Information for Manufacturers pertaining to Gasoline and Motive Fuel Tax Exemptions

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1 Information for Manufacturers pertaining to Gasoline and Motive Fuel Tax Exemptions Fuel Tax Guide Province of New Brunswick Department of Finance Revenue and Taxation Division FTG: 0205 October 2013 Gasoline and Motive Fuel Tax Act This guide is intended to provide information respecting eligibility for motive fuel tax exemptions available to manufacturers under the Gasoline and Motive Fuel Tax Act, (the Act). This guide should not be regarded or relied upon as a legal interpretation of the Act. In all cases, legislation should be consulted to determine eligibility criteria and exemption provisions. Table of Contents Sections I. Exemptions for Manufacturing II. Eligibility Criteria III. Purchaser s Permit IV. Purchasing Tax Exempt Motive Fuel V. Motive Fuel Marked as Tax Exempt VI. Record Keeping Requirements VII. Annual Reporting VIII. Gasoline and Motive Fuel Tax Refunds IX. Audit and Inspections X. Objections and Appeals XI. Definitions XII. Contact Information Section I - Exemptions for a Manufacturer The Act specifies that gasoline and motive fuel used solely and directly in the manufacturing of goods will qualify for exemption when consumed to operate the following: i) stationary and portable engines other than those mounted on motor vehicles or propelled by motor vehicles; equipment used to heat materials; i tractors other than truck tractors on property other than a public highway; or iv) motor vehicles which are not required by the Motor Vehicle Act to be registered under that Act. In general, this means that gasoline and motive fuel will qualify for exemption when used to: power the production process; feed materials to the production machinery; remove goods from the production machinery; unload raw materials on the manufacturing site; move raw materials around the manufacturing site; move finished goods around the manufacturing site; load finished goods for shipment from the manufacturing site; and move waste materials from the production machinery or to load waste for removal from the site. Dual use tractors: Although, the legislation permits the consumption of tax exempt (marked) fuel in both registered and unregistered tractors while being used solely and directly in manufacturing, care must be taken relative to the registered tractors. The legislation provides for an offence when marked fuel is found in the fuel system of a licensed tractor when the tractor is being used other than in manufacturing. If such a licensed tractor is operated in taxable uses as well as in manufacturing, it is recommended that taxed (clear) fuel be consumed at all times in the tractor in order to avoid the possibility of marked fuel being detected in the fuel system of the tractor while performing taxable functions. The manufacturer would then be permitted to apply for a refund of the tax on the portion of fuel consumed in manufacturing. Snow Removal: This activity qualifies for exemption provided that: it is restricted to the manufacturing site; is performed in order to facilitate the manufacturing operations; and is performed using equipment that qualifies for exemption under the manufacturing provision. Snow removal in areas such as opening residential and non-residential driveways and parking lots is subject to the gasoline and motive fuel tax. In order to receive the motive fuel exemption, the qualifying person can either obtain the exemption at the point-of-purchase, provided that a valid manufacturer s purchaser s permit can be presented, or apply for a refund of taxes paid. This publication is prepared for information purposes only and is not binding on the Province of New Brunswick with respect to the application of tax due and owing to the Province of New Brunswick under the Gasoline and Motive Fuel Tax Act and Regulations. The application of tax to a particular situation is governed by the Act and Regulations and if there is a conflict between the provisions of this Fuel Tax Guide and the Act and Regulations, the Act and Regulations shall prevail.

2 In order to receive the gasoline exemption, the qualifying person must apply for a refund. The Act does not permit gasoline to be obtained exempt of tax at point-of-purchase. Manufacturers who opt to purchase tax-paid gasoline and/or motive fuel may apply for a refund whether or not they possess a valid purchaser s permit. It is important to note that these consumers must maintain proper records as specified below in Section VI in order to substantiate claims. Section II - Eligibility Criteria To be eligible for a purchaser s permit as a manufacturer, an applicant must be engaged in activities which involve making (forming by shaping or putting parts together) goods by hand or especially by machinery, often on a large scale and with division of labour. Examples of manufacturing would include (but are not limited to): Saw mills; Rock crushing; Cement plants; Composting plants; Textile mills; Pulp and paper mills; Food Processing; Petroleum refining; Steel manufacturing; Furniture manufacturing; Equipment manufacturing; Asphalt mixing plants. To confirm eligibility, please contact the Department of Finance (see Section XII). Section III Purchaser s Permit Application Persons who wish to obtain a manufacturer s purchaser s permit, must apply to the Department of Finance on a form provided by the Minister, providing all information and documentation specified on the application form. Applications must also include payment of a fee of $ Any application that does not include the fee will not be processed. In the event that an application is rejected, the applicant will be notified in writing. Conditions Purchaser s Permits for manufacturers do not entitle the permit holder to purchase all fuel tax exempt. The permit only entitles either the person named, an employee, or his/her agent to purchase tax exempt fuel that is prescribed by the Act. Gasoline and motive fuel consumed by a manufacturer outside of the specific areas prescribed by the Act do not qualify for exemption. The permit is not to be used by any other person and is not transferable. Purchaser s permits cannot be used to purchase tax exempt motive fuel after the expiry date or before the date of issue shown on the permit. It is the responsibility of the permit holder to advise the Department of Finance of any changes, such as, the name or address of the business. If a permit is lost, damaged or destroyed, the permit holder is required to contact the Department in writing advising of the circumstances and to request a replacement permit. Renewals It is the responsibility of the permit holder to renew the purchaser s permit on a form provided by the Minister before the expiry date of the permit. All renewal applications must be completed in their entirety in order to be processed. The department will verify eligibility using the same criteria that is applied upon making a first time application. A fee of $12.50 must also accompany all applications for renewal. The department will provide the applicant with a written notice indicating whether the application has been approved or rejected. Where the application is approved, the permit will indicate the effective renewal date. Qualifying manufacturers will have their permits renewed for one (1) year. The renewal of a permit will be dated consecutively with the expiry date of the former permit, provided that the application for renewal is received no later than thirty (30) days after the expiry date of the permit. Applications received beyond the thirty-day timeframe will be effective from the issue date. It is recommended that the renewal application be filed within the thirty days to avoid breaks in active status. Revocation and Reinstatement A manufacturer s purchaser s permit may be revoked if the Minister has reasonable and probable grounds to believe that the permit holder has either violated or failed to comply with the Act or Regulations in a manner related to any of the following: i) the information provided on or with the application for either the issuance of or the renewal, is inaccurate, misleading or false; or the permit holder is not or is no longer engaged in the activity for which the permit was issued or renewed and does not meet the criteria for a manufacturer; or i the permit holder defaulted on payment of monies payable under the Act or the Real Property Tax Act; or Page 2

3 iv) the permit holder is in breach of an undertaking or agreement given or made to the Minister; or v) the permit holder refuses to allow a peace officer, an inspector or any other person with the written authority of the Minister to remove motive fuel samples. The Minister shall serve a person whose purchaser s permit is revoked a written notice explaining the reasons for revocation. The period of revocation shall be not less than six (6) months and not more than three (3) years. A person whose permit is revoked is to surrender his/her permit to the Minister immediately upon being served the notice of revocation. That person may then apply to the Minister for reinstatement by requesting reinstatement in writing and submitting an application for renewal. A permit which has been revoked may be reinstated by the Minister where: i) the Minister is satisfied that the corrected information on the application entitles the applicant to a permit; or the manufacturer whose permit has been revoked gives a written undertaking acceptable to the Minister to pay the tax on the fuel purchased without payment of tax; or Section IV - Purchasing Tax Exempt Motive Fuel Gasoline and motive fuel retailers and wholesalers are required to obtain proof of a valid purchaser s permit prior to dispensing tax exempt product. Failure to provide a valid purchaser s permit at time of purchase will result in the payment of the applicable tax. Section V - Motive Fuel Marked as Tax Exempt All tax exempt diesel fuel, stove oil and furnace oil sold in New Brunswick or sold outside New Brunswick for consumption in this Province is required to be marked with a red dye so as to make it distinguishable from taxable clear diesel. It is recommended that extreme care be taken when refueling from bulk storage. Manufacturers must ensure that marked tax exempt motive fuel is not placed in vehicles or equipment that do not qualify for exemption. The Act does not permit the storage of tax paid and tax exempt (marked) fuel in the same storage tank. Section VI - Record Keeping Requirements The Act requires that consumer s of tax exempt motive fuel maintain records to substantiate the following: i) Date of each purchase or acquisition of fuel relating to the manufacturing operation; i a satisfactory agreement is made with the Minister to pay the monies payable under the Act or the Real Property Tax Act. Before a permit is reinstated, the Minister or his designate may require an audit of the person seeking reinstatement. i iv) Name and address of the person from whom the fuel was acquired; Number of gallons or litres of fuel purchased or acquired; Type of fuel purchased or acquired; Reinstated permits are effective for one (1) year and expire on the first anniversary on which reinstatement became effective. No purchaser s permit will be reinstated until the revocation period has expired, if applicable. The Minister will notify all applicants as to whether or not the permit is reinstated, and where applicable, the effective date of reinstatement. Cancellation Cancellation of a purchaser s permit is voluntary and occurs when the permit holder is no longer engaged in manufacturing activities and does not otherwise qualify for a purchaser s permit. This may be the result of either discontinued operations or the sale of the business entity. Cancellation must be requested in writing. Upon cancellation, the permit must be surrendered to the Department of Finance immediately. v) Vehicle or equipment into which fuel was placed; vi) v Tasks performed by that vehicle or equipment; and Number of hours of service dedicated to each task where the vehicle or equipment is used for both taxable and exempt tasks. Manufacturers must provide these records upon request for the purposes of allowing either an audit or an inspection. Failure to either maintain or provide records may result in fines or revocation of the purchaser s permit. All validly registered manufacturers must maintain records for a period of six (6) years. Written permission must be obtained from the Revenue and Taxation Division before any documents may be destroyed. Page 3

4 Section VII Annual Reporting Fuel purchase information and equipment details will now be included in the Purchaser s Permit Application form and will be submitted along with the request for the Purchaser s Permit renewal. The fuel purchase information and equipment details are to be completed using the records outlined above and will serve to substantiate the consumption associated with all gasoline and motive fuel purchased within each reporting period. Section VIII Refunds In order to qualify for a refund of gasoline and/or motive fuel tax, a manufacturer must purchase gasoline, clear diesel or other motive fuel and pay the applicable tax. The manufacturer may then apply to the Department of Finance for a refund of the tax paid on fuel consumed in qualified equipment performing qualified activities as prescribed by legislation. The manufacturer shall complete a refund application form in its entirety and submit the form to the Department of Finance along with clear photocopies of purchase receipts to substantiate all purchases of tax paid gasoline and/or diesel. Claimants must be able to substantiate their claim with proper records, indicating the disbursement records outlined in Section VI. Disbursements refer to the total consumption during a claim period of both taxed and tax exempt product. Fuel tax refund applications will be processed in a timely manner providing: i) all requested information is supplied and verifiable; i supplemental documents and invoices are included; and no discrepancies in taxable and/or tax exempt amounts occur. The claimant will be notified in writing as to whether the application has been approved or rejected and, where applicable, the amount of gasoline and motive fuel tax refunded. All claims are limited to a period of three (3) years from the day on which the overpayment of tax was made and may be subject to an audit. Section IX Audit and Inspections The Act authorizes peace officers, inspectors, auditors or any person with specific or general written authority from the Minister to have records made available to them upon request at any reasonable time for the purposes of making any inquiries, examinations or seizures as are deemed necessary. Occasionally, your records will be reviewed to ensure compliance with regulations. Failure to maintain records as explained above may result in fines being levied or loss of the privilege to purchase tax exempt fuel. Inspectors and designated agents are also authorized to procure fuel samples from machinery, vehicles, equipment and external storage units to verify the presence of tax exempt fuel, which is marked with a coloring agent. Department of Finance auditors and inspectors are available for assistance with matters regarding record keeping and record maintenance or general inquiries regarding the motive fuel tax exemption program. Penalties Any violation of the Act as either revealed by an audit or an inspection is subject to fines and/or penalties. It could also result in the loss of the privilege to purchase tax exempt motive fuel. For example, the minimum fine for consuming tax exempt fuel in a motor vehicle not exempted under subsection 6(6) of the Act is $1, Section X Objections and Appeals Applicants wishing to dispute tax amounts may file a Notice of Objection with the Provincial Tax Commissioner setting out the reasons for the objection and all relevant facts. The notice must be filed within 30 days after paying the tax or the date of the service or mailing of a Notice of Assessment, whichever is sooner. Upon receipt of a Notice of Objection, the Commissioner shall within 60 days reconsider the assessment and vacate, confirm or vary the assessment or reassess, and the Commissioner shall thereupon notify the applicant of the action. Within 30 days after being notified of such decision, taxpayers who are dissatisfied with the decision of the Commissioner may file a Notice of Appeal with the Minister of Finance. The Minister shall within 30 days after the receipt of Notice of Appeal, fix a date to consider the appeal and shall give a notice of such hearing to the appellant and the Commissioner. Upon any such appeal, the Minister may affirm, vary or reverse the decision of the Commissioner and shall give a written notice of the decision to the appellant by personal service or by ordinary or registered mail. Appellants who are dissatisfied with the decision of the Minister may, within 30 days after the date of service or mailing of the notice explaining the Minister s decision, appeal from such decision to a judge of the Court of Queen s Bench of New Brunswick. Page 4

5 Section XI Definitions Audit means the examination of books and records and other documentation supporting the applicant s nature of business to ascertain the proper quantity of tax exempt fuel consumption and taxable fuel consumption for assessment and/or refund purposes. Cancellation means the voluntary termination of one s exemption status as a result of discontinued activities, which qualify for a fuel exemption. Commissioner means the Provincial Tax Commissioner provided for under the Revenue Administration Act and includes those persons designated by the Minister of Finance to act on behalf of the Provincial Tax Commissioner. Section XII - Contact Information All inquiries regarding fuel tax exemptions to manufacturers or to the application of the gasoline and motive fuel tax should be directed to: Department of Finance Revenue & Taxation Division Marysville Place, P.O. Box 3000 Fredericton, NB E3B 5H1 Telephone: (800) Fax: (506) wwwfin@gnb.ca Web site: Disbursement Records refer to the total consumption during a claim period. The Gasoline and Motive Fuel Tax Act requires that disbursements be supported by legitimate documentation. Disbursements may include withdrawals from bulk storage and/or direct deliveries from suppliers to vehicles, equipment and machines. Gasoline means any petroleum product containing any product of petroleum, natural gas or coal having a specific gravity of or under at 60 degrees Fahrenheit (15.6 degrees Celsius); including benzol and any benzol mixture, but not including manufactured gas, natural gas, bunker fuel, crude oil or propane. Minister means the Minister of Finance and includes the Commissioner and those persons designated by the Minister of Finance to act on behalf of the Minister or on behalf of the Commissioner. Motive Fuel means any gas fuel or liquid fuel that is not gasoline and that can be used for moving or operating any internal combustion engine or for heating, such as: kerosene, propane, natural gas, crude oil, furnace oil, stove oil, diesel, distillate and other motor oil. Motor Vehicle is defined under the Gasoline and Motive Fuel Tax Act as every vehicle that is (a) self propelled, or (b) propelled by electric power from overhead trolley wires, and not operated upon rails but does not include a farm tractor. Peace Officer means a member of the Royal Canadian Mounted Police and, in relation to the administration, collection and enforcement of taxes payable under the Gasoline and Motive Fuel Tax Act, includes an appointed officer. Revocation means the action of having a licence or a right rescinded, retracted, repealed and/or invalidated. Page 5