Motor Fuels FAQs
This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue (DOR) until amended. A guidance document does not include internal procedural documents that only affect the internal operations of DOR and does not impose additional requirements or penalties on regulated parties or include confidential information or rules and regulations made in accordance with the Administrative Procedure Act. If you believe that this guidance document imposes additional requirements or penalties on regulated parties, you may request a review of the document.
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Motor Fuels Tax General Information
How is the motor fuels tax calculated?
The tax per gallon consists of several components:
- Fixed tax of 6.8 cents per gallon and 9.5 cents per gallon (effective January 2019);
- Wholesale portion (10.5 cents per gallon for January 2023 through June 2023), based upon 5% of the average wholesale cost of fuel in the previous six-month period; and
- Variable portion (2.2 cents per gallon for January 2023 through June 2023), which is determined by multiplying a variable percentage rate by the base cost of fuel purchased by the State of Nebraska.
Is there less motor fuels tax on blended products such as gasohol or biodiesel?
No. Gasohol and biodiesel are taxed at the same rate as gasoline and undyed diesel.
Is diesel exhaust fluid (DEF) subject to Nebraska motor fuels tax?
No. DEF is not blended into fuel or consumed in a vehicle’s engine, and is exempt from Nebraska motor fuels tax.
Is propane used in a propane injection system subject to Nebraska motor fuels tax?
Yes. When propane is either blended into fuel or injected into the engine of a motor vehicle, it is subject to Nebraska motor fuels tax.
How is a gallon equivalent of compressed natural gas (CNG) or liquefied natural gas (LNG) determined?
The gasoline gallon equivalent of CNG is 5.660 pounds (2.567 kg) of natural gas. This is based upon the National Institute of Standards and Technology Handbook 130.
The diesel gallon equivalent of LNG is 6.06 pounds of liquefied natural gas.
Motor Fuels Licensees
Will I receive a permit as proof that I have a Nebraska motor fuels tax license?
Yes and no. When your application for a Nebraska motor fuels tax license is approved, you will be notified. You will receive a permit if you are licensed for the Nebraska Motor Fuels Retailer program, Nebraska Compressed Fuel Tax Retailer program, or the Nebraska Liquid Fuel Carrier program. The retailer permit should be posted at your retail location, and a copy of the carrier permit should be kept in each transport vehicle. You will not receive a separate permit for the other motor fuels tax programs. Your notification letter will serve as proof of your license.
Do I have to file a motor fuels tax return if I do not have any activity to report?
Yes. Nebraska motor fuels tax returns are due for every tax period for which you hold a Nebraska motor fuels tax license, even if you did not have any activity in the tax period.
When is my motor fuels tax return due?
All motor fuels tax returns are due on the 20th day of the month following the close of the reporting period. If the 20th falls on a Saturday, Sunday, or legal holiday, the return is due on the first business day following the 20th. Returns must be sent before midnight on the due date.
When is my Nebraska motor fuels tax payment due?
Nebraska motor fuels tax payments are due on the due date of the motor fuels tax return. Payments submitted by EFT must be initiated by 5:00 pm Central Time on or before the due date. Payments submitted by check must be postmarked on or before the due date.
Do I need to round my Nebraska motor fuels tax payment?
Yes. All motor fuels tax payments should be rounded to the nearest dollar. Round dollar amounts from .50 to .99 to the next higher whole number. Round dollar amounts less than .50 to the next lower whole number.
What is the interest rate assessed on motor fuels taxes?
The rate of interest on delinquent payments of taxes is:
- 8% January 1, 2007 through December 31, 2008;
- 5% January 1, 2009 through December 31, 2012;
- 3% January 1, 2013 through December 31, 2018 and
- 5% January, 2019 forward
How can I find out if my customer is licensed to purchase fuel tax-free?
Is dyed diesel taxed?
No. Diesel that is indelibly dyed at the terminal is not subject to motor fuels tax. However, it is subject to the Petroleum Release Remedial Action Fee (PRF). This fee is reported on the Nebraska Monthly Fuels Tax Return, Form 73.
Are additives and blending agents subject to motor fuels tax?
Yes. Fuel additives and blending agents, such as methanol and kerosene, are subject to tax when they are added to motor fuels or placed directly into the supply tank of a licensed motor vehicle in quantities over one quart. The receipt should be reported when the additive is blended with the fuel. The schedule product code should be identical to the product code of the fuel into which the additive was placed. This will provide for the calculation of the applicable fuel tax and the Nebraska Release Remedial Action Fee (PRF).
Additives are not subject to tax and are not required to be reported when placed directly into the supply tank of a motor vehicle in quantities of one quart or less.
Is racing fuel subject to Nebraska motor fuels tax?
It depends. The taxability of racing fuel is dependent upon both the octane level and the presence of lead in the fuel. Unleaded racing fuel is a motor fuel and is subject to the motor fuels tax. Consumers of unleaded racing fuel may be eligible to receive a refund of the motor fuels tax by filing a Nebraska Non-Ag Use Motor Fuels Tax Refund Claim, Form 84.
Leaded racing fuel with an octane level over 105 is exempt from Nebraska motor fuels tax.
Can I receive a motor fuels tax credit for blending undyed biodiesel with dyed diesel?
Yes. If you blend tax-paid undyed biodiesel with dyed diesel, you can receive a credit on the Nebraska Monthly Fuels Tax Return, Form 73, for the motor fuels tax paid on the biodiesel gallons. However, you must ensure that the resulting blended product meets the federal dye concentration requirements. Additional information on federal dye requirements can be found in IRS Publication 510, Excise Taxes, and IRS Notice 2005-80, Excise Tax Changes under SAFETEA and the Energy Act; Dye Injection.
Is there a motor fuels tax exemption for gasoline or diesel fuels sold to Native Americans?
No. The three tribes with reservation land in Nebraska (Winnebago, Santee-Sioux, and Omaha tribes) have each entered into an agreement with the State. The terms of these agreements allow each tribe to collect a "tribal tax" on their respective reservations, equal in tax per gallon and basis to the state motor fuels tax. The tribal tax is then shared by the tribe and the state according to the agreement.
Can I sell motor fuels tax-free to a U.S. Government (federal) employee using a government credit card?
Yes. When the federal government is the direct purchaser of fuel, the fuel may be sold tax-free.
Generally, purchases charged on federal government credit cards are either paid directly by the federal government (centrally billed), paid by the federal employee, or a combination of the two (integrated). If the federal employee uses a centrally billed credit card, or an integrated card for which the fuel charges are paid directly by the federal government, the federal exemption applies. If the federal employee pays for the fuel, the federal exemption does not apply, even if the employee is later reimbursed for the expense of the fuel.
New Federal GSA SmartPay®2 credit cards were issued to federal employees in the fall of 2008. For additional information regarding the Federal GSA SmartPay®2 program see the GSA SmartPay website.
Can I sell motor fuels tax-free to a foreign diplomat?
Yes. A Nebraska fuels tax exemption is extended to purchases of fuel made by diplomatic and consular missions and their eligible personnel as required by treaties between the U.S Government and other countries. To obtain the exemption, the diplomat must provide the seller with an exemption identification card issued by the U.S. State Department which indicates a specific exemption for motor fuels taxes. The seller must maintain appropriate documentation to substantiate the exempt sale and may claim the exempt gallons on their return in the same manner as a sale to a federal agency.
Is fuel used in buses for hire exempt from Nebraska motor fuels tax?
It depends. Motor fuels purchased by a metropolitan transit authority (currently limited to the Omaha Metro Transit) are exempt from all Nebraska motor fuels taxes, including the petroleum release remedial action fee. Fuels purchased by other transit or transportation entities are subject to motor fuels tax upon purchase. However, these entities may be eligible to receive a refund of the motor fuels tax for fuel used in buses that are:
- Equipped to carry more than seven persons for hire; and
- Engaged entirely in the transportation of passengers for hire within municipalities, or within a radius of six miles of that municipality.
The owner or agent of the bus must also pay an equalization fee at the time of registration equal to twice the registration fee to qualify for the refund.
Refund requests should be filed on the Nebraska Non-Ag Use Motor Fuels Tax Refund Claim, Form 84
Do I need to collect sales tax on motor fuels?
Yes and no. Motor vehicle fuels (gasoline, gasohol, and ethanol) are never subject to sales tax. Other fuels (such as diesel and compressed fuels) are subject to sales tax when sold for uses other than to propel a vehicle. Information on Nebraska Sales and Use Tax is available on DOR’s website.
What are some examples of motor fuels that are subject to sales tax?
A common example is bottled propane sold for barbecue grills. Another example is diesel fuel used to power a refrigeration unit (reefer).
Motor Fuels Consumers
Is the fuel used in school buses exempt from Nebraska motor fuels tax?
No. Nebraska motor fuels tax is due on all fuel used in licensed vehicles, except for fuel purchased by the federal government and metropolitan transit authorities. Schools are not exempt from Nebraska motor fuels tax, but may be eligible for exemptions from federal fuel tax and other state taxes.
Public school districts, and other state and local governmental entities, may use dyed diesel in their vehicles as an alternative to paying Nebraska motor fuels tax to their suppliers. However, the governmental entity must become licensed for Motor Fuels Use Tax, and report and pay the tax directly to the Motor Fuels Division. You can apply for a Motor Fuels Use Tax license by completing the Nebraska Motor Fuels License Application, Form 20MF.
Can I purchase fuel tax-free for use in my crop-dusting plane?
No. Fuel used in an aircraft, even for agriculture use, is not exempt from Nebraska aircraft fuels tax. If you purchase motor vehicle fuels, you may be eligible to receive a refund for the difference between the motor fuels tax and the aircraft fuels tax. Please refer to Refunds for additional information.
We are acquiring a vehicle whose only power source is electricity. Are there any special rules regarding motor fuels taxes?
Yes. Electricity, solar power, or any other power source not otherwise taxed under the motor fuels tax laws is considered an alternative fuel. Any vehicle powered by an alternative fuel is subject to a fee, imposed at the rate of $75 per registration year. This fee was collected by the Nebraska Department of Revenue for vehicles registered on or before December 31, 2011, and is collected by the Nebraska Department of Motor Vehicles at the time of vehicle registration after January 1, 2012.
We are acquiring a vehicle that operates on compressed natural gas. Is the compressed natural gas subject to Nebraska motor fuels tax?
Yes. Compressed natural gas used in a licensed vehicle is subject to motor fuels tax. If you fuel the vehicle at a public compressed natural gas fueling station, the vendor is responsible for collecting and remitting the Nebraska motor fuels tax.
However, if you have a natural gas compressor installed in your home, the vendor may or may not be collecting the motor fuels tax, depending upon the type of equipment installed. You should review your natural gas billing statements to determine whether your vendor is collecting motor fuels tax. If your vendor is not collecting motor fuels tax, contact the Motor Fuels Division at the numbers above for assistance in remitting the tax.
Do I owe motor fuels tax if I use vegetable oil or a similar product in my licensed vehicle?
Yes. Vegetable oil, soy oil, or other similar products, which are blended with diesel or placed into the supply tank connected to the engine of a licensed vehicle, are subject to Nebraska motor fuels tax. If you are a consumer of these fuels, you must obtain a Motor Fuels Use Tax license by completing a Nebraska Motor Fuels License Application, Form 20MF. If you also intend to sell these products, please contact the Motor Fuels Division at the numbers above for assistance.
What happens if I have dyed diesel in a registered vehicle or a vehicle that is required to be registered?
Dyed diesel is untaxed fuel. It is illegal for consumers, other than governmental entities, to use dyed diesel in any registered vehicle or a vehicle that is required to be registered. The Nebraska State Patrol routinely tests diesel vehicles to determine whether dyed diesel is being used improperly. If you are found to be the owner of a vehicle illegally using dyed diesel, you are subject to penalties. These penalties begin at $250 and increase with repeated violations. You may be assessed a separate federal penalty by the IRS. Additional information can be found in the Nebraska Dyed Diesel Penalty Assessments document handed out by the Nebraska State Patrol during their dyed diesel testing.
How do I report purchasing “bad fuel” or deceptive fuel sales?
“Bad fuel” and deceptive fuel sales are consumer protection issues, which are handled by the Nebraska Attorney General. You may contact the Attorney General’s Office at 800-727-6432 or visit their Consumer Protection Division website.