Take Your Excise Tax Rebate!
Even some experienced contractors are still paying excise tax on the fuel their auxiliary engines burn while sweeping off the highway. Others are taking the deduction but are unaware that it covers only fuel used by the auxiliary, not what is used by the truck engine while sweeping. Your auxiliary fuel usage can still amount to a tidy sum, however. As of February of 2005, it was $.244 a gallon for diesel fuel and $.184 per gallon for gasoline.
Here is an outline of how the system works:
IRS rules require that you keep 'reasonable' records showing the amount of fuel used, and the usage must be from a separate engine than that of your propulsion power plant. In other words, if your sweeper has only a single engine, that runs off a power take-off connected to your truck motor, you are not eligible for a deduction.
Because auxiliary engines come equipped with hour-meters, recordkeeping for the deduction is a relatively simple process. If you only sweep private lots, then the number of gallons used by your power module per hour, times the number of hours you ran it (including a factor for warmup), is a way you might use to estimate your total fuel consumption. The average amount of fuel you use will vary, of course, depending upon the model of sweeper you are using.
If you do street sweeping with a sweeper, you will not be able to discount the street sweeping portion of your fuel used. If you used the hour meter system, street sweeping hours must be deducted from your excise tax deduction.
The form used for submitting your deduction is IRS form #4136, Credit for Federal Tax on Fuels. Guidelines for gasoline burning engines require that the credit may only be applied for via this form, and received as part of your income tax refund. Diesel guidelines, however, allow you, at the time you buy your diesel fuel, to NOT pay the tax on the percentage of fuel you estimate will be used by your power module engine while sweeping off-road. If your supplier is a federally authorized diesel distributor, they can supply you with a form to use for this estimation. Then you won't have to pay the supplier for the excise tax on the amount of diesel you calculate will be used sweeping parking lots.
For definitive information on how this program works, don't take our word for it. Talk to your CPA or an IRS agent in your local tax office who is familiar with excise tax statutes. There is also an excise tax charged by each state, and it is typically even more than that levied by the federal government. Check with your state's Department of Revenue, or Department of Motor Vehicles, to find out if or how to deduct your state excise taxes. Requirements differ from state to state.
Some states, for example, require a fuel meter to be installed on an auxiliary if it shares a fuel tank with the vehicle's propulsion engine. If so, it's often cost-effective to do so even though these meters run about $350 for gasoline and $500 for diesels. If you know in advance that you will need one, ask your manufacturer to add a meter to your new sweeper before it leaves the factory.
We have a current list of fuel usage by engine manufacturer, as well as an article from an IRS agent outlining this program, in the Contractors' section of the website.
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