26 U.S.C. § 6427 — Fuels not used for taxable purposes

(a) Nontaxable uses. If tax was imposed under section 4041(a)(2), 4041(a)(3), or 4041(c) when fuel was sold, and the buyer uses it for a different purpose or resells it, the Secretary^* must pay the buyer, without interest, the tax charged on the sale. If the buyer uses the fuel, the payment is reduced by the tax that would have applied to that use under section 4041 if the sale had not already been taxed. Subsection (k) provides an exception.

(b) Intercity, local, or school buses. (1) Allowance. Subject to this subsection and subsection (k), when taxed fuel other than gasoline is used in an automobile bus to provide, for compensation, passenger land transportation available to the public, or to transport students and school employees, the Secretary must pay the ultimate purchaser, without interest. The payment equals the number of gallons used multiplied by the rate of tax imposed under section 4041(a) or 4081.

(2) Reduction in some cases. (A) Unless (B) or (C) applies, the rate used for the payment is 7.4 cents per gallon less than the combined tax rate imposed under section 4041(a) or 4081. (B) That reduction does not apply to fuel used for school-bus transportation described in paragraph (1)(B). (C) It also does not apply to fuel used in a qualified local bus providing, for compensation, scheduled intracity passenger transportation on regular routes available to the public. (D) A qualified local bus is a local bus with seats for at least 20 adults, not counting the driver, that is under contract with, or receives more than a nominal subsidy from, a State or local government. The quoted term “local government” is not defined in this section.

(3) Nonscheduled buses. Paragraph (1)(A) does not apply to fuel used in an automobile bus providing transportation that is neither scheduled nor on regular routes unless the bus seats at least 20 adults, not counting the driver.

(4) Intercity diesel-bus vendor refunds. For fuel covered by paragraph (2)(A), the ultimate purchaser may waive the payment under paragraph (1), in the time and form required by the Secretary, and assign the right to the ultimate vendor. The Secretary must then pay the amount that would have been paid under paragraph (1) to the vendor, but only if the vendor is registered under section 4101 and meets section 6416(a)(1)(A), (B), or (D).

(c) Farming. Subject to subsection (k), if fuel taxed under section 4041(a)(2), 4041(a)(3), or 4041(c) is used on a farm for farming purposes, the Secretary must pay the purchaser, without interest, the tax imposed on the sale. “Farming purposes” is used by reference to section 6420(c). If someone other than the farm’s owner, tenant, or operator uses the fuel on the farm, the rules of section 6420(c)(4) apply, except that “liquid taxable under section 4041” replaces “gasoline” wherever it appears there.

(d) Aircraft museums and other aircraft uses. Subject to subsection (k), the Secretary must pay the ultimate purchaser, without interest, the total tax on gasoline taxed under section 4081 or fuel taxed under section 4041 if an aircraft museum uses it in a museum-owned aircraft or vehicle exclusively for the purposes listed in section 4041(h)(2)(C), or if it is used in a helicopter or fixed-wing aircraft for a purpose described in section 4041(l). “Aircraft museum” is used by reference to section 4041(h)(2); this section does not define it.

(e) Alcohol, biodiesel, alternative fuel, or sustainable aviation fuel. Subject to subsection (k): (1) If a person produces a section 6426 mixture in the person’s business, the Secretary must pay that person, without interest, the applicable alcohol fuel mixture credit, biodiesel mixture credit, alternative fuel mixture credit, or sustainable aviation fuel mixture credit. (2) If a person sells or uses an “alternative fuel,” as defined by section 6426(d)(2), for a purpose described in section 6426(d)(1) in the person’s business, the Secretary must pay the alternative fuel credit. (3) No payment is made under paragraph (1) or (2) for a mixture or fuel for which a credit is allowed under section 6426. (4) No payment for an alternative-fuel credit or alternative-fuel-mixture credit may be made unless the person is registered under section 4101. (5) No payment is made if section 6426(i) prevents a credit for the mixture or fuel. (6) This subsection does not apply to an alcohol fuel mixture sold or used after December 31, 2011; a biodiesel mixture sold or used after December 31, 2024; an alternative fuel sold or used after December 31, 2024; an alternative fuel mixture sold or used after December 31, 2011; or a qualified mixture of sustainable aviation fuel sold or used after December 31, 2024. The quoted terms are defined by the sections cited; this section does not define them.

(f) Repealed by Pub. L. 109–59, title XI, section 11151(a)(1), August 10, 2005, 119 Stat. 1968.

(g) Repealed by Pub. L. 104–188, title I, section 1606(a), August 20, 1996, 110 Stat. 1839.

(h) Blend stocks not used to make taxable fuel. (1) Subject to subsection (k), if a person does not use a gasoline blend stock^* or additive to make gasoline and establishes that its ultimate use is not to make gasoline, the Secretary must pay that person, without interest, the total tax imposed on that person for the blend stock or additive. (2) The same rule applies to a diesel-fuel blend stock that is not used to make diesel fuel and whose ultimate use is established not to be making diesel fuel.

(i) Claim timing and covered periods. (1) Unless this subsection provides otherwise, a person may file no more than one claim under subsections (a), (b), (c), (d), (h), (l), (m), or (o) for fuel used during that person’s taxable year^*. The purchaser must file by the legal deadline for claiming an income-tax overpayment for that year. “Taxable year” means the person’s taxable year for subtitle A. (2)(A) If, at the end of a quarter, at least $750 is payable in total under the listed subsections and section 6421 for fuel used in that quarter or an earlier quarter of the same year for which no claim was filed, a claim may be filed. (B) It must be filed during the first quarter after the last quarter covered. (C) This rule does not apply to fuel used only in the off-highway business use described in section 6421(e)(2)(C). (3)(A) A claim under (e)(1) or (e)(2) may cover a period of at least one week when at least $200 is payable. An electronic claim need not meet the $200 condition. (B) If the Secretary has not paid within 45 days after filing, or 20 days for an electronic claim, the claim must be paid with interest from filing, using the section 6621 overpayment rate and method. (C) The claim must be filed by the last day of the first quarter after the earliest quarter covered. (4)(A) A person may claim vendor refunds under (l)(4)(C) or (l)(5) for a period of at least one week when at least $200 is payable, or at least $100 for kerosene. Paragraph (3)(B) also applies to claims under (b)(4), (l)(4)(C)(ii), and (l)(5), despite (l)(1). (B) The same first-quarter filing deadline applies.

(j) Applicable laws. (1) Laws, including penalties, that apply to taxes under sections 4041 and 4081 also apply, as appropriate and consistently with this section, to these payments as though they were refunds of tax overpayments. (2) To check a claim or payment, the Secretary has the powers in section 7602(a)(1), (2), and (3) to examine books and witnesses as if the claimant owed the tax.

(k) Income-tax credit instead of payment. (1) Payments under this section may be made only to the United States or its agency or instrumentality; a State or political subdivision; an agency or instrumentality of one or more States or political subdivisions; or an organization exempt under section 501(a), other than one required to file a subtitle A tax return. (2) That restriction does not apply to a claim filed under (i)(2), (i)(3), or (i)(4). (3) For income-tax credits under subtitle A for fuel used or resold by the purchaser, section 34 applies.

(l) Nontaxable diesel fuel and kerosene uses. (1) Subject to this subsection and (k), if taxed diesel fuel or kerosene is used in a “nontaxable use,” the Secretary must pay the ultimate purchaser, without interest, the total section 4041 or 4081 tax, reduced by any payment to the ultimate vendor under paragraph (4)(C)(i). (2) “Nontaxable use” means a use exempt from section 4041(a)(1) for a reason other than an earlier tax imposition. This section does not otherwise define that quoted term. (3) The term also includes fuel used in a diesel-powered train. This does not include the Leaking Underground Storage Tank Trust Fund^* financing rate under sections 4041 and 4081, or the part of the section 4081(a)(2)(A) rate that does not exceed the section 4041(a)(1)(C)(ii) rate. It also does not apply to fuel sold exclusively for a State or political subdivision. (4)(A) For kerosene used in commercial aviation, other than supplies for vessels or aircraft under section 4221(d)(3), paragraph (1) does not apply to the Trust Fund financing rate or the part of the section 4041(c) or 4081(a)(2)(A)(iii) rate that does not exceed 4.3 cents per gallon. (B) For kerosene used in noncommercial aviation, other than a use exempt from section 4041(c) for a reason other than an earlier tax, paragraph (1) does not apply to section 4041(c) or (d)(2) tax, or the section 4081 tax attributable to the Trust Fund financing rate or the part of the section 4081(a)(2)(A)(iii) rate that does not exceed the section 4081(a)(2)(C)(ii) rate. (C)(i) For other aviation kerosene, the ultimate purchaser may waive and assign the paragraph (1) right to the ultimate vendor. The Secretary then pays that vendor if it is registered under section 4101 and meets section 6416(a)(1)(A), (B), or (D). (ii) For kerosene covered by (B), only the ultimate vendor may receive the payment, under the same registration and qualification requirements. (5)(A) Paragraph (1) does not apply to diesel fuel or kerosene used by a State or local government. (B) It also does not apply to non-aviation kerosene sold from a pump that regulations say is unsuitable for fueling a diesel highway vehicle or train, or, as provided by the Secretary, sold for blending with heating oil used during extreme or unseasonable cold. (C) Unless (D) applies, the amount that otherwise would have been paid goes to the ultimate vendor if the vendor is registered under section 4101 and meets section 6416(a)(1)(A), (B), or (D). (D) If a State or local government’s covered fuel is bought with a credit card issued to the ultimate purchaser, the Secretary pays the person extending credit if that person meets section 6416(a)(4)(B)(i), (ii), and (iii). If not, that person must collect an amount equal to the tax from the ultimate purchaser, and only that purchaser may claim it.

(m) Diesel fuel used to produce emulsion. (1) Subject to (k), if diesel fuel taxed under section 4081 at the regular rate is used to produce a section 4081(a)(2)(D) emulsion that is sold or used in the person’s business, the Secretary must pay the person, without interest, the regular rate minus the incentive rate for that fuel. (2)(A) “Regular tax rate” means the combined section 4081 rate without applying section 4081(a)(2)(D). (B) “Incentive tax rate” means the combined section 4081 rate applying section 4081(a)(2)(D).

(n) Regulations. The Secretary may issue regulations, consistent with this section, setting the conditions for making payments.

(o) Taxes under section 4041(d). For subsections (a), (b), and (c), taxes imposed by section 4041(d) are treated in the same manner as taxes imposed under the provisions referred to in those subsections.

(p) Cross-references. (1) Section 6675 covers the civil penalty for excessive claims under this section. (2) Chapter 75, including section 7201 and following sections, covers fraud penalties and crimes, other offenses, and forfeitures. (3) Section 7871 covers treating an Indian tribal government^* as a State and its subdivision as a State subdivision.