The Fuel Tax Act, 2000 is a tax on importing or purchasing fuel in Saskatchewan. In 2015 to 2016, this tax generated $479 million, but some taxpayers are exempt. If you advise farmers, fishers, bulk fuel dealers, or anyone else affected by this tax, you need to understand the basics so you can answer their questions.
How Much Is the Fuel Tax?
As of 2018, the Saskatchewan fuel tax rate has been steady since 2006. The tax is 15 cents per litre of clear gasoline and diesel. It is 9 cents per litre of propane, 15 cents per litre of railway fuel, and 1.5 cents for aviation or aviation turbo gas. Clear simply means the gas is not marked.
What Is Marked Fuel?
Marked fuel has been dyed to indicate the fuel is completely or partially exempt from tax. To mark fuel, stations must be authorized by Saskatchewan Finance, and their dye injecting equipment must work properly. Keylock, cardlock, and service stations can only sell marked diesel or gasoline to people with valid Fuel Tax Exemption Permits. If they have a pump with marked fuel, it must be clearly marked.
If these stations accidentally blend marked and unmarked fuel or sell marked fuel to someone without a permit, they should contact Saskatchewan Finance to report the error.
What Is the Farm Fuel Program?
This program allows farmers, fishers, trappers, or loggers to purchase 80 percent of their diesel fuel tax-free. They can also obtain tax-free propane as long as it is used for heating or another allowable use. Participants must obtain a Fuel Tax Exemption Permit and must only use the fuel for certain purposes. The rules vary based on their industry, but as a general rule of thumb, the fuel must be used in their farming, fishing, trapping, or logging businesses.
When Can Farmers Use Marked Fuel?
To use marked tax-free fuel, farmers must own or rent at least 75 acres of land for cereal crops. Alternatively, they must collect at least $10,000 per year in revenue from selling farm products produced in Saskatchewan or be a shareholder in a farm co-op, partnership, or similar organization. They can use this fuel for farm machinery and Class F vehicles. As long as they don’t receive compensation, they can use marked diesel while cleaning snow from local access roads, but they can’t use this fuel when cleaning snow from city, town, or village roads identified on Saskatchewan’s grid map.
When Can Loggers Use Marked Fuel?
Loggers can use marked, tax-reduced fuel in their equipment while logging. Saw mills, pulp and paper operations, and truckers hauling logs cannot use marked fuel. They must use clear diesel.
How Do You Obtain the Permit?
Qualified individuals can apply for the Fuel Tax Exemption Permit online through Finance Saskatchewan. Annually, they must renew their permit and can also do that online.
Do Bulk Dealers Pay Tax on Fuel?
Bulk dealers pay this tax on fuel upfront, but after they sell fuel to a permit holder, they can apply for a refund. For instance, if a bulk dealer sells marked fuel to a farmer who gets an 80 percent discount on his fuel tax, the dealer can apply for a refund of 12 cents per litre sold. That is 80 percent of the 15 cent tax.
What Is the First Nation Fuel Refund?
Retailers that sell fuel on reserves have to pay tax when purchasing the fuel, but if individual buyers present a Certificate of Indian Status Identification Card, they don’t have to pay tax on the fuel they buy. Then, the retailer can request a refund. If the retailer meets the criteria, it can apply for a status identification card through Indigenous and Northern Affairs Canada.
What Is the Gasoline Competition Assistance Program?
Alberta and Manitoba do not charge the same amount of tax on their fuel. As a result, people who sell fuel in Saskatchewan near the borders of these provinces may face competition due to people driving over the border to buy fuel. To make up for these potential losses, the government pays service stations a commission on the gas and propane they sell. The exact amount depends on the distance between the service station and its over-the-border competitors.
If a service station is in Zone A, which includes Lloydminster and Onion Lake, or in Zone D, which includes Flin Flon and Creighton, it can claim 100 percent of the tax difference. As of 2018, the tax on a litre of diesel in Alberta is 13 cents. That means service stations in these areas can claim a refund of 2 cents, or the difference between Saskatchewan’s 15 cent tax and Alberta’s 13 cent tax.
In Zone B and E, service stations can claim 50 percent of the tax difference. In Zone C, service stations are located 24 to 56 kilometre from their over-the-border competitors, and they can claim 25 percent of the difference in tax.
How Do You Apply for a Fuel Tax Refund?
To apply for a refund, your clients can use Saskatchewan’s automated upfront exemption system. They can also use this system to verify permits and track previous sales reported. This applies to both bulk dealers and fuel retailers on reserves.
If you work with service station owners, bulk fuel dealers, farmers, or any other types of businesses affected by Saskatchewan’s fuel tax, you need to be able to advise these clients. Make sure you understand the rules and expectations related to this tax as well as how to apply for refunds.