributr is liable fr the tax, which is due 3 days after imprt. Recgnitin f Dyed Fuels With few exceptins, fuel is taxable unless dyed. Flr Tax fr fuels held in inventry Taxes must be paid n fuel held in inventry as f the clse f business n the day preceding perative date f the Law December 31, Seller / User f Special Fuels, Imprters, and Jbbers have fuel in inventry which wuld have been taxed if they had purchased it under the new law. The nly way t cllect the tax due is by way f a flr tax. Thse wh have taxable fuel in inventry fr which the tax has nt been paid will take an inventry upn end f business n December 31, Understanding that they have nt cllected the tax frm custmers yet, the tax is nt due until July 1, Hwever, if yu pay the tax due n r befre January31 f this year, yu can take a 10% credit fr rapid payment. There is n bligatin either way yu chse what wrks. Dead strage is nt taxed at all. Dead Strage is 200 gallns fr tanks with under 10,000 capacity; 400 gallns fr tanks with greater capacity. Alternative Fuels All grades f Fuel Grade Alchl and all grades f Bidiesel are taxable. They are treated just like gasline r diesel.

3 Fr thse licensed as Mtr Fuels Distributrs As per Sectin 151a f the Mtr Fuels Tax Act f 2010, thse wh were licensed as Distributrs under 54:39-1 et seq will autmatically becme licensed Mtr Fuels Suppliers under 54: et seq unless: They receive special ntice frm the Divisin f Taxatin infrming them that their Distributr s License will nt be cnverted; r They refuse the cnversin f licensure by cmpleting Frm MFA-3, Change f Status Request, and remit it befre December 15, Distributrs wh refuse r are denied the cnversin must cease all activities that require a license under 54: et seq n r befre December 31, They must als file a final GA-1-D n r befre January 20, Distributrs wh accept the cmmutatin f licensure will receive a Supplier s License that will expire n the same date as their frmer Distributrs licenses wuld have expired if they had nt been cnverted. Bnding requirements are unchanged. Cnverted Suppliers have until January 31, 2011 t have their surety bnds altered t reflect their new status as Mtr Fuels Suppliers. Accrding t 54:39-102, a Supplier is ne wh is registered r required t be registered pursuant t 26 U.S.C. s.4101 fr transactins in fuels in the terminal transfer system, and meets any f the fllwing criteria: 1. is the psitin hlder in a terminal r refinery in this State f New Jersey, 2. is the imprter f fuel int this State frm a freign cuntry, 3. acquires fuel frm a terminal r refinery in this State frm a psitin hlder pursuant t either a tw-party exchange r a qualified buy-sell agreement which is treated as an exchange and appears n the recrds f the terminal peratr, 4. is the psitin hlder utside this state with respect t fuel which that persn imprts int this State, 5. is the prducer f fuel grade alchl r alchl derived substances in this State, 6. is the imprter f fuel grade alchl r alchl derived substances int this State, r 7. is a Permissive Supplier. A Permissive Supplier is an ut f State supplier wh elects t have a Supplier s License. If yu believe that yu d nt meet the qualificatins f a Mtr Fuels Supplier, but shuld be therwise licensed, yu must refuse the Mtr Fuels Supplier license and request the apprpriate license using Frm MFA-3, Change f Status Request befre December 15, Fr thse licensed as Mtr Fuels Retailers As per Sectin 151b f the Mtr Fuels Tax Act f 2010, thse wh were licensed as Retailers under 54:39-1 et seq will autmatically becme licensed Mtr Fuels Retail Dealers under 54: et seq unless:

4 They receive special ntice frm the Divisin f Taxatin infrming them that their Retailer s License will nt be cnverted r They refuse the cnversin f licensure by cmpleting Frm MFA-3, Change f Status Request, and remit it befre December 15, Retailers wh refuse r are denied the cnversin must cease all activities that require a license under 54: et seq n r befre December 31, Retailers accepting the new Mtr Fuels Retail Dealer Licenses will receive licenses that will expire n the same date as their frmer Retailer s licenses wuld have expired if they had nt been cnverted. Under the new law, there are three types f Retail Dealer licenses Aviatin Fuel Dealer, LPG Dealer, and Retail Dealer. If yu are currently licensed as a Retailer because yu sell LPG fr highway use r Aviatin Fuel, then yu must refuse the Retail Dealer License and request the apprpriate type f retail license using Frm MFA-3, Change f Status Request. Accrding t 54:39-102, a Retail Dealer is ne engaged in the business f selling r dispensing mtr fuel t the cnsumer in this State. If yu believe that yu d nt meet the qualificatins f a Mtr Fuels Retail Dealer, but shuld be therwise licensed, yu must refuse the Retail Dealer s License and request the apprpriate license using Frm MFA-3, Change f Status Request befre December 15, Fr thse licensed as Mtr Fuels Imprters, Exprters, Whlesalers, and Jbbers As per Sectin 151c f the Mtr Fuels Tax Act f 2010, thse wh were licensed as Imprters, Exprters, Whlesalers, and Jbbers under 54:39-1 et seq will autmatically becme licensed Distributrs f Mtr Fuels under 54: et seq unless: They receive special ntice frm the Divisin f Taxatin infrming them that their Imprter s, Exprter s, Whlesaler s, and/r Jbber s License will nt be cnverted r They refuse the cnversin f licensure by cmpleting Frm MFA-3, Change f Status Request, and remit it befre December 15, Imprters, Exprters, Whlesalers, and Jbbers wh refuse r are denied the cnversin must cease all activities that require a license under 54: et seq n r befre December 31, They must make their final reprts n r befre January 20, Imprters, Exprters, Whlesalers, and Jbbers accepting the cmmutatin f licensure will receive a Distributr f Mtr Fuels License that will expire n the same date as their frmer licenses wuld have expired if they had nt been cnverted. Accrding t 54:39-102, a Distributr is anyne wh acquires mtr fuel frm a Supplier f Mtr Fuels r anther Distributr fr subsequent sale. Accrding t

5 54:39-133, a Distributr s license is required fr anyne ther than a Supplier f Mtr Fuels wh des ne r mre f the fllwing: Purchases in-state fr resale Exprts Imprts Blends The Distributr f Mtr Fuels License that yu receive will be categrized specifically t the activity in which yur cmpany engages. Exprters will receive a Distributr f Mtr Fuels License fr exprting; imprters will receive ne fr imprting, and s frth. If yu believe that yu d nt meet the qualificatins f a Mtr Fuels Distributr, but shuld be therwise licensed, yu must refuse the Distributr s license and request the apprpriate license with Frm MFA-3, Change f Status Request befre December 15, Fr thse licensed as Mtr Fuels Transprters As per Sectin 151d f the Mtr Fuels Tax Act f 2010, thse wh were licensed as Transprters under 54:39-1 et seq will autmatically becme licensed Mtr Fuels Transprters under 54: et seq, and the cnveyances registered fr transprting fuel under 54:39-1 will be registered as a fuel cnveyance under 54: et seq unless: They receive special ntice frm the Divisin f Taxatin infrming them that their Transprter s Retailer s License and vehicle registratins will nt be cnverted r They refuse the cnversin f licensure by cmpleting Frm MFA-3, Change f Status Request, and remit it befre December 15, Transprters wh refuse r are denied the cnversin must cease all activities that require a license under 54: et seq n r befre December 31, They must make their final reprts n r befre January 20, Transprters accepting licensure under the new Act will receive Transprters f Mtr Fuels licenses that expire n the same date as their frmer licenses wuld have expired if they had nt been cnverted. If yu believe that yu d nt meet the qualificatins f a Mtr Fuels Transprter, but shuld be therwise licensed, yu must refuse the Transprter s License and request the apprpriate license with Frm MFA-3, Change f Status Request befre December 15, Fr thse licensed as Sellers / Users f Special Fuels Under the Mtr Fuels Act f 2010, there is n designatin fr a Seller / User f Special Fuels. Yu dn t need a distinct license fr selling diesel r kersene. Yur

6 license expires n December 31, Yu will file yur final reprt n r befre January 20, If yu believe that yu need a license, yu will need t use Frm MFA-3, Change f Status Request t request the apprpriate license. Dyed Fuel Prvisins f the Act Accrding t 54:39-141b(3), Dyed Fuel is exempt frm taxatin. This will simplify recrd keeping and cllectins. 54:39-2 defines dyed fuel as diesel r kersene that is dyed accrding t prvisins f the Federal Gvernment. 54: details usages f fuel that are exempt frm the taxes. Fuel sld fr ne f the usages is exempt regardless f dying. Using r selling dyed fuel fr any use nt specifically exempted by the Law is punishable by heavy fines that mirrr the Federal penalties. 54: states that any persn, and any fficer, emplyee r agent f any persn wh participates in any act that vilates the dyed prvisins f the Law will be jintly and severally liable fr the penalties. Pint f Taxatin 54: impses the taxes n fuel remved frm the terminal transfer system, ther than by a bulk transfer. Suppliers f Mtr Fuels remved frm the terminal system cllect the tax and hld it in trust fr the State, and remit it n r befre the 22 nd day f the mnth fllwing the remval. As New Jersey previusly taxed fuels at pints lwer dwn the supply chain, individuals licensed as Imprters and Jbbers paid the taxes due n the 20 th day f the mnth fllwing the sale. Their inventry cst did nt include the tax. Under the new law, thse individuals wuld have t pay the tax at the time f purchase, and carry the cst f the tax in inventry, if nt fr 54: This sectin allws a Distributr f Mtr Fuels t make an electin as t the timing f the remittance f the tax t the Supplier. Distributrs wh qualify fr the electin may delay remittance t their Supplier the amunt f tax due until the 20 th day f the mnth fllwing the purchase. Elective Distributrs must make remittances t their Suppliers by EFT t guarantee that the Supplier has funds t remit t New Jersey by the 22 nd. In rder fr a Distributr t qualify fr the delayed remittance t its Suppliers, the Distributr must cmplete Frm DMF-2, Distributr s Applicatin t Qualify fr Delayed Remittances. Upn apprval, the Divisin f Taxatin will issue a Frm DMF-3 Ntice f Qualifying Elective Distributr. If an Elective Distributr remits payment t its Suppliers late, the Elective Distributr is liable fr all penalties and interest, and will lse its status as an Elective Distributr. Fr fuel imprted int the state, 54: allws Suppliers f Mtr Fuels with terminals utside New Jersey t treat remvals f fuel frm thse terminals as thugh they are remvals frm a terminal within the State. Thus, there is n need t maintain separate accunts fr Distributrs wh pick up fuel frm terminals n bth sides f the

7 brder. New Jersey is a small state with many terminals just ver the State line, s this prvisin is very useful. In rder t take advantage f this prvisin, Suppliers must cmplete and remit Frm SMF-2, Ntice f Electin t Pre-cllect Mtr Fuels Taxes frm Out f State Terminals. Licensure T apply fr a new license, Individuals will cmplete and remit Frm MFA-1, Applicatin fr Mtr Fuels License. This frm is used fr any license desired. Licenses are valid fr a three year perid r the unexpired prtin theref cmmencing n April 1 f the year the applicatin is received and expiring n the third succeeding March 31, unless cancelled r revked. T renew a license: Licensees will cmplete and remit Frm MFA-1, Applicatin fr Mtr Fuels License. This frm is used fr any license. The terms and fees fr a renewed license are the same as thse fr the initial license. Flrstcks Tax On January 1, 2011, thse frmerly licensed as Seller / User f Special Fuels, Imprters, Jbbers, etc will find themselves in pssessin f Mtr Fuels that have nt been taxed. This fuel will have already passed ver the rack, and thus tax is due. 54: specifies hw anyne with fuel in strage can pay the tax. Thse with taxable fuel in strage must: Take an inventry n the clse f business n December 31, Reprt the gallns held in strage n Frm MFA-10, Mtr Fuels Flrstcks Reprt, n r befre January 31, Remit the tax due n later than July 1, If a taxpayer remits the tax due n r befre January 31, 2011, then that taxpayer may deduct 10% frm the liability. The Divisin f Taxatin recgnizes that the changes required may be difficult fr sme taxpayers t cmply with. We are wrking t make the transitin as smth as pssible. Please d nt hesitate t if yu need assistance r clarificatin with any part f the new Mtr Fuels Tax Act: fuel.tax@treas.state.nj.us