HB-6749, As Passed House, December 11, 2008

SUBSTITUTE FOR

HOUSE BILL NO. 6749

     A bill to amend 2000 PA 403, entitled

"Motor fuel tax act,"

by amending sections 2, 4, 6, 8, 14, and 152 (MCL 207.1002,

207.1004, 207.1006, 207.1008, 207.1014, and 207.1152), section 2 as

amended by 2002 PA 668, section 4 as amended by 2006 PA 277, and

section 8 as amended by 2006 PA 268; and to repeal acts and parts

of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 2. As used in this act:

     (a) "Alcohol" means fuel grade ethanol or a mixture of fuel

grade ethanol and another product.

     (b) "Average wholesale price" means the per gallon wholesale

price, adjusted no more frequently than quarterly, as determined by

the department. In any administrative or court proceeding brought

to challenge the determination of the average wholesale price of

motor fuel, the department's determination is presumed to be

correct and shall not be set aside unless it is clearly erroneous.

(c) (b) "Blendstock" means and includes any petroleum product

component of motor fuel, such as naphtha, reformate, or toluene; or

any oxygenate that can be blended for use in a motor fuel.

(d) (c) "Blended motor fuel" means a mixture of motor fuel and

another liquid, other than a de minimis amount of a product

including, but not limited to, carburetor detergent or oxidation

inhibitor, that can be used as motor fuel in a motor vehicle.

(e) (d) "Blender" means and includes any person who produces

blended motor fuel outside of the bulk transfer/terminal system.

(f) (e) "Blends" or "blending" means the mixing of 1 or more

petroleum products, with or without another product, regardless of

the original character of the product blended, if the product

obtained by the blending is capable of use in the generation of

power for the propulsion of a motor vehicle, an airplane, or a

marine vessel. Blending does not include mixing that occurs in the

process of refining by the original refiner of crude petroleum or

the blending of products known as lubricating oil in the production

of lubricating oils and greases.

(g) (f) "Bulk end user" means a person who receives into the

person's own storage facilities by transport truck or tank wagon

motor fuel for the person's own consumption.

(h) (g) "Bulk plant" means a motor fuel storage and

distribution facility that is not a terminal and from which motor

fuel may be withdrawn by a tank wagon, a transport truck, or a

marine vessel.

(i) (h) "Bulk transfer" means a transfer of motor fuel from 1

location to another by pipeline tender or marine delivery within

the bulk transfer/terminal system, including, but not limited to,

all of the following transfers:

     (i) A marine vessel movement of motor fuel from a refinery or

terminal to a terminal.

     (ii) Pipeline movements of motor fuel from a refinery or

terminal to a terminal.

     (iii) Book transfers of motor fuel within a terminal between

licensed suppliers before completion of removal across the terminal

rack.

     (iv) Two-party exchanges between licensed suppliers.

(j) (i) "Bulk transfer/terminal system" means the motor fuel

distribution system consisting of refineries, pipelines, marine

vessels, and terminals. Motor fuel in a refinery, pipeline,

terminal, or a marine vessel transporting motor fuel to a refinery

or terminal is in the bulk transfer/terminal system. Motor fuel in

a fuel storage facility including, but not limited to, a bulk plant

that is not part of a refinery or terminal, in the fuel supply tank

of any engine or motor vehicle, in a marine vessel transporting

motor fuel to a fuel storage facility that is not in the bulk

transfer/terminal system, or in any tank car, rail car, trailer,

truck, or other equipment suitable for ground transportation is not

in the bulk transfer/terminal system.

(k) (j) "Carrier" means an operator of a pipeline or marine

vessel engaged in the business of transporting motor fuel above the

terminal rack.

(l) (k) "Commercial motor vehicle" means a motor vehicle

licensed under the motor carrier fuel tax act, 1980 PA 119, MCL

207.211 to 207.234.

(m) (l) "Dead storage" is the amount of motor fuel that cannot

be pumped out of a motor fuel storage tank because the motor fuel

is below the mouth of the tank's draw pipe. The amount of motor

fuel in dead storage is 200 gallons for a tank with a capacity of

less than 10,000 gallons and 400 gallons for a tank with a capacity

of 10,000 gallons or more.

(n) (m) "Denaturants" means and includes gasoline, natural

gasoline, gasoline components, or toxic or noxious materials added

to fuel grade ethanol to make it unsuitable for beverage use but

not unsuitable for automotive use.

(o) (n) "Department" means the bureau of revenue within the

department of treasury or its designee.

(p) (o) "Destination state" means the state, Canadian province

or territory, or foreign country to which motor fuel is directed

for export.

(q) (p) "Diesel fuel" means any liquid other than gasoline

that is capable of use as a fuel or a component of a fuel in a

motor vehicle that is propelled by a diesel-powered engine or in a

diesel-powered train. Diesel fuel includes number 1 and number 2

fuel oils, kerosene, dyed diesel fuel, and mineral spirits. Diesel

fuel also includes any blendstock or additive that is sold for

blending with diesel fuel, any liquid prepared, advertised, offered

for sale, sold for use as, or used in the generation of power for

the propulsion of a diesel-powered engine, airplane, or marine

vessel. An additive or blendstock is presumed to be sold for

blending unless a certification is obtained for federal purposes

that the substance is for a use other than blending for diesel

fuel. Diesel fuel does not include an excluded liquid.

(r) (q) "Dyed diesel fuel" means diesel fuel that is dyed in

accordance with internal revenue service rules or pursuant to any

other internal revenue service requirements, including any

invisible marker requirements.

(s) (r) "Eligible purchaser" means a person who has been

authorized by the department under section 75 to make the election

under section 74.

(t) (s) "Excluded liquid" means that term as defined in 26

C.F.R. CFR 48.4081-1.

(u) (t) "Export" means to obtain motor fuel in this state for

sale or other distribution outside of this state. Motor fuel

delivered outside of this state by or for the seller constitutes an

export by the seller and motor fuel delivered outside of this state

by or for the purchaser constitutes an export by the purchaser.

(v) (u) "Exporter" means a person who exports motor fuel.

     Sec. 4. As used in this act:

     (a) "Kerosene" means all grades of kerosene, including, but

not limited to, the 2 grades of kerosene, No. 1-K and No. 2-K,

commonly known as K-1 kerosene and K-2 kerosene respectively,

described in American society for testing and materials

specifications D-3699, in effect on January 1, 1999, and kerosene-

type jet fuel described in American society for testing and

materials specification D-1655 and military specifications MIL-T-

5624r and MIL-T-83133d (grades jp-5 and jp-8), and any successor

internal revenue service rules or regulations, as the specification

for kerosene and kerosene-type jet fuel. Kerosene does not include

an excluded liquid.

     (b) "Leaded racing fuel" is a fuel other than diesel fuel that

is leaded and at least 100 octane and is used in vehicles on a

racetrack.

     (c) "Liquid" means any substance that is liquid in excess of

60 degrees Fahrenheit and a pressure of 14.7 pounds per square inch

absolute.

     (d) "Motor fuel" means compressed natural gas, gasoline,

diesel fuel, kerosene, a mixture of gasoline, diesel fuel, or

kerosene, or a mixture of gasoline, diesel fuel, or kerosene and

any other substance. Motor fuel does not include leaded racing

fuel.

     (e) "Motor vehicle" means a vehicle that is propelled by an

internal combustion engine or motor and is designed to permit the

vehicle's mobile use on the public roads or highways of this state.

Motor vehicle does not include any of the following:

     (i) An implement of husbandry.

     (ii) A train or other vehicle operated exclusively on rails.

     (iii) Machinery designed principally for off-road use and not

licensed for on-road use.

     (iv) A stationary engine.

     (f) "Net gallons" means the remaining product, after all

considerations and deductions have been made, measured in gallons,

corrected to a temperature of 60 degrees Fahrenheit, 13 degrees

Celsius, and a pressure of 14.7 pounds per square inch, the

ultimate end amount.

     (g) "Oxygenate" means an oxygen-containing, ashless, organic

compound, such as an alcohol or ether, which may be used as a fuel

or fuel supplement.

     (h) "Permissive supplier" means a person who may not be

subject to the taxing jurisdiction of this state but who does meet

both of the following requirements:

     (i) Is a position holder in a federally registered terminal

located outside of this state, or a person who acquires from a

position holder motor fuel in an out-of-state terminal in a

transaction that otherwise qualifies as a 2-party exchange under

this act.

     (ii) Is registered under section 4101 of the internal revenue

code for transactions in motor fuel in the bulk transfer/terminal

system.

     (i) "Person" means and includes an individual, cooperative,

partnership, firm, association, limited liability company, limited

liability partnership, joint stock company, syndicate, and

corporation, both private and municipal, and any receiver, trustee,

conservator, or any other officer having jurisdiction and control

of property by law or by appointment of a court other than units of

government.

     (j) "Position holder" means a person who has a contract with a

terminal operator for the use of storage facilities and other

terminal services for motor fuel at the terminal, as reflected in

the records of the terminal operator. Position holder includes a

terminal operator who owns motor fuel in the terminal.

     (k) "Public roads or highways" means a road, street, or place

maintained by this state or a political subdivision of this state

and generally open to use by the public as a matter of right for

the purpose of vehicular travel, notwithstanding that they may be

temporarily closed or travel is restricted for the purpose of

construction, maintenance, repair, or reconstruction.

     Sec. 6. As used in this act:

     (a) "Tank wagon" means a straight truck having 1 or more

compartments other than the fuel supply tank designed or used to

carry motor fuel.

     (b) "Tank wagon operator-importer" means a person who operates

a tank wagon and imports motor fuel into this state from another

state.

     (c) "Tax" means a tax, interest, or penalty levied under this

act.

     (d) "Terminal" means a motor fuel storage and distribution

facility that meets all of the following requirements:

     (i) Is registered as a qualified terminal by the internal

revenue service.

     (ii) Is supplied by pipeline or marine vessel.

     (iii) Has a rack from which motor fuel may be removed.

     (e) "Terminal operator" means a person who owns, operates, or

otherwise controls a terminal.

     (f) "Transmix" means the mixed product that results from the

buffer or interface of 2 different products in a pipeline shipment,

or a mixture of 2 different products within a refinery or terminal

that results in an off-grade mixture.

     (g) "Transport truck" means a semitrailer combination rig

designed or used for the purpose of transporting motor fuel over

the public roads or highways.

     (h) "Transporter" means an operator of a railroad or rail car,

tank wagon, transport truck, or other fuel transportation vehicle

engaged in the business of transporting motor fuel below the

terminal rack.

     (i) "Two-party exchange" means a transaction in which motor

fuel is transferred from 1 licensed supplier or licensed permissive

supplier to another licensed supplier or licensed permissive

supplier where all of the following occur:

     (i) The transaction includes a transfer from the person who

holds the original inventory position for motor fuel in the

terminal as reflected in the records of the terminal operator.

     (ii) The exchange transaction is completed before removal

across the rack from the terminal by the receiving licensed

supplier or licensed permissive supplier.

     (iii) The terminal operator in its books and records treats the

receiving exchange party as the supplier that removes the product

across a terminal rack for purposes of reporting the transaction to

the department.

     (j) "Ultimate vendor" means the person who sells motor fuel to

the end user of the fuel.

     (k) "Wholesale price" means the price charged by a licensed

supplier to a purchaser, excluding the tax imposed by this act,

prepaid sales tax under section 6a of the general sales tax act,

1933 PA 167, MCL 205.56a, and any environmental protection

regulatory fee imposed under section 21508 of the natural resources

and environmental protection act, 1994 PA 451, MCL 324.21508.

(l) (k) "Wholesaler" means a person who acquires motor fuel

from a supplier or from another wholesaler for subsequent sale and

distribution at wholesale by a fuel transportation vehicle, rail

car, or other motor vehicle.

     Sec. 8. (1) Subject to the exemptions provided for in this

act, tax is imposed on motor fuel imported into or sold, delivered,

or used in this state based on the average wholesale price at a

rate of 0%. the following rates:

     (a) Except as otherwise provided in subdivision (c), 19 cents

per gallon on gasoline.

     (b) Except as otherwise provided in subdivision (d), 15 cents

per gallon on diesel fuel.

     (c) Subject to subsections (10) and (11), 12 cents per gallon

on gasoline that is at least 70% ethanol. Under this subdivision,

blenders of ethanol and gasoline outside of the bulk transfer

terminal system shall obtain a blender's license and are subject to

the blender reporting requirements under this act. A licensed

supplier who blends ethanol and gasoline shall also obtain a

blender's license.

     (d) Subject to subsections (10) and (11), 12 cents per gallon

on diesel fuel that contains at least 5% biodiesel. Under this

subdivision, blenders of biodiesel and diesel fuel outside of the

bulk transfer terminal system are required to obtain a blender's

license and are subject to the blender reporting requirements under

this act. A licensed supplier who blends biodiesel and diesel fuel

shall also obtain a blender's license.

     (2) Tax shall not be imposed under this section on motor fuel

that is in the bulk transfer/terminal system.

     (3) The collection, payment, and remittance of the tax imposed

by this section shall be accomplished in the manner and at the time

provided for in this act.

     (4) Tax is also imposed at the rate described in subsection

(1) on net gallons of motor fuel, including transmix, lost or

unaccounted for, at each terminal in this state. The tax shall be

measured annually and shall apply to the net gallons of motor fuel

lost or unaccounted for that are in excess of 1/2 of 1% of all net

gallons of fuel removed from the terminal across the rack or in

bulk.

     (5) It is the intent of this act:

     (a) To require persons who operate a motor vehicle on the

public roads or highways of this state to pay for the privilege of

using those roads or highways.

     (b) To impose on suppliers a requirement to collect and remit

the tax imposed by this act at the time of removal of motor fuel

unless otherwise specifically provided in this act.

     (c) To allow persons who pay the tax imposed by this act and

who use the fuel for a nontaxable purpose to seek a refund or claim

a deduction as provided in this act.

     (d) That the tax imposed by this act be collected and paid at

those times, in the manner, and by those persons specified in this

act.

     (6) Bills of lading and invoices shall identify the blended

product and the correct fuel product code. The motor fuel tax rate

for each product shall be listed separately on each invoice.

Licensees shall report the correct fuel product code for the

blended product as required by the department. When fuel is blended

below the terminal rack, new bills of lading and invoices shall be

generated and submitted to the department upon request. All bills

of lading and invoices shall meet the requirements provided under

this act.

     (7) Notwithstanding any other provision of this act, all

facilities in this state that produce motor fuel and distribute the

fuel from a rack for purposes of this act are a terminal and shall

obtain a terminal operator license and shall comply with all

terminal operator reporting requirements under this act. All

position holders in these facilities shall be licensed as a

supplier and shall comply with all supplier requirements under this

act.

     (8) If the tax on gasoline that contains at least 70% ethanol

or diesel fuel that contains at least 5% biodiesel held in storage

outside of the bulk transfer/terminal system on the effective date

of the amendatory act that added this subsection has previously

been paid at the rates imposed by subsection (1)(a) and (b), the

person who paid the tax may claim a refund for the difference

between the rates imposed by subsection (1)(a) and (b) and the

rates imposed by subsection (1)(c) and (d). All of the following

shall apply to a refund claimed under this subsection:

     (a) The refund shall be claimed on a form prescribed by the

department.

     (b) The refund shall apply only to:

     (i) Previously taxed gasoline containing at least 70% ethanol

or diesel fuel containing at least 5% biodiesel in excess of 3,000

gallons held in storage by an end user.

     (ii) Previously taxed gasoline containing at least 70% ethanol

or diesel fuel containing at least 5% biodiesel held for sale that

is in excess of dead storage.

     (9) A refund request shall be filed within 60 days after the

last day of the month in which the amendatory act that added this

subsection took effect. A taxpayer shall provide documentation that

the department requires in order to verify the request for refund.

A person who may claim a refund under subsection (8) shall do all

of the following to claim the refund:

     (a) Not later than 12 a.m. on the effective date of the

amendatory act that added this subsection, take an inventory of

gasoline containing at least 70% ethanol or undyed diesel fuel

containing at least 5% biodiesel.

     (b) Deduct 3,000 gallons if the person claiming the refund is

an end user.

     (c) Deduct the number of gallons in dead storage if the

gasoline containing at least 70% ethanol or the undyed diesel fuel

containing at least 5% biodiesel is held for subsequent sale.

     (10) Beginning on the effective date of the amendatory act

that added this subsection, the state treasurer shall annually

determine, for the 12-month period ending May 1 and for any

additional times that the treasurer may determine, the difference

between the amount of motor fuel tax collected and the amount of

motor fuel tax that would have been collected but for the

differential rates on gasoline pursuant to subsection (1)(c) and

biodiesel pursuant to subsection (1)(d). Subsection (1)(c) and (d)

is no longer effective the earlier of 10 years after the effective

date of the amendatory act that added this subsection or the first

day of the first month that is not less than 90 days after the

state treasurer certifies that the total cumulative rate

differential from the effective date of this amendatory act is

greater than $2,500,000.00.

     (11) The legislature shall annually appropriate to the

Michigan transportation fund created in 1951 PA 51, MCL 247.651 to

247.675, the amount determined as the rate differential certified

by the state treasurer for the 12-month period ending on May 1 of

the calendar year in which the fiscal year begins. Subsection

(1)(c) and (d) shall not be effective beginning January of any

fiscal year for which the appropriation required under this

subsection has not been made by the first day of the fiscal year.

     (12) As used in this section:

     (a) "Biodiesel" means a fuel composed of mono-alkyl esters of

long chain fatty acids derived from vegetable oils or animal fats

and, in accordance with standards specified by the American society

for testing and materials, designated B100 and meeting the

requirements of D-6751, as approved by the department of

agriculture.

     (b) "Ethanol" means denatured fuel ethanol that is suitable

for use in a spark-ignition engine when mixed with gasoline so long

as the mixture meets the American society for testing and materials

D-5798 specifications.

     (8) A tax is imposed on compressed natural gas at the rates in

subsection (1) per gasoline gallon equivalent as defined by the

national conference on weights and measures, which is 5.660 pounds

of natural gas at standard temperature and pressure. A tax is

imposed on all gaseous motor fuels other than compressed natural

gas at the rates in subsection (1) per gasoline gallon equivalents

as may be published by the national conference on weights and

measures or a successor agency.

     Sec. 14. (1) The department may require a supplier required to

remit tax under this act to remit the tax by an electronic funds

transfer acceptable to the department. The remittance shall be made

on or before the date the tax is due.

     (2) In computing the tax, a supplier may deduct 1.5% of the

quantity of gasoline removed by the supplier to allow for the cost

of remitting the tax. This deduction is not allowed for the

quantity of gasoline removed by the supplier and sold tax-free. At

the time of filing the report and paying the tax, the supplier

shall submit satisfactory evidence to the department that the

amount of tax represented by the deduction was paid or credited to

the supplier or wholesaler who purchased the gasoline from the

supplier or wholesaler. The amount of the deduction shall be paid

or credited by each supplier or wholesaler to the purchaser at each

subsequent sale to a wholesaler. When a wholesaler or supplier

sells gasoline to a retailer, the wholesaler or supplier shall pay

or credit to the retailer 1/3 of the deduction on quantities sold

to that retailer.

     Sec. 152. A tax at a rate of 15 cents per gallon is imposed

upon all liquefied petroleum gas used in this state based on the

average wholesale price at the rates determined under section 8.

The tax shall be paid at the times and in the manner specified in

this section. The tax on liquefied petroleum gas fuel sold or

delivered either by placing into a permanently attached fuel supply

tank on a motor vehicle, or exchanging or replacing the fuel supply

tank of a motor vehicle, shall be collected by the LPG dealer from

the purchaser and paid over quarterly to the department as provided

in this act. Liquefied petroleum gas fuel delivered in this state

into the storage facility of any person when the exclusive purpose

of the storage facility is for resale or use in a motor vehicle on

the public roads or highways of this state, shall, upon delivery to

storage facility, be subject to tax. An LPG dealer shall, upon

delivery of the liquefied petroleum gas, collect and remit the tax

to the department as provided in this act. A person shall not

operate a motor vehicle on the public roads or highways of this

state from the cargo containers of a truck, trailer, or semitrailer

with liquefied petroleum gas in vapor or liquid form, except when

the fuel in the liquid or vapor phase is withdrawn from the cargo

container for use in motor vehicles through a permanently installed

and approved metering device. The tax on liquefied petroleum gas

withdrawn from a cargo container through a permanently installed

and approved metering device shall apply in accordance with

measured gallons as reflected by meter reading, and shall be paid

quarterly by the LPG dealer to the department as provided in this

act.

     Enacting section 1. Section 10 of the motor fuel tax act, 2000

PA 403, MCL 207.1010, is repealed.

     Enacting section 2. This amendatory act does not take effect

unless all of the following bills of the 94th Legislature are

enacted into law:

     (a) House Bill No. 4575.

     (b) House Bill No. 4576.