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Fuel

Overview

Vermont Sales and Use Tax and Fuel Tax, and the Petroleum Distributor License Fee apply differently to fuel in Vermont, depending on the type and use of fuel. A person buying at retail will pay 6% sales and use tax for natural gas to fuel a motor vehicle, propane in a free-standing container, and dyed diesel for limited specific uses. Heating oil, gas, and other fuels used for commercial purposes are also subject to 6% sales and use tax, but not when used in the home. Where a municipality has voted to impose a local option sales tax, an additional 1% tax will apply to taxable sales made in that municipality. The $0.02 per gallon fuel tax applies to heating oil, propane, kerosene, or other dyed diesel fuel delivered in Vermont. The Petroleum Distributor License Fee is $0.01 per gallon of fuels sold. Its application is similar to the fuel tax. The charts on this fact sheet explain the types of fuels assessed in each case.

Dyed Diesel

Starting July 1, 2017, two new uses of dyed diesel became exempt from sales and use tax. Dyed diesel is now exempt when purchased for any of the following uses:

  • to power the types of forestry machinery and equipment listed below;
  • to propel a vehicle off road;
  • for farming, if used directly and exclusively for farming purposes; and
  • to manufacture tangible personal property for sale, whether used directly or indirectly.

The types of exempt forestry machinery and equipment are:

  • skidders with grapple and cable
  • feller bunchers
  • cut-to-length processors
  • forwarders, delimbers
  • loader slashers
  • log loaders
  • whole-tree chippers
  • stationary screening systems
  • firewood processors
  • elevators
  • and screens.

The exemption can be claimed by completing Form S-3F, Vermont Sales Tax Exemption Certificate For Fuel Or Electricity. Dyed diesel used off road in stationary equipment (i.e., generators) when used for commercial purposes remains taxable.

Wood pellets sold for residential use are not subject to Sales Tax, even when sold in smaller quantities at a retail establishment. An Exemption Certificate is not required.

Fuel Tax

On July 1, 2016, the Fuel Gross Receipts Tax was renamed the Fuel Tax. The Fuel Tax is imposed on the retail sale by means of delivery in Vermont of heating oil, propane, kerosene, and other dyed diesel fuel at a rate of $0.02 per gallon.

A new gross receipts tax on retail sales of coal and natural gas is also imposed at a rate of 0.75%. 

Additionally, a gross receipts tax on the retail sale of electricity is now imposed at a rate of 0.5%.

Before Jan. 1, 2017, the Department required quarterly filing of Fuel Tax. The Fuel Tax must now be filed and paid monthly. Returns and payments for the Fuel Tax must be made to the Department of Taxes using Form FGR-615, Fuel Tax and Petroleum Distributor Licensing Fee Return.

Fuel dealers who choose to itemize an invoice or bill in order to show the amount of the Fuel Tax must include the following statement:

The purpose of the Fuel Tax is to support Vermont’s Low Income Home Weatherization Program

Petroleum Distributor Licensing Fee

The Petroleum Distributor Licensing Fee of $0.01 per gallon is imposed on sellers for the retail sales of heating oil, kerosene, or other dyed diesel sold in Vermont. Sales for resale, sales made from a dealer’s retail pump, and delivery sales to an out-of-state location are exempt. The revenue collected from this fee funds the cleanup and restoration of contaminated soil and groundwater caused by leaking storage tanks, as well as third-party claims for compensation.

Exemption Certificates

Exemption certificates are available:

Vermont Business Tax Account and License

Businesses and nonprofits must register for a Vermont Business Tax Account and license before collecting Vermont tax. Registration is free.

Sales and Use Tax (32 V.S.A. ch. 233)
Tax rate 6% of the retail sales price, plus 1% of the retail sales price in municipalities that have voted to impose a local option sales tax
Taxpayer Any purchaser, unless exempt
Types of fuels taxed
  • Heating oil, gas, and other fuels used for commercial purposes in mixed-use buildings (both residential and commercial) are subject to sales tax, but the portion of fuel used for residential purposes is exempt. 32 V.S.A. § 9741(26)
    • Fuel delivered to a residence is allowed to be billed at a residential rate under applicable regulations or tariffs by the Public Service Board and are presumed to be exempt.
  • Fuel purchased over the counter or picked up for residential use generally requires an exemption certificate to be exempted.  In limited circumstances, however, there is a presumption that the sale of a fuel for residential use is exempt, and a vendor is not required to obtain an exemption certificate.  This presumption applies to the following circumstances:
    • Wood pellets sold to an individual on the vendor's premises or delivered to an individual's residence, unless the vendor knew or ought reasonably to have known that the wood pellets were not purchased for residential use.
    • Sales of small quantities of fuel commonly used for residential and domestic use, but often purchased at a vendor’s location and not delivered, including charcoal briquettes, fire logs, and fire starters. This presumption does not apply – and a vendor is required to obtain an exemption certificate – if any of the following is true: (1) the sale exceeds $250.00; or (2) the vendor knows, or has reason to know, that the purchaser is not an individual (i.e., that the purchaser is a corporation, LLC, or other business) or that the fuel will not be used for residential and domestic use. The presumption will not apply if the purchaser has an account with the vendor that indicates that the purchaser is not an individual.
  • Propane sold at retail in free-standing containers, or sold as part of a transaction where a free-standing container is exchanged without a separate charge 32 V.S.A. § 9741(26)
  • No sales tax on propane refills using the purchaser’s own container
  • Natural gas used to propel a motor vehicle 32 V.S.A. § 9741(7)(B)
  • Dyed diesel used off road in stationary equipment (e.g., generators) for commercial
  • purposes 32 V.S.A. § 9741(7)(A)(iii);
    • If equipment is capable of both propulsion and non-propulsion use, only the non-propulsion use of dyed diesel is taxable. Examples of mixed use equipment include excavators, bull dozers, and skid steers. Examples of non-propulsion uses are idles time, lifting, digging, and scooping.
Types of fuels exempt from sales tax, based on use
  • Heating oil, gas, and other fuels used in a residence for all domestic use, including heating 32 V.S.A. § 9741(26)
    • In mixed-use buildings (both residential and commercial), the portion of fuel used for residential purposes is exempt, but the portion for commercial purposes is subject to sales tax.
  • Dyed diesel used to:
    • power forestry machinery; for a full list of exempt machinery and equipment that dyed diesel is bought to power, see 32 V.S.A. § 9741(51)
    • propel a vehicle on or off road, including specifically for agricultural or manufacturing purposes, 32 V.S.A. § 9741(7)(A)(iii), (27), (34)
    • If equipment is capable of both propulsion and non-propulsion use, only the propulsion use of dyed diesel is exempt.
  • Sales of electricity, oil, gas, and other fuels used:
    • directly and exclusively for farming purposes 32 V.S.A. § 9741(27)
    • directly or indirectly in manufacturing tangible personal property for sale 32 V.S.A. § 9741(34)
Types of
exempt 
purchasers

Organizations that are exempt from sales and use tax under 32 V.S.A. § 9743:

  • Federal and State of Vermont (including municipal) government entities
  • Nonprofit organizations that qualify for exempt status under 26 U.S.C. § 501(c)(3), agricultural organizations, qualified for exempt status under 26 U.S.C. § 501(c)(5), when presenting agricultural fairs, field days or festivals
  • Schools as defined in 16 V.S.A. § 11(7) and (8); and municipalities, which include any city, town, unorganized town, village, grant, or gore

 

Fuel Tax (33 V.S.A. § 2503)
Tax rate $0.02 per gallon of fuel sold at retail
Taxpayer Any seller who makes a retail sale of fuel by means of delivery in Vermont
Types of fuels taxed Heating oil, propane, kerosene, and other dyed diesel fuel sold by means of delivery are
subject to fuel tax. There are also two percentage-based gross receipts taxes imposed on the retail sale of natural gas and coal (0.75%), and on electricity (0.5%).
Types of
Exempt Sales
Only sales for resale, sales from a dealer pump, or deliveries to an out-of-state location.

 

Petroleum Distributor Licensing Fee (10 V.S.A. §1942(b))
Tax rate $0.01 per gallon of fuel sold at bulk retail
Payer of Fee Any seller who makes a retail sale of fuel in Vermont
Types of fuels subject to Fee Heating oil, kerosene, and other dyed diesel fuel sold by means of bulk delivery in Vermont are subject to fuel tax.
Types of
Exempt Sales
Only sales for resale, sales from a dealer pump, or deliveries to an out-of-state location.

Laws, Regulations, and Guidance

Number Title
10 V.S.A. §1942(b) Petroleum distributor licensing fee
32 V.S.A. § 9741 Sales and Use Tax - Exemptions
33 V.S.A. § 2503  Fuel Tax