Bulletin Number
VTB 88-3
Tax Type
Motor Vehicle Fuel Sales Tax
Retail Sales and Use Tax
Description
Impact of Federal Fuel Excise Tax Law Changes on Virginia Sales and Use Taxes
Topic
Basis of Tax
Date Issued
04-01-1988
88-3
Impact Of Federal Fuel Excise Tax Law Changes on Virginia Sales and Use Taxes
Impact Of Federal Fuel Excise Tax Law Changes on Virginia Sales and Use Taxes
As the result of recent federal legislation, which takes effect on April 1, 1988, the federal excise tax on diesel fuel will be included in the base for computing the Virginia sales and use tax. Dealers who are registered for the collection of the sales tax on diesel fuel will not be required to implement this change until May 1, 1988. Until May 1, 1988, dealers will be required to charge the sales tax based on the price (less federal excise tax) of diesel fuel only.
IMPACT ON RETAIL SALES AND USE TAX
- The 4|1/2% retail sales and use tax generally applies to the sale of motor vehicle fuels that are (1) exempt from the special fuel taxes or (2) subject to the off-highway or other refund provisions of the motor or special fuel taxes.
- The base for computing the sales and use tax includes all federal manufacturers' excise taxes. On April 1, 1988, the federal retailers' excise tax on diesel fuel is replaced by a manufacturers' excise tax imposed at the wholesale level.
- Due to the recent federal change, the federal excise tax will now be included in the base for computing the tax on diesel fuel subject to the sales and use tax.
- Example: A customer pays $1.00 per gallon for diesel fuel and 15.1 cents per gallon in federal excise tax. The sales and use tax on one gallon of fuel would be 5 cents ($1 + 15.1 cents = $1.151 X 4|1/2%).
SPECIAL REFUND PROVISIONS-RETAIL SALES AND USE TAX
- Purchasers who receive refunds of federal manufacturers' excise taxes may apply to the department for a refund of that portion of the sales and use tax attributable to the federal excise tax previously paid on diesel fuel or gasoline.
- Example: A contractor purchases $9,934 in diesel fuel for off-highway use, which includes federal manufacturer's excise tax of $1,500. The Virginia sales and use tax = $447 (sales price of $9,934 X 4|1/2% tax rate). The contractor later receives a refund of the federal tax and may request a sales and use tax refund from the department of $67.50 (the federal excise tax of $1,500 X 4|1/2 tax rate).
IMPACT ON MOTOR VEHICLE FUEL SALES TAX
- The recent federal law change also requires that the federal excise tax on diesel fuel be included in the base for computing the special 2% motor vehicle fuel sales tax levied in the Northern Virginia and Potomac and Rappahannock Transportation Districts. Dealers will not be required to implement this change until May 1, 1988.
The refund procedures set forth in § 33 of the Virginia Motor Vehicle Fuel Sales Tax Regulations for fuel for off-highway use will continue to apply.
(Note: This Bulletin superseded by 88-4 (PD 88-68) dated April 26, 1988)
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