What is a federal LUST tax, and who pays it?

The Federal LUST Tax refers to the Leaking Underground Storage Tank (LUST) tax, a federal excise tax of 0.1 cent per gallon imposed on motor fuels sold across the US. The revenue from this tax is allocated to the LUST Fund, which is dedicated to addressing and cleaning up leaks from underground storage tanks.

Once collected, the tax is deposited into the Highway Trust Fund and then distributed to states based on a formula determined by legislation. The Environmental Protection Agency (EPA) oversees the administration of this fund to ensure that it is used for its intended purpose.

The LUST tax applies primarily to the removal, importation, and sale of fuels like gasoline, diesel, and kerosene. Its purpose is to mitigate environmental damage caused by leaking fuel storage systems.

The funds collected through the Federal LUST (Leaking Underground Storage Tank) tax are maintained in the LUST Trust Fund. These funds are used to support the following activities, benefitting both the environment and public health:

• Oversight and enforcement: The funds are used to oversee the cleanups of petroleum releases by responsible parties and to enforce cleanups for those who are unwilling or slow to act.

• Emergency and orphaned sites: LUST funds are also allocated to clean up sites where the owner or operator is unknown, unwilling, or unable to take action, or where immediate emergency action is required.

• Preventative activities: The money is also used to conduct inspections and other activities that prevent fuel releases. It supports enforcement actions related to prevention and ensures that federally regulated underground storage tank (UST) facilities are inspected properly.

Both states and tribes benefit from the LUST Fund, which supports activities that maintain public health and safeguard the environment from the hazards associated with leaking storage tanks.

The Federal LUST Tax rate is 0.1 cent per gallon on motor fuels sold across the United States. This tax is added to the original tax rate of various fuels, helping fund the LUST Trust Fund, which supports environmental cleanup efforts for leaking underground storage tanks.

Some of the fuels subject to this tax, along with their IRS identification numbers from Form 720, include:

• Dyed diesel – IRS No. 105

• Dyed kerosene – IRS No. 107

• Kerosene for use in aviation – IRS No. 111

• Diesel or kerosene sold or used in Alaska – IRS No. 119

These fuels are taxed to ensure that resources are available for both preventative measures and necessary cleanups related to underground storage tank leaks.

The LUST tax is generally included with the overall fuel excise tax. If your business involves the use of motor fuels such as diesel, kerosene, or gasoline, you may be required to pay this tax. Specific entities, including manufacturers, retailers, and importers, are subject to the LUST tax under the following conditions:

• Diesel for transportation: If your business uses diesel for transportation and removes diesel from the terminal rack, you must pay the LUST tax.

• Refiners or owners of taxable fuel: If the refiner or owner of taxable fuel is not a taxable fuel registrant immediately before removal, the bulk transfer of taxable fuel is subject to specific conditions, requiring payment of the LUST tax.

• Biodiesel mixtures: If you sell or remove biodiesel mixtures, you are obligated to pay the LUST tax.

• Diesel-water emulsions: Using diesel-water emulsions for fuel also makes your business liable for the LUST tax.

• Aircraft fuel: If your aircraft operations involve any liquid fuel, your business is subject to the LUST tax as well.

In general, any business involved in the distribution or use of these fuels may be responsible for paying the LUST tax.

• Download the latest Form 720 from the IRS website.

• Complete the form by hand and mail it to the IRS at the appropriate mailing address.

• Use eFile720, an IRS-approved 720 efile provider to file the form electronically in a few minutes.

• The online process is quick and efficient, allowing you to complete and submit your filings within minutes.

Our platform simplifies the filing process by categorizing all applicable LUST tax categories under the Fuel Taxes section, making it straightforward for you to file your LUST tax efficiently.

WRAP:

After reading this blog, you will gain a clear understanding of the Federal LUST Tax—what it is, who is responsible for paying it, who benefits from the tax proceeds, and the simple steps you can take to pay it, either manually or online.

File your Federal Lust Tax Online with us in just a few minutes!