Tax and Revenue Administration Fuel Tax Act Information Circular LPG-1

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 - PROPANE PRODUCERS AND DISTRIBUTORS:
OVERVIEW OF FUEL TAX ON LIQUID PETROLEUM GAS (LPG)

This information circular provides an overview of the Alberta fuel tax on liquid petroleum gas ("LPG"). The topics discussed include:

• LPG Subject to Tax
• Tax-Exempt Purchasers of Propane
• Registration Requirements
• Appointment of LPG Agent-Collectors
• Refunds for Uncollected Tax
• Refunds to Propane Retailers for Tax-out Sales

LPG Subject to Tax

1. Fuel tax must be paid by consumers on LPG purchased in Alberta for use as a motive fuel regardless of how it is dispensed, and for other uses when it is dispensed from an automotive dispensing system. The only exception is if the consumer is a tax-exempt purchaser (see paragraphs 5 to 7 following). LPG is a defined term which includes closely competing products such as butane, ethane and propane; however, in Alberta only one grade of propane (commonly called "spec propane") is normally sold for use as a motive fuel. Spec propane is the product referred to as propane in this series of information circulars. The consumer pays the fuel tax as part of the purchase price of the propane. Consumers are not required to pay fuel tax on portable propane cylinder fills, nor on propane delivered to the consumer and used for farming or for non-motive purposes.
   
   
2. Retailers who sell propane for automotive use pay tax on the propane that is dispensed into the tank from which vehicles are filled. The tax is collected by the propane distributor who delivers the propane. Retailers who sell propane tax-out from the same storage tank can obtain refunds from Alberta Finance, Tax and Revenue Administration (TRA) of the tax they paid on propane that they dispensed into portable cylinders. Propane delivered into a retailer's storage tank that is not capable of fueling vehicles can be purchased by the retailer tax-out.
   
   
3. In this series of information circulars, "propane producers" includes propane brokers. Propane producers and distributors include tax in their sale price of propane to both consumers and re-sellers unless the sale is to a registered producer, distributor or tax-exempt purchaser, or to a purchaser who does not use or re-sell the propane for motive purposes. Propane producers may also sell propane tax-out if they have evidence that the propane is being exported out of Canada. TRA will provide up-to-date lists of registrants to all producers and distributors.
   
   
4. If a propane distributor delivers propane to a consumer who does not use propane for motive purposes, but the tank into which it is delivered is capable of filling a vehicle, then the distributor must either charge the tax or obtain a certification from the purchaser that the propane will not be used for taxable purposes, in the following form:

   "I hereby certify that the propane purchased will not be used for purposes that would
   make it subject to fuel tax in Alberta, as set out in the Fuel Tax Act. (Tax exempt uses
   of propane include farming, heating, lighting, and use in appliances.) The propane will
   not be used to fuel a licensed motor vehicle other than a farm truck."

   Signature ___________________________ Date ___________________
   

   Name _____________________________ Phone __________________

Tax-Exempt Purchasers of Propane

5. A few large consumers, such as mining companies, may pick up propane from a producer using their own propane trucks or a common carrier, and bring it to their job sites, where it is used solely for non-taxable purposes. Such consumers can apply to TRA to be registered as a tax-exempt purchaser. Producers can sell propane tax-out to registered tax-exempt purchasers.
   
   
6. Propane paid for directly by the Government of Canada (not by a government employee) can be sold tax-out by producers and distributors. The Government of Canada includes all federal government departments and a number of federal agencies and Crown corporations. In order to ensure that the purchaser of the propane is included in the definition of the Government of Canada, the seller should obtain an exemption certificate in the following form:

   "This is to certify that the propane ordered/purchased hereby is being purchased by __________________________________ 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."

   Signature _________________________ Date ___________________

   The certification should be obtained on the purchase order, contract or invoice relating to the propane sold. Tax must be included in the price of any propane sold to a purported government entity that did not produce an exemption certificate, if it can be used for motive purposes in Alberta.

7. Propane can be sold tax-out on Indian reserves to eligible Indians and Indian bands. For further details on the Alberta Indian Tax Exemption program, please refer to the AITE series of Information Circulars.

Registration Requirements

8. Propane producers and distributors, tax-exempt purchasers per paragraph 5 above, and propane retailers who wish to claim a refund of fuel tax must register with TRA. In the case of propane producers, the entity registering should be the one which controls the sale and the movement of the propane. This may be the owner of the propane, a broker or marketer, or the operator of the plant that produces the propane. Propane producers that use brokers or marketers to sell all of their propane do not need to register. Application for registration forms are available from TRA's offices.

Appointment of LPG Agent-Collectors

9. LPG agent-collectors are appointed by TRA to collect tax from propane retailers and from consumers. Propane producers and distributors are eligible to apply to TRA for appointment as LPG agent-collectors. Distributors that are not appointed as agent-collectors will have to pay the tax when they buy propane from a producer or another distributor. Applications are available from TRA's offices.
   
   
10. The application includes questions about how the applicant plans to conduct its business, the number of retailers serviced by the applicant, forecast volumes of taxable and non-taxable sales, and other information that will assist TRA in evaluating the appropriateness of tax returns that are subsequently filed with TRA.
    
    
11. TRA will undertake rigorous screening of applications to ensure the applicant is capable of fulfilling its duties and responsibilities as a collector of fuel tax on propane. TRA may request security for the payment of tax if it has doubts about the financial strength of the applicant. Once TRA is satisfied that the producer or distributor meets established criteria, the application will be approved and an agent-collector agreement will be sent to the applicant for signature.
    
    
12. TRA will maintain up-to-date information on all agent-collectors to ensure their reporting and payment of fuel tax on propane is in line with their business plans.

Refunds for Uncollected Tax

13. If an agent-collector sells propane tax-in on credit to a retailer, and the agent-collector cannot collect the receivable from the retailer, then the agent-collector can obtain a refund for the tax portion of the uncollected receivable. The following procedures are to be used when claiming a refund in these circumstances:

    a) TRA must be notified of the loss within 30 days of the date that the agent-collector becomes aware of it. A refund claim must be submitted within 90 days of the date that the agent-collector became aware of the loss. If the retailer has declared bankruptcy or a receiver has been appointed, the agent-collector is deemed to have become aware of the loss on the date that the Notice of Bankruptcy or notification of receivership is received from the trustee or receiver. Otherwise, the collector is deemed to have become aware of the loss when the receivable is shown as a bad debt for income tax purposes.

    b) Refund requests must be supported by:

    • copies of the agent-collector's sales invoices;
    • a copy of the receivable ledger;
    • where applicable, a copy of the Notice of Bankruptcy or notification of receivership; and
    • a brief description of action taken to try to collect the account.

    c) In the case of a bankruptcy or receivership, the agent-collector should include the tax in the claim submitted to the trustee or receiver, and should submit a copy of the claim to TRA.

    d) Where the agent-collector receives full or partial payment of the receivable after having received a refund of the tax from TRA, then a proportional payment of tax is to be forwarded to TRA. The amount of the payment is the same percentage of the amount recovered that the fuel tax is of the original amount of the loss.

Refunds to Propane Retailers for Tax-out Sales

14. Retailers will purchase propane for use in automotive dispensing systems from the distributors or producers tax-in. Producers and distributors will only sell propane tax-out to retailers if their equipment is incapable of being used to fuel vehicles (i.e. can only fill portable cylinders). Retailers who buy their propane tax-in will be able to claim a refund of tax on portable cylinder sales directly from TRA. For further information on refunds to retailers, please refer to the PRO series of information circulars.