Tax and Revenue Administration Fuel Tax Act Information Circular FT-4

FT-4/ March 2007

ALBERTA FUEL TAX ACT INFORMATION CIRCULAR - SALE OF TAX-EXEMPT FUEL

(Effective April 1, 2007)

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.

SALE OF TAX-EXEMPT FUEL

This Information Circular explains:

• Role of Exempt-Sale Vendor
• Sale of Clear Tax-Exempt Fuel
  • Indians and Indian Bands
  • Armed Forces of Another Country
  • The Government of Canada
  • Foreign Operator of Air Transportation Service
  • Operators of Mines in Alberta
  • Railways
• Sale of Marked Fuel
• Sale of Marked Fuel to Farmers
• Providing the Alberta Farm Fuel Distribution Allowance
• Duties of Exempt-sale Vendors
• Sales to Ineligible Consumers
• Prohibited Use

ROLE OF EXEMPT-SALE VENDOR

1. An exempt-sale vendor is a person registered with Alberta Finance and Enterprise, Tax and Revenue Administration (TRA) to sell tax-exempt fuel to consumers. The sale of clear tax-exempt or marked fuel can be made only when the consumer provides the necessary proof of eligibility for the exemptions described below at the time the tax-exempt fuel is purchased. Tax-exempt fuel is marked where required by the Fuel Tax Act.

SALE OF CLEAR TAX-EXEMPT FUEL

2. A consumer is exempt from paying tax on fuel if:
   
   • at the time of purchasing the tax-exempt fuel the consumer provides
     
   • required evidence of exemption, and
     
   • the fuel is intended for a prescribed purpose or use.
     

3. Consumers who are eligible to purchase clear tax-exempt fuel and the proof that must be presented to the exempt-sale vendor by the consumer to verify eligibility are discussed below.

Indians or Indian Bands

• At the time of purchasing clear fuel exempt of tax for their personal use, the Indian or Indian band must present to the exempt-sale vendor an Alberta Indian Tax Exemption (AITE) card issued by TRA or a card issued by the Treaty 7 Tribal Council as proof of exemption. The Certificate of Indian Status card, issued by Indian and Northern Affairs Canada cannot be used. In all cases, the sale of clear fuel exempt of tax must be made by an exempt-sale vendor located on a reserve, the Garden River Settlement or the Heart Lake property described in the Regulations within the time period specified. Refer to the AITE Information Circular series for additional information.

Armed Forces of Another Country

• Armed forces of another country stationed in Alberta may purchase clear fuel exempt of tax by providing documentation to the exempt-sale vendor confirming that they are armed forces of another country stationed in Alberta. The exempt-sale vendor is required to retain the documentation.
  

The Government of Canada

• To purchase clear fuel exempt of tax, the Government of Canada provides to the exempt-sale vendor an exemption certificate in the following form:

"This is to certify that the fuel ordered/purchased hereby is being purchased by
_________________________________________________________
Name of Department, Agency or Corporation
which is part of the Government of Canada or is a tax-free Government of Canada agency, and is therefore not subject to Alberta fuel tax."

• The certification must be recorded on the purchase order, contract, or invoice relating to the fuel purchased. Any fuel sold to a purported government entity without an exemption certificate is taxable.
  

Foreign Operator of Air Transportation Service

• The foreign operator of an air transportation service must provide the federal documentation establishing eligibility to purchase aviation fuel exempt of excise tax to purchase aviation fuel exempt from Alberta tax. For more information, see Information Circular AV-1 , “ Aviation Fuel Tax – International Flights”.

Operators of Mines in Alberta

• An operator of a mine in Alberta may purchase liquefied petroleum gas (LPG) for use in mining operations exempt of tax from a distributor of LPG by providing a copy of the letter issued by TRA acknowledging the mine operator's exemption.

Railways

• Operators of railways may purchase clear diesel for use in operating a railway locomotive if the railway is registered with TRA and shown on TRA's website as eligible to purchase tax-exempt locomotive fuel. For more information refer to the Railways information circular.

SALE OF MARKED FUEL

4. Registered sellers of marked fuel can sell marked fuel to other registered marked fuel sellers. A listing of these entities will be posted on TRA's website. Sellers who use the marked fuel for their own use must have a valid Tax Exempt Fuel User (TEFU) or Alberta Farm Fuel Benefit (AFFB) number.
   
   
5. Persons, other than farmers, are eligible to purchase marked fuel upon presentation of a certificate issued by TRA establishing their eligibility. The marked fuel must be used for:
   
   • commercial purposes in an engine, but not an engine that drives a motor vehicle, boat or aircraft or is used solely to regulate the temperature of a trailer used for the commercial transportation of goods;
     
   • commercial use in a motor vehicle not required to be licensed or registered;
     
   • use by a government authority other than the Government of Canada in an engine owned by the authority, where the engine does not drive a motor vehicle, boat or aircraft;
     
   • use by a government authority other than the Government of Canada in a motor vehicle not required to be licensed or registered;
     
   • production of heat or light other than in a motor vehicle, locomotive, or trailer used for commercial transportation of goods;
     
   • for any purpose other than burning in an internal combustion or turbine engine.
     
     
6. Consumers eligible to purchase marked fuel are required to present a TEFU number at the time of purchasing marked fuel. Refer to Information Circular FT-3, “Fuel Tax Exemption Certificates”, for more information.

SALE OF MARKED FUEL TO FARMERS

7. Upon presenting a certificate issued by Alberta Agriculture and Food, farmers are eligible to purchase marked fuel and receive the Alberta Farm Fuel Distribution Allowance (AFFDA) on diesel purchases. Marked fuel is to be used by farmers only in farming operations in Alberta. Refer to Information Circular FT-3, “Fuel Tax Exemption Certificates”, for more information.

PROVIDING THE ALBERTA FARM FUEL DISTRIBUTION ALLOWANCE

8. Exempt-sale vendors provide the AFFDA on marked diesel fuel sold to eligible farmers where the marked fuel is used in farming operations. The amount of the AFFDA is six cents per litre on marked diesel. The amount of the AFFDA provided by the exempt-sale vendor to the farmers is reimbursed on application to TRA.

DUTIES OF EXEMPT-SALE VENDORS

9. Before the exempt-sale vendor makes the sale, the vendor should verify the eligibility for fuel tax exemption, record the approval number of the fuel tax exemption certificate (if applicable), and take reasonable steps to ensure the fuel is intended for eligible uses.
   
   
10. Exempt-sale vendors are required to pass on the benefit of the tax exemption and if applicable, the farm fuel distribution allowance to eligible consumers. A vendor who does not pass on the benefit or the farm fuel distribution allowance is liable to pay to TRA the amount equal to the benefit and the farm fuel distribution allowance not passed on.

SALES TO INELIGIBLE CONSUMERS

11. If an exempt-sale vendor sells tax-exempt fuel without obtaining proof of the consumers eligibility or knows the fuel will not be used for authorized purposes, both the exempt-sale vendor and the consumer are jointly and severally liable to pay TRA the amount of the tax the consumer would have been required to pay on the fuel.
    
    
12. If an exempt-sale vendor sells marked fuel which includes the AFFDA without obtaining proof of the consumer's eligibility for the exemption and grant, or knows the fuel will not be used for eligible farming operations, both the exempt-sale vendor and the consumer are jointly and severally liable to pay TRA the amount of the tax the consumer would have been required to pay on the fuel and the amount of the AFFDA provided.

PROHIBITED USE

13. A consumer who purchases fuel exempt from tax must use the fuel for purposes noted in paragraph 5.
    
    
14. A consumer who purchases fuel exempt from tax and uses the fuel, or permits the fuel to be used, for another purpose is liable to pay TRA the amount of tax the consumer would have paid had the fuel not been purchased exempt from tax. The tax is determined by TRA based on the amount of fuel used for ineligible purposes.
    
    
15. A farmer that purchased AFFDA bearing marked fuel must use the fuel for farming operations in Alberta. When AFFDA bearing marked fuel is not used in farming operations in Alberta the consumer is liable to pay to TRA the amount of the tax and the AFFDA provided on the fuel that was not used in farming operations.