The Texas Fuel Tax Refund Process and Requirements

The Texas fuel tax is a state excise tax on motor fuels that serves as a funding source for the state’s transportation infrastructure, including roads and bridges. While consumers see this tax in the price at the pump, it is formally levied on suppliers. For certain uses, this tax may not apply, and individuals or businesses who pay the tax on fuel for exempt purposes can pursue a refund from the state.

Texas Fuel Tax Rates and Application

Texas imposes a motor fuel tax on a per-gallon basis, with the rate depending on the fuel type. For both gasoline and diesel fuel, the state tax is 20 cents per gallon. The tax also extends to alternative fuels, with liquefied petroleum gas (LPG) taxed at 15 cents per gallon, while compressed natural gas (CNG) and liquefied natural gas (LNG) are also taxed at 15 cents per gallon.

Although the tax is paid by the end-user, the legal responsibility for remitting these funds to the Texas Comptroller of Public Accounts falls on licensed suppliers or distributors. These parties pay the tax to the state when fuel is removed from a terminal rack or imported into Texas. This structure means the tax is embedded in the wholesale price of the fuel and passed through retailers to the consumer.

Tax Exemptions and Dyed Diesel Fuel

Exemptions are available for specific uses, with the most common being for fuel consumed for “off-highway” purposes. This includes fuel used to power farm tractors, construction machinery, generators, and boats. The rationale is that the fuel tax funds roadways, so the tax should not apply if the fuel is not used to power a vehicle on a public highway.

Another category of exemption is for government and other specific uses. Fuel is exempt from the state motor fuel tax when purchased for:

• Use by the federal government
• Use by Texas public school districts
• Vehicles providing public transportation services
• Use as a feedstock in manufacturing
• Use by a nonprofit food bank for its delivery vehicles

To help enforce exemptions for off-highway diesel use, the state uses a system of dyed diesel fuel. This diesel is colored with a red dye to identify it as tax-exempt. It is illegal under state and federal law to use dyed diesel in a vehicle on public highways, and penalties for misuse are substantial, including fines and payment of back taxes. To legally purchase and use dyed diesel for off-road purposes, a user must first register with the Texas Comptroller.

Required Information for a Fuel Tax Refund

To claim a refund for tax paid on exempt-use fuel, an individual or business must gather specific documentation. The foundation of a refund claim is the original fuel purchase invoices, which are different from simple credit card receipts. Invoices must show:

• The name and location of the seller
• The name of the purchaser
• The date of purchase
• The number of gallons purchased
• The type of fuel
• The amount of tax paid

In addition to purchase invoices, detailed records of fuel use are necessary to substantiate the claim. This can include mileage logs for vehicles, hour meters for equipment, or distribution logs if fuel was dispensed from a bulk storage tank. These records must demonstrate how many gallons were used for a qualifying exempt purpose.

This information is compiled on specific forms from the Texas Comptroller. For gasoline and diesel, claimants use Form 06-106, Texas Claim for Refund of Gasoline or Diesel Fuel Taxes. For alternative fuels like CNG or LNG, the correct document is Form 06-189, Texas Claim for Refund of Compressed Natural Gas (CNG) or Liquefied Natural Gas (LNG). On the form, the claimant must enter identifying information, the refund period, and detailed calculations for the gallons claimed. Gallons should be rounded to the nearest whole number, and the form must be signed.

The Texas Fuel Tax Refund Process

After completing the appropriate refund form, it must be signed and mailed to the Texas Comptroller of Public Accounts at the address specified on the form. It is important not to send original supporting documents like invoices or logs with the initial claim. Claimants should retain these records for at least four years.

After the claim is submitted, a representative from the Comptroller’s office will review it. If the claim requires further verification, the representative will contact the claimant to request copies of the specific supporting documentation needed. They will also provide instructions on where to send the documents.

The timeline for receiving a refund can vary. A claim must be postmarked on or before one year from the first day of the calendar month following the purchase or use of the fuel. If the claim is approved, the refund amount will be issued but is subject to a deduction of 2% of the total gallonage claimed.