Motor Fuel - Biodiesel-Biofuel Frequently Asked Questions
Taxation of biodiesel is governed by the California State Diesel Fuel Tax Law and administered by the Fuel Industry Section (FIS) of the Board of Equalization (BOE). This page is meant to provide answers to some of your frequently asked questions about biodiesel and biofuel, including straight vegetable oil (svo), waste vegetable oil (wvo), and the California diesel fuel tax.
What is biodiesel?
Biodiesel is a fuel made fully or partially from vegetable oils or animal fats. It is typically produced by combining a vegetable oil or animal fat with an alcohol, such as methanol or ethanol, in the presence of a chemical catalyst to produce mono-alkyl esters and glycerin. Pure biodiesel must meet ASTM specification ASTM D6751.
Is biodiesel a taxable diesel fuel?
Yes. Under Revenue and Taxation Code section 60022, "Diesel fuel" means any liquid that is commonly or commercially known or sold as a fuel suitable for use in a diesel-powered highway vehicle. Biodiesel is included in this definition.
Is straight vegetable oil (svo) or waste vegetable oil (wvo) a taxable fuel?
Yes. Raw vegetable oil, whether it is svo (virgin oil, fresh, uncooked) or wvo (used cooking oil, "grease," fryer oil, including tallow fats), that is sold or used in powering a motor vehicle in California is subject to the California diesel fuel tax in the same manner as is petroleum-based diesel fuel.
How is the diesel tax used?
California fuel taxes pay for the construction and maintenance of state and local roads and highways. The taxes apply to all fuel used on roads and highways, whether the fuel is sold, given away, or made for your own use
What is the rate of the California state diesel fuel tax?
Is the tax the same rate for biodiesel?
Yes, in California biodiesel is considered diesel fuel and is taxed at the diesel fuel Tax Rate.
Who must register and pay fuel tax on biodiesel?
In general, you must register with us if you do any of the following in California:
- Manufacture or produce biodiesel.
- Blend biodiesel with petroleum diesel.
- Sell or import biodiesel from another state or country that has not been previously taxed as diesel fuel in California.
- Use biodiesel that has not been previously taxed as diesel fuel to power a vehicle driven on the roads or highways.
- Use, sell, or import svo or wvo for use in a diesel-powered highway vehicle that has not been previously taxed as diesel fuel.
- Process or filter svo or wvo for use in a diesel-powered highway vehicle.
How do I register?
If I just put SVO or WVO in my own fuel tank for my own use, do I need to register?
Yes, because the SVO and WCO are subject to the diesel fuel tax when ever they are used as fuel to power a diesel-powered vehicle on California highways. When you register with the BOE, you will be issued a diesel supplier account number which will allow you to pay the diesel fuel tax on the gallons of fuel you use during the year to power a vehicle driven on the roads and highways in California.
Is there a fee for this license?
There is no fee for the license. However, if you are a commercial enterprise or import biodiesel from outside of California, it is possible that you may be required to post a security deposit.
How much is a security deposit?
A security deposit is calculated on your projected taxable gallons of diesel fuel per month, multiplied by the diesel fuel tax rate. This deposit is used to protect the State’s interest until you have an established business record with the BOE. It is refundable after three years of filing and paying timely returns.
How do I know if I will be required to post a security deposit?
If you are required to post a security deposit, the online registration system will notify you of the amount of security you are required to post at the time you register. You will not receive your diesel fuel supplier license until the security is posted, and you are not allowed to engage in business until then.
Will I have to file a diesel fuel tax return?
Yes, after we issue you a supplier license, you will be sent a diesel fuel tax return indicating that you are registered to report on either a monthly, quarterly, or yearly basis. The Supplier of Diesel Fuel tax return is due on the last day of the month, following the close of your reporting period. For example, the return for year 2008 is due on January 31, 2009. You must file your return even if you have nothing to report for the period.
When is the tax imposed on the transaction(s)?
The tax is imposed when the "fuel" is imported into California, removed from a California refinery, biodiesel production facility, or terminal rack, or blended with tax-paid diesel. If you are producing your own biodiesel or using svo or wvo, the tax is imposed when you put the fuel into the tank of your vehicle or sell it to another person. You must report this fuel on your Supplier of Diesel Fuel tax return for the period during which the transaction(s) took place.
If I just put SVO and/or WVO directly into my vehicle, do I have to file a state diesel fuel tax return?
Yes, svo and wvo are considered diesel fuel when used to power a diesel-powered highway vehicle. You will be placed on a yearly reporting basis and be required to report the number of gallons of svo or wvo you used in your diesel-powered highway vehicle during the reporting period.
What if I sell the SVO, WVO or the biodiesel I produce, to another person?
You may be required to register for a California Seller’s Permit and collect and remit the sales tax to the BOE. This is in addition to the California state diesel fuel tax.
For more information please see Publication 96, Biodiesel and California Tax. Publication 96 addresses common questions regarding the application of diesel fuel tax as well as the sales and use tax on biodiesel and biofuel, including straight vegetable oil (svo), and waste vegetable oil (wvo) transactions in California. Additional information on biodiesel may be found in the archive of Fuel Taxes Newsletters, or you may call the Customer Service Center at 1-800-400-7115.