When is kerosene subject to South Carolina's motor fuel user fee?

Plain-English summary

South Carolina Revenue Ruling #18-3 explains that kerosene is not automatically taxed merely because it can be a motor fuel. The user fee attaches when the kerosene enters one of four specified motor-fuel uses or transactions.

Kerosene is subject to the fee when:

• it is delivered into the fuel-supply tank of a highway vehicle under the backup-fee provision;
• it is blended in South Carolina with undyed diesel fuel;
• it is sold as part of a gasoline-and-kerosene blended fuel; or
• it is sold in an undyed-diesel-and-kerosene blend used in South Carolina to power motor vehicles.

When kerosene is blended with undyed diesel, the fee applies at the blending event. A gasoline-containing blend is taxed when used or consumed for any purpose in South Carolina under the provision quoted by the ruling. A diesel-containing blend is taxed when used to produce power for propelling motor vehicles.

Kerosene outside those motor-fuel conditions is not subject to the fee under the ruling. The Department's longstanding position remained unchanged even though RR #18-3 updated the older guidance for Act No. 40's scheduled increase in the per-gallon fee.

What this means for you

Fuel vendors and blenders

Track K-1 kerosene and other untaxed blendstocks separately. When kerosene is blended with previously taxed undyed diesel or gasoline, determine and remit the additional user fee and follow the licensing and report rules in §§ 12-28-990 and 12-28-1390.

Heating-fuel sellers

Unblended kerosene sold outside a taxable motor-fuel use is not subject to the motor fuel user fee merely because kerosene appears in the statutory definition of motor fuel subject to the fee.

Highway-vehicle operators

Putting otherwise untaxed kerosene into a highway vehicle can trigger the backup user fee. The ultimate vendor can be jointly liable if it knows or has reason to know the fuel will be consumed in a nonexempt use.

Common questions

Q: Is all kerosene taxed at sale?
A: No. The ruling identifies specific delivery, blending, and motor-vehicle-use events that trigger the fee.

Q: When is a diesel-kerosene blend taxed?
A: Kerosene blended in South Carolina with undyed diesel is taxed at blending, and a diesel-containing blend used to propel vehicles is covered by the user-fee provision.

Q: What about kerosene placed directly in a highway vehicle?
A: The backup user fee applies upon delivery into the vehicle's fuel-supply tank unless an exemption applies.

Citations and references

• S.C. Code Ann. §§ 12-28-110 and 12-28-310 — definitions and motor fuel user fee
• S.C. Code Ann. § 12-28-970 — backup user fee
• S.C. Code Ann. §§ 12-28-990 and 12-28-1390 — blending, licensing, remittance, and reports
• Act No. 40 of 2017 — scheduled motor fuel user-fee increases

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR18-3.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 12265, Columbia, South Carolina 29211

SC REVENUE RULING #18-3

SUBJECT:

Kerosene
(Motor Fuel User Fee)

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

SC Revenue Ruling #98-20 and all previous documents and any
oral directives in conflict herewith.

REFERENCES:

S.C. Code Ann. Section 12-28-110 (Supp. 2017)
S.C. Code Ann. Section 12-28-310 (2014, Supp. 2017)
S.C. Code Ann. Section 12-28-320 (2014)
S.C. Code Ann. Section 12-28-330 (2014)
S.C. Code Ann. Section 12-28-970 (2014)
S.C. Code Ann. Section 12-28-990 (2014)
S.C. Code Ann. Section 12-28-1390 (2014)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-20(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the
public. It is an advisory opinion to apply principles of tax law to a
set of facts or general category of taxpayers. It is the Department’s
position until superseded or modified by a change in the statute,
regulation, court decision, or another Department advisory opinion.

Purpose:
The purpose of this advisory opinion is to update SC Revenue Ruling #98-20 to address the
increase in the motor fuel user fee contained in Act No. 40 of 2017, “The South Carolina
Infrastructure and Economic Development Act.” This legislation increases the motor fuel user
fee over the next several years from sixteen cents per gallon to twenty-eight cents per gallon. The
increase will be fully implemented on July 1, 2022. This advisory opinion also addresses the
application of the motor fuel user fee to blended fuels containing kerosene. However, the
Department’s longstanding position as to when kerosene is subject to the motor fuel user fee
remains unchanged.
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Question:
Is kerosene subject to the user fee on motor fuels (“user fee”) under Chapter 28 of Title 12 of the
South Carolina Code of Laws?
Conclusion:
Kerosene is subject to the user fee:
(1) under the provisions of Code Section 12-28-970 upon its delivery into the fuel supply
tank of a highway vehicle;
(2) under the provisions of Code Sections 12-28-310 and 12-28-990 when it is blended in
South Carolina with undyed diesel fuel;
(3) under the provisions of Code Section 12-28-310(A)(1) when sold as part of a blended fuel
of gasoline and kerosene; or
(4) under the provisions of Code Section 12-28-310(A)(2) when sold as part of a blended fuel
of undyed diesel fuel and kerosene for use or consumption in South Carolina for
producing or generating power for propelling motor vehicles.
Discussion:
The question has arisen as to how kerosene is subject to the user fee under Chapter 28 of Title 12
of the South Carolina Code of Laws. In order to determine the method by which kerosene is
subject to the user fee, we must first review the various imposition sections 1 and definitional
sections under the law.
Code Section 12-28-310 imposes a user fee upon certain types of motor fuels and reads:
(A) Subject to the exemptions provided in this chapter, a user fee of sixteen cents
a gallon is imposed on:
(1) all gasoline, gasohol, or blended fuels containing gasoline that are used or
consumed for any purposes in this State; and
(2) all diesel fuel, substitute fuels, or alternative fuels, or blended fuels
containing diesel fuel that are used or consumed in this State in producing or
generating power for propelling motor vehicles.
(B) The user fee levied on motor fuel subject to the user fee pursuant to this
chapter is a levy and assessment on the consumer, and the levy and assessment on
other persons as specified in this chapter are as agents of the State for the
1

For purposes of this ruling, there is no need to include a discussion of the floorstock user fee imposed under Code
Section 12-28-530(A).

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collection of the user fee. This section does not affect the method of collecting the
user fee as provided in this chapter. The user fee imposed by this section must be
collected and paid at those times, in the manner, and by the persons specified in
this chapter.
(C) The license user fee imposed by this section is instead of all sales, use, or
other excise tax that may be imposed otherwise by any municipality, county, or
other local political subdivision of the State.
(D) On July 1, 2017, and each July first thereafter until after July 1, 2022, the
department shall permanently increase the amount of the user fee imposed
pursuant to subsection (A) by two cents, for a total of twelve cents. All the funds
raised by the increase in the motor fuel imposed by this subsection must be
credited to the Infrastructure Maintenance Trust Fund.
(Emphasis added.)
Code Section 12-28-320 establishes a presumption concerning the delivery of motor fuel subject
to the user fee into a motor vehicle fuel supply tank and states:
Except as otherwise provided under Article 7 of this chapter, the department shall
consider it a presumption that all motor fuel subject to the user fee delivered in
this State into a motor vehicle fuel supply tank is to be used or consumed on the
highways in this State producing or generating power for propelling motor
vehicles.
Code Section 12-28-330 establishes a rebuttable presumption concerning motor fuel subject to
the user fee and states:
The department considers it a rebuttable presumption, subject to proof of
exemption pursuant to Article 7 of this chapter, that all motor fuel subject to the
user fee removed from a terminal in this State, or imported into this State other
than by a bulk transfer within the bulk transfer terminal system or delivered into
an end user’s storage tank, is to be used or consumed in this State, in the case of
gasoline, gasohol, or blended fuels containing gasoline and is to be used or
consumed on the highways in this State in producing or generating power for
propelling motor vehicles in the case of all other motor fuel.
(Emphasis added.)
Code Section 12-28-970, which authorizes a “backup user fee,” states:
(A) A backup user fee equal to the user fee imposed by Section 12-28-310 is
imposed and must be administered in accordance with procedures established by
the department on the use on the highways of motor fuel subject to the user fee by
an end user, including operators of state and local government vehicles, American
Red Cross vehicles, and buses, and other persons exempted from the full federal
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highway tax, unless the person is exempted otherwise under Section
12-28-710(12), upon the delivery in this State into the fuel supply tank of a
highway vehicle of:
(1) diesel fuel that contains a dye;
(2) motor fuel subject to the user fee on which a claim for refund has been made;
(3) alternative fuels; or
(4) substitute fuel on which a user fee previously has not been imposed by this
chapter.
(B) The ultimate vendor of motor fuel subject to the user fee is jointly and
severally liable for the user fee imposed by subsection (A) if the ultimate vendor
knows or has reason to know that the motor fuel, as to which the user fee imposed
by this chapter has not been paid, is or will be consumed in a nonexempt use.
(C)(1) A back-up user fee equal to the user fee imposed by Section 12-28-310 is
imposed on a liquid or gas that is not otherwise taxed pursuant to this chapter and
that is commonly or commercially known or sold as a fuel suitable for use in a
highway vehicle. The user fee is due upon the first receipt of the product when
received from a source outside of South Carolina by any wholesaler, retailer, or
end-user and the user fee is imposed upon, and is the liability of, the wholesaler,
retailer, or end-user who first received the product into the State.
(2) A back-up user fee equal to the user fee imposed by Section 12-28-310 is
imposed on any liquid or gas that is not otherwise taxed pursuant to this chapter
and that is commonly or commercially known or sold as a fuel suitable for use in
a highway vehicle. The user fee is due upon the first sale or use of the product
when produced in this State by a person and the user fee is imposed upon the first
in-state sale or use by that person. The user fee is imposed upon, and is the
liability of, the producer of the product.
Code Section 12-28-990, which concerns persons blending materials on which the user fee has
not been paid, including blendstocks, additives, fuel grade ethanol, and renewable fuels, with
motor fuels subject to the user fee, states:
(A) A person (i) blending materials including blendstocks, additives, fuel grade
ethanol, and renewable fuels on which the user fee has not been paid, with motor
fuels subject to the user fee for which the user fee has been paid or accrued; or (ii)
manufacturing or otherwise producing a substitute fuel or diesel fuel, unless dye
was added in a manner that conforms to federal requirements established by the
Internal Revenue Code and regulations exempting the product from the motor fuel
tax pursuant to Secton 12-28-710(11) shall remit the user fee imposed by this
chapter.

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(B) A fuel vendor subject to the user fee under subsection (A) shall remit the user
fee with the report required pursuant to Section 12-28-1390(B).
(C) A person other than a fuel vendor liable for the user fee payable pursuant to
subsection (A) shall remit the user fee directly to the department within thirty days
of the blending or manufacturing event in accordance with procedures established
by the department.
(D) A person subject to the user fee payable pursuant to subsection (A) must be
licensed by the department as a blender or a manufacturer.
Code Section 12-28-1390, which concerns a fuel vendor's reports and the reporting of blending,
states:
(A) A fuel vendor shall file an annual report of total gallons of gasoline sold at
retail through a retail outlet accessible to the general public by that vendor by
county before February twenty-eighth annually for the preceding calendar year.
(B) A fuel vendor shall make and file quarterly reports on the last day of the
month following the close of each calendar quarter of sales of K-1 kerosene, or
other blendstocks not subject to the user fee, other than dyed diesel fuel, in
accordance with regulations promulgated by the department. The department may
waive this report requirement if it becomes unnecessary to the administration of
this chapter. Persons who are required to identify separately and schedule sales
and transfers of undyed K-1 kerosene in reports otherwise required by this article
are exempt from this requirement.
(C) A fuel vendor making sales of K-1 kerosene or other blendstocks not subject
to the user fee for blending with diesel fuel or gasoline subject to the user fee or
which sells K-1 kerosene, other motor fuel, or blendstocks not subject to the user
fee shall remit monthly a report on or before the last day of the following month
and remit with the report any user fee payable pursuant to this section or Section
12-28-990.
(D) A fuel vendor shall retain for three years all purchase invoices for motor fuel
subject to the user fee which clearly must designate the amount of user fees paid
to this State as a separate line item. This line item also must be described
generally as a "South Carolina Motor Fuel User Fee". In the absence of invoices
with the disclosures, the fuel vendor is jointly liable for the state user fee imposed
by this chapter and the department has authority to proceed against the fuel vendor
to collect the user fee.
(Emphasis added.)

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In understanding the above imposition section, we must review the following definitions found in
Code Section 12-28-110:

(15) "Diesel fuel" means a liquid, including biodiesel and a biodiesel blend that is
commonly or commercially known or sold as a fuel that is suitable for use in a
diesel-powered highway vehicle. A liquid meets this requirement if, without
further processing or blending, the liquid has practical and commercial fitness for
use in the propulsion engine of a diesel-powered highway vehicle. However, a
liquid does not possess this practical and commercial fitness solely by reason of
its possible or rare use as a fuel in the propulsion engine of a diesel-powered
highway vehicle. "Diesel fuel" does not include jet fuel if the buyer is registered to
purchase jet fuel subject to federal taxes applicable to jet fuel and the seller
obtains certification of that fact satisfactory to the Internal Revenue Service before
making the sale.

(37) "K-1 kerosene" means burner fuel designed for unvented space heaters which
meets American Society for Testing Materials standard D-3699, in effect January
1, 1995, and successor rules, as the specification for #1-K kerosene.
(38) "Liquid" means a substance that is liquid in excess of sixty degrees
Fahrenheit and a pressure of fourteen and seven-tenths pounds a square inch
absolute.
(39) "Motor fuel" means gasoline, diesel fuel, substitute fuel, renewable fuel,
alternative fuel, and blended fuel.

(55) "Motor fuel subject to the user fee" means gasoline, diesel fuel, kerosene,
blended fuel, substitute fuel, alternative fuel and blends of them and any other
substance blended with them.
“In construing statutory language, the statute must be read as a whole, and sections which are
part of the same general statutory law must be construed together and each one given effect, if it
can be done by any reasonable construction.” Higgins v. State, 307 S.C. 446, 415 S.E.2d 799
(1992). Smalls v. Weed, 293 S.C. 364, 360 S.E.2d 531 (Ct. App. 1987).
Based on the above, blends of undyed diesel fuel and kerosene that are capable of use in a
highway vehicle are subject to the user fee provisions of Code Section 12-28-310(A)(2) since:

1. the imposition provisions of Code Section 12-28-310 apply to gasoline, gasohol,
   blended fuels containing gasoline, that are used or consumed for any purpose in this
   State; and diesel fuel, substitute fuels, alternative fuels, and blended fuels containing
   diesel fuel that are used or consumed in this State in producing or generating power
   for propelling motor vehicles;
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2. the presumptive provisions of Code Section 12-28-330, while applying to motor fuel
subject to the user fee, do not apply to kerosene since these provisions can only apply
to a motor fuel subject to the user fee for which a user fee is imposed upon its
removal from the terminal, its importation into the State, or its delivery into an end
user’s storage tank;

3. the provisions of Code Sections 12-28-990 and 12-28-1390 indicate that kerosene is
   not subject to the user fee until such time it is blended with diesel fuel subject to the
   user fee or gasoline or sold for use as motor fuel subject to the user fee; and
4. kerosene falls within the definition of a “liquid” as set forth in Code Section 12-28110(38).
   In addition, a mixture of kerosene and diesel fuel falls within the definition of diesel fuel found
   in Code Section 12-28-110(15) and must be subject to the user fee in the same manner as “pure”
   undyed diesel fuel. As such, kerosene mixed with undyed diesel fuel is subject to the user fee at
   the time it is blended with the undyed diesel fuel. However, kerosene that is not blended with
   motor fuel as noted above is not subject to the user fee.
   Therefore, kerosene is subject to the motor fuel user fee: (a) under the provisions of Code Section
   12-28-970 upon its delivery into the fuel supply tank of a highway vehicle; (b) under the
   provisions of Code Sections 12-28-310 and 12-28-990 when it is blended in South Carolina with
   undyed diesel fuel; (c) under the provisions of Code Section 12-28-310(A)(1) when sold as part
   of a blended fuel of gasoline and kerosene; or (d) under the provisions of Code Section 12-28310(A)(2) when sold as part of a blended fuel of undyed diesel fuel and kerosene for use or
   consumption in South Carolina for producing or generating power for propelling motor vehicles.
   SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
May 2
, 2018
Columbia, South Carolina

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