Keep Records to Avoid Missing out on Fuel-tax Credits
With the high prices of gasoline, construction companies have all the more reason to take advantage of the fuel-tax exemption for off-highway business use.
By Brad Gross

Construction companies of all sizes qualify to claim a fuel-tax credit for the off-highway business use of fuel purchased, with tax, at the pump.

The per-gallon rates for 2003 varied from 13.2 cents for 10percent gasohol to 24.4 cents for diesel. Gasoline gets a credit of 18.4 cents per gallon. Based upon recent fuel prices, this is more than a 10 percent savings on fuel used in a qualified manner.

The fuel-tax is collected in large part to fund the construction and maintenance of highways and bridges. Congress realized it was unfair to collect this tax from businesses and individuals who were not using the fuels on those highways and created the fuel-tax credit, which is a refundable credit allowed to offset your income and excise taxes, or simply be refunded when it exceeds those tax liabilities.

Off-Highway Business Use

Off-highway business use of fuel is defined as any use in a trade or business other than vehicles required to be registered for public highway use. Any selfpropelled vehicles designed to carry a load over public highways, including passenger automobiles, motorcycles, buses and trucks, are considered highway vehicles.
Those not considered highway vehicles fall into two general types: specially designed mobile machinery for nontransportation functions and vehicles designed for off-highway transportation.

The first type includes bulldozers, forklifts and cranes. Because they have a chassis with permanently mounted machinery or equipment, and the chassis has been specially designed to serve only as a mobile carriage and mount for the equipment or machinery they cannot be used as part of a vehicle to carry any other load.

The second type are designed to carry specific loads other than over the public highways, and any highway use is substantially limited or impaired because of the design of the vehicle.

The determination of the limitation or impairment can take into account any of the following facts: the vehicle requires a special permit for highway use, is overweight, overheight, overwidth or cannot travel at normal highway speeds.

Business use of fuel not used in vehicles also qualifies for the credit. Fuel used in generators, pumps, refrigeration units, lawn mowers and power saws are examples.
Some highway vehicles have a second motor to operate specialized equipment, which can qualify for the credit even though the use in the motor propelling the vehicle does not qualify. Fuel used in a motor that is used to propel a highway vehicle does not qualify for the credit, nor does fuel lost, spilled or destroyed.

Claiming the Credit

Form 4136 is used to claim the fuel-tax credit. This is a multipurpose form used to claim several different types of fuel-tax credits, and bases the credit on the total number of gallons of each type of fuel used in a qualified manner.

Records to support the gallons of each type of fuel used in off-highway business activities need to be available. They can be reasonable estimates based upon reports such as total fuel used, miles per gallon and hours of operation. Many fuel providers can supply a printout of all fuel purchased for the year by type of fuel.

Using that report as a starting point, usage of both qualified and nonqualified activities can be estimated to obtain the number of gallons on which the credit can be claimed. Fuel used in a construction project may be a small percentage of the total costs in that job, but even small percentages are important when considering overall construction costs your company incurs during a year.