State Taxes

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Clarification of IRS Form 637 Registration Requirements for Biodiesel Blending


With Congress looking increasingly likely to approve legislation retroactively reinstating the $1.00 per gallon biodiesel mixture excise tax credit, questions have arisen over the necessary IRS Form 637 registration requirements for blending biodiesel and claiming the mixture credit.  We reached out to the IRS Fuel Policy Section who clarified and confirmed the following:

  • There is no Form 637 registration required per se for a taxpayer to claim the biodiesel mixture credit.  Any registration that is required relates to the location of blending or the blend being created.
  • All taxpayers who are position holders of taxable fuel (gasoline, diesel, kerosene) in an IRS registered terminal are required to hold an “S” registration.   A position holder is defined in the applicable regulations as the person that holds the inventory position (meaning the person has a contract with the terminal operator for storage and terminaling services) in the taxable fuel, as reflected on records of the terminal operator.  This includes taxpayers who bring diesel into a terminal solely for the purpose of adding it to B100 already in tank and who are reported on the books and records of the terminal operator.  Failure to properly register will give rise to a violation under 26 U.S.C. 6719, carrying a $10,000 initial failure to register penalty.
  • All taxpayers blending biodiesel in an IRS registered terminal are required to hold an “S” registration.  This is to ensure that there is no violation if the terminal operator reports the receipt of taxable fuel into a terminal.  Taxable fuel that is brought into the terminal is typically reported on the books and records of the terminal operator while an in-tank transfer may not be. Failure to properly register will give rise to a violation under 26 U.S.C. 6719, carrying a $10,000 initial failure to register penalty.
  • Importers and producers of biodiesel are required to hold an “AB” and/or “NB” registration.  This is a statutory requirement and necessary to issue a valid Certificate for Biodiesel.
  • Taxpayers blending B99 outside the bulk terminal system (e.g. at a biodiesel plant) are not required to hold any Form 637 registration.
  • Taxpayers creating a taxable fuel outside the bulk terminal system are required to hold an “M” registration.  In the case of biodiesel, blends of B70 or below are generally treated as taxable.  Blends between B70 and B85 may be taxable if the paraffin content exceeds 4% (the threshold at which biodiesel ceases to be an excluded liquid) – as the IRS recommends testing such blends to determine whether or not the paraffin content requirement to be an excluded liquid (and therefore not taxable) is met, taxpayers creating such blends ought to obtain an “M” registration to avoid the failure to register penalties.

We note parenthetically that the IRS Fuel Policy Section seems to take the position that all taxpayers operating in a terminal – even those only dealing in non-taxable biofuels – ought to hold an “S” registration so that they are able to deal in taxable fuel should the opportunity arise.  While some IRS Field Agents have recently sought to deny applications for “S” registrations by taxpayers whose applications are based on non-taxable fuels, we were advised that the Fuel Policy Section would likely issue internal guidance setting down its position to any agent requesting same.