Minnesota's special fuel tax law requires the first licensed distributor receiving undyed diesel fuel or undyed kerosene to pay the special fuel excise tax. Minnesota's law is consistent with the federal dyed fuel program.
Distributors can, however, receive a credit for the tax paid on the following tax free sales of undyed diesel fuel or undyed kerosene on their monthly special fuel return:
sales of fuel for residential heating
sales of fuel to the U.S. government, and
exports of fuel out of Minnesota for product consigned to this state.
On the above sales only, licensed distributors may claim the credits based on the current filing requirements. Unlicensed distributors may claim tax free sales by using the Form PDR-1, Minnesota Motor Fuel Claim for Refund. Refund claims may be filed anytime within one year of the sale.
All PDR-1 refund claims must be filed for the whole month being claimed. A separate claim is required for each and every month in which you have a qualifying sale or purchase. Only one claim is allowed per period so if you have multiple qualifying purchases or sales they must be combined on a single form. If corrections to the original claim are necessary, an amended claim must be filed.
Retail service stations must charge the special fuel excise tax on all sales of undyed diesel fuel and undyed kerosene, except in the following situations:
undyed diesel fuel sold for exclusive use in a truck refrigeration unit (reefer fuel), and
undyed kerosene sold from a blocked pump (as defined by IRS regulations) and placed in tanks not used to propel a motor vehicle
To receive a refund of tax paid on the above sales, the retail station operator must complete the Form PDR-1, Minnesota Motor Fuel Claim for Refund. Refund claims may be filed anytime within one year of the sale.
For all other undyed fuel sales or purchases, the ultimate end user is responsible for applying for a refund if the fuel is used for a qualifying off highway purpose. In all cases, refund claims must be supported by original sales tickets.
Although it is not necessary to be licensed or file a monthly tax return, retail service stations and bulk purchasers must maintain complete records for at least 3 1/2 years.
If the claim is for fuel purchased from a retail service station, you must keep the original sales ticket to verify the claim.
Original sales tickets must have:
name and address of dealer or retail station;
number of gallons purchased, price per gallon, type of fuel;
description or unit number of vehicle;
name and address of purchaser;
dollar amount of sale;
rate and amount of motor fuel excise tax charged, or a statement that explains Minnesota tax is included in the price;
date of purchase
The department will accept alternative records for fuel purchased, including computer or electronically generated listings, as long as they clearly provide the necessary information.
Tax Free Sales
A common misconception is that if the gasoline is used for off highway use or is used in a non-licensed piece of equipment, it can be sold tax free by distributors as a farm sale. This is not always the case. For example, the gasoline used in a tractor that is not used on a farm is not eligible as a tax free farm sale. Also, gasoline sold to the following businesses do not qualify for tax free sales form distributors:
ag tiling companies
While gasoline cannot be sold tax free for use in the examples provided above, distributors may inform purchasers that they may be eligible for a refund on the tax paid if the fuel is used off highway for a business purpose. The purchaser would use the Form PDR-1, Minnesota Motor Fuel Claim for Refund to claim the refund. Note: The fact that gasoline may be subject to a refund is not a reason to sell the gasoline tax free.
Tax paid on fuel used in a licensed motor vehicle is not refundable.
any gasoline powered vehicles using Minnesota roads and highways must pay the excise tax (M.S. 296A.07)
all licensed motor vehicles powered by special fuel are subject to the petroleum excise tax (M.S. 296A.08)
a licensed motor vehicle is defined as a vehicle that is subject to Minnesota registration (M.S. 296A.01, subd. 29)
The fuel on which the motor fuel tax has been refunded under this law may be subject to Minnesota sales and use tax. Please see Petroleum Products (Sales Tax Fact Sheet 116) for additional information.