Motor Fuel Tax
Historical Overview





AS 43.40

Description

Alaska levies a motor fuel tax and surcharge on motor fuel sold, transferred, or used within Alaska. The Department of Revenue’s Tax Division collects motor fuel taxes primarily from wholesalers and distributors that hold “qualified dealer” licenses issued by the division.

(A qualified dealer is a person who refines, imports, manufactures, produces, compounds or wholesales refined or motor fuel.)

Rates

Fuel TypeRate/Gallon
Highway$0.08
Marine$0.05
Aviation Gasoline$0.047
Jet Fuel$0.032

In addition to the tax rates, there is a motor fuel surcharge, which is $0.0095 a gallon. It went into effect July 1, 2015.

Returns

Taxpayers file returns and make payments monthly. There are four separate returns:

  • Gasoline
  • Diesel
  • Aviation
  • Gasohol

Taxpayers must file their returns electronically using Revenue Online. The due date is the last day of the month following the month of sale or taxable use. Taxpayers may deduct 1% of the tax and surcharge due, limited to a maximum of $100 per return, as a credit for timely filing to cover the expense of accounting and filing the monthly return.

Exemptions

Motor fuel tax exemptions – Sales and use for heating, for federal, state, and local government agencies, foreign flights (jet fuel), exports, charitable institutions, bunker fuel (residual fuel oil or #6 fuel oil), and for sales or transfers between qualified dealers.

Surcharge exemptions – Sales and use for federal and state government agencies, liquefied petroleum gas, aviation fuel, for fuel refined and used outside the United States, and for sales and transfers between qualified dealers.

Refunds

Consumers may claim a refund for the full tax rate or surcharge if the consumer paid the full tax rate or surcharge at the time of purchase and then used the fuel for exempt purposes. Consumers may also claim a partial refund of the tax if a higher rate was paid at the time of purchase or if the consumer used the fuel for partially exempt purposes.

Resellers, usually retailers, may claim a refund for the full tax if the reseller paid the tax, and then sold the fuel for exempt use and did not collect the tax.

Deferrals

For diesel specifically, municipalities and federally recognized tribes may elect to defer the payment of tax on diesel purchased for their own official use and for resale to residents of the municipality or tribal members by filing a form with the Tax Division. The municipalities and federally recognized tribes must receive approval prior to receiving untaxed fuel. A list of approved municipalities and tribes can be found here. (Select "Search for a License" and then "Motor Fuel Tax Deferral Query.") Then, if the fuel for which taxes were deferred ends up being sold for a taxable use, the municipality or tribe must file a tax return and pay the tax.

Disposition of Revenue

The Tax Division deposits revenue derived from motor fuel taxes into the General Fund. Revenue from each category of fuel is accounted for separately in the division’s tax accounting system. For example, proceeds from tax on motor fuel used in boats and watercraft are deposited in a special watercraft fuel tax account, and proceeds from tax on motor fuel used in highway vehicles are deposited in a special highway fuel tax account within the General Fund.

(For the watercraft fuel account, the Legislature may appropriate that money for water and harbor facilities. For the highway fuel account, the Legislature may appropriate that money for the Alaska Department of Transportation and Public Facilities.)

For aviation fuel, the Tax Division shares with the respective municipalities 60% of taxes attributable to aviation fuel sales at municipally owned or operated airports. (A current list can be found here). The Tax Division calculates the amount due to the municipalities based on reports filed by qualified dealers. Qualified dealers that collect tax at municipal airports must attach Schedule 532A to the aviation return.

History

The motor fuel tax dates back to 1945 when the Territorial Legislature imposed a tax of $0.01 per gallon on all motor fuel. Over time, the Alaska Legislature enacted separate tax rates for each of the fuel types as they exist today. The Legislature has also changed tax rates through the years.

1994 – The Legislature enacted a tax decrease for bunker fuel. The tax rate decreases from $0.05 to $0.01 per gallon on bunker fuel sales exceeding 4.1 million gallons. The tax decrease expired on June 30, 1998.

1997 – The Legislature repealed the gasohol exemption. The Legislature enacted a provision that reduces the tax on gasohol from $0.08 to $0.02 per gallon in areas and at times when the use of gasohol is required. However, gasohol has not been required since the winter of 2002-2003 and gasohol is currently taxed at the full tax rate of $0.08 per gallon.

Legislation was also passed that fully exempted gasohol blended with at least 10% alcohol derived from wood or seafood waste. The legislation expired on June 30, 2004.

The Legislature expanded the foreign flight exemption to include flights originating from foreign countries in addition to the existing exemption for flights with a foreign destination. The legislation included a permanent exemption for bunker fuel (residual fuel oil known as #6 fuel oil), which nullified the 1994 bunker fuel tax rate reduction.

1998 – The Legislature authorized taxpayers to take a “bad debt” credit for sales deemed to be worthless and for sales to persons who filed bankruptcy. The provision expired July 1, 2008.

2003 – The Legislature enacted legislation that made it easier for the state to issue motor fuel excise tax refunds for credit card purchases made by federal, state, and local government agencies.

2004 – The provision that exempted gasohol blended with at least 10% alcohol derived from wood or seafood waste from the motor fuel tax expired on June 30, 2004. Currently all gasohol is taxed at the rate of $0.08 per gallon.

2008 – In special session, the Legislature suspended the motor fuel tax on all fuel types effective Sept. 1, 2008, through Aug. 31, 2009.

2009 – Motor fuel distributors were required to file monthly reports of all fuel sales during the period of suspension. The motor fuel tax was reinstated effective Sept. 1, 2009.

2015 – House Bill 158, effective July 1, 2015, added a surcharge of $0.0095 a gallon on refined fuel sold, transferred or used in Alaska. Refined fuels exempt from the surcharge are sales and use for federal and state government agencies, liquefied petroleum gas, aviation fuel, for fuel refined and used outside the United States, and for sales and transfers between qualified dealers. The surcharge is collected in the same manner as the motor fuel tax.