Fuel Tax

As announced in the 2013 Ontario Budget, the fuel tax exemption for biodiesel is repealed effective April 1, 2014, making biodiesel taxed in the same way as diesel fuel.

If you operate an internal combustion engine that uses clear diesel fuel, you will pay fuel tax when the fuel is purchased.

Gasoline, aviation fuel and propane are taxed under the Gasoline Tax Act.

Who has to pay the fuel tax?

In most cases, if you buy clear fuel for an internal combustion engine, you will pay fuel tax.

The only exemptions are:

  • Businesses that hold a Fuel Acquisition Permit
  • Members of the diplomatic corps
  • Visiting armed forces

Will I pay fuel tax on coloured fuel?

You do not have to pay fuel tax on coloured (red) fuel when the fuel is used for any of the following:

  • heating, lighting or cooking;
  • generating electricity;
  • unlicensed construction, forestry, mining, farm and other business equipment;
  • operating commercial marine vessels;
  • auxiliary equipment of a vehicle where the equipment has its own separate fuel tank; and
  • operating railway equipment provided that the operator is registered with the Ministry of Finance and pays fuel tax on all fuel used in its railway operations.

First Nations individuals and bands registered under the Indian Act (Canada) may use coloured fuel in licensed vehicles as long as the fuel is acquired on a reserve.

Important: Coloured fuel is not to be used in a licensed motor vehicle or in unlicensed recreation equipment.

Are you an operator of a commercial motor vehicle traveling into or out of Ontario?

If you are, then you are required to obtain and display, International Fuel Tax Agreement registration decals issued by your base state or province on your vehicle.

If the vehicle is not registered under the International Fuel Tax Agreement then you must get a one-time permit from your state/province for each trip and keep it in your vehicle.

Who should be registered under the Fuel Tax Act?

  • Collectors
  • Importers
  • Exporters
  • Interjurisdictional carriers
  • Interjurisdictional transporters of fuel
  • Manufacturers

Who is responsible for the reporting and remitting of fuel tax?

Fuel tax is collected from consumers by retailers who pay the tax to designated wholesalers. These designated wholesalers then report and remit the tax to the ministry.

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