I. DEFINITIONS a. Account Percentage: The percentage of taxable fuel usedfor purposes other than the operation of a motor vehicle upon the highwaysof this state, assigned to an individual refund account.

b. Account Historical Average: The average percentage of historicalnon-highway fuel use data used to reflect a business' cyclical or seasonaloperation. The Account Historical Average is determined by the average ofthe historical non-highway fuel use data of an existing account during theperiod of April 1, 1999 through June 2000.

c. Approved Paper Filing Period: The twelve-month calendarperiod following written approval for paper filing. Approved paper filerswill be monitored for a change in the calculated transaction average for subsequenttwelve-month calendar periods, as provided for in Regulation (39-) 27-105(5).

d. Calculated Transaction Average (CTA): Calculated by dividingthe properly reported total receipt (DR 7055) and disbursement (DR 7056) transactionsfor the most current consecutive twelve-month period by 12 is the monthlytransaction average. The twelve-month CTA will account for seasonal fluctuationsand provide an accurate barometer of the business. The CTA will be used todetermine if a fuel licensee is required to report electronically or can filea paper return.

e. Confines of Highway Construction Projects: The area in whichthe highway is actually being constructed unless outside areas are specificallyincluded in the definition of the confines of particular highway constructionproject in the contract with the awarding governmental agency.

f. Electronic Reporting Means: Defined as filing of data acceptableto the Colorado Fuel Tracking System and the Department of Revenue.

g. Industry Segment: A group of companies or businesses inan industry involved in the same business activities and processes using similarvehicles and equipment to provide services or products to customers.

h. Industry Segment Historical Average: The percentage derivedfrom the historical non-highway fuel use filing data of established accounts.This average will be assigned to new accounts without any previous historicalfiling data in the industry segment, which the new account is most closelyassociated.

i. Industry Standard: The percentage proposed by an industryand derived from identical or similar industries or other state's studies.The percentage will be used as the Account Percentage for new accounts inan industry.

j. LPG/NG: Liquefied petroleum gas or natural gas k. Refund Account: An account established for individual, company,or corporate business to claim refunds for exempt use of fuel.

l. Terminal Operator: Defined as any person that owns, operates,or otherwise controls a terminal.

II. TAX IMPOSED ON - DEPOSITS - PENALTIES - EXEMPTIONS- EX-TAX PURCHASES a. Two Percent Allowance. The two percent allowance will notbe allowed on gasoline exported or sales exempt from the tax imposed by thissection. Exempt sales can be made only by a Colorado Licensed Gasoline Distributor,in accordance with § 39-27-104, C.R.S.

b. Eligibility for Two Percent Allowance. Only a Colorado licensedgasoline distributor is eligible for the two-percent allowance.

c. Basis for Taxation. The tax shall be based on gallons asmeasured on a gross gallon basis.

d. LPG/NG.

1. A LPG/NG decal vendor having delivery pumps which are controlledby keys, personal identification numbers of cards issued to and used by exemptusers must identify such exempt use by key number, personal identificationnumber or card number on the forms for decal fee collections and decal issuances.

2. A supplier of LPG/NG must apply with the Department of Revenueto become a LPG/NG decal vendor. The application must be filed on forms prescribedby the Executive Director. The LPG/NG decal vendor applicant must be a distributoras defined in 39-27-101 C.R.S.

3. The LPG/NG decal vendor shall remit to the Department of RevenueLPG/NG decal fees collected. For each calendar year the Department of Revenueshall issue to the requesting vendor, LPG/NG decals in a volume determinedby the vendor no later than the preceding November 1. The payment for decalcollections made by the end of January is due from the vendor the last businessday of February of such calendar year. Payments for collections made duringeach subsequent month, beginning with February, are due the last businessday of the month following the month of collection. Any late filed paymentswill be subject to interest and penalty provisions of 39-27-105,C.R.S. Additional request for LPG/NG decals by the vendor may be ordered duringeach calendar year. Any un-issued LPG/NG decals for the year must be returnedto the Department of Revenue by December 31.

4. A nonprofit transit agency must meet the definition as describedin § 40-1.1-102, C.R.S. A nonprofittransit agency that is exempt from the payment of LPG/NG decal fees will berequired to display on the vehicle windshield the LPG/NG decal provided atno cost.

5. The LPG/NG decal vendor must remit to the Department of Revenuecompleted LPG/NG decal forms prescribed by the Executive Director of the Departmentof Revenue. The forms will be created by the Department of Revenue specificallyfor recording the LPG/NG decal issuances, collections, and decal inventoryby the LPG/NG vendor. The forms will be due at the same time and coveringthe same period as payments for collections are due in accordance with II(d)(3). Failure to receive the authorized forms does not relievethe LPG/NG decal vendor from the obligation of submitting the forms to theExecutive Director.

e. Tax Imposed on Special Fuel.

1. Special Fuel Tax Due on Acquisitions & Payment of Tax on UntaxedInventory. Effective January 1, 2001, all fuel acquired at the terminal rack willbe taxable, except three tax-deferred transactions are allowed between licenseddistributors after leaving the terminal of origin. Special fuel in inventoryon December 31, 2000 will be untaxed inventory. The tax will be due on theinventory January 1, 2001 and payable on March 25, 2001.

2. Reporting and Payment of December 31,2000 Taxable Inventory. When the licensed distributor submits the payment for their December2000 Ending Inventory, the licensee will remit the payment with a letter to: Colorado Department of RevenueMotor Carrier Service's - Fuel &Mileage Unit1881 Pierce Street - Room 114Lakewood, CO 80214-1407 The licensed distributor must include the following four pieces of informationin the letter accompanying payment:

1. — Company Name, Contact Person, and Phone Number — Colorado Fuel License Account Number — Statement: “Enclosed is Special Fuel Tax Due for December31, 2000 Ending Inventory.”
   1. — Calculation of tax due:
      1. Ending Inventory of Taxable Special Fuel, (Does not include Dyed DieselProducts), multiplied times the special fuel tax rate. Ending Inventory Taxable Gallons multiplied by $.205 = Total Amount Due — In addition to the required information, a copy of the December2000 Tax Return and Inventory Section (DR7050) on the back of the return mustbe included.

III. REFUNDS - PENALTIES a. Rental Equipment. When gasoline is used in rental equipmentother than motor vehicles, the rental equipment agency that furnishes gasolineat no extra cost to the customer may be entitled to a refund on gasoline soused.

b. Claims for Refund.

Claims for refund shall be postmarked no later than twelve months afterthe purchase of the fuel. Invoices are the delivery tickets issued at thetime of sale and delivery. Billing invoices prepared later are not acceptableunless accompanied by a receipt delivery ticket. Invoices must be retainedfor a period of three years from the date of purchase of fuel or the dateof the refund claim filing for the fuel purchased, whichever is later. Theseinvoices must be available for audit and upon request by the Colorado Departmentof Revenue. Invoices must show the following information:

1. 1. Dealer's name and address, and address of delivery.
2. 2. Purchaser's name and address.
3. 3. Correct date of sale and delivery as to month, day, and year.
4. 4. The kind and quantity of gasoline or special fuel sold.
5. 5. Price per gallon of gasoline or special fuel, the total amountof Colorado tax, and total amount paid.
6. 6. Electronic invoices are acceptable if the same information foritems (1-5) are included on an electronic invoice.

Fuel used in vehicles licensed and plated for on road use in the stateof Colorado does not qualify as exempt use of fuel. In the calculation foran industry percentage for exempt fuel use the fuel is treated as taxableuse. The only exception is fuel used as a power source for a qualifying exemptpurpose other than powering the vehicle over the road. The fuel must havebeen accounted for in the industry percentage proposal approved by the ColoradoDepartment of Revenue.

c. Establishing Account Percentages. Account percentages areestablished by using either the Account Historical Average, Industry SegmentHistorical Average or Industry Standard.

d. Identification of and Establishment of Industry Segments.An industry segment will be identified and established as follows:

1. Industry segments will be identified and established using informationreceived from established refund account holders.

2. An industry segment can be established by supporting documentationin tests or studies completed by a nationally recognized group, organization,or jurisdiction.

e. Establishing an Industry Segment Percentage. The industrysegment percentage will be established based on historical filing data onestablished refund accounts or from data provided in an industry segment proposalthat has been approved by the Colorado Department of Revenue.

f. Procedures & Documentation for an Industry Standard Proposal.The industry standard proposal will include a fair representation of companiesin the specific industry segment, a definition of the segment, a descriptionof the segment's business and typical equipment used in conducting business.The studies must include documentation to support the percentage proposed.Upon review and approval by the Department of Revenue, the percentage willbe added as the “Industry Standard Percentage”. The approved IndustryStandard Percentage will be assigned to companies in the industry segmentelecting to be in the segment. Required Proposal Documentation:

— Outline the rationale for the method used to determine anindustry percentage for equipment, vehicles, fuel use, and typical businessoperations for the segment. — Identify typical equipment used, operations, and seasonalor cyclical events that might affect business operations.

— Explain the measuring method used and the application to typicalbusiness equipment and operations.

— Provide fuel records and data used to determine exempt andnon-exempt fuel. Records and data might include total fuel used and consumedor mileage records. — Period of Tune for Study or Test - Should include period coveringcyclical or seasonal impacts to cover low and high points of fuel usage forexempt or non-exempt purposes.

g. Establishment of the Account Percentage and Utilization of theIndustry Segment Percentage. An Account Percentage will be assigned toeach refund account. Refundable gallons will be calculated by multiplyingthe account percentage times the gallons purchased for use by the business.

1. New applicants, without a filing history, applying to establisha new refund account, will be assigned the established Industry Segment Percentage.

2. Change in business operations by an established account- Documentation must be submitted to show the business change, change in equipment,and the change in operations. Documentation must include actual records fora year, to account for cyclical or seasonal change affecting the business.The data must include accurate information for the actual use of fuel, includeequipment records and use, and provide actual mileage over the road, milesper gallon, and include inventory records of fuel and equipment.

h. Protests Of The Industry, Industry-Segment, Or Account Percentage.The industry, industry- segment or account percentage assigned and used mustinclude data to support an alternative percentage. The data must include actualdata for total fuel purchased and used, total mileage over the road, milesper gallon, equipment and vehicle use, and inventory records of fuel and equipment.The data must be accurate information for a year to account for cyclical orseasonal operations. The data must support the alternative percentage, Protestssubmitted with out that supporting documentation may be disapproved.

i. Qualifying Fuel. Qualifying fuels shall be in accordancewith the provisions and rules under § 39-27- 103,C.R.S.

1. Effective date to claim refunds using a percentage is July 1,2000.All fuel purchased prior to July 1, 2000 should be claimed on the old refundclaim forms in use prior to July 1, 2000.

2. Invoices for less than twenty gallons of fuel will qualify fora refund and can be included with the refund claim, if the total refundablegallons on a claim form exceed 20 gallons.

3. Gallons reported included with total gallons purchased for businessuse must be gallons on which the Colorado motor fuel excise tax was paid.Red dyed diesel, fuel purchased in another jurisdiction, or fuel purchasedtax exempt does not qualify.

IV. LICENSE AND DEPOSIT - EXCEPTION a. Requirement for Importer and/or Exporter License. In orderto receive an importer and/or exporter license, the applicant must be a licenseddistributor in Colorado.

b. Colorado Exporters. Some Colorado exporters may not qualifyfor a license in other jurisdictions, because the point of taxation can bedifferent in other jurisdictions. If so, Colorado will recognize that theColorado exporter is not required to be licensed in the jurisdiction to whichthe fuel is exported.

c. License Application. A license application will be sentout to all currently registered distributors with the notification of thenew regulations. Upon receipt of the application, the distributor has sixtydays to comply.

A ten-dollar fee is required for each application. A five-dollar feeis required for each additional location named on the application.

Currently registered distributors are not required to provide a bondor financial statement. However, a complete statement of the ownership ofthe company is required. A financial statement and a complete statement of the ownership of thecompany are required if the distributor is required to provide a bond.

The following is required for a new distributors license: — A bond whose amount is determined by the Department.

1. — Complete financial statement.

   — A complete statement of ownership of the company.

Any person acquiring a ten-percent equity holding in a company must submitin writing to the Department within thirty days notification of such equityinterest. Any change of ownership or equity interest amounting to ten-percent withina twelve-month period will require written notification to the Departmentwithin thirty days. The Department may require a bond, new financial and ownership statementsif the equity interest or ownership changes within a company.

The Department will allow one bond of a sufficient amount to cover liabilitiesassociated with both gasoline and special fuel.

V. LICENSE & DEPOSIT - EXCEPTIONS a. Licensing of Terminal Operators. Terminal operators shallbe licensed with the state of Colorado. A terminal operator shall completean application Form DR 7064 and provide the IRS terminal code, terminal location,type of fuel stored, storage capacity of the terminal, and provide a bond.

b. Bond Requirements for Current Fuel Licensees. Bonds willbe increased to the new requirements for established licensees upon analysisof the tax and bond on an account during a period of two consecutive months.The demand for additional bond will be processed as provided for in CRS 39-27-104(2)(a)(II)(b).

VI. COLLECTION OF TAX ON GASOLINE & SPECIAL FUELEXCISE TAX a. Use of Forms or Computerized Printouts. Prior to use ofany form or computerized printout other than that provided by the Departmentof Revenue, it shall be submitted to the Department of Revenue for writtenapproval.

b. Basis for Tax Computation. Gallons as measured on a grossgallon basis will be used for the tax computation.

c. Aviation and Jet Fuel. All sales of aviation gasoline andjet fuel delivered tax collected, must be reported on the appropriate disbursementschedule and be included with the tax return. All requested information onthe disbursement schedules must be provided. The destination point, on thedisbursement schedules, must include the Federal Aviation Administration airportcode. The FAA airport code is available on the Division of Aeronautics Website.

d. Carrier reports are required on imports and exports. Carrierreports are required on imports and exports hauled by common or contract carriers.Importers and exporters must report gallons in net, gross and billed.

e. Collection of Tax & Reporting.

1. Terminal Operator Reporting Requirements The terminals shall provide a monthly terminal report by electronic means,acceptable into the Colorado Fuel Tracking System (COFTS). When the IRS TerminalReport data, required by Colorado, is provided electronically to the ColoradoFuel Tracking System, reporting to the state of Colorado will be satisfied.

1. The terminal reports are not a tax report but will provide the statefull accountability of all fuel moving through the terminal on forms prescribedand required by the executive director. The forms shall require the followinginformation: — Inventory report including beginning inventory, total receipts,total disbursements, and ending inventory by product type from the terminaloperator.
   1. — Schedule of receipts by product code and position holder. — Schedule of disbursements by position holder.

      — Schedule of inventories by position holder.

2. Electronic Reporting Requirements Effective January 1, 2001, all Fuel Licensees, (distributors, suppliers,importers, exporters, blenders, carriers, and terminal operators), will berequired to file by an electronic means to the Colorado Fuel Tracking System,if the licensee averages 20 or more transactions a month for receipts anddisbursements of fuel. Receipt and Disbursement Transactions will be reportedas prescribed in CRS 39-27-105 3. Penalty and License Revocation for Failure to Report Electronically If any fuel licensee refuses or fails to report electronically or filesincorrectly by the due date, and has 20 or more receipt and disbursement transactionsas required by the average 20 transaction calculation, shall be assessed the30 % penalty under § 39-27- 105(3),C.R.S. If the fuel licensee does not subsequently file electronically, thelicense may be revoked as provided in § 39-27-104(2.2),C.R.S.

4. Paper Filing Authority & Protest of Electronic Filing Requirements A written request must be submitted to the Department of Revenue - MotorCarrier Services Fuel & Mileage Unit, to file on paper. The request mustinclude the most recent 12 consecutive monthly returns including all receiptand disbursement schedules DR 7055 & DR 7056. If the review of the returnsshows the requester averages less than twenty transactions per month, paperfiling will be allowed.

1. Approved paper filing will allow the fuel licensee to report on paperfor the subsequent calendar twelve- month period. The Department of Revenuewill review transactions for the period of October, proceeding the paper-filingperiod, through September of the approved paper-filing period. The Departmentof Revenue will notify the licensee if a change to electronic filing is required.Beginning January of the subsequent filing period the licensee will be requiredto file electronically if the Department's review shows mat the licensee averagedtwenty or more transactions.

   Electronic filing will be required unless a fuel licensee has writtenapproval from the Fuel & Mileage Unit to file on paper returns.

   Protest of the determination must be submitted to the Supervisor of theFuel & Mileage Unit and include documentation supporting a monthly transactionaverage of less than twenty.

   Subsequent appeal procedures will be handled under the provision of §§39-21-104 and 39-21-105,C.R.S.

VII. DATA COLLECTION SERVICES a. Distributor who is solely a vendor of LPG. A person whois a distributor under this act solely because he is a vendor of LPG needonly maintain the following records: — The date of the sale.

— The amount of liquefied petroleum gas sold.

— Amount of tax collected — License number of vehicle.

VIII. INTERNATIONAL FUEL AGREEMENT (IFTA)

a. In accordance with § 39-27-301C.R.S., et seq., the State of Colorado participates in the International FuelTax Agreement (IFTA).

b. IFTA, of which Colorado is a member, requires motor carriers licensedunder this agreement to report of fuel use taxes for qualified motor vehicles,“Qualified motor vehicle” is defined in the IFTA, which is incorporatedby reference. Because an IFTA licensed carrier may also be operating non- qualifiedvehicles that are not subject to IFTA reporting requirements, when fuelingthose vehicles; the carrier must pay the Colorado fuel tax at the time ofpurchase.