House Bill 3159, effective September 1, 1999, provided that certain commercial motor vehicles are exempt from the motor fuel tax paid on diesel fuel used exclusively to transport passengers for compensation or hire between points in Texas on fixed or scheduled routes. A new school fund benefit fee of $0.04875 per gallon is owed on diesel fuel exempted from the motor fuel tax under this bill (tax code 77).
To qualify for the diesel fuel tax exemption, the commercial motor vehicle must have a registered gross weight of more than 26,000 pounds or be designed to transport more than fifteen (15) passengers, including the driver, and the vehicle owner or operator must not be a political subdivision. All bus companies qualifying for diesel fuel refunds and the School Fund Benefit Fee must be pre-approved by the Comptroller.
An entity that qualifies for the exemption must pay the motor fuel tax to its supplier on ALL purchases of diesel fuel, and then file a claim for refund in the calendar month following the month in which the diesel fuel is used while traveling fixed or scheduled routes in this state. The amount of school fund benefit due for each monthly reporting period will be paid from the proceeds of the monthly claim for refund of motor fuel taxes. In the event the school fund benefit fee due exceeds the amount of the motor fuel tax refund, any remaining amount should be paid with the report. (Rule 3.1251)
Qualified and approved bus companies will file a diesel fuel refund claim accompanied by the School Fund Benefit Fee return. The claim should be filed the month after the fuel is consumed by the qualified buses. The diesel fuel consumption is based on the overall mpg. In many cases these companies are also permitted for IFTA for their interstate travel. The overall mpg is not computed until the IFTA quarterly return is completed. The SFB Fee is not due until a diesel fuel tax refund is requested and received. For this reason there is not a penalty for filing the SFB Fee return late.
Texas miles traveled for fixed or scheduled routes should be verified. In the case of interstate travel by the same buses, the Texas miles begin when the buses enter Texas and end when the buses leave Texas. The intervening miles on fixed or scheduled routes comprise the Texas miles subject to refund.
Tax paid on diesel fuel used to operate commercial vehicles on charter trips or other non-fixed or non-scheduled routes is not refundable, other than for refunds provided by §3.173 of this title.
Verify that the Texas miles are divided by the overall mpg to compute the number gallons consumed by the qualified vehicles in Texas. These same gallons are entered on the SFB Fee return. Revenue Accounting Refund Verification Section processes the return and does a fund transfer. The remaining amount is refunded. The gallons on the refund claim and the SFB Fee return must agree. Any other gallons subject to refund, such as PTO would be processed as a separate claim.
|Claim Period||Fixed Route Miles||IFTA Fleet MPG||Fixed Route Gallons|
|Total Fixed Route Gallons||234,943|
|School Fund Benefit Fee to be retained|
|(234,943 X $0.04875)||$11,453.47|
|Gallons eligible for refund||234,943|
|Less: 2% handling allowance||<4,699>|
|Net gallons subject to refund||230,244|
|Total Refund (230,244 X $0.20)||$46,048.80|
|Claim Amount Paid ($46,048.80 - $11,453.47)||$34,595.33|
If, in verifying a School Fund Benefit Fee refund claim, it appears that previously paid refund claims were paid in error (the taxpayer claimed too many gallons) then a diesel audit (90 07) audit should be generated. If the taxpayer is not permitted for diesel fuel tax, a fuel's TCR should be completed and sent to the RPC to set up a "one-time sale." A School Fund Benefit Fee (77) audit should also be generated and performed concurrently with the 90 07. These audits need to be processed together.
Recovering previously paid refunds also means a reduction in the School Fund Benefit Fee gallons submitted by the taxpayer. The SFBF audit would always be a credit in these circumstances. The SFBF audit should be written up similar to fuels tax audits and other miscellaneous taxes, i.e., an adjustment report by period needs to be part of the audit package, but not on the index.
Refund claims and SFBF returns should be for the same period of time - monthly.
If the taxpayer files IFTA returns or is part of consolidated IFTA returns, the mpg to compute the gallons used on Texas fixed routes should be based on the IFTA or consolidated IFTA returns mpg. Since the IFTA return is quarterly and the refund claim and the SFBF return is monthly, the taxpayer can wait and file the refund claims and SFBF returns after the IFTA mpg has been computed. There no penalty if the SFBF return(s) is late.
In many cases, the taxpayer files the monthly returns before the IFTA quarterly return is filed. For these situations, the auditor should compute the quarterly mpg using the monthly data per the refund claim and SFBF return; and, compare it to the IFTA mpg. The mpg for the 3 months of the quarter should approximate the IFTA mpg. Or, the taxpayer can still file on a monthly basis, but they should adjust the third month in the quarter to tie the total refund gallons claimed to the valid refund gallons using the IFTA mpg.
If there are adjustments to the refund claim and School Fund Benefit Fee, the auditor should obtain a letter from the taxpayer requesting that the credits from the SFBF be applied to the diesel audit liability. The letter should be an exhibit in both audit packages. Comments/Notes to Reviewer on AWM must also indicate that the two audits (90 07 and 77) should be processed together and that the SFBF credit be applied to the diesel fuel audit liability.
Note: Credit interest does apply to the School Fund Benefit Fee.
The current tax rate on diesel is $ .20 per gallon; the SFBF rate is $ .04875 per gallon.
For more information on Refunds and Refund Verification assignments, please refer to Chapter 13 of this manual.