What Georgia taxes must a licensed distributor collect when it sells dyed diesel to end users for highway or non-highway use?

Plain-English summary

A licensed motor-fuel distributor bought dyed diesel from other licensed distributors and resold it to end users. The Department divided the tax treatment by how the customer would use the fuel.

• Purchase for resale: The distributor may buy dyed diesel free of sales and use tax by giving the seller a resale certificate such as Form ST-5. Its licensed-distributor purchases from other licensed distributors were also free from motor-fuel excise tax.
• Non-highway use: Sales to end users are subject to regular, non-prepaid state and local sales and use taxes, measured by the sales price. The licensed distributor may sell dyed fuel oil for non-highway use without motor-fuel excise tax.
• Highway use: Sales for highway use are subject to motor-fuel excise tax and prepaid local tax, but not regular non-prepaid state or local sales and use tax. The ruling treats construction, reconstruction, maintenance, and repair of public highways as highway use. Prepaid local tax is measured using the Department's published average retail sales price.

The letter does not approve the legality of using dyed diesel on highways. It warns that sale or consumption for highway use may trigger penalties under O.C.G.A. § 48-9-16 and other laws.

What this means for you

Dyed-diesel distributors

Document the customer's intended use before applying the tax treatment. The tax mix reverses depending on use: regular sales taxes for non-highway sales, versus excise tax and prepaid local tax for highway-use sales.

Contractors working on public highways

The Department expressly includes fuel used in public-highway construction, reconstruction, maintenance, or repair within highway use. That classification applies even though the fuel is not described merely as propelling a vehicle along the highway.

Accountants and fuel-tax teams

Use the correct tax base. Regular state and local sales taxes use the fuel's sales price; prepaid local tax uses the average retail sales price the Department publishes by bulletin.

Common questions

Q: Can the distributor buy dyed diesel tax-free for resale?

A: Yes. It may present a resale certificate, such as Form ST-5, to avoid sales and use tax on the resale purchase.

Q: What applies when the customer uses dyed diesel off highway?

A: Regular state and generally applicable local sales and use taxes apply to the end-user sales price; motor-fuel excise tax does not apply to a licensed distributor's sale for non-highway use.

Q: What applies when the fuel is sold for highway use?

A: Motor-fuel excise tax and prepaid local tax apply, while regular non-prepaid state and local sales or use tax does not.

Q: Is road construction a highway use?

A: Yes. The ruling includes construction, reconstruction, maintenance, and repair of public highways.

Q: Does the ruling say highway use of dyed diesel is lawful?

A: No. A footnote disclaims any assertion about legality and warns of possible penalties.

Q: Can another distributor rely on this ruling?

A: No. It applies only to the requesting distributor and represented transactions, and changed facts or law may invalidate the result.

Citations and references

Key authorities:

• O.C.G.A. § 48-9-2(8)-(9) -- highway use and motor fuel definitions
• O.C.G.A. § 48-9-3(a)(1), (b)(1), (b)(9) -- excise tax and licensed-distributor exclusions
• O.C.G.A. § 48-8-2(23), (31), (37) -- relevant sales-tax definitions
• O.C.G.A. § 48-8-3.1 -- motor-fuel sales-tax exemption and non-highway exception
• O.C.G.A. § 48-8-30 -- sales/use tax and prepaid local tax
• O.C.G.A. § 48-8-38 -- resale certificate
• Ga. Comp. R. & Regs. r. 40-20-1-.01(e) -- dyed diesel classified as fuel oil

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2018-01

Original ruling text

Georgia Letter Ruling Number: LR SUT-2018-01
Topic: Dyed Diesel Fuel
Dated: March 7, 2018
This letter is in response to your letter ruling request dated June 14, 2017, regarding the application of Georgia sales
and use tax to sales of dyed diesel fuel.
Facts Presented By Taxpayer
[Redacted], (“Taxpayer”) is a motor fuel distributor licensed to use and resell dyed diesel fuel. 1 Taxpayer buys dyed
diesel fuel from other licensed motor fuel distributors free from motor fuel excise tax and sales tax and sells the dyed
diesel fuel to end-users.
Issue
What is the appropriate tax treatment of a duly licensed distributor’s sales of dyed diesel to end-users?
Analysis
Motor Fuel Excise Tax
O.C.G.A. § 48-9-3 imposes excise tax on distributors who sell or use motor fuel. 2 “‘Motor fuel’ means any source of
energy that can be used for propulsion of motor vehicles on the public highways including, but not limited to: (A)
Gasoline; (B) Fuel oils; (C) Compressed petroleum gas; and (D) Special fuel.” 3,4 No excise tax, however, is imposed
on bulk sales 5 of motor fuel by duly licensed distributors to duly licensed distributors. 6 Because Taxpayer in this case
is a duly licensed distributor, it may purchase dyed diesel from duly licensed distributors free from excise tax.
Taxpayer, as a duly licensed distributor, may sell dyed diesel free from excise tax to a consumer for a purpose other
than highway use. 7 Note that highway use includes the “use of motor fuel other than gasoline in the construction,
reconstruction, maintenance, or repair of public highways.” 8 As such, if Taxpayer sells dyed diesel to an end-user for
highway use, 9 including the construction, reconstruction, maintenance, or repair of public highways, then Taxpayer
must remit excise tax on the transaction.
Sales and Use Tax
State sales and use tax is imposed on retail sales of tangible personal property, including fuels. 10 “Retail sale” or a
“sale at retail” means any sale, lease, or rental for any purpose other than for resale, sublease, or subrent. 11

License No. [Redacted]. The license states that Taxpayer is licensed to use and resell all fuels except compressed
and special fuels. Dyed diesel is fuel oil. Ga. Comp. R. & Regs. r. 40-20-1-.01(e). Dyed diesel is not a compressed
fuel or a special fuel. O.C.G.A. § 48-9-2.
2
O.C.G.A. §§ 48-9-3(a)(1).
3
O.C.G.A. § 48-9-2(9).
4
Dyed diesel is a fuel oil. Ga. Comp. R. & Regs. r. 40-20-1-.01(e).
5
Chapter 9 of Title 48 does not define “bulk sale.”
6
O.C.G.A. § 48-9-3(b)(1).
7
O.C.G.A. § 48-9-3(b)(9)(“No tax is imposed by this article upon or with respect to the following sales by duly
licensed distributors: . . . Sales of dyed fuel oils to a consumer for other than highway use as defined in paragraph (8)
of Code Section 48-9-2 . . .”).
8
“Highway use” means: (A) The consumption or use of motor fuel other than gasoline in or upon a motor vehicle
which is operated on the public highways; (B) The placing of motor fuel other than gasoline in the running tank or
power cells of a motor vehicle designed for use and used on the public highways; or (C) The use of motor fuel other
than gasoline in the construction, reconstruction, maintenance, or repair of public highways. O.C.G.A. § 48-9-2(8).
9
This ruling makes no assertions on the legality of the sale or consumption of dyed diesel for highway use. The sale
or consumption of dyed diesel for highway use may result in penalties under O.C.G.A. § 48-9-16 and other laws.
10
O.C.G.A. §§ 48-8-30(b)(1), 48-8-2(37).
11
O.C.G.A. § 48-8-2(31).
1

Georgia Letter Ruling Number: LR SUT-2018-01
Topic: Dyed Diesel Fuel
Dated: March 7, 2018
Page 2 of 3
Accordingly, Taxpayer may purchase dyed diesel tax free for resale by presenting a resale certificate of exemption,
such as a completed Form ST-5, to the seller. 12
Retail sales of motor fuel, other than gasoline, purchased for purposes other than propelling motor vehicles on public
highways as defined in Article 1 of Chapter 9 of Title 48 are fully subject to state sales and use tax, unless otherwise
specifically exempted. 13 Except as expressly provided, local sales and use taxes correspond to state sales and use tax,
except as to rate. 14 Thus, in addition to state sales and use tax, local sales and use taxes are generally imposed on retail
sales of non-gasoline motor fuel for purposes other than propelling motor vehicles on public highways. 15 Therefore,
Taxpayer must remit state and local sales and use taxes on the sale to the end-user of dyed diesel for non-highway
uses. The measure of tax is the “sales price,” as defined in O.C.G.A. § 48-8-2, of dyed diesel to the end-user. 16
If Taxpayer sells dyed diesel for highway use, a different analysis applies. O.C.G.A. § 48-8-3.1 states that, except for
sales of non-gasoline motor fuel purchased for purposes other than “propelling motor vehicles on public highways as
defined in Article 1 of Chapter 9 of Title 48,” sales of motor fuels are exempt from state sales and use tax. 17 In other
words, sales of gasoline for any purpose and sales of motor fuel for purposes of propelling vehicles on public highways
are exempt from state sales and use tax.
Because Chapters 8 and 9 of Title 48 are inextricably intertwined, containing multiple cross-references to each other,
there is no significant difference between the meaning of “highway use” and “propelling motor vehicles on public
highways.” To construe the terms as having different meanings would lead to incongruent results. Thus, “propelling
motor vehicles on public highways” in Chapter 8, in addition to its obvious meaning, must include the construction,
reconstruction, maintenance, or repair of public highways, just as “highway use” in Chapter 9 (as discussed above)
includes the construction, reconstruction, maintenance, or repair of public highways. Thus, to the extent Taxpayer
sells motor fuel for highway use, including the construction, reconstruction, maintenance, or repair of public highways,
state sales and use tax does not apply.
As for local sales and use tax, the local sales and use tax imposition statutes state that no item or transaction that is not
subject to state sales and use tax is subject to local sales and use taxes, except that local sales and use taxes are
applicable to sales of motor fuels as prepaid local tax. 18 Note, however, that prepaid local tax does not apply to all
sales of motor fuel. Rather, prepaid local tax applies to motor fuel only when non-prepaid state and local sales and use
taxes do not apply to motor fuel and when motor fuel excise tax applies to motor fuel. That is, prepaid local tax applies
only to motor fuel sold for highway use. This conclusion is supported by O.C.G.A. § 48-8-30, which states, “The
prepaid local tax shall be imposed at the time tax is imposed under Code Section 48-9-3.” 19
Thus, to the extent Taxpayer makes sales of dyed diesel for highway use, such as for the construction, reconstruction,
maintenance, or repair of public highways, Taxpayer should remit motor fuel excise tax and prepaid local tax on those
sales and should not remit any non-prepaid state or local sales or use tax. The measure of tax for prepaid local tax is
“the average retail sales price.” 20 The Department publishes the average retail sales price at least twice annually by
bulletin.
O.C.G.A. § 48-8-38.
O.C.G.A. § 48-8-3.1.
14
O.C.G.A. §§ 48-8-82(a) (LOST), 48-8-102(b) (HOST), 48-8-109.5(a) (EHOST), 48-8-110.1(c) and (d) (SPLOST),
48-8-141(a) (ESPLOST), 48-8-201(c)(1)(A) and (e) (MOST), 48-8-241, 48-8-269, 48-8-269.15, 48-8-269.30
(TSPLOSTs), 32-9-13 (Atlanta MARTA); MARTA Act, § 25(a).
15
Not all local sales and use taxes are imposed on all uses of motor fuel. For example, the TSPLOST taxes imposed
under Articles 5 and 5A of Title 48, Chapter 8 of the Georgia Code do not apply to motor fuel used for propulsion of
motor vehicles on the public highways and to various non-highway uses of motor fuel.
16
O.C.G.A. § 48-8-30.
17
O.C.G.A. § 48-8-3.1(a) and (b).
18
O.C.G.A. §§ 48-8-82(a) (LOST), 48-8-102(b) (HOST), 48-8-109.5(a) (EHOST), 48-8-110.1(c) and (d) (SPLOST),
48-8-141(a) (ESPLOST), 48-8-201(c)(1)(A) and (e) (MOST), 32-9-13 (Atlanta MARTA), 48-8-2(23) (definition of
prepaid tax), and MARTA Act, § 25(a).
19
O.C.G.A. § 48-8-30(k).
20
O.C.G.A. § 48-8-2(23).
12
13

Georgia Letter Ruling Number: LR SUT-2018-01
Topic: Dyed Diesel Fuel
Dated: March 7, 2018
Page 3 of 3
Ruling
Taxpayer may purchase dyed diesel for resale free from sales and use tax by presenting a resale certificate, such as a
completed Form ST-5, to the seller. Taxpayer must then remit non-prepaid state and local sales and use taxes on the
sale to the end-user of dyed diesel for non-highway uses. The measure of tax is the “sales price” of dyed diesel to the
end-user as that term is defined in O.C.G.A. § 48-8-2.
If Taxpayer sells dyed diesel for highway use, such as for the construction, reconstruction, maintenance, or repair of
public highways, Taxpayer should remit motor fuel excise tax and prepaid local tax on those sales and should not
remit any non-prepaid state or local tax. The measure of tax for prepaid local tax is the average retail sales price. The
Department publishes the average retail sales price at least twice annually by bulletin.
The opinions expressed in this ruling are based upon the information contained in your request and limited to the
specific transactions, facts, circumstances and taxpayer in question. Should the circumstances regarding the
transactions change or differ materially from those represented, this ruling may become invalid. In addition,
subsequent statutory or administrative rule changes or judicial interpretations of the statutes or rules upon which this
advice is based may subject similar future transactions to a different tax treatment than that expressed in this ruling.