Rev. Rul. 58-575

Advice has been requested whether a credit or refund of the retailers excise tax is allowable where tax-paid diesel fuel is used to operate special equipment mounted on diesel-powered highway vehicles.

Many diesel-powered highway buses are equipped with air conditioning units. One of the units is mounted in a compartment on the side of each bus along with a separate motor which operates the unit. The motor of the unit and the motor of the bus are activated by diesel fuel drawn from the same fuel supply tank.

Also, some diesel-powered highway tank trucks are equipped with pumping units which are used to discharge various liquids from the truck tanks into customers' storage facilities. In some cases, the pump is activated by means of a `power take-off' from the motor of the vehicle. Other similar tank trucks are equipped with separate fuel supply tanks from which fuel is drawn to activate the motor of the pumping unit.

Under the provisions of section 6416(b)(2)(C) of the Internal Revenue Code of 1954 the Secretary of the Treasury or his delegate shall credit or refund (without interest) the overpayments on diesel fuel sold for use as a fuel in a diesel-powered highway vehicle if the vendee used such liquid otherwise than as fuel in such vehicle, motorboat, or airplane, or resold such liquid.

It is held that diesel fuel used to activate the motor which operates special equipment, such as air conditioners, pumping units, generators, and cranes, qualifies for a credit or refund under the provisions of section 6416(b)(2)(C) of the Code. However, the provisions of section 6416(a) of the Code and of the applicable regulations must be complied with as a condition precedent to the allowance of the credit or refund. Where a diesel-powered highway vehicle has tow separate motors and one fuel supply tank, a determination of the amount of fuel used in the separate motor based on actual consumption or actual operating experience and supported by the records of the consumer will be accepted for refund purposes.

It is further held that no credit or refund is allowable with respect to the retailers excise tax on diesel fuel used to power the motor of a diesel-powered highway vehicle even though the motor is also used to activate special equipment, where the equipment is operated by means of a `power take-off' from the motor of the vehicle.