HS/HCS/SB 619 - This act rewrites most of Chapter 142, RSMo, regarding motor fuel tax collection, and it revises the law on alternative fuel vehicles, reformulated gas and the aviation trust fund.

RACK TAX - The main change is to require suppliers to collect motor fuel taxes from the distributors. The point of transfer between suppliers and distributors is the terminal rack, and this tax system is sometimes called the "rack tax". The change is meant to increase collections of motor fuel taxes by collecting at a higher point in the motor fuel distribution system.

IMPOSITION OF TAX - The fuel tax is generally imposed on motor fuel as it is removed from the bulk transfer/terminal system (terminal rack). Section 142.809. The tax shall be collected on behalf of the consumers by the distributor and remitted to the state through the supplier. The supplier shall pay the tax to the state by the second day of the second succeeding month. Section 142.842.

Distributors may elect to be "eligible purchasers". Eligible purchasers are not required to pay the tax to the supplier until two days before the supplier pays the Department of Revenue (a float period of 1-2 months, current law). Eligible purchasers also get the 2-3% deduction for shrinkage (current law). Eligible purchaser status depends upon bonding and financial responsibility requirements and upon timely payment of the tax to suppliers. Sections 142.848 and 148.851.

LIABILITY - The terminal operator is liable for unaccounted motor fuel losses in excess of 0.5% per year. Section 142.812. The terminal operator is jointly liable for the tax on any fuel removed from the terminal by an unlicensed supplier. Section 142.845. Any person responsible for collection of the tax (the distributor) is fully responsible for any unpaid tax. Section 142.833. The consumer shall be responsible for paying any tax which is not collected. Sections 142.866, 142.908.

EXEMPTIONS - Exemptions from the motor fuel tax are given for non-highway purposes such as farm tractors, for kerosene used in aircraft engines, and for diesel used as heating oil or in railroad engines. These refunds must be claimed by the users, except vendors may claim refunds on behalf of farmers. Other exemptions are given for the following specified reasons: (1) certain exports; (2) undyed kerosene sold in dispensers which prevent motor vehicle use; (3) U.S. government purposes; (4) Indian government functions; (5) other Indian use within Indian country; (6) operation of equipment on a vehicle with a common fuel supply tank; (7) fuel brought into Missouri in a vehicle's fuel supply tank; (8) casualty or contamination losses; and (9) dyed diesel or kerosene used for an exempt purpose. Different methods for claiming these 9 exemptions apply. Section 142.815- 824.

IMPORTS & EXPORTS - The tax on imports shall be collected by the distributor and remitted either directly or through the supplier. Section 142.836. Suppliers may elect to collect the fuel tax for all imports which are destined for Missouri from out-of-state terminals. Section 142.839. Exports and imports which are diverted to a destination within Missouri shall be reported to the Department of Revenue, and taxes shall be paid. Section 142.872. An import verification number and shipping papers are required for any import upon which the tax has not yet been paid. Section 142.929.

DEDUCTIONS & CREDITS - Distributors who are eligible purchasers get a deduction of 2-3% for shrinkage (2% for diesel, 3% for gasoline). Section 142.848. Suppliers removing fuel for their own account or for noneligible purchasers get the 2-3% deduction. Section 142.842. A licensed distributor importing motor fuel under a collection agreement also gets the 2-3% deduction. Section 142.833. The deduction for shrinkage is current law.

Suppliers get a credit for taxes paid to the state but not received from an eligible purchaser. Notice of this credit must be made to the DOR within 10 business days, and the credit may be taken on the next return. Sections 142.854 and 142.857. Suppliers may retain 0.1% of the tax imposed for administration requirements. Section 142.863.

LICENSES - Applications for licenses shall include information required by the DOR, and licenses may be denied for nine reasons. Section 142.878. Licenses are required for suppliers, terminal operators, transporters, distributors and interstate motor fuel users. Sections 142.830 and 142.884-893. Licenses are not transferable; business transfers and changes in majority interest must be reported. Section 142.899.

BONDS - Licensees must file a bond, a certificate of deposit or an irrevocable letter of credit. The bond may be increased if the licensee's financial condition warrants it or if the bond is insufficient to guarantee payment of the tax. Section 142.881. Any distributor not required to post a bond under the current law may elect to participate in a mutual bond trust fund held for the benefit of participating distributors to prevent any loss to the state. Other distributors may participate after three consecutive years of tax compliance. Section 142.896.

DOCUMENTS - Various reports are required. Sections 142.875, 142.896 and 142.902. The requirements for shipping documents are set out. Sections 142.911, 142.914, 142.926 and 142.938. Special rules are provided for diversions from the original destination state. Section 142.917.

DYED FUEL - Vehicles shall not be operated upon the highways with dyed fuel. Notices shall be provided by terminal operators and any sellers of dyed diesel fuel or dyed kerosene. A statement shall be placed on every shipping paper on a transport truck indicating the dyed fuel is for "nontaxable use only, penalty for taxable use". Sections 142.932, 142.935 and 142.926.

PENALTIES - The Director of Revenue may revoke licenses or seek civil penalties for violations of this chapter. Criminal penalties also apply. Interest is applied to late tax payments, and vehicles may be impounded in certain instances. Sections 142.905-914 and 142.923.

INSPECTIONS & AUDITS - The Director of Revenue may inspect any tank, reservoir or container used for the production, storage or transportation of fuel. All shipping papers and documents shall be kept for immediate inspection. Inspection sites are designated. Inspections may also be conducted by the Department of Public Safety, the Department of Agriculture, motor carrier inspectors and any law enforcement officer through procedures set by the Director of Revenue. Audits and record examinations are authorized. Sections 142.941, 142.944 and 142.950.

RULEMAKING - No general rulemaking authority is granted. Specific provisions for rules are provided in several sections.

ALTERNATIVE FUEL VEHICLES - The mandate for the state vehicle fleet's use of alternative fuel is revised. The need for a 20% reduction in motor fuel use by 1997 (and 30% of vehicles by 2002) is replaced with compliance with federal CAFE standards and a requirement that 30% of the fuel used by state vehicles be alternative fuel by July 1, 2001. The exemptions are revised, credits are allowed, and the cost limit for alternative fuel vehicles is increased. The definitions of alternative fuel and life cycle costs are expanded. (Similar to HB 1394)

REFORMULATED GASOLINE - The Air Conservation Commission shall establish a reformulated gasoline program by June 1, 1999. Conventional gasoline may be stored in nonattainment areas. An orderly transition to reformulated gas shall be ensured. These provisions apply to the greater St. Louis area and were drawn from SB 541.

AVIATION - Beginning September 1, 1998, the revenues from the sales and use tax on aviation jet fuel, less amounts for cities, counties and education, shall be deposited in the Aviation Trust Fund. The Highways and Transportation Commission may use the trust fund to provide financial assistance to private reliever airports and airports operated by state agencies or state educational institutions. Aviation funds could also be spent on emergency projects. The aviation assistance language in Section 17 of SB 1 of the 1997 extraordinary session is repealed. A definition of commercial aircraft is revised. (Similar to HCS/SB's 813 & 864)

LP GAS SALE - Any person selling LP gas at retail in bulk must have a storage tank in Missouri with a capacity of at least 18,000 gallons. (SCS/SB 610 & 835)
MICHAEL HOEFERKAMP