Biodiesel & Blended Fuel Tax
Excise Tax Rates
Biodiesel fuel is motor vehicle fuel that is produced from plant or animal products or wastes, as opposed to fossil fuel sources. Biodiesel is treated as a special fuel, and is subject to the fuel excise tax rate of $0.205 per gallon if it is clear and the Environmental Response Surcharge fee. Only the Environmental Response Surcharge applies if it is dyed. See the Blended Fuel section below for blending requirements of biodiesel.
Biodiesel is considered a clear special fuel because it can be used in vehicles without modification. As such, biodiesel is taxed at the special fuel rate of 20.5 cents per gallon unless it is sold to a licensed distributor, exported out of Colorado, sold to a government entity, or blended with dyed special fuel. The environmental response surcharge also applies unless the biodiesel is sold to a licensed distributor, exported out of Colorado, or sold to a railroad.
Diesel Anti-Coagulate Additives
Additives to diesel are subject to fuel excise tax if the diesel fuel can be used to propel motor vehicles on public highways. When the additives are received, the receipt of those products should be reported on schedule 2 as blending components; if the additive has a specific code in COFTS, such as 076 for xylene or 199 for toluene, the specific code should be used.
If you are blending fuel types, the initial receipt of the fuel(s) should be reported on a Schedule 2. The fuels to be blended should then be reported on Schedule 6 as a disbursement to yourself, with a mode of transportation of "BA" (book adjustment). Then the blended fuel should be reported on another Schedule 2 with the mode of transportation as "BA".
Licensed blenders can blend biodiesel with dyed petroleum diesel up to the maximum federal allowance after withdrawal from the terminal rack. Blenders must have a Colorado blending license and a federal blending permit.