If you’re using compressed natural gas (CNG) as a propulsion fuel in a licensed motor vehicle in Minnesota, it’s essential to understand its tax obligations. The Minnesota Department of Revenue provides clear guidelines on the taxation of CNG. Let’s delve into the key details.
Tax Rate:
Purchasing CNG for use in a licensed motor vehicle is subject to the Minnesota Motor Fuel Excise Tax. The tax rate for CNG is $0.001974 per cubic foot (CF) or 25 cents per gasoline gallon equivalent (GGE). Additionally, CNG is subject to the Petroleum Debt Service Surcharge, resulting in a combined tax rate of $0.00225 per cubic foot.
GGE Measurement:
To determine the taxable usage of CNG, the National Conference on Weights and Measures defines a GGE as 5.66 pounds of natural gas or 126.67 CF.
Reporting and Payment:
To report and pay the Motor Fuel Excise Tax for CNG, complete the Alternative Fuel Tax calculation section in your Minnesota Petroleum Tax Return each month. Report the amount of CNG used in cubic feet.
Methods of Determining Taxable Usage:
There are multiple methods for measuring your use of CNG, depending on your fueling setup:
Dedicated CNG Meter:
If you have a dedicated CNG meter at your fueling station, subtract the prior month’s month-end meter reading from the current month-end meter reading. Report the resulting cubic feet on your tax return. Ensure that the meter reading is in CF and make necessary conversions if the meter measures at a different level (such as CCF or MCF).
Retail or Private Pump:
If you have a retail or private pump that provides GGEs for each disbursement, multiply the monthly GGEs by 126.67 to determine the total cubic feet. Report this number on your tax return.
Monthly Utility Bill:
If you’re using your monthly utility bill from your natural gas provider, consider the following:
- Use only the dedicated meter for motor fuel.
- Verify that the unit of measure reported on the bill is in CF. If it is, report that number on your tax return.
- If the unit of measure is in CCF, multiply by 100 and report the result.
- If the unit of measure is in MCF, multiply by 1000 and report the result.
- If the unit of measure is in therms, convert therms to CF per 900 BTUs. Multiply the therms by 100,000, then divide that total by 900. Report the resulting number on your tax return.
For Additional Information, visit Taxation of Compressed Natural Gas | Minnesota Department of Revenue (state.mn.us) or contact our tax professionals at Prudent Accountants today!
Stay informed about the taxation of CNG and ensure compliance with the Minnesota Department of Revenue’s guidelines. Understanding your tax obligations helps you manage your fuel usage and reporting accurately.
