SERVICE CLARIFIES THAT EXCISE TAX REFUND PROCEDURES CONTINUE TO APPLY TO GASOLINE EXCISE TAX.

Notice 88-13

This notice is a reminder that the procedures provided in section 6416 of the Internal Revenue Code of 1986 (Code), relating to credits or refunds of excise tax paid on gasoline, remain in effect. The procedures were not changed by section 1703 of the Tax Reform Act of 1986 (P.L. 99-514, 100 Stat. 2774). This notice only discusses the procedures provided in section 6416 as they relate to the gasoline excise tax imposed under Code section 4081. This notice does not discuss the section 6416 procedures as they relate to other taxes, such as the tax on diesel fuel.

Under section 6416, the person that pays gasoline excise tax to the government under section 4081 may receive a credit or refund of the amount of such tax if the gasoline is later sold or used by any person for any purpose specified in section 6416(b)(2), such as sale for export or a sale to a State or local government for the exclusive use of a State or local government.

Under section 48.6416(a)-3(b) of the Manufacturers and Retailers Excise Tax Regulations, this credit or refund is conditioned upon a showing that the person that paid the tax (1) has not included the tax in the price of the gasoline with respect to which it was imposed and has not collected the amount of the tax from the person that purchased such gasoline; (2) has repaid, or agreed to repay, the amount of the tax to the ultimate vendor of the gasoline; or (3) has obtained the written consent of such ultimate vendor to the allowance of the credit or the making of the refund. See section 48.6416(b)(2)- 3 of the Manufacturers and Retailers Excise Tax Regulations for procedures to be followed and supporting evidence required for obtaining such credit or refund.

These procedures serve as an alternative to those provided in the proposed regulations relating to the gasoline excise tax that were published in the Federal Register on November 18, 1987 (52 FR 44141). Under the proposed regulations, if gasoline is sold at a tax- included price to any person for any purpose described in section 4221(a)(2) (relating to exportation), (a)(3) (relating to vessel or aircraft supplies), (a)(4) (relating to State or local government use), or (a)(5) (relating to nonprofit educational use), a credit or a payment with respect to the gasoline shall be allowed or made to the ultimate purchaser of the gasoline. See section 48.6421-3 of the proposed regulations for rules relating to credits or payments to ultimate purchasers of gasoline used for certain exempt purposes.

For any particular transaction, only one of the two procedures described above can be used for the purposes described in the proposed regulations. For example, if a credit or refund is allowed to a taxpayer under section 6416 as to a particular sale of gasoline to a State, then the State cannot also claim a refund under section 6421 as to that purchase of gasoline. The Service anticipates that the regulations under section 6416 will be amended to clarify this point by providing that the person that paid the tax may not receive a credit or refund unless it has received from the ultimate vendor a certification that the ultimate purchaser has agreed not to claim a refund under section 6421.

For further information regarding this notice, contact Cynthia Grigsby on (202) 566-4336 (not a toll-free call).