and Revenue Administration
Fuel Tax Act
Information Circular FT-1R1
||February 2, 2016
||Alberta Treasury Board and Finance,
Tax and Revenue Administration
|For more information:
FUEL TAX ACT
NOTE: This Information Circular is intended to explain legislation and provide specific information. Every effort has been made to ensure the contents are accurate. However, if a discrepancy should occur in interpretation between this Information Circular and governing legislation, the legislation takes precedence.
OVERVIEW OF FUEL TAX
This Information Circular explains:
FRAMEWORK OF THE FUEL TAX ACT AND REGULATIONS
- Alberta Treasury Board and Finance, Tax and Revenue Administration (TRA) administers Alberta’s Fuel Tax Act (Act), which legislates a multi-stage direct tax. Each entity in the fuel distribution chain becomes a fuel taxpayer and recovers the tax paid from the next person in the distribution chain, with the end user (consumer) ultimately paying the fuel tax.
- The first person in the distribution chain, the “direct remitter”, usually makes the payment of fuel tax to TRA. The sale or removal of fuel from a refinery or registered terminal or the importation of fuel is generally the first trigger for the payment of fuel tax. This ensures fuel tax is paid at the highest level for administrative efficiency. The role of the direct remitter is explained below.
DEFINITION OF FUEL
- Under the Act, fuel is any combustible gas or liquid used to generate power in an internal combustion or turbine engine. Where the fuel contains additives, these are also subject to tax. The most common fuels used in Alberta to generate power in internal combustion and turbine engines are gasoline, diesel fuel, liquefied petroleum gas (LPG) and aviation fuel. Ethanol and biodiesel are also taxable fuels. Locomotive fuel is taxed on use in Alberta.
- Other fuels may, in specific circumstances, be used to generate motive power in an internal combustion or turbine engine. These fuels are commonly called bunker fuel, kerosene, methanol or condensate. Special rules on the taxability, reporting, and payment of tax on these fuels are provided below.
- Definitions of Specific Fuels
Aviation fuel is a fuel that has been refined
or produced specifically for use in aircraft.
Liquefied petroleum gas (LPG) is a fuel that
is composed predominantly of propane, propylene, butane (normal
or isobutene) or butylene or any mixture of the substances.
Locomotive fuel is a fuel used to operate a
railway locomotive or to provide heat or light to railway cars
attached to a railway locomotive.
Biodiesel fuel is a fuel comprised of mono-alkyl
esters of long chain fatty acids derived from vegetable oils or
animal fats and meets the requirements of ASTM International Standard
ASTM D 6751, Standard Specification for Biodiesel Fuel Blend Stock
(B100) for Middle Distillate Fuels.
Bunker fuel is crude oil distillate having
a viscosity of greater than 5.5cST at 40 ° C.
Ethanol is a fuel derived from renewable or
non-renewable sources and meets the requirements of either ASTM
International Standard ASTM D 4806, Standard Specification for
Denatured Fuel Ethanol for Blending with Gasolines for use as
Automotive Spark-ignition Engine Fuel, or National Standard of
Canada CAN/CGSB-3.511-2005, Oxygenated Unleaded Automotive Gasoline
Kerosene is a light petroleum distillate that
meets the requirements of National Standard of Canada CAN/CGSB-3.399,
DEFINITION OF RECIPIENTS
- The Act defines recipients as any persons who:
- purchase fuel,
- import fuel into Alberta,
- sell or remove their own fuel from a refinery
or registered terminal,
- distribute liquefied petroleum gas (LPG),
- rebrand fuel, or
- pay tax based on the use of the fuel, including
railways and International Fuel Tax Agreement (IFTA) carriers.
DEFINITION OF DIRECT REMITTERS
- Direct remitters are those recipients who pay tax directly to
the Crown. All other recipients pay tax to the person from whom
they purchase the fuel.
- Direct remitters are recipients who:
- sell fuel or remove their own fuel in Alberta
from a refinery or registered terminal;
- import fuel into Alberta for resale;
- purchase fuel outside Alberta where the fuel
is brought into Alberta and put into the fuel system of an
internal combustion engine without first being sold or resold
- rebrand fuel to a different tax rate in Alberta;
- use locomotive fuel in Alberta;
- are distributors of LPG selling or delivering
LPG in Alberta into a dispensing system, other than a bulk
storage tank, used to dispense LPG for use as motive fuel;
- use bunker fuel, kerosene, methanol or condensate
to generate motive power using an internal combustion or turbine
- There are two types of direct remitter:
Full Direct Remitter
Recipients are full direct remitters for all purposes if they:
operate a refinery in Alberta except a refinery that produces only biodiesel, ethanol, bunker fuel, kerosene,
methanol or condensate; or
manufacture, refine, acquire in Alberta or import into Alberta
at least 500 million litres of clear fuel annually.
Full direct remitters may purchase fuel from another full direct
remitter without paying the tax.
Activity-based Direct Remitter
A recipient is an activity-based direct remitter if the person carries out an activity described in paragraph 8 above, but does not qualify as a full direct remitter. This includes end consumers who use bunker fuel, kerosene, methanol or condensate to generate motive power using an internal combustion or turbine engine. These consumers must register and submit tax based on use of these products. See Information Circular, FT-11, Direct Remitter, for more information.
DEFINITION OF EXEMPT-SALE
- An exempt-sale vendor is a person who sells tax-exempt fuel (clear or marked) to a consumer and must register with TRA. An exempt-sale vendor may also be a direct remitter, fuel seller, LPG retailer, or a person registered with TRA to provide the Alberta Indian Tax Exemption. Registration criteria vary, depending on the specific program and type of exempt-sale vendor. See Information Circular FT-13, Exempt-sale Vendors, for more information.
DEFINITION OF FUEL SELLER
- The term “fuel seller”, while not defined in the Fuel Tax
Act (FTA) or Regulation is a term used in administering
the Act by TRA.
A fuel seller is a person who conducts one or more of the following
- sells tax-exempt fuel (clear or marked),
- sells aviation fuel
- rebrands fuel
- exports fuel from Alberta in bulk,
- sells fuel to persons other than consumers, or
- sells bunker fuel, kerosene, methanol or condensate in bulk.
- Fuel sellers may sell fuel in bulk to other sellers or to consumers. Fuel sellers who own the fuel, other than the fuel sellers selling only clear taxable fuel to consumers, are required to register with TRA. See Information Circular FT-12, Fuel Sellers, for more information.
ALBERTA INDIAN TAX EXEMPT (AITE) RETAILER
- A retailer must be registered with TRA to sell fuel exempt of
Alberta tax to eligible Indian consumers. Retailers can be registered
under the AITE program only if located on an Indian reserve in
Alberta, or if the retailer is a direct remitter or fuel seller
and delivers the fuel to an Indian reserve in Alberta.
- Each retail location must be registered separately. See the AITE series of Information Circulars for more information.
- Retailers who have one or more storage tanks that are the source of LPG for both a vehicle dispensing system and a cylinder dispensing system may apply directly to TRA for a refund of the tax paid on the LPG that is not dispensed through the vehicle dispensing system.
- LPG retailers who own the fuel are required to register with TRA for each location. See the Propane series of Information Circulars for more information.
REGISTRATION UNDER THE
- The Act requires a person to register with TRA when the person:
- produces or refines fuel;
- operates a registered terminal or acts as a
position holder within a registered terminal operated by another
- sells fuel for the purpose of resale;
- sells aviation fuel;
- sells tax-exempt fuel;
- marks fuel;
- rebrands fuel;
- sells or removes its own fuel from a refinery
or registered terminal;
- imports fuel into Alberta for the purpose of
- exports fuel from Alberta in bulk;
- sells fuel dye for use in Alberta;
- uses locomotive fuel in Alberta; or
- sells in bulk: bunker fuel, kerosene, methanol
- Registration ensures that TRA knows the participants in Alberta's
fuel distribution chain. Retailers who sell only clear taxable
fuel to consumers do not have to register unless they sell aviation
WHEN IS FUEL TAXED
- Recipients pay fuel tax on all gasoline, diesel, biodiesel,
ethanol and aviation fuel, when the fuel is:
- sold or removed from a refinery or registered
- imported into Alberta; or
- rebranded from a non-taxable fuel to a taxable
fuel, or fuel is taxable at a higher rate, and
- when the fuel is bunker fuel, kerosene, methanol
or condensate and used by a consumer to generate motive power
in an internal combustion or turbine engine.
- The current rates of fuel tax are available online.
- The process for paying tax on LPG is described in the Propane series of Information Circulars.
- Locomotive fuel is taxed based on the consumption in Alberta and not at the time it is sold to the railway. Further details are available in Information Circular RWY-1, Railways.
- An interjurisdictional carrier pays tax on gasoline or diesel
purchased in Alberta and on fuel consumed in Alberta if the fuel
was purchased outside Alberta. Tax is adjusted under the International
Fuel Tax Agreement. For more information see the IFTA
series Information Circulars.
WHEN IS FUEL NOT TAXED
- No fuel tax is payable at the time fuel is:
- sold from a full direct remitter to another
full direct remitter;
- imported to a refinery or registered terminal;
- exported in bulk and change of ownership takes
place outside Alberta;
- sold to authorized purchasers of marked fuel;
- sold to exempt purchasers of clear fuel;
- sold as locomotive fuel to a railway; or
- bunker fuel, kerosene, methanol or condensate
However, the fuel may become taxable at a later time.
IMPORT AND EXPORT OF FUEL
- Fuel imported into Alberta for resale and not placed into a terminal or registered refinery is taxed at the time of importation. Where fuel is imported into Alberta and placed in the fuel system of an internal combustion engine without having been sold or resold in Alberta, the fuel is subject to tax when it is placed into the fuel system.
- Fuel exported from Alberta by those who are not full direct remitters will be taxed in Alberta when it leaves a refinery or registered terminal. When the fuel is subsequently exported and used outside Alberta, the fuel tax paid will be refunded on application to TRA.
TAX-EXEMPT FUEL (CLEAR OR
- Prior to March 27, 2015, marked fuel was fully exempt from tax. The term “tax-exempt fuel” was introduced effective March 27, 2015 to refer to fuel that is purchased either fully or partially exempt from tax, depending on the circumstances. A consumer is fully exempt from paying tax on clear fuel or is entitled to a partial exemption of $0.09 per litre on marked fuel, if:
- the consumer provides, at the time of purchase,
a fuel tax exemption certificate or other prescribed evidence
of the consumer's exemption, and
- the fuel is intended for a prescribed purpose
Tax-exempt fuel must be marked if required by the regulations.
- Consumers who wish to purchase tax-exempt fuel must apply to TRA for a certificate to be eligible to purchase fuel exempt or partially exempt from tax. Farmers who wish to purchase tax-exempt fuel must apply to Alberta Agriculture and Rural Development for a certificate to purchase marked fuel partially exempt from tax. Refer to Information Circular FT-3, Fuel Tax Exemption Certificates, for information on eligibility and application for the certificate.
MARKED FUEL IN ALBERTA
- Only persons registered with TRA as exempt-sale vendors can sell tax-exempt fuel to consumers. Refer to Information Circular FT-5, Marking Fuel, for more information about when fuel must be marked.
- Gasoline and diesel are marked in Alberta to signify that the fuel is partially exempt from tax. It is an offence to be in possession of marked fuel if you are not registered with TRA, an eligible consumer, or if the fuel is not used in a manner permitted by the Act.
- The only persons allowed to mark fuel are those that are registered by TRA to mark fuel in Alberta. Those authorized to mark fuel must use dye purchased from approved dye manufacturers and mark the fuel in accordance with TRA’s specifications.
REFUND OF TAX
- TRA may, on application by a recipient other than a consumer, provide a refund, credit or allowance for all or a portion of the tax paid by a recipient on fuel where TRA is satisfied the recipient paid the tax and one of the following circumstances occurred:
- the fuel was sold exempt from tax to:
- an Indian or Indian band,
- the armed forces of another country stationed
- the Government of Canada, or
- the foreign operator of an air transport
- the fuel was clear fuel exported in bulk and used outside Alberta. A consumer who exports aviation fuel in bulk and the aviation fuel is used outside Alberta is also eligible for a refund.
- a verifiable quantity of fuel was stolen or
- the fuel was rebranded to a:
- fuel with a lower or zero tax rate, or
- non-taxable product.
- the fuel was sold to persons other than consumers
- tax was charged or remitted in error by
- fuel was unsaleable due to contamination;
- LPG was purchased by a recipient from a
system other than a system used to dispense LPG for use
as a motive fuel and the fuel was used for any purpose
other than as a motive fuel; or
- tax was remitted for fuel purchased on credit
by a recipient, other than a consumer, where all or a
portion of the debt becomes a bad debt.
More information about refunds is available on our website, as follows:
REBATE OF TAX
- A consumer may apply to TRA for a rebate of tax paid under the Act where the fuel was clear fuel used for a prescribed purpose. For more information about rebates available to consumers see the following series of Information Circulars: