Could a Florida wholesaler obtain a fuel-tax refund for undyed B99 biodiesel intentionally blended with dyed diesel fuel for resale?

Plain-English summary

The Florida Department of Revenue concluded that a licensed fuel wholesaler could obtain a refund of tax paid on undyed B99 biodiesel only for qualifying blends that met the federal below-rack blending standard Florida was administering.

At least 80% of the finished blend had to be dyed diesel that was dyed at a terminal. The remaining portion could be biodiesel or another product that was not diesel fuel or kerosene. On the described percentages, the approximately 96/4, 90/10, and 80/20 blends could meet that threshold; the 70/30 blend could not.

The wholesaler could not base the refund on the specific state provisions it cited. Its mixing was intentional rather than an accidental misfueling, and it was not the terminal-supplier-to-exporter transaction described in the ruling. Refund eligibility instead depended on IRS Notice 05-80, Florida's related administrative treatment, and the applicable filing and record requirements.

What this means for you

Fuel wholesalers and blenders

Track the terminal-dyed diesel percentage in each blend. A blend below the 80% threshold does not qualify under this ruling's federal-standard route.

Refund claimants

Retain the records required for the refund, including blend quantities and disposition. The ruling referred taxpayers to TIP 06B05-05 for filing and documentation requirements.

Accountants and tax professionals

Distinguish intentional biodiesel blending from the accidental mixing process in Rule 12B-5.140. The Department reached a conditional refund result through the federal notice, not through the taxpayer's cited statutory theories.

Common questions

Q: Did an 80/20 dyed-diesel and biodiesel blend meet the percentage test?
A: Yes, if the dyed diesel was dyed at a terminal and all other requirements were met.

Q: Did a 70/30 blend meet the test?
A: No.

Q: Was intentional mixing treated as an accidental misfueling?
A: No.

Q: Were records required for the refund?
A: Yes.

Citations and references

• Fla. Stat. §§ 206.86, 206.872(11), 206.874, 206.8741, 206.8745, 212.0501, 213.22, 213.255, and 215.26
• Fla. Admin. Code r. 12B-5.140
• IRS Notice 05-80, Internal Revenue Bulletin 2005-46
• Florida Taxpayer Information Publication 06B05-05

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 15B5-001

Original ruling text

Executive
Director
Marshall Stranburg

QUESTION: WHETHER THE TAXPAYER IS ENTITLED TO A REFUND OF THE TAX IT PAID
TO ITS SUPPLIER ON ITS PURCHASE OF UNDYED BIODIESEL FUEL THAT WAS MIXED
WITH DYED DIESEL FUEL?
ANSWER: TAXPAYER IS ELIGIBLE FOR REFUND OF THE TAX PAID ON THE UNDYED
BIODIESEL FUEL, IF THE UNDYED BIODIESEL FUEL IS MIXED WITH DYED DIESEL FUEL IN
ACCORDANCE WITH FEDERAL LAW AND MEETS THE STANDARDS DESCRIBED IN IRS
NOTICE 05-80, INTERNAL REVENUE BULLETIN 2005-46 (NOVEMBER 14, 2005), WHICH
STATES A REFUND MAY BE GRANTED TO A TAXPAYER ON ONLY THOSE BLENDS THAT
CONTAIN AT LEAST 80 PERCENT DYED DIESEL FUEL THAT WAS DYED AT A TERMINAL,
AND THE REMAINING PORTION IS BIODIESEL OR ANY OTHER PRODUCT THAT IS NOT A
DIESEL FUEL OR KEROSENE.
July 31, 2015
RE:

Technical Assistance Advisement 15B5-001
Refund of Tax Paid on Undyed Biodiesel
Internal Revenue Bulletin: 2005-46
Sections: 206.86, 206.874, 206.8745, Florida Statutes (F.S.)
Rule: 12B-5.140, Florida Administrative Code (F.A.C.)
XXXXXX (Taxpayer)
XXXXXX
XXXXXX
FEIN: XXXXXX

Dear XXXXXX:
This is in response to your request dated XXXXXX, for a Technical Assistance Advisement (TAA)
pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C, regarding a refund of the fuel tax paid
on biodiesel. An examination of your letter has established that you have complied with the statutory and
regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request
for a TAA.

Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2
FACTS
Taxpayer is a licensed Florida wholesaler selling fuel products in Florida. Taxpayer has bulk storage
capacity at its facilities for dyed diesel fuel, clear diesel fuel, and biodiesel fuel. XXXXXX (Supplier)
produces and distributes, among other products, biodiesel fuel. Supplier has a current pollutants tax
license, a wholesaler license, and an exporter license.
Taxpayer purchased B99 biodiesel fuel from Supplier, where Supplier causes the B99 to be shipped into
Florida by rail car to an unloading destination near Taxpayer’s tank farm. Supplier charges Taxpayer the
pollutants tax in the amount of .0207 cents per gallon, as a separate line item, and the Florida Fuel tax in
the amount of .316 cents per gallon. Taxpayer remits the pollutants tax and the fuel taxes to its supplier.
Taxpayer transfers the B99 to its clear biodiesel storage tank. It then blends it with its bulk inventory of
dyed diesel fuel to create the following: (1) a blend constituting approximately 4% clear B99 biodiesel (in
all cases less than 5% clear B99), and dyed diesel fuel for the remaining percentage; and (2) 90/10, 80/20,
70/30 blends. (The top figure is the percentage of dyed diesel fuel and the lower figure is the percentage
of clear B99 biodiesel.) The blend of approximately 4% clear B99 biodiesel and approximately 96% dyed
diesel is stored in a separate tank.
TAXPAYER POSITION
Taxpayer believes it is entitled to either a refund or credit of the Florida diesel fuel tax it paid to Supplier
on the clear B99 biodiesel under the following conditions:
1.

Taxpayer’s sales of the various blends of clear (undyed) B99 with dyed diesel fuel for purposes
set forth in section 206.874(1)(e), F.S.1, are not subject to the diesel fuel tax under section 206.87,
F.S.

2.

Taxpayer submits with its refund application the documentation required by section
206.8745(3)(a), F.S.

The legal authority Taxpayer relies upon is the provisions in Sections 206.874, and 206.8745, F.S.
REQUESTED ADVISEMENT
Taxpayer’s representative seeks a binding TAA from the Department on whether Taxpayer is entitled to a
refund of the Florida diesel fuel tax that it paid to its supplier for the clear B99 biodiesel on Taxpayer’s
sales of the B99 blends described above for purposes exempt from the Florida diesel fuel tax under
Sections 206.874, and 206.8745, F.S.

1

Taxpayer believed it was entitled to a refund of the tax paid on undyed biodiesel pursuant to s. 206.874, F.S. Taxpayer
confirmed through a telephone conversation that s. 206.874(1)(e), F.S., was the specific reference within s. 206.874.

Technical Assistance Advisement
Page 3
APPLICABLE AUTHORITY
Section 206.86, F.S., provides definitions that are pertinent to this discussion and states in part:
(1) “Diesel fuel” means all petroleum distillates commonly known as diesel #2, biodiesel, or any
other product blended with diesel or any product placed into the storage supply tank of a dieselpowered motor vehicle. . . .
(7) “Dyed diesel fuel” means diesel fuel that is dyed in accordance with United States
Environmental Protection Agency or Internal Revenue Service requirements for high sulfur diesel
fuel or low sulfur diesel fuel. . . .
(12) “Biodiesel” means any product made from nonpetroleum-based oils or fats which is suitable
for use in diesel-powered engines. Biodiesel is also referred to as alkyl esters. . . .
Section 206.874, F.S., provides that diesel fuel is exempt from the diesel fuel tax under certain conditions
and states in part:
(1) The provisions of this part requiring the payment of taxes do not apply to any of the
following: . . .
(e) Diesel fuel which is destined for delivery to a location outside of this state on which the
diesel fuel registrant is required to collect the taxes of the destination state pursuant to an
agreement with the state of destination.

(3) Dyed diesel fuel may be purchased and used only for the following purposes: . . .
(l) Use in self-propelled off-road equipment or stationary equipment subject to tax under s.
212.0501.
This provision of the Florida Statutes authorizes an exemption from the diesel fuel tax when the fuel is
destined for delivery to a location outside of this state. This provision applies only to sales by a licensed
terminal supplier to a licensed exporter, where the exporter will export the fuel from this state. The
terminal supplier is required to collect the tax that is imposed by the destination state.
This provision also provides that dyed diesel fuel is exempt from the fuel tax when such fuel is used in
self-propelled off-road equipment or stationary equipment subject to tax under s. 212.0501, F.S. This
provision applies only to dyed diesel fuel purchased for business purposes, and such fuel is subject to sales
tax pursuant to Chapter 212, F.S.
Taxpayer is not a licensed terminal supplier selling fuel to a licensed exporter. Taxpayer does not use
dyed diesel fuel in self-propelled off-road equipment or stationary equipment subject to tax under s.
212.0501, F.S. Taxpayer’s purchase of undyed biodiesel fuel that it mixed with dyed diesel fuel was for
the sole purpose of resale.

Technical Assistance Advisement
Page 4
Section 206.8745, F.S., provides a refund of the fuel tax paid on undyed diesel fuel used for specific
applications and states in part:
(1) Except as provided in subsections (2) and (7), any person who purchases undyed, tax-paid
diesel fuel who has paid the tax imposed by this part to the seller may file a claim for refund of
such taxes paid as provided in s. 215.26 if the fuel is used for an exempt purpose identified in s.
206.874(3). . . .
(3)(a) A licensed terminal supplier, importer, or wholesaler which holds title to undyed diesel
fuel which has been mixed with dyed diesel fuel in storage may claim a refund or credit for any
state and local option tax paid on the undyed diesel fuel. In lieu of applying for a refund, a credit
may be taken on the return required pursuant to s. 206.43. Any refund or credit claimed under this
subsection shall be supported by documentation showing the date and location of the mixing,
number of gallons involved, and disposition of the mixed fuel.
(b) Any mixture of dyed and undyed diesel fuel shall not be subject to a taxable use, and shall
remain subject to the dye specifications provided by s. 206.8741. . . .
This provision of Florida Statutes authorizes a refund of the tax paid on undyed biodiesel fuel when the
undyed biodiesel fuel is used in the same manner authorized for dyed diesel fuel.
This provision also provides a refund to a terminal supplier, importer, or wholesaler for the accidental
mixing of undyed biodiesel fuel with dyed diesel fuel. The refund is granted when the taxpayer complies
with the provisions of Rule 12B-5.140, F.A.C.
Taxpayer does not use undyed biodiesel fuel in the same manner as authorized for dyed diesel fuel, and
the mixing of undyed biodiesel fuel with dyed diesel fuel was not accidental. Taxpayer’s mixing of
undyed biodiesel fuel with dyed diesel fuel was intentional, and for the purpose of creating specific
biodiesel blends for resale.
Rule 12B-5.140, F.A.C., provides further explanation to s. 206.8745(3), F.S., and states:
(1) Marking and Dyeing. The dyeing and marking of diesel fuel will follow the requirements of
48.4082-1, Treasury Regulations (February 26, 2002, hereby incorporated by reference in this
rule), and shall conform to the Environmental Protection Agency’s high sulfur diesel fuel
requirements as found in 40 C.F.R. Chapter 1, s. 80.29 (January 18, 2001, hereby incorporated by
reference in this rule).
(2) Mixing.
(a) A licensed terminal supplier, importer, or wholesaler that holds title to taxable diesel fuel that
has been mixed with dyed diesel fuel in storage may qualify for a refund of any state and local
option tax paid on the taxable diesel fuel as follows:

Technical Assistance Advisement
Page 5

1. The terminal supplier, importer, or wholesaler must contact the Department at (850) 717-6034
   within “thirty 30 days” of the misfueling incident that caused the mixing of dyed diesel fuel with
   taxable diesel fuel to obtain a refund authorization number. The terminal supplier, importer, or
   wholesaler must report the following information:
   a. The name of the licensee holding title,
   b. The location of the storage,
   c. The number of gallons of taxable diesel,
   d. The number of gallons of dyed diesel,
   e. The resulting total number of gallons of mixed diesel,
   f. The date and time of the incidence of mixing,
   g. The disposition of all mixed diesel fuel, and
   h. The steps taken to bring the mixed fuel to proper dyed fuel specifications.
2. Prior to granting a refund authorization number, the Department will investigate the
   circumstances of the misfueling incident and the handling of the mixed dyed diesel fuel with
   taxable diesel fuel.
   (b) To obtain a refund of tax paid on diesel fuel, the terminal supplier, importer, or wholesaler
   holding a refund authorization number must file an Application for Refund (Form DR-26,
   incorporated by reference in Rule 12-26.008, F.A.C.) with the Department. Form DR-26 must be
   filed in accordance with the timing provisions of Section 215.26(2), F.S., and must meet the
   requirements of Section 213.255(2) and (3), F.S. and Rule 12-26.003, F.A.C. Form DR-26,
   Application for Refund, must be filed with the Department within 3 years after the date the tax was
   paid.
   (c)1. The discovery by the Department of dye in any fuel storage facility that is not properly
   marked for off highway or other exempt use as dyed fuel will be prima facie evidence of a
   violation of Section 206.8741, F.S., and subject to the penalty imposed under Section 206.872(11),
   F.S.
3. Unless the misfueling incident has been previously reported, persons found in violation of the
   marking provisions will be subject to a penalty of the greater of $10 for each gallon of diesel fuel
   involved or $1,000, and no refund of tax paid on the diesel fuel will be granted.
   Florida law generally authorizes a refund of the tax paid on undyed biodiesel fuel mixed with dyed diesel
   fuel only when the mixing is accidental. IRS Bulletin 2005.46 temporarily authorizes the mixing of dyed
   diesel fuel with undyed biodiesel fuel below the loading rack. Because Florida fuel tax laws generally
   mirror federal regulations, the State of Florida has permitted the mixing of dyed diesel fuel with undyed
   biodiesel below the loading racks of a terminal. For Florida tax administrative purposes, the dyeing of
   diesel products by wholesalers and blenders will be deemed in compliance with the provisions of IRS
   Bulletin 2005-46 by the Department of Revenue, when the volume of diesel products blended outside a
   terminal consists of at least 80 percent dyed diesel that was dyed at a terminal, and the remaining portion
   is biodiesel or any other product that is not diesel fuel or kerosene.

Technical Assistance Advisement
Page 6
CONCLUSION
There is nothing in sections 206.874(1)(e) and 206.8745(3)(a), F.S., that provide for a refund of the tax
paid on the undyed biodiesel diesel fuel that is mixed below the loading rack with dyed diesel fuel by a
wholesaler. Accordingly, the Taxpayer cannot base its claim for refund on those specific statutory
provisions under the facts provided.
However, a taxpayer is eligible for refund if the undyed biodiesel fuel is mixed in accordance with federal
law and meets the standards described in IRS Notice 05-80, Internal Revenue Bulletin 2005-46
(November 14, 2005). See Taxpayer Information Publication 06B05-05 (December 8, 2006). Under
these provisions, a refund may be granted to a taxpayer on only a those blends that contain at least 80
percent dyed diesel fuel that was dyed at a terminal. The filing and record requirements to obtain a refund
can also be found in TIP 06B05-05, a copy which is enclosed with this correspondence.
This response constitutes a Technical Assistance Advisement under Section 213.22, F.S., which is binding
on the Department only under the facts and circumstances described in the request for this advice as
specified in Section 213.22, F.S. Our response is predicated on those facts and the specific situation
summarized above. You are advised that subsequent statutory or administrative rule changes, judicial
interpretations of the statutes or rules, or changes to the facts, upon which this advice is based, may
subject similar future transactions to a different treatment than expressed in this response.
You are further advised that this response, your request and related documents are public records under
Chapter 119, F.S., which are subject to disclosure to the public under the conditions of Section 213.22,
F.S. Your name, address, and any other details, which might lead to identification of the taxpayer, must be
deleted before disclosure. In an effort to protect the confidentiality of such information, we request you
provide the undersigned with an edited copy of your request for Technical Assistance Advisement, backup
material and response within fifteen days of the date of this advisement.
If you have any further questions with regard to this matter and wish to discuss them, you may contact me
directly at (850) 717-6745.
Sincerely,

Ron Gay
Tax Law Specialist
Technical Assistance & Dispute Resolution
Record ID: 196014
Enclosure