Tax and Revenue Administration (TRA), Alberta Finance, administers the Fuel Tax Act*, which currently provides for the following:

• collection of fuel taxes on gasoline, diesel, and aviation fuel;
• payment of aviation fuel tax rebates;
• collection of fuel taxes on propane (LPG) used as motive fuel or dispensed from an automotive dispensing system;
• collection of fuel taxes from railways;
• reallocation of fuel taxes collected based on pro-ration under the International Fuel Tax Agreement (IFTA), including settling accounts with all member jurisdictions;
• payment of fuel tax refunds to propane retailers for tax-exempt sales;
• administration of fuel tax exemption under the Tax Exempt Fuel User (TEFU) program, including payment of rebates under the program;
• provision of farm fuel benefits, including payment of fuel tax refunds and grants, under the Alberta Farm Fuel Benefit (AFFB) program;
• administration of fuel tax exemption under the Alberta Indian Tax Exemption (AITE) program, including the payment of refunds under the program.

*IMPORTANT NOTICE: A new Fuel Tax Act was passed in the 2006 spring session of the Alberta Legislature. It will be proclaimed when new Fuel Tax Regulations are developed and approved. All information circulars relating to the Fuel Tax Act and Regulations will be revised entirely when the Regulations are approved and the new Act is proclaimed in force.

Background

The Alberta Fuel Tax Act is a direct tax on consumers for the purchase of all unmarked fuel in Alberta.  This includes gasoline, diesel and propane, except where the fuel is delivered and consumed outside Alberta. Natural gas and ethanol are tax free, as well as fuel used for eligible agricultural operations or commercial off road purposes.

The current tax rates are 9 cents/litre for gasoline and diesel and 6.5 cents/litre for propane. The rates for railway and aviation fuel are 1.5 cents/litre (effective May 1, 2001) and 1.5 cents/litre respectively.

Tax Exempt Fuel Use (TEFU)

Alberta provides tax exemptions and rebates on fuel used off-road for commercial purposes.  TEFU currently provides benefits of about $120 million per year, including approximately $45 million in the form of rebates.

Prescribed Rebates Off-road Percentages (PROP)

Alberta Finance, Tax and Revenue Administration (TRA) and several industry sectors have signed agreements to simplify administration of the Tax Exempt Fuel Use (TEFU) program. These industry sectors include those entities involved in oil and gas drilling, production, and servicing, in oil and gas geophysical or seismic exploration, and in forestry. The simplified process, known as Prescribed Rebates Off-road Percentages (PROP), uses prescribed rebate percentages based on activity and type of vehicle/equipment, for rebate calculations and claims.

Alberta Farm Fuel Benefit Program and Farm Fuel Distribution Allowance

These programs reduce the cost of fuel used in farm vehicles by eligible Alberta farmers, providing an exemption from the fuel tax of 9 cents per litre on both diesel and gasoline and 6.5 cents per litre on propane, and a subsidy of 6 cents per litre on diesel. Alberta farmers use about 550 million litres of diesel and 400 million litres of gasoline per year. The programs provide benefits of about $120 million per year.