By: Larry Gearhardt, Field Specialist, Taxation, OSU Extension
Farming can be a fuel-intensive business. Both the federal and state governments impose an excise tax (fuel tax) on each gallon of fuel purchased. The amount of fuel tax can become substantial if the farming operation uses thousands of gallons of fuel to plant and harvest its crops.
There are exemptions from paying the fuel tax for certain off-road uses, including farming. There is no tax on dyed diesel fuel when it is delivered to the farm because it is assumed that the dyed diesel fuel will be used for an exempt purpose. However, for gasoline and un-dyed diesel fuel, the fuel tax is included in the cost of the fuel. If the tax is included in the cost of the fuel used in farming, the farm operator can file for a refund. In the case of the federal fuel tax, instead of a refund, the farm operator has the option of applying the fuel tax credit against any income tax liability. Unfortunately, there is no similar provision in Ohio law and the only avenue open to the farm operator is to apply for a refund of the Ohio fuel tax.
This article focuses on the two main fuels used in farming – gasoline and diesel fuel. Other specialized fuels, such as liquid natural gas and aviation fuel, have their own specific rules and the reader is encouraged to review those rules if specialized fuels are used on the farm. To read more Click Here