Who is exempt from the federal LUST tax?

The Federal LUST tax, short for Leaking Underground Storage Tank tax, is a federal excise tax of 1% per gallon applied to taxable fuels. This tax is generally paid by manufacturers, importers, or retailers who use motor fuels in their business operations. The purpose of the LUST tax is to fund the cleanup of leaks from underground storage tanks that hold petroleum or other hazardous substances, helping to protect the environment from contamination.

Several exemptions apply to the payment of LUST (Leaking Underground Storage Tank) excise taxes, including:

• State Agencies: Similar to other motor fuel taxes, state agencies are exempt from paying the LUST tax, provided they meet certain conditions.

• Special Motor Fuels: Fuels such as benzol, benzene, naphtha, liquefied petroleum gas (LPG), compressed natural gas (CNG), casinghead and natural gasoline, and other fuels used to power cars, trucks, and boats are considered "special motor fuels." These fuels are not subject to the LUST tax. For example, LPG is taxed at a rate of $0.184 per gallon, and CNG is taxed at $0.4854 per thousand cubic feet (approximately $0.043 per equivalent gallon), both exempt from LUST.

• Aviation Fuels: Aviation fuels used in foreign trade are exempt from the LUST tax. Additionally, kerosene removed directly into the fuel tank of an aircraft for use in foreign trade is also exempt.

• Exported Fuels: Diesel and kerosene fuels exported outside the U.S. are exempt from LUST taxes.

WRAP:

After reading this blog, you should now have a clearer and deeper understanding of who qualifies for exemptions from paying the LUST tax and why certain fuels and entities are not subject to it.

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