The New York State Senate today passed legislation (S.7947B), to reverse the unintended consequence of a federal regulation that forces farmers and other small businesses to pay taxes upfront for tax-free fuel sold in New York State.
In the fall of 2007, the United States Environment Protection Agency implemented new regulations mandating that all non-road vehicles, including farm tractors and farm equipment, use a lower sulfur diesel.
The lower sulfur diesel fuel is considered an “enhanced” diesel fuel. New York State tax law requires that fuel distributors pay taxes at the time of purchasing the fuel, regardless of whether the end sale is an exempt use, such as farming.
Fuel distributors must layout almost $0.40/gallon in taxes and then wait for four to five months for a refund of those taxes. Some small distributors have passed the tax onto farmers, who then must apply for a refund with the New York State Department of Taxation and Finance.
The legislation would provide fuel distributors with an upfront exemption from the petroleum business, excise and state and local sales taxes for lower sulfur diesel fuel that will be sold to qualified farmers and other exempt users. The legislation provides the Commissioner of Taxation and Finance the ability to request reasonably necessary forms from the fuel distributors to ensure the integrity of the new exemption system.
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