United States

Bringing clarity to fuel excise taxes and credits


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The federal excise taxes, tax credits and exemptions for various types of fuel constitute a terribly confusing area of the tax law, involving several Internal Revenue Code sections and overlapping provisions. In this article, originally published in The Tax Adviser, Justin Silva and Tom Windram clarify how these various provisions interact, specifically with respect to fuel excise taxes contained in sections 4041 and 4081.

The authors point out that after a fuel leaves a refinery, it can pass through many intermediate channels before reaching the ultimate consumer. However, any gallon of fuel should be taxed only once. If a purchaser pays the excise tax on a fuel and can substantiate that another taxpayer has already paid the excise taxes due, the purchaser may be eligible to submit a claim for refund of fuel excise taxes paid. Additionally, alternative fuels, or traditional fuel blended with alcohol, biodiesel or alternative fuels, may create eligibility for an excise tax credit. 

Bringing clarity to fuel excise taxes and credits offers a straightforward discussion of the fuel excise tax to help businesses understand their excise tax liability and avoid overpayment. Careful attention to detail is necessary to navigate the complexity of several interrelated code provisions and related administrative guidance in order to pay the minimum amount of excise tax required by law.


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