The Fuel Tax Act, 2000 is a tax on importing or purchasing fuel in Saskatchewan. If you advise farmers, fishers, bulk fuel dealers, or anyone else affected by this tax, it’s important to understand the basics so you can answer your client’s questions and help them determine if they are exempt.

How Much Is the Fuel Tax?

As of 2022, 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. The term “clear” simply refers to unmarked gasoline.

What Is Marked Fuel?

Marked fuel is fuel that has a dye to indicate the fuel is either partially or completely exempt from tax. To mark fuel, authorized Saskatchewan Finance stations use specialized dye injecting equipment. Keylock, cardlock, and service stations can only sell marked diesel or gasoline to people with valid Fuel Tax Exemption Permits.

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?

The Farm Fuel Program program allows farmers, fishers, trappers, or loggers to purchase 80% of their diesel fuel tax-free. They can also obtain tax-free propane as long as they use it 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 is for use in 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 may use marked, tax-reduced fuel in their equipment while logging. Saw mills, pulp and paper operations, and truckers hauling logs cannot use marked fuel.

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. Online renewals are also an option.

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% discount on his fuel tax, the dealer can apply for a refund of 12 cents per litre sold. That is 80% 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, and 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% of the tax difference. As of 2022, 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% of the tax difference. In Zone C, service stations are located 24 to 56 kilometres from their over-the-border competitors, and they can claim 25% 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. 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, it’s helpful to brush up on the the latest fuel tax rules. Staying on top of any fuel tax refunds also smooths things out at year end. Accelerate your year-end adjustment process and start saving time on corporate returns with QuickBooks Online Accountant. Sign up for free.