Mercedes Mullins
Indiana's fuel tax laws are complex, with various taxes, rates, and exemptions applying to different types of fuel, vehicles, and usage. The state imposes a Motor Carrier Fuel Tax (MCFT) on carriers operating within Indiana, with rates varying for special fuel, alternative fuel, and gasoline. Additionally, there are International Fuel Tax Agreement (IFTA) requirements for interstate carriers traveling through Indiana and other states or Canadian provinces. While some exemptions exist for certain types of fuel, vehicles, and usage, it is unclear whether diesel fuel for hire carriers is specifically tax-exempt in Indiana. Understanding Indiana's fuel tax landscape is essential for carriers to ensure compliance and optimize tax obligations.
Diesel fuel tax exemption for hire carriers in Indiana
| Characteristics | Values |
|---|---|
| Motor Carrier Fuel Tax (MCFT) rate | $0.59 per gallon of alternative fuel and $0.35 per gallon of gasoline, consumed by a carrier in its operations on highways in Indiana |
| Special Fuel Tax rate | $0.59 per gallon |
| Applicable laws | House Enrolled Act (HEA) 1050, Indiana Code 6-2.5-5-51 and 6-6-2.5-22 |
| Tax exemptions | Transactions involving tangible personal property and services, sales of motor vehicles for use outside the state, transportation of property for hire, biodiesel blends of at least 20%, biodiesel used by a biodiesel producer holding an exemption certificate, dedicated AFVs that operate exclusively on natural gas, propane, ethanol, hydrogen, or methanol |
| Tax refunds | A portion of the state and local sales tax on purchases of fuel, lubricants, repair parts, accessories, and repair, maintenance, and installation services for motor vehicles |
| Tax reductions | Sales tax reductions on equipment used for transporting goods or passengers interstate, prorated tax collected when a motor carrier buys equipment |
| Tax credits | Carriers operating a commercial CNG vehicle on any Indiana highway may claim a credit equal to 12% of the road taxes imposed on its CNG consumption in the previous calendar quarter |
| Tax incentives | Grants and loans provided by the Indiana 21st Century Research and Technology Fund for qualified alternative fuel technologies and fuel-efficient vehicle development and production |
| Tax licenses | IFTA license, MCFT license, transporter's license, importer's license, supplier's license, permissive supplier's license, terminal operator's license |
| Tax registration | Quarterly tax returns, yearly renewals, decals, and license cards |
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What You'll Learn
Indiana's Motor Carrier Fuel Tax (MCFT)
Vehicles subject to this tax must be registered with the Indiana Department of Revenue's (DOR) Motor Carrier Services. Any vehicle with a gross or registered weight of over 26,000 pounds that operates within Indiana must file a tax return based on fuel usage. There are exceptions for certain intrastate vehicles, such as those operated by government agencies. To comply with MCFT requirements, carriers must obtain a fuel tax account, an MCFT license, and MCFT decals. These decals must be displayed on the vehicles, along with a compliance emblem and a license card.
The MCFT annual permit covers all qualified vehicles operated by the permit holder and must be renewed by December 31 each year. Carriers can manage their MCFT transactions, including tax returns, renewals, and decal orders, through the Indiana Fuel Tax System, which offers online services for motor carriers.
It's important to note that Indiana allows for credits or refunds on excess tax paid on fuel purchased in the state. Carriers can request a refund when filing their quarterly tax returns or claim a Proportional Use Credit (PUC) for taxes paid on motor fuel consumed in certain situations.
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Indiana's Special Fuel Tax
Indiana's Motor Carrier Fuel Tax (MCFT) rate is $0.59 per gallon of alternative fuel and $0.35 per gallon of gasoline consumed by carriers in their operations on Indiana highways. This applies to carriers with a combined gross vehicle weight or registered weight in excess of 26,000 pounds.
The MCFT is for intrastate carriers operating only within Indiana. For interstate carriers travelling in Indiana and at least one other state, an International Fuel Tax Agreement (IFTA) license is required.
The Special Fuel Tax rate in Indiana is $0.59 per gallon from July 1, 2024, to June 30, 2025. The previous rate, from July 1, 2023, to June 30, 2024, was $0.57 per gallon.
Any person transporting special fuel from outside Indiana to a point inside Indiana, or from inside Indiana to outside Indiana, must obtain a transporter's license, regardless of whether they are engaged for hire in interstate or intrastate commerce. A supplier's license is required for any supplier engaged in business in Indiana, with a fee of $500. A permissive supplier's license is also available for a fee of $50.
Indiana's Department of Revenue (DOR) provides an online Fuel Tax System for motor carriers to manage their MCFT/IFTA transactions, including processing and paying quarterly tax returns, renewals, and ordering additional decals.
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International Fuel Tax Agreement (IFTA)
The International Fuel Tax Agreement (IFTA) is a program that standardizes the reporting of fuel usage by commercial motor vehicles operating in multiple states or Canadian provinces. Prior to the implementation of IFTA, each state had its own fuel tax system, requiring trucks to obtain tax permits for each state they operated in. This process was cumbersome for both the trucking industry and the states.
Under IFTA, qualifying commercial motor vehicles traveling in more than one jurisdiction are required to file a consolidated report of motor fuel taxes, including taxes on gasoline, diesel fuel, liquefied gas, compressed natural gas, and liquefied natural gas. This simplifies the process for carriers, as they no longer need to obtain separate permits for each state.
To participate in IFTA, motor carriers are encouraged to apply for an IFTA license through the appropriate authority, such as the Comptroller's Webfile system in Texas. The application process is straightforward and can be completed electronically. Once approved, the IFTA license and decals will be provided to the carrier.
IFTA tax reports are typically due on a quarterly basis and must be filed electronically. However, in cases of hardship where electronic filing is not possible, paper reports are accepted. IFTA subscribers can access various resources and benefits, including jurisdiction contact information, discounts on events, newsletters, training materials, and a message board for sharing ideas with industry peers.
In Indiana, the Motor Carrier Fuel Tax (MCFT) rate for the period from July 1, 2023, to June 30, 2024, was $0.57 per gallon of special fuel or alternative fuel and $0.34 per gallon of gasoline consumed by a carrier on highways within the state. From July 1, 2024 to June 30, 2025, the MCFT rate will increase to $0.59 per gallon of alternative fuel and $0.35 per gallon of gasoline. These rates are subject to change and are outlined by the Indiana Department of Revenue (DOR).
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Federal diesel fuel tax exemptions
In the United States, the federal government imposes an excise tax on the sale of diesel fuel, which is currently set at 24.4 cents per gallon. This tax is used to fund transportation-related projects and programs, such as the construction and maintenance of highways, bridges, and other infrastructure. While this tax is applicable to most diesel fuel sales, there are certain federal diesel fuel tax exemptions in place.
One notable exemption is for agricultural use, where farmers can purchase diesel fuel tax-free if it is used exclusively for farming purposes, such as powering tractors and other farm equipment. This exemption helps to reduce operating costs for farmers and keep food prices affordable for consumers. Similarly, diesel fuel used solely for off-road purposes, such as powering construction equipment, generators, and landscaping machinery, is also exempt from the federal excise tax. This exemption benefits businesses that rely on heavy equipment by reducing their operating costs.
In addition to these use-based exemptions, specific industries may also qualify for federal diesel fuel tax exemptions. Industries such as fishing, logging, manufacturing, transportation by boat or locomotive, and electricity generation could be eligible for tax exemptions. These exemptions are intended to reduce the tax burden on certain industries that rely heavily on diesel fuel, helping to keep their operating costs down.
To claim a federal diesel fuel tax exemption, eligible entities must follow specific procedures. For instance, in some cases, an exemption permit must be obtained from the Department of Finance before purchasing tax-exempt diesel fuel. Additionally, companies and individuals may be able to claim fuel tax credits by filing the necessary documentation, such as Federal Tax Form 4136, to substantiate their eligibility for exemptions or credits.
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Indiana's fuel tax rates
From July 1, 2023, to June 30, 2024, the Motor Carrier Fuel Tax (MCFT) rate is $0.57 per gallon of special fuel or alternative fuel, and $0.34 per gallon of gasoline consumed by carriers on Indiana highways. From July 1, 2024, to June 30, 2025, the MCFT rate will increase to $0.59 per gallon of alternative fuel and $0.35 per gallon of gasoline.
The Special Fuel Tax rate from July 1, 2023, to June 30, 2024, is $0.57 per gallon. From July 1, 2024, to June 30, 2025, the Special Fuel tax rate will be $0.59 per gallon.
Additionally, Indiana levies a gasoline excise tax, which is a fixed rate applied per gallon of gasoline sold. As of July 1, 2024, the excise tax rate is $0.35 per gallon, following an increase from $0.34 per gallon in the previous year. This excise tax contributes to funding infrastructure and transportation projects in the state.
Indiana also imposes a gasoline use tax, which is calculated based on the average retail price of gasoline in the state each month. This use tax replaces the sales tax on fuel usage within Indiana.
Furthermore, there are specific taxes and requirements for suppliers and transporters of special fuel, as outlined in Indiana's taxation laws. These include license fees and registration requirements for suppliers, permissive suppliers, terminal operators, and transporters.
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Frequently asked questions
IFTA stands for the International Fuel Tax Agreement, an agreement between the lower 48 states and Canadian provinces that simplifies fuel tax reporting for motor carriers operating in multiple jurisdictions.
From July 1, 2024, to June 30, 2025, the MCFT rate is $0.59 per gallon of alternative fuel and $0.35 per gallon of gasoline.
From July 1, 2024, to June 30, 2025, the Special Fuel Tax rate is $0.59 per gallon.
Transportation for hire is generally exempt from sales tax in Indiana, especially if it is provided by a tourism service broker or funeral establishment. However, specific exemptions for diesel fuel were not clearly stated.
Vehicles weighing over 26,000 pounds that operate within Indiana must file a tax return based on fuel usage and register with the Indiana Department of Revenue's Motor Carrier Services.
