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Iowa Fuel Tax Rate Changes Effective July 1, 2015

Q: What are the new fuel tax rates?

A: The table below summarizes all applicable fuel tax rates and their effective dates.

Iowa Fuel Tax Rates

Fuel
Type
 No.

Fuel Type

Effective Dates

Prior to
March 1, 2015

March 1, 2015 to
June 30, 2015

Effective
July 1, 2015

065

Gasoline

$0.21/gal

$0.31/gal

  $0.308/gal

123

Alcohol

$0.19/gal

$0.29/gal

  $0.293/gal

124

Ethanol Blended Gasoline

$0.19/gal

$0.29/gal

  $0.293/gal

079

E85

$0.19/gal

$0.29/gal

  $0.293/gal

169

Diesel (including biodiesel B10
and lower)

  $0.225/gal

  $0.325/gal

  $0.325/gal

179

Biodiesel B11 or Higher

   $0.225/gal*

   $0.325/gal*

  $0.295/gal

125

Aviation Gasoline

$0.08/gal

$0.08/gal

 $0.08/gal

130

Aviation Jet

$0.03/gal

$0.05/gal

 $0.05/gal

054

Liquefied Petroleum Gas (LPG)

$0.20/gal

$0.30/gal

 $0.30/gal

225

Liquefied Natural Gas (LNG)

  $0.225/gal

  $0.325/gal

   $0.325/gal

224

Compressed Natural Gas (CNG)

$0.21/gal

$0.31/gal

 $0.31/gal

* Prior to July 1, 2015 Biodiesel B11 or Higher is included in the Diesel fuel tax rate.

Q: Why did the rates change?

A: Senate File 257 was enacted on February 25, 2015, resulting in changes to Iowa fuel tax rates.

 

Q: When are the fuel tax rate changes effective?

A: Please refer to the table above for a complete list of all fuel types and their corresponding tax rates by time period.

 

Q: How will the fuel tax rate changes impact the submission of Iowa fuel tax returns?

A: Motor fuel forms and systems are being updated to accommodate the fuel tax rate changes, as well as the additional fuel type Biodiesel B11 or higher. Please refer to the Department of Revenue website to retrieve the revised forms.

 

Q: How will the rate changes impact the submission of Iowa fuel tax refund claims?

A: Claims for fuel tax refund must be calculated using the correct rates based on the date of purchase. The telephone refund system has now been updated with the new tax rates, and is available to use for invoice dates on or after March 1, 2015. The system can still be used to claim refunds for periods prior to March 1, 2015 as well.  The system will calculate refunds using the correct tax rates for the invoice dates given.  Therefore, separate refund claims must be filed for invoices dated prior to March 1, 2015; those dated March 1, 2015 through June 30, 2015; as well as those dated on or after July 1, 2015.

 

Q: Is there an inventory tax?

A: There is no inventory tax associated with the rate increases.

 

Q: Will dyed diesel now be subject to Iowa fuel tax?

A: No. Dyed diesel will remain exempt from fuel tax, but may be subject to Iowa sales and use tax in the same way it always was.

 

Q: How were Iowa fuel tax rates determined prior to March 1, 2015?

A: Tax rates for motor fuel, which includes ethanol-blended fuel classified as E10 or higher, and gasoline, were based on a fuel distribution percentage formula. The use of that formula and the resulting distinct tax rates for E10 and gasoline were scheduled to expire after June 30, 2015, when the tax on all motor fuel would have been $0.20 per gallon; the tax rate for all diesel fuel was $0.225 per gallon.

 

Q: How were the rates determined beginning March 1, 2015?

A: The fuel distribution percentage formula as a basis for motor fuel tax rates, including distinct rates for E10 and gasoline, was extended and modified. In addition, the tax rate for diesel fuel, including biodiesel, increased by $0.10 per gallon and the rate of tax on special fuel for aircraft, also referred to as aviation jet fuel, increased from $0.03 to $0.05 per gallon.

 

Q: How will the rates be determined beginning July 1, 2015?

A: Beginning July 1, 2015, a fuel distribution percentage formula will continue to be used as a basis for the fuel tax rates for ethanol blended fuel, classified as E10 or higher, and gasoline. In addition, a fuel distribution percentage formula will be established as the basis for distinct tax rates for biodiesel blended fuel classified as B11 or higher and all other diesel fuel.

 

Q: Will the effectiveness of the rate changes be reviewed?

A: Yes. A legislative review is required every six years.

 

Q: Is the money collected from the new tax increase deposited into the state’s
general fund?

A: No. Money collected from fuel tax is transferred to the Road Use Tax Fund, which is constitutionally protected and must be spent on roads and bridges.

 

Q: How do we know where construction projects are being worked on or planned?

A: The Iowa Transportation Commission develops the “Iowa Transportation Improvement Program” each year, which identifies transportation investments over a five-year period. The document can be viewed on their website: http://www.iowadot.gov/program_management/five_year.html

Listings of county and city transportation projects are included in their respective programs and can be obtained by contacting the individual jurisdictions.