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Department of the Treasury
EXCISE TAX ON GASOLINE AND DIESEL FUEL

CIRCULAR LETTER: 88-23

TO: ALL DEPARTMENTS AND AGENCIES

ATTENTION: DIRECTORS OF ADMINISTRATION AND CHIEF FISCAL OFFICERS

SUBJECT: EXCISE TAX ON GASOLINE AND DIESEL FUEL

PURPOSE

The purpose of this circular letter is to promulgate the State of
New Jersey's policy regarding the payment of federal excise tax
on purchases of gasoline and diesel fuel used for vehicles.

BACKGROUND

In late 1987, an obscure provision in the Tax Reform Act was in-
terpreted by the Internal Revenue Service to require tax exempt
governments to pay excise tax on gasoline and diesel fuel used
for vehicles. The government would then be required to seek a
refund at some future time. The tax for gasoline was imposed ef-
fective January 1, 1988, while the tax for diesel fuel was im-
posed effective April 1, 1988.

On January 28, 1988, the I.R.S. modified its position to allow
gasoline suppliers, at their option, to continue to sell
gasoline, tax free, to state and local governments. Congress has
given the U.S. Treasury, discretionary authority to exempt state
and local governments from excise tax on diesel fuel. This
authority has been exercised by the Secretary of the Treasury.

POLICY

It is the policy of the State of New Jersey that excise tax shall
not be included on invoices for gasoline or diesel fuel submitted
to the State for payment.

PROCEDURES FOR PAYMENT

  • If a department or agency receives a State Invoice (AR50/54)
    for the purchase of gasoline or diesel fuel which includes a
    charge for federal excise tax, such invoice shall be corrected by
    the agency before submittal to OMB for processing. If excise tax
    is included in the unit price of the product, the invoice shall
    be returned to the vendor for correction.
  • Each department and agency is responsible for including the
    following within the description field of each State Invoice for
    the purchase of gasoline and diesel fuel:

    • The State's federal identification number which is 21-
      6000928.
    • A statement indicating that the entire quantity of fuel
      purchased is for the exclusive use of the State.

  • If a department or agency experiences problems with a gasoline
    or diesel fuel supplier regarding these procedures, GSA's Divi-
    sion of Procurement and Central Services should be contacted for
    assistance.

Richard B. Standiford
Director

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