Fuels Tax Exceptions Gaseous Fuels

Gaseous special fuels are gases at a standard temperature and pressure. The most common gaseous special fuels are propane and natural gas. Hydrogen is also a gaseous special fuel (see Idaho Code section 63-2401).

Types

Propane

Propane is delivered in a compressed state.

Natural gas

Natural gas is delivered as either:

  • CNG – under pressure as compressed natural gas
  • LNG – in a super cold state as liquefied natural gas

Hydrogen

The most common taxable use of hydrogen is generating electricity from a hydrogen fuel cell to power a vehicle.

When tax is due

Only licensed distributors pay motor fuels tax on traditional motor fuels like gasoline and diesel. (See the Fuels Distributor guide for more information.) However, either the licensed distributor or the consumer pays motor fuels tax on nontraditional motor fuels like gaseous special fuels.

Motor fuels tax is due on gaseous special fuels used in motor vehicles that are licensed or required to be licensed motor vehicles.

  • At a retail outlet, distributors charge motor fuels tax when the gaseous special fuel goes into the main supply tank of the motor vehicle.
  • When sold into a consumer’s bulk tank, motor fuels tax is due when the fuel goes into the motor vehicle. Tax must be paid in one of these ways:
    • The consumer pays the fuel tax using a pdf Form 75 – Fuels Use Report and Instructions.
    • The consumer can ask the licensed distributor to charge the tax on the fuel the distributor delivered. The licensed distributor collects and pays the tax.
Transfer fee

Gaseous special fuels aren’t subject to the Petroleum Clean Water Trust transfer fee. They’re not liquid at standard temperature and pressure.

When tax isn’t due

Consumers don’t owe motor fuels tax when distributors sell them gaseous special fuels for nontaxable uses, like heating fuel. If consumers use tax-paid gaseous special fuels in nontaxable ways, they can file for a refund of the motor fuels tax. For more information about nontaxable uses of special fuels, go to the Fuels Consumers guide.

Distributors shouldn’t charge the motor fuels tax on special gaseous fuels they put in vehicles that the federal government or a political subdivision of the State of Idaho owns or leases and operates. These government agencies are exempt. The distributor must keep records showing:

  • Into which government vehicles they put the gaseous special fuel
  • When they put the gaseous special fuel into the main supply tank of the government vehicle

For more information, see Motor Fuels Tax Rule 132.

Distributors must be licensed

People selling gaseous special fuels as a motor fuel must be licensed distributors, and they must collect and pay tax as required. They can become licensed distributors by getting one of these licenses:

  • Motor fuels distributor license. This license allows distributors to buy for resale any type of untaxed motor fuels, including gaseous special fuels.
  • Gaseous special fuels distributor license. This license is for distributors selling gaseous special fuels as a motor fuel. All other fuel they purchase must include the motor fuels tax and transfer fee in the purchase price.

Use pdf Form IBR-3 – Idaho Fuel Distributor License Application and Instructions, to apply for the license you want.