Diesel Fuel Tax

Vermont diesel fuel tax applies to all clear diesel.

Vermont diesel fuel tax does not apply to dyed diesel. Dyed diesel is colored red and has either a high or low sulfur content.

  • High Sulfur dyed diesel may be used only in unregistered equipment, stationary engines, tractors, etc. EPA regulations prohibit its use in motor vehicles.
  • Low Sulfur dyed diesel may be used in stationary engines, tractors, equipment and other vehicles that are not required to be registered. It may also be used in vehicles operated exclusively by state and local Governments.

Diesel in Storage Tanks:

If you have only one diesel storage tank and use the fuel in both taxable and nontaxable ways, you must buy taxed clear diesel. When you use tax-paid diesel fuel in nontaxable ways, you may apply for a tax refund by filing the Vermont Diesel Fuel Refund Application. Records must be maintained for 4 years indicating the number of gallons withdrawn from the tank and put into each vehicle or piece of equipment.

Sales tax on dyed diesel:

Vermont requires a use tax be paid on dyed diesel unless the sale is for propulsion use. If you have any questions please call Commercial Vehicle Operations at 802-828-2070

Vermont Diesel Fuel Refunds

Definitions

  • “Distributor” shall mean a person, firm, or corporation who imports or causes to be imported gasoline or other motor fuel for use, distribution, or sale within the State, or any person, firm, or corporation who produces, refines, manufactures, or compounds gasoline or other motor fuel within the State for use, distribution, or sale. When a person receives motor fuel in circumstances which preclude the collection of the tax from the distributor by reason of the provisions of the Constitution and laws of the United States, and thereafter sells or uses the motor fuel in the State in a manner and under circumstances as may subject the sale to the taxing power of the State, the person shall be considered a distributor and shall make the same reports, pay the same taxes, and be subject to all provisions relating to distributors of motor fuel.
  • “Dealer” means any person who sells or delivers motor fuel into the fuel supply tanks of motor vehicles owned or operated by others.
  • “Gasoline or other motor fuel” or “motor fuel” shall not include kerosene, diesel oil, aircraft jet fuel, or natural gas in any form.
  • “Motor vehicle” means any self-propelled vehicle using motor fuel on the public highways and registered or required to be registered for operation on the highway.

Diesel Fuel Distributor License

It is unlawful for any person to act as a distributor or dealer without being licensed as such. An applicant for a dealer’s or distributor’s license shall file an application with the Commissioner. The application shall not be under oath but shall contain a declaration that it is made under the penalties of perjury.

Upon review of the application and bond, (see bond requirements below) to ensure all requirements and conditions are met, the Commissioner may issue a license to an applicant which will remain in effect until such time as surrendered or revoked.

Every distributor or dealer, on or before the 25th day of each month, shall file with the Commissioner a report for the preceding month which shall include the number of gallons of fuel sold or delivered. A distributor’s report shall also include the identity of the person to whom the fuel was sold or delivered, the amount of the tax collected and by whom, and the monthly total of fuel sold or delivered. The report shall be filed even though no fuel was sold or delivered.

Motor Fuel Distributor License:

Before commencing business, on application, a distributor shall first procure a license from the Commissioner permitting him or her to continue or to engage in business as a distributor. Upon approval of the application and bond (see bond requirements below), the Commissioner shall issue to the distributor a nonassignable license which shall continue in force until surrendered or revoked.

Every distributor or dealer, on or before the 25th day of each month, shall file with the Commissioner a report for the preceding month. The report shall be filed even though no fuel was sold or delivered.

Diesel & Motor Fuel Surety Bond Requirements:

The amount of a surety bonds required shall be reviewed annually in September. If the Commissioner retains or reimposes a bond requirement, the amount required shall be the sum of the highest two months’ payment during the preceding year or $1,000.00, whichever is greater, but in no case shall it exceed $700,000.00.

A distributor may request release or reduction of the bond if the distributor has complied with all licensing and reporting requirements for at least the last three consecutive years. If the Commissioner determines that release or reduction of the bond will not unreasonably jeopardize State revenues, the bond shall be released or reduced.  Upon a finding to the contrary, the Commissioner shall retain the bond. 

Related Forms & Information

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Vermont Department of Motor Vehicles
120 State Street
Montpelier, VT 05603-0001

Monday-Friday: 7:45am-4:30pm
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