Biodiesel and State Taxes

I guess it should come as no surprise that many (if not all) states put a ton of taxes on you if you make your own biodiesel.  I will create a list of links to state regulations here so that you can research your own area.

PLEASE NOTE:  I have tried to make this as accurate as possible, but you are responsible to insure that you are in compliance.  Laws change, sometimes faster than I can find out or update, so don’t use this list as the definitive authority on whether you have to pay taxes on biodiesel or not. Keep in mind, diesel for agricultural use is commonly tax free both at the state and federal level, so check locally.

At this time, the list is FAR from complete.  Please be patient, or email me a link for your state if you have one.

Federal Law
These credits are supposed to be in the works, although the IRS may not have all the data yet: $1 per gallon tax credit for each gallon of pure biodiesel made from virgin oils derived from agricultural products and animal fats – “Agri-biodiesel” $.50 per gallon tax credit for each gallon of pure biodiesel made from other oils – “non-Agri-biodiesel”. Note, this is a tax credit, not deduction. Home made biodiesel is subject to the same tax as petrodiesel. You need to fill out IRS Form 637 to. More to come.

I want to thank Paul Robinson for the info on several states!


Alabama

Alaska

Arizona

Arkansas

California
Taxed the same as regular diesel even if you make it yourself.  You have pay taxes when you put it in the tank. No tax credits or breaks for using biodiesel.  Read more in this PDF file.

Colorado

Connecticut

Delaware

District of Columbia
Paul sent this info: According to District of Columbia official code dealing with taxation of fuel

Title 47 is titled TAXATION, LICENSING, PERMITS, ASSESSMENTS, AND FEES. Chapter 23 is titled MOTOR FUEL TAX.

DC ST § 47-2301 sets the tax on “motor vehicle fuels” at 22.5c per gallon.

DC ST § 47-2302 (2) says,
(2) The term “motor vehicle fuels” means gasoline, diesel fuel, and other volatile and flammable liquid fuels produced or compounded for the purpose of operating or propelling internal combustion engines. It also includes benzol, benzene, naphtha, kerosene, heating oils, all liquified petroleum gases, and all combustible gases and liquids suitable for the generation of power for propulsion of motor vehicles when advertised, offered for sale, sold for use, or used, alone, or blended or compounded with other products, for the purpose of operating or propelling internal combustion engines.
Read more. This basically sounds like it is taxed the same as petrodiesel.

Florida

Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Lousiana

Maine

Maryland
Another from Paul: This one is confusing to say the least, but it appears that biodiesel is taxed at the same rate as regular diesel because it isn’t a “special fuel” and likely doesn’t qualify as a “clean-burning fuel”. The link I have is for a LexisNexis search, which won’t help anyone here, so I will have to follow up with more info as I find it.

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina
Currently taxed like regular diesel, although some politicians are calling for a “tax holiday” period to develop the use. People who make their own biodiesel have to register and pay taxes for each gallon made.

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania
Thanks again to Paul: According to http://www.pennsylvaniagasprices.com/tax_info.aspx there is a 12c per gallon franchise tax on oil companies sales of non-gasoline fuel, a 26c tax on diesel, and a 1.2c tax on storage tanks owned by retailers, for a total tax of 39.2c per gallon on diesel (note the tax on gasoline is 32.3). The Pennsylvania statutes are very hard to navigate and searching for the appropriate statutes is very difficult, so I can’t discover what would be the requirements for personal production of biodiesel, but they do have a nationwide toll-free number 1-877-PATAXES.

Rhode Island

South Carolina

South Dakota

Tennessee

Texas
Appears that biodiesel is not taxed, thus B20 blend would be taxed at 80% of the regular rate.(20c p/g for diesel, 16c p/g for B10). More information is needed.

Utah

Vermont

Virginia
Paul was nice enough to forward this info: § 58.1-2201 of the Code of Virginia defines the following: “Alternative fuel” means a combustible gas, liquid or other energy source that can be used to generate power to operate a highway vehicle and that is not a motor fuel.

“Diesel fuel” means any liquid that is suitable for use as a fuel in a diesel-powered highway vehicle or watercraft. The term shall include undyed #1 fuel oil and undyed #2 fuel oil, but shall not include gasoline
or aviation jet fuel.

Motor fuel” means gasoline, diesel fuel, blended fuel, and aviation
fuel.

§ 58.1-2217 B sets the tax rate for “diesel” at 16c per gallon.

§ 58.1-2249 sets the tax on “alternative fuel” at 16c per gallon.

So whether biodiesel is considered “diesel” or “alternative fuel” it is taxable at 16c per gallon.

Washington

West Virginia

Wisconsin

Wyoming

This page is Copyright (C)2006 and was written by Dennis Brown with the help of several members of the site.  It is licensed under the GNU Free Document License.