PURPOSE: This rule clarifies the taxability of special fuel sold to farmers and home heating oil customers who use the fuel for highway and exempt purposes pursuant to section 142.404(5) and (6), RSMo.

1. (1) Dual user is defined as a user of special fuel who has both exempt and nonexempt bulk purchases of special fuel, where the exempt purchases of fuel are for farm equipment, home-heating purposes, railroad companies and the nonexempt purchases are for diesel-powered highway equipment.

2. (2) A special fuel distributor may sell special fuel to a dual user for exempt purposes without collecting the special fuel tax provided the following conditions are met:

   1. (A) The dual user (that is, a farmer, homeheating oil customer, railroad company or a combination of these) has separate bulk storage tanks for the exempt fuel and the taxable fuel;
   2. (B) Each tank is clearly marked to distinguish exempt fuel and taxable fuel. Example: “Farm Equipment”, “Home Heating” or “Railroad Rolling Stock” for exempt fuel and “Highway” for taxable fuel;
   3. (C) The purchaser completes and signs a special fuel exemption certificate form and files it with the distributor; and 12 CSR 10-7
   4. (D) The special fuel distributor must charge and collect tax on special fuel sold for highway use (that is, delivered to the taxable fuel tank).
3. (3) The special fuel distributor may deduct from his/her distributor’s monthly tax report exempt sales made to dual users who qualify under section (2). This deduction must be reported and documented in the same manner as other exempt sales.
4. (4) If a dual user has a single bulk storage tank from which s/he draws fuel for exempt and nonexempt purposes, the distributor shall charge fuel tax on all of the fuel and s/he shall not deduct any of the fuel as exempt. The purchaser may file a claim for refund with the department for fuel which has been used for nonhighway purposes. Anyone filing for refund must have records to document his/her claim.
5. (5) For a period of three (3) years, the purchaser must maintain records which distinguish exempt fuel purchases from taxable fuel purchases.
6. (6) Any dual user who is found to be in violation of section (2) shall have his/her claim of special fuel exemption disallowed by the department and s/he shall be required to purchase all special fuel tax paid and file a refund claim for the fuel tax paid on fuel used for nonhighway purposes.

AUTHORITY: section 142.621, RSMo 1986. Original rule filed Oct. 19, 1989, effective Feb. 25, 1990. Amended: Filed Jan. 31, 1992, effective June 25, 1992.