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  1. #1
    Platinum Member
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    Tescott, Kansas
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    Kubota L5740/cab with air ride seat

    Default Which fuel should I use

    I use my tractor for a lawn bissiness, personal, & some farm work. Can I use red fuel legelly or should I but the taxed fuel? In my area farmers are exempt but I am in a gray area I think. Any thoughts

  2. #2
    Veteran Member
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    Oklahoma City
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    Deere 855 (24hp/19@PTO)

    Default Re: Which fuel should I use

    Is the issue farm/non-farm or on-road/off-road?

  3. #3
    Veteran Member
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    May 2001
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    2,385
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    Michigan
    Tractor
    New Holland TC40D Supersteer

    Default Re: Which fuel should I use

    As per the <A target="_blank" HREF=http://www.fhwa.dot.gov/ohim/hwytaxes/2001/pt2.htm>Federal Highway Association summary</A>, diesel fuel is taxed in Kansas when used for "transit use".

    If you need further help with grey area distinctions, try contacting the <A target="_blank" HREF=http://www.ksrevenue.org/mflawsandregs.htm#1>Kansas Department of Revenue, Business Tax Bureau:</A>
    <font color=red>"Kansas Statute Number: 79-3408 (6) The sale or delivery of special fuel which is indelibly dyed in accordance with regulations prescribed pursuant to 26 U.S.C. 4082 and such special fuel is only used for nonhighway purposes."</font color=red>

    Toss in the federal tax law, and you find, not suprisingly, that the IRS has extensive opinions: <A target="_blank" HREF=http://www.irs.gov/formspubs/page/0,,id%3D11332,00.html>How to Buy Diesel Fuel and Kerosene Tax-Free</A>
    <font color=red>"You buy dyed diesel fuel and dyed kerosene excise tax free. You must use them only for a nontaxable use, including use on a farm for farming purposes. If you use the dyed fuel for a taxable use, you could be subject to the excise tax and a penalty. For example, if a truck used on a farm for farming purposes is also used on the highway (even though in connection with operating the farm), tax applies to the diesel fuel used (or sold for use) in operating the truck on the highways. The fuel was used off the farm for a taxable use.... You cannot claim a credit or refund for the excise tax on diesel fuel or kerosene used on a farm for farming purposes. The registered ultimate vendor who sells you the fuel claims the credit or refund. </font color=red>

    The <A target="_blank" HREF=http://www.irs.gov/formspubs/page/0,,id%3D104053,00.html#T16>IRS Definition of Non-Taxable Uses</A>: <font color=red>A credit or refund may be allowed for the excise tax on fuel used or sold for use on a farm for farming purposes. Fuel is used on a farm for farming purposes only if used in carrying on a trade or business of farming, on a farm in the United States, and for farming purposes. </font color=red>. There are very strict regulations here as to what constitutes "farming".

    Another IRS publication <A target="_blank" HREF=http://www.irs.gov/formspubs/page/0,,id%3D11460,00.html>Undyed Diesel and Undyed Kerosene</A> lists when you should use the undyed fuel, yet apply for a tax refund:
    <font color=red>The following are the uses of undyed diesel fuel and undyed kerosene for which a credit or refund may be allowable to an ultimate purchaser.
    Off-highway business use.
    Export.
    In an intercity or local bus.
    In a qualified local bus.
    In a school bus.
    Used other than as a fuel.
    In a train. </font color=red>

    An overall summary is <A target="_blank" HREF=http://www.irs.gov/formspubs/page/0,,id%3D11492,00.html>Fuel Tax Credits and Refunds</A>. One of the subparagraphs is:
    <A target="_blank" HREF=http://www.irs.gov/formspubs/page/0,,id%3D104053,00.html#T16>Farming Purposes</A>. This gives a caution (with a big warning symbol) which reads:
    <font color=red>If undyed diesel fuel or undyed kerosene is used on a farm for farming purposes, the claim is made by the registered ultimate vendor. </font color=red>It also lists activities on a farm that are not farming activities [img]/w3tcompact/icons/crazy.gif[/img]:
    <font color=red>"Fuel not used for farming.
    You do not use fuel on a farm for farming purposes when you use it in any of the following ways:

    Off the farm, such as on the highway or in noncommercial aviation, even if the fuel is used in transporting livestock, feed, crops, or equipment.
    For personal use, such as mowing the lawn. <font color=black>Emphasis added.</font color=black>
    In processing, packaging, freezing, or canning operations.
    In processing crude gum into gum spirits of turpentine or gum resin or in processing maple sap into maple syrup or maple sugar. </font color=red>

    I'm taking this to mean if you're using your equipment on non-farm, off-highway work you should use the undyed fuel and claim the tax credit; farm work (by the IRS' very stict definition] can use the dyed fuel, but not claim any tax credit.

    This last IRS publication really goes against some opinions I've read on this forum. I guess it isn't clear to me - that's why I'm adding the disclaimer:

    The opinions offered above are not attempts to offer tax advice, and may not reflect reality or truth - just the Google search results eminating from an emergency physician's dysfunctional circadian rhythm after a few night shifts!

  4. #4
    Veteran Member
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    Deere 855 (24hp/19@PTO)

    Default Re: Which fuel should I use

    Great piece of research, Chris. Isn't the internet amazing?

    From first hand experience, the IRS can interpret any tax law any way it wants to, even the exact opposite of what the text seems to say.

    It seems like the IRS is looking at two issues 1) When is it appropriate to use dyed/undyed fuel, and 2) When is it appropriate to claim a tax credit for using undyed fuel.

    For DDT's tractor,
    business- undyed may qualify for tax credit, but can't he just use dyed and forget about the credit?
    personal- undyed won't qualify for tax credit, but can't he use dyed anyway (non-highway use)?
    farm- use dyed -or- vendor involvement is required to claim credit if using undyed?

    Anybody know the answers?

  5. #5
    Veteran Member BillyP's Avatar
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    Eagletown, OK
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    JD 4610 ehydro MFWD

    Default Re: Which fuel should I use

    The way I understand this is, the dyed (non-road) diesel can be used by anyone. As long as this vehicle isn't used on public roadways for transportation. I do know they use the dyed in skidders, tractors (not the 'big' rig type), 4wheelers, reefers on the big rigs and anything else that's not used for transportation on public roads. Here where I live, DOT has surprise inspections at the sale barns. Checking all those ole farmers diesel trucks for that tell tell red.

    The answer is yes, DDT can use dyed diesel.


    Billy

  6. #6
    Platinum Member
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    Tescott, Kansas
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    Kubota L5740/cab with air ride seat

    Default Re: Which fuel should I use

    I have been using red fuel, I just wanted to make sure I was right. You guys have stoped me worrying about it. Thanks for all the input, and DOC Thanks for all the info.

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