Ruling 2003-1, Motor Vehicle Fuels Tax / Biodiesel Fuel

FACTS:

A company doing business in Connecticut (hereinafter “the Company”) plans to import a fuel called “biodiesel.”  Biodiesel (hereinafter “pure biodiesel”) is defined in the Code of Federal Regulations as a nontoxic, biodegradable product made from the oils and fats of plants and animals. 7 C.F.R. §1424.3.  Pure biodiesel is intended as a replacement for or additive to petroleum diesel fuel.  It burns cleaner and is safer to handle and store than petroleum diesel fuel.

The Company intends to mix pure biodiesel with petroleum diesel in an approximate proportion of 20% pure biodiesel to 80% petroleum diesel.  When so blended, the mixture (hereinafter “blended biodiesel”) is suitable for use in most diesel-burning motor vehicles, requiring little or no engine modification. 

ISSUE:

Is blended biodiesel subject to the motor vehicle fuels tax, and if so, at what rate?

RULING:

Because blended biodiesel is a fuel suitable for the generation of power in motor vehicles with diesel engines, it is subject to the motor vehicle fuels tax at the rate for diesel fuel under Conn. Gen. Stat. §12-458(a)(2)(C), currently twenty-six cents per gallon.

DISCUSSION:

The motor vehicle fuels tax is imposed in Conn. Gen. Stat. §12-458(a) on licensed distributors of fuels at the rates specified in subdivision (2) of that subsection.  The term “fuels” is defined in Conn. Gen. Stat. §12-455a(b)(2) to include “any . . . combustible gas or liquid suitable for the generation of power to propel motor vehicles . . . .”  Blended biodiesel, as the facts of this ruling indicate, is a liquid suitable for the generation of power to propel motor vehicles with diesel engines.  Therefore, it is a fuel for purposes of the motor vehicle fuels tax.

The statutes do not specify a rate of tax for blended biodiesel.  In Conn. Gen. Stat. §12-458(a)(2)(A), the rate for all fuels is currently set at twenty-five cents per gallon, unless another rate is specified.  A separate rate of twenty-four cents per gallon is imposed in subparagraph (B) for gasohol, and the rate for diesel fuel, in subparagraph (C), is twenty-six cents per gallon on and after August 1, 2002.          

The term “diesel fuel” is not defined for purposes of the motor vehicle fuels tax.  But it is defined for purposes of the federal excise tax on petroleum products as “any liquid (other than gasoline) which is suitable for use as a fuel in a diesel-powered highway vehicle or a diesel-powered train.”  26 U.S.C. §4083(a)(3).  In the absence of a definition of diesel fuel in Connecticut statutes or regulations, it is reasonable to rely on the definition of the same term in the context of the federal tax law that parallels the Connecticut motor vehicle fuels tax.

Blended biodiesel qualifies as “diesel fuel” under the federal definition, because it is suitable as a fuel for diesel-powered highway vehicles.  So the rate of tax for blended biodiesel in Connecticut is the rate imposed on diesel fuel under Conn. Gen. Stat. §12-458(a)(2)(C), currently twenty-six cents per gallon.

LEGAL DIVISION

March 25, 2003