Other than the fuel types listed below, all other deliveries and sales of fuel must include the excise tax and be reported as such when filing the Colorado Fuel Distributor Tax Return. If purchasers are using excise tax-paid fuel for purposes exempt by statute, they can apply to the Colorado Department of Revenue for a refund permit to receive a refund of the excise tax paid. See the Exempt Use of Fuel web page for more information.
Only Colorado fuel licensees (distributor, supplier, blender, or importer) can sell fuel, which is exempt from the Colorado fuel excise tax to users.
Gasoline can only be sold without excise tax to government entities that hold a valid Fuel Tax Exemption Certificate. The gasoline must be requisitioned and used by the government entity and paid for with funds drawn from the government entity. Government entities must apply for and receive an exemption certificate from the Colorado Department of Revenue before they can purchase fuel tax exempt. Government entities can apply for an exemption certificate by completing the Application for Fuel Tax Exemption Certificate for Government or Political Subdivision (DR 0241).
Upon receipt of an exemption certificate, such governmental entity may purchase gasoline or special fuel from a distributor without payment of the excise tax imposed pursuant to statute, if the gasoline or special fuel is used exclusively by the governmental entity in performing its governmental functions and activities.
Special fuel can be sold without excise tax to government entities, and the same guidelines as gasoline apply. All other sales of clear diesel fuel must include the excise tax. If purchasers feel they have an exempt use of the fuel, they can apply to the Department of Revenue for a refund.
Dyed diesel fuel is sold without excise tax to be used for exempt purposes off-road such as agricultural, home heating, or commercial manufacturing. Dyed diesel is not exempt from the Environmental Response Surcharge.
Aviation fuel is exempt from fuel excise tax when sold to commercial and scheduled air carriers that are exempt from the federal aviation fuel taxes. Aviation fuel sold to government entities is exempt from the Colorado aviation fuel excise tax.
Liquefied Petroleum Gas (LPG)
Liquefied Petroleum Gas (LPG) (commonly referred to as propane) used to propel a motor vehicle on Colorado highways must be sold with the excise tax included. LPG (propane) can be sold without excise tax to an end-user for use in a home heating system or other non-vehicle uses. When used for residential energy use, propane is also exempt from state sales and use tax.