Tax and Revenue Administration Fuel Tax Act Information Circular FT-1R2

Note: Due to the Government of Alberta reorganization in November 2004, where applicable, the web versions of our documents have been updated to change references from "Minister of Revenue" or "Provincial Treasurer" to "Minister of Finance". References to "Revenue Canada" or "Canada Customs and Revenue Agency" have been changed to "Canada Revenue Agency" to reflect that name change as well. The paper version of this document is available from Tax and Revenue Administration and if applicable, will be updated as time permits.

ALBERTA FUEL TAX ACT INFORMATION CIRCULAR - OIL MARKETING COMPANIES
OVERVIEW OF FUEL TAX

This information circular gives an overview of the Alberta fuel tax. The topics discussed include:

• Agents, Agent-Collectors and Agent-Dealers
• What is Taxed?
• Who Must Pay Fuel Tax?
• Exemptions from Fuel Tax
  • Marked Fuel
  • Export Sales - Interprovincial
  • Export Sales - International
  • Sales to the Government of Canada
  • Alberta Indian Tax Exemption

Agents, Agent-Collectors and Agent-Dealers

1. Every consumer of fuel oil, whether the fuel oil is purchased in Alberta or received in Alberta, must pay fuel tax unless specifically exempted by legislation (see "Exemptions from Fuel Tax" section). The consumer pays the tax to the retailer as part of the purchase price of the fuel. The seller of the fuel normally pays an amount equal to the tax to the supplier as part of the purchase price of the fuel.
   
   
2. Agent-collectors are appointed by Alberta Finance, Tax and Revenue Administration ("TRA") to collect fuel tax on all fuel oil sold in or delivered into Alberta. Agent-dealers are also appointed by TRA and are authorized to dye fuel in certain circumstances and deal in marked, tax-exempt fuel (see paragraphs 11 and 12). Businesses that are appointed as both agent-collectors and agent-dealers are referred to as agents. Persons wishing to become agents, agent-collectors or agent-dealers must apply to TRA.
   
   
3. In cases where the applicant's financial strength is considered to be inadequate, TRA requires the applicant to provide security prior to being appointed as an agent or agent-collector. The security required is equal to three times the estimated monthly tax collections.
   
   
4. All approved applicants must sign an agreement with TRA which formalizes their appointments and sets out their duties and obligations with respect to the collection of fuel tax.

What is Taxed?

5. Fuel tax is payable on all fuel oil and aviation fuel purchased in Alberta or delivered into Alberta. Fuel oil is defined as fuel capable of being used to generate power in an internal combustion engine or a turbine engine other than a locomotive or an aircraft. Aviation fuel includes both aviation gasoline and jet fuel.
   
   
6. Ethanol and methanol that is included in mixed fuel is not considered to be fuel oil and is not taxed under certain conditions. See Information Circular FT-5 for details.
   
   
7. Propane is taxed when dispensed from a system capable of filling a vehicle. The FTP series of information circulars provide information on the taxation of propane.
   
   
8. Fuel tax is payable on locomotive fuel used in Alberta, and is calculated and remitted by the railway companies. The railway companies buy their locomotive fuel tax-out.

Who Must Pay Fuel Tax?

9. Ultimately the consumer is the one who pays the tax. However, sales to anyone other than another agent, agent-collector or railway must be made tax-in. Bulk dealers and service station operators must pay the tax amount on all clear fuel oil purchased and will recover this tax when the fuel is sold to the consumer.
   
   
10. Agents and agent-collectors must collect the tax and remit it to TRA (see Information Circular FT-2).

Exemptions from Fuel Tax

Marked Fuel

11. Marked fuel is fuel that has been coloured or identified by injecting a dye into the fuel. Only authorized persons are permitted to dye fuel -- e.g. terminals, agent-dealers. Bulk fuel dealers are only given authorization to dye fuel in the event of a product mix between clear and marked fuel. The authorization to dye fuel is usually provided in the agreement between the Provincial Treasurer and the agent or agent-dealer.
    
    
12. Marked fuel is exempt from fuel tax and can be sold only by persons who have entered into an agreement with the Provincial Treasurer to handle marked fuel. Agents can sell marked fuel only to agent-dealers or to consumers who provide an approved fuel tax exemption number or Alberta Farm Fuel Benefit registration number (see BD series of Information Circulars for further details).

    Export Sales - Interprovincial

13. An agent-collector is permitted to sell clear fuel without adding the Alberta fuel tax if the fuel is delivered to a customer located outside Alberta and is for use outside Alberta. To be sold on a tax exempt basis, the fuel must be delivered by the agent-collector or by an independent common carrier to the location outside Alberta. If the customer is not an appointed fuel tax collector for that jurisdiction, the tax of the jurisdiction to which the fuel is delivered must be charged to the customer and remitted to that jurisdiction.
    
    
14. If an independent common carrier delivers the fuel, the agent-collector must obtain a bill of lading. It must be signed by the agent-collector as shipper and by the customer. It must state the amount and type of fuel consigned to the carrier and the delivery location. Invoicing documentation must show that Alberta fuel tax was not charged.
    
    
15. Alberta Revenue may require agent-collectors to produce bills of lading supporting tax exempt sales.

    Export Sales - International

16. The guidelines set out above for interprovincial sales also apply to international sales. In addition, an agent-collector may sell fuel on a tax exempt basis to a U.S. customer if the U.S. customer transports the fuel and if the agent-collector receives an original "Entry Summary Form" (form 7501). The Entry Summary Form must:

    a) bear an original U.S. Customs Department stamp and original signature for each truck load of product lifted; and

    b) include volume, product and bill of lading or ticket number as stated by the U.S. Customs Department.

    The agent-collector must obtain the Entry Summary Form by the end of the month following the month in which the product was lifted. If the agent-collector fails to obtain an original Entry Summary Form, he will be liable for the Alberta fuel tax which would otherwise have been payable on the fuel lifted. The original Entry Summary Form should be retained for audit purposes.

17. If a U.S. customer purchases gasoline or diesel fuel from a bulk dealer for use outside of Alberta, the customer may claim a refund of Alberta fuel tax. The refund claim must be supported by one of the following:

    a) a copy of the bill of lading covering the transport of the fuel by a carrier;

    b) a copy of the fuel tax return for the jurisdiction of destination which includes the fuel transaction; or

    c) an original "Entry Summary Form" (form 7501) containing the information set out above to claim a refund of Alberta fuel tax.

    Reporting

18. For both interprovincial and international deliveries, agent-collectors are required to complete the "Fuel Sales, Transfers or Exchanges Outside of Alberta" (form FTD 3 or FTG3). This form must be submitted to Tax and Revenue Administration with the monthly fuel tax return to support tax exempt sales.

    Sales to the Government of Canada

19. Fuel paid for directly by the Government of Canada (not by a government employee) is not subject to fuel tax. The Government of Canada includes all government departments, and a number of agencies and Crown Corporations. In order to ensure that the purchaser of the fuel is included in the definition of the Government of Canada, a collector must obtain 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."

20. The certification must be obtained on the purchase order, contract, or invoice relating to the fuel purchased. Any fuel sold to a purported government entity that did not produce an exemption certificate is taxable.

    Alberta Indian Tax Exemption

21. Eligible Indians and Indian bands in Alberta can purchase fuel exempt from the provincial tax, when such purchases are made at registered retail businesses located on Alberta Indian reserves or from registered bulk dealers who deliver to reserves. Registered retailers buy the fuel tax-in and obtain a refund from TRA of the tax on the qualifying sales. For further information about this program, refer to the AITE series of information circulars.