taxes

Motor Fuels Tax Audit Procedures Manual - Ch. 153

Chapter 15 - Groundwater Protection Act

Groundwater Protection Act

Groundwater and surface water must be protected from contamination caused by leaks of hazardous, toxic, and other harmful substances. The Groundwater Protection Act provides an "insurance policy" for the cleanup of leakage and spillage.

The Texas Commission on Environmental Quality (TCEQ) is responsible for administration of the fund and the groundwater cleanup program, registration and regulation of tanks containing hazardous materials, and the enforcement of environmental cleanup. The Commission collects fees for the registration of underground and above ground storage tanks.

The Comptroller is responsible for the collection of fees on deliveries of petroleum products. The fees are deposited in the Petroleum Storage Tank Remediation Fund, which is used for the administration, investigation and cleanup of the environment when contamination occurs due to leakage or spillage.

The law became effective September 1, 1989. Initially there was confusion as to the title of the statute. Consequently, the following are some of the terms used by the industry on their billing invoices and transporting documents:

  • Texas Petroleum Production Fee
  • Texas Loading Fee Tax
  • Texas H.B. 1588
  • Delivery Charge
  • Texas Tank Remediation Fee
  • Texas Groundwater Protection Fee

Definitions

Definitions applicable to the groundwater protection are:

Petroleum Product:
A product that is obtained from distilling and processing crude oil and that is capable of being used as a fuel for the propulsion of a motor vehicle or aircraft, including motor gasoline, gasohol, other alcohol blended fuels, aviation gasoline, kerosene, distillate fuel oil, and #1 and #2 diesel fuel. The term does not include naphtha-type jet fuel, kerosene-type jet fuel, or a petroleum product destined for use in chemical manufacturing or feedstock of that manufacturing.

Regulated Substance:
An element, compound, mixture, solution, or substance that, when released into the environment, may present substantial danger to the public health, welfare, or the environment.

Hazardous Substance:
The definition is assigned by Section 101(14) of the Comprehensive Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et. seq.).

Above Ground Storage Tank:
A nonvehicular device that is:
A. made of non-earthen materials;
B. located on or above the surface of the ground or on or above the surface of the floor of a structure below ground such as a mineworking, basement, or vault; and
C. designed to contain an accumulation of petroleum.

Underground Storage Tank:
Any one or combination of underground tanks and any connecting underground pipes used to contain an accumulation of regulated substances, the volume of which, including the volume of the connecting underground pipes, is 10 percent or more beneath the surface of the ground.

Bulk Facility:
A facility, which receives gasoline or diesel fuel by pipeline, rail, or barge and then delivers the fuel into a cargo tank or barge. If the terminal receives fuel in some way other than by pipeline, rail, or barge, this law does not cover it. If the fuel leaves the terminal in some way other than a cargo tank or barge, this law does not cover it. This term does not include petroleum products consumed at an electric generating facility.

Cargo Tank:
An assembly that is used for transporting, hauling, or delivering liquids and that consists of a tank having one or more compartments mounted on a wagon, truck, trailer, railcar, or wheels.

Withdrawal from Bulk:
The removal of a petroleum product from a bulk facility storage tank for delivery directly into a cargo tank or a barge to be transported to another location, other than a bulk facility for distribution or sale in this state.

Inquiry

XISUMM---Tp#.64

Petroleum Products Delivery Fee is included in the fee system - tax code 64. The following are the most frequently used inquiries. To check other inquiries, check the Fee System listings.

XIDATA Return data inquiry information
XIDATA.TP#.64.
XICOLL Collection balance information.
XICOLL.TP#.64.

There is not a history for tax code 64 on XIRPTS. The auditor should print all data per the XIDATA screens for the audit period in lieu of the history.

Refer to the Quick Reference Manual for other inquiries for Petroleum Product Delivery Fee accounts.

Exemptions

Exemptions from Regulation Fee Only

An underground or aboveground storage tank is exempt from the tank registration fee but not from the petroleum products delivery fee if the tank is:

  • A farm or residential tank with a capacity of 1,100 gallons or less and used for storing motor fuel for noncommercial purposes;
  • Used for storing heating oil for consumptive use on the premises where stored;
  • A septic tank;
  • A surface impoundment, pit, pond, or lagoon;
  • A storm water or wastewater collection system;
  • A flow-through process tank;
  • A tank, liquid trap, gathering line, or other facility used in connection with an activity associated with the exploration development or production of oil, gas, or geothermal resources, or any other activity regulated by the Railroad Commission of Texas pursuant to Section 91.101, Natural; Resources Code; or
  • A transformer or other electrical equipment that contains a regulated substance and that is used in the transmission of electricity to the extent that such a transformer or equipment is exempted by the United States Environmental Protection agency under 40 C.F.R. part 280.

An above ground storage tank that is located at or is part of a petrochemical plant, a petroleum refinery, an electric generating facility, or a bulk facility is exempt from regulation but not exempt from the fee imposed by this subChapter.

Exemptions from Both Fees

A storage tank is exempt from regulation under this subChapter if the sole or principal substance in the tank is a hazardous substance and the tank is located:

  • In an underground area, including a basement, cellar, mineworking, drift, shaft, or tunnel; and
  • On or above the surface of the floor of that area.

An interstate pipeline facility, including gathering lines or an above ground storage tank connected to such a facility is exempt from regulation under the Groundwater Protection Act if the pipeline facility is regulated under the Natural Gas Pipeline Safety Act of 1968 or the Hazardous Liquid Pipeline Safety Act of 1979.

An intrastate pipeline facility or an aboveground storage tank connected to such a facility is exempt from regulation of the Groundwater Protection Act if the pipeline facility is regulated under the Natural Resources Code or Articles 6053-1 and 6053-2, Revised Statutes.

In-ground hydraulic lifts that use a compressed air/hydraulic fluid system and hold less than 100 gallons of hydraulic oil, if exempt by the federal Environmental Protection Agency, are exempt from regulation and fees under this subChapter.

The Fee

Fee Collection

The Petroleum Product Delivery Fee is imposed on the delivery of a petroleum product upon withdrawal from bulk of that product.

Each operator of a bulk facility, upon withdrawal from bulk of a petroleum product, shall collect from the person who orders the withdrawal a fee based on the net gallons of the product.

A person who imports a petroleum product in a cargo tank or a barge destined for delivery into an underground or above ground storage tank, regardless of whether or not the tank is exempt from regulation, shall pay the fee to the Comptroller.

The fee amount is determined as follows:

Cargo Tank Capacity
Load Size Effective Date
  09/01/1995 09/01/1999 09/01/2001 09/01/2003
0 - 2,499 gallons 25.00 18.75 12.50 10.00
2,500 - 4,999 50.00 37.50 25.00 20.00
5,000 - 7,999 75.00 56.25 37.50 30.00
8,000 - 9,999 100.00 75.00 50.00 40.00
10,000 + @5,000 50.00 37.50 25.00 20.00
Fee Exception:        
Gasoline less than 7,000 75.00 56.25 37.50 30.00
Gasoline 7,000 - 9,999 100.00 75.00 50.00 40.00

The amount of the fee will be reduced by 20% for fiscal years 2004 and 2005, by 50% for fiscal year 2006 and by 60% for fiscal year 2007, after which time the fee will no longer be collected.

A bulk facility operator who receives petroleum products on which the fee has been paid may take credit for the fee paid on monthly reports.

Exceptions

Exceptions to the fee are as follows:

Imported petroleum product that is delivered to a tank connected to or part of a bulk facility in this state from which the imported petroleum product will be withdrawn from bulk is exempt from the fee requirement.

The fee does not apply to delivery of a petroleum product destined for export from this state if the petroleum product is in continuous movement to a destination outside this state. Petroleum products taken to an intermediate storage facility prior to export are not exempt from the fee.

The fee does not apply to a petroleum product withdrawn from bulk for delivery to an electric generating facility.

The fee does not apply to a petroleum product withdrawn from bulk for delivery to a common carrier railroad for exclusive use by the common carrier railroad.

Common carrier railroads are exempt from the fees imposed by the Groundwater Protection Act and are not reimbursed for costs incurred as a result of a release from a storage tank system, operated, or maintained by the common carrier railroad.

Deliveries into the fuel supply tanks of boats and vessels are exempt when each of the following conditions is met:

  • The entire withdrawal from the bulk facility will be delivered into the fuel supply tanks of vessels or boats; and
  • None of the withdrawal will be placed into intermediate storage tanks prior to delivery into the fuel supply tanks of vessels or boats.

Persons exempt from the fee cannot request a refund directly from the Comptroller. The refund must be obtained from the bulk facility operator who collected the fee.

NOTE:
The exporter, electric generating facility or common carrier railroad must furnish the bulk facility with a copy of an exception letter issued by the Comptroller.

Permit

The following persons must obtain a Petroleum Product Delivery Fee Permit:

  • Each operator of a bulk facility and
  • Each importer of petroleum products

The permit entitles that person to deliver a petroleum product into a cargo tank destined for delivery to an underground or above ground storage tank, regardless of whether or not the tank is exempt from regulation.

A permit issued by the Comptroller is valid on the date of its issuance and is permanent until it is surrendered by the holder or canceled by the Comptroller.

The permit must be posted in a conspicuous place or kept available for inspection at the principal place of business of the owner. A copy of the permit must be kept at each place of business or other place of storage from which petroleum products are delivered into cargo tanks and in each motor vehicle used by the permit holder to transport petroleum products by the holder for delivery into petroleum storage tanks in this state.

Security

Persons required to obtain a permit must post a security. The security may be waived if any motor fuels bonds have been released and the taxpayer's account is current in all other taxes.

Acceptable securities are:

  • Surety bond,
  • Cash in the form of U.S. currency,
  • Assignment of a Certificate of Deposit in any Texas financial institution that is a member of FDIC,
  • Letter of credit from any Texas financial institution that is a member of FDIC.

The amount of security required is equal to two times the highest fees expected to accrue during a reporting period. The minimum bond is $30,000 and the maximum bond is $600,000.

Invoices and Manifests

Each operator of a bulk facility and each importer shall list, as a separate line item on an invoice or cargo manifest required to be carried with the petroleum product, the amount of the delivery fee due. Only persons who hold a petroleum products delivery fee permit may charge and collect the fee. No other person selling fuel may list the fee as a separate item on an invoice or manifest unless the amount is clearly identified as reimbursement. An amount listed as a reimbursement may not exceed the amount of fee actually collected.

The owner or lessee of a cargo tank or a common or contract carrier transporting a petroleum product shall possess a cargo manifest or an invoice showing the point of origin, the delivery point of the product, the amount of the required fee, and other information as required by the rules of the Comptroller.

Records

Originals or copies of the cargo manifests or invoices and any other records required under this section or rules of the Comptroller must be maintained for a period of four years after the date on which the document or other record is prepared and be open for inspection by the Comptroller at all reasonable times.

Audit Procedure

The audit procedure would consist of verifying:

  • Reported amounts according to number of gallons and rate
  • Exemptions of deliveries on which no fee was charged
  • Imported petroleum products
  • Fee previously paid

A "Total Fuel to Account For" type of cross-check using the distributor and supplier reports is recommended.

Reports

Each operator of a bulk facility and each importer shall file a report with the Comptroller on or before the 25th day of each month and remit the amount of fees required to be collected or paid during the preceding month.

Failure to file the report and/or pay the fee results in the addition of a 5% penalty for the first 30 days and an additional 5% penalty that accrues on the 31st day after the due date. A fraud penalty of 75% of the fee plus penalty and interest may be assessed.

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(Revised 02/2004)