Federal Fuel Tax Credit – Common Mistakes to Avoid

excise fuel tax
October 9, 2023 0 Comments

Business owners who rely on fuel to power their everyday operations may have a lot to gain when it comes to the federal fuel tax credit.  

This distinctive but overlooked excise fuel tax refund can have a huge impact on the bottom line and can be applied to industries and companies across the board. The fuel tax credit applies to virtually any company that requires fuel off the highway to thrive. Some eligible industries include landscapers, construction companies, and food vendors.  

However, because the US federal excise tax law is so complicated, it’s easy to make miscalculations and errors when seeking a fuel excise tax refund.  

The smartest move is to partner with an expert in federal excise tax law, and this is where TiP Excise Tax Recovery Services can ensure you get the refund you deserve.  We can set the ball in motion to bring you the biggest refund possible when it comes to the fuel that you use every day. You can begin the process with just a minimal amount of information about your company and fuel use.  

In the meantime, it’s helpful for business owners to understand the fundamentals of the federal fuel tax credit. It’s just as important to know the common mistakes that can lead to a smaller refund or an IRS audit. So, before you explore your options when it comes to the federal fuel tax credit, be sure to avoid these mistakes that could potentially make your refund out of reach. 

Who Must Pay a Federal Excise Tax? 

Excise tax is a unique tax built into the total price of a product or service, typically considered a luxury item. Examples of goods that have a built-in excise tax include cigarettes, soda, alcohol, and even more unusual items. Therefore, virtually every American pays this tax routinely without noticing. 

Excise tax is arguably most found in fuel prices, and it’s built into the price at the gas pump. Simply put, every time you fill up your gas tank, you pay the excise tax automatically with every fuel transaction. 

Who Qualifies for a Fuel Tax Credit? 

The fuel excise tax is a little tricky because it does not apply to everyone or every business. So, even if you use fuel for your business operations, it doesn’t automatically mean you are eligible for an excise tax refund.  

The main distinction when it comes to excise tax refunds is how the fuel is used. Fuel excise tax refunds can be received for any fuel used off the highway. So, for example, you may not be able to claim the fuel you use to drive a delivery truck from Point A to Point B. However, you can claim the fuel required to refrigerate the interior of the truck if needed.  

As another example, construction companies may not be able to claim the fuel required to drive back and forth to a job site. But they can claim the fuel used to power off-the-grid equipment, like bulldozers, backhoes, or generators. 

Your tax expert in fuel excise tax refunds will be able to help you identify these distinctions and determine which fuel uses apply for a refund. 

Mistakes to Avoid When Claiming the Federal Fuel Tax Credit 

With these basics in mind, here are the most common issues to look out for when seeking a fuel excise tax refund. 

Misclassifying Fuel Types 

Generally speaking, there are three main types of fuel that can be eligible for an excise tax refund – gasoline, diesel, and kerosine. Therefore, all three fuel types are taxed differently on both a state and federal level. Make sure that you identify the fuel you use properly, as misclassification can raise red flags with the IRS. These fuel types can also be further classified, and the IRS’ 62-page guide on Excise Tax is a helpful resource for investigating these different distinctions.  

Inaccurate Record Keeping 

Once you start considering applying for a fuel excise tax refund, you’ll want to make sure that you have receipts or records of the fuel you used, including the dates.  Quarterly filings or statements are often involved, so having the dates of when fuel was purchased and used is especially important when it comes to record keeping.  

Not Distinguishing Between Fuel Uses 

As stated, only fuel that is utilized off the highway is eligible for a fuel excise tax refund. Therefore, you’ll want to separate and distinguish the varying fuel you purchase for your business operations. Keep separate records of the fuel you use at the gas pump for transportation and the fuel you use for off-highway purposes. This way, you’ll ensure clear records that only include eligible fuel uses.  

Overlooking Eligible Tax Deductions and Exemptions 

Many companies don’t realize that they are eligible for a fuel excise tax refund to begin with.  Therefore, the first step is taking stock of all the ways that you use fuel on a day-to-day basis, from generators to lawnmowers. In addition, if this is the first time you are seeking an excise tax refund, you may be able to claim previous years’ fuel expenses, which makes your eventual refund even bigger. 

Not Having an Expert Resource at Your Side 

Even if you are adept at bookkeeping and taxes or have an in-house accounting team that manages your annual tax preparation and planning, an excise tax is a distinctive area of tax law that requires an expert hand. 

This is why, to get the biggest refund possible without costly mistakes along the way, you need a specialist resource that can guide the way forward. 

Navigate Excise Tax Challenges with the Best Partner  

At Tip Excise, we are not paid until we have secured your refund. We only earn a small percentage of the money we put back into your pocket, which is why we’re the preferred partner for businesses of all sizes and across all industries. 

Reach out to us today to start exploring your options when it comes to an excise tax refund. With TiP taking the reins, you can rest assured that you’ll receive the largest refund possible without red flag-raising mistakes or errors along the way.  

Contact us today.