State Tax Perspective on Biodiesel

Transcription

1 State Tax Perspective on Biodiesel FTA Motor Fuel Tax Annual Meeting Albuquerque, NM October 10, 2006 IOWA Most soy oil plants Most ethanol plants Most soy oil produced for biodiesel Most ethanol produced Lowest gasoline prices Lowest auto insurance rates 1

2 Blends of biodiesel can range from 1% to 100%. Common blends used in Iowa are B2, B5, B10 and B20. Many farmers use even higher blend levels in their equipment. Landmark Renewable Fuels Legislation With passage of the 25% Iowa Renewable Fuels Standard (RFS), Iowa has the most aggressive renewable fuels program in the country. The Iowa Renewable Fuels Association helped lead the effort to enact this landmark legislation. Under the bill, HF 2754, Iowa retailers will be incentivized to replace 25% of gasoline sales with ethanol and biodiesel by Biodiesel and E85 availability will greatly increase, giving motorists cleaner, renewable choices at the pump. 2

3 8/15/06 Iowa-based Renewable Energy Group, Inc. Announces Largest Expansion in Biodiesel History Renewable Energy Group, Inc. (REG) announced completion of $100 million financing and two new strategic partnerships. REG expects to increase its biodiesel production to approximately 640 million gallons by 2009, including thirdparty plants. 8/15/06 Petroleum Retailers Pumped Up About Biodiesel A South Carolina petroleum retailer now makes a 20 percent biodiesel blend (B20) available at 35 public pumps statewide, signifying a trend of increasing availability to consumers nationally 3

4 7/27/06 Jeep to Fuel Grand Cherokee CRD with B5 Biodiesel Blend at the Factory Chrysler Group announced today that its first diesel-powered, full-size sport utility vehicle (SUV) offered in the United States will be shipped from the factory with B5. 7/21/06 Austin Leads the Nation for B20 Pumps, with Recent Opening of 19 A city renowned for its live music is now also renowned for its availability of biodiesel, thanks to Shell stations in the Austin, Texas area offering the 20 percent biodiesel/80 percent diesel blend. 4

5 7/26/06 Countrymark Makes B5 Pipeline Run Countrymark recently became the first company to announce a successful B5 run through a pipeline that carries gasoline, diesel and heating oil. Taxation Issues Majority of soy oil now blended with dyed diesel. Thus no tax consequence as exempt from fuel tax. But this is changing and moving into more clear diesel Soy oil does not go to a terminal in many cases Soy Manufacturers don t dye the B100 Difficult to track sales multiple levels of sales exist 100% soy can be used without blending Many products can be blended with diesel such as vegetable oil, cooking oils and animal fats Almost anyone can make a product to blend with diesel as home kits are sold Blend with clear diesel Blend with dyed diesel affecting the dye level 5

6 Point of Taxation States now tax at various levels Terminal (Supplier) First Reciever Distributor Retailer Possible Points of Taxation Manufacturer or Terminal level Pros All tax collected up front Less tax evasion Fewer licensees filing Fewer Delinquents, less persons to audit Tax part of price down to consumer level Cons Manufacturer may or may not dye All purchasers have to pay more for the soy oil due to tax being part of price Majority of soy oil blended with dyed diesel which is tax exempt Blender, retailer or consumer in refund or credit situation 6

7 Possible Points of Taxation Blender Level Pro Manufacturer usually not a taxpayer If Blender blends with dyed diesel, no tax, thus no refunds The sale does not include motor fuel tax If Blender blends with clear diesel, tax due unless exempt purchaser such as gov t, farmer Con Lots of potential blenders to license Difficult to locate all blenders Ensure the blend is correct amount Proper metering Who is the Blender? Manufacturer when they blend the small amount of diesel fuel at the plant to get the federal credit Bulk Plant where B2, B5 or B? is created Retailer where B2, B5 or B? is created Consumer where they determine where soy oil is added directly into a supply tank Dye or undyed issue Who can add the dye? 7

8 Blender situation issues Enough resources to find all blenders Enough resources to handle refunds or credits Mfg sells to bulk plant who sells to retailer who sells to construction company where delivery is to dedicated tank for soy oil Construction company could put in vehicles with dyed fuel or in vehicles with clear fuel driven on highways Product Codes Does the state require sellers keep track and report every kind of possible combination, B2, B5, B6, B10, B52, B67.67 Other Issues Refunds or credits Invoices need to properly show B2, B5, B10 product sold to ensure proper refunds or credits Different tax rates for B2, B5, B1, B20 creates problems at all levels from state administration to vendor to consumer Different tax rates for all these products at federal and individual state level Enforcement dip tank for dyed works, How do you dip tank to determine B2, B87? How do you monitor meters for different products? More products, more sellers, more tax rates, more exemptions all lead to more tax evasion 8

9 Possible Solutions Manufacturers treated the same as IRS gasoline/diesel terminal Manufacturers offer both dyed or clear Manufacturers provide the different blends Only allow certain blends All sold through a IRS terminal or no credits Rack state all clear is taxable when sold by manufacturer, no exemptions, dyed exempt Blender state All clear is taxable when blended with clear diesel, no exemptions, dyed exempt Large penalties for violations Uniformity 9

10 Dale Thede Iowa Department of Revenue