IRS Ruling Simplifies Tax-Exempt Fueling
Supply chain management has been an ongoing challenge for governmental fleets, in effect making it near impossible to take advantage of significant savings and volume purchasing opportunities because of limitations and uncertainty on obtaining and reporting fuel tax exemptions.
But the supply chain landscape has changed significantly due to a July 21, 2001 ruling handed down by the Internal Revenue Service (IRS), for the first time allowing tax-exempt fleets to file for refunds on tax-exempt sales at gas stations using a universal fleet card.
“This levels the playing field for tax-exempt fleets who have been at a significant purchasing disadvantage for years,” said Randy Morgan, senior vice president of Business Fleet Services for Comdata Corp. “This ruling opens the door for state and city governments to purchase fuel on a tax-exempt basis at retail gas stations.”
Supply chain management provider TransMontaigne and Comdata have completed the beta test of a new paperless, Web-based fuel purchasing system using a Comchek-branded MasterCard to process tax-exempt fueling transactions using data directly from the point-of-sale. Several cities and municipalities have been testing the system, and report initial success.
“Tax-exempt fleets now have a great deal more flexibility and can be much more proactive in the overall management of their respective supply chains,” said Rick Eaton, senior vice president of marketing and logistics for TransMontaigne.
The IRS ruling provides the state or municipality the ability to purchase fuel at retail and receive tax exemptions, with the flexibility and coverage provided by a bank-issued fleet card. The Comdata/TransMontaigne solution combines a federal government-approved MasterCard product with paperless reporting capabilities.
The steps for obtaining tax exemptions at retail:
-- TransMontaigne issues a Comchek MasterCard Corporate Fleet Card to city, state, or munici-pality. The card can be issued at either the driver or vehicle level for more customized accounting, at the customer’s preference.
-- Comdata processes the transaction in real-time from the point-of-sale.
-- TransMontaigne extends credit to the customer, while Comdata electronically sends funds to the station where the fuel was purchased.
-- Station operator is paid full pump price, less transaction fees. The customer is billed at the price level negotiated with TransMontaigne, without federal taxes.
-- TransMontaigne files and processes the refund claim.