701—260.4(452A) Blended fuel taxation—nonterminal location.
	260.4(1) Responsibilities of all blenders at nonterminal locations. A person who blends ethanol blended gasoline or biodiesel blended fuel at a nonterminal location must obtain a blender’s license. Blending ethanol with gasoline, or blending biodiesel with petrodiesel, may result in additional tax due or an allowable refund depending on the ethanol content of the mixture and the tax paid on its components. The blender must make payment to the department for the additional tax due. The blender must obtain a refund permit to receive a refund of the overpayment of tax on the blended product.
Example 1. A blender blends three parts ethanol with 17 parts gasoline to create E-15. The E-15 is taxed as ethanol blended gasoline, and the blender may be due a refund for excess tax paid on the gasoline used.
Example 2. A blender blends one part biodiesel with four parts petrodiesel to create B-20. The B-20 is taxed as B-11 or higher, and the blender may be due a refund for excess tax paid on the petrodiesel used.
Example 3. A blender blends one part biodiesel with 19 parts petrodiesel to create B-5. The B-5 is taxed as diesel other than B-11 or higher, and the blender may owe additional tax to the department on the biodiesel used.
Example 4. A blender blends one part B-20 with five parts B-2 to create B-5. The B-5 is taxed as diesel other than B-11 or higher, and the blender may owe additional tax to the department on the B-20 used.
	260.4(2) Blenders of ethanol blended gasoline.
	a. 	A blender who owns the ethanol (supplier) being used to blend with gasoline must purchase the gasoline from a supplier and pay the appropriate tax to the supplier. The blender must obtain a blender’s license and compute the tax due on the total gallons of blended product and make payment to the department for the additional amount due. For purposes of the following example, the tax rate for gasoline is presumed to be 30¢ per gallon and the tax rate for ethanol blended gasoline E-15 or higher is presumed to be 24¢ per gallon. The actual tax rates for the appropriate period are shown in subrule 260.2(1).

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper>:	 	
Blender purchases 7,000 gallons tax-paid gasoline (7,000 ×.30) =	$2,100.00	
Blender adds 3,000 gallons untaxed ethanol	$.00	
Total tax paid on products	$2,100.00	
Total tax due on 10,000 gallons ethanol blended gasoline E-15 or higher (10,000 ×.24) =	$2,400.00	
Additional Amount Due		 $300.00	
	b. 	A blender who purchases ethanol and gasoline from a supplier must pay tax on both the ethanol purchased and the gasoline purchased. The blender must obtain a refund permit to receive a refund of the overpayment of tax on the blended product. For purposes of the following example, the tax rate for gasoline is presumed to be 30¢ per gallon and the tax rate for ethanol blended gasoline E-15 or higher is presumed to be 24¢ per gallon. The actual tax rates for the appropriate period are shown in subrule 260.2(1).

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper>:	 	
Blender purchases 7,000 gallons tax-paid gasoline (7,000 ×.30) =	$2,100.00	
Blender purchases 3,000 gallons tax-paid ethanol (3,000 ×.24) =	$720.00	
Total tax paid on products	$2,820.00	
Total tax due on 10,000 gallons ethanol blended gasoline E-15 or higher (10,000 ×.24) =	$2,400.00	
Amount of Refund Allowable		 $420.00	
	c. 	A blender who purchases ethanol and gasoline from any source must pay tax on both the ethanol purchased and the gasoline purchased. The blender must obtain a blender’s license and compute the tax due on the total gallons of blended product and make payment to the department for the additional amount due. For purposes of the following example, the tax rate for gasoline is presumed to be 30¢ per gallon, the tax rate for ethanol is presumed to be 24¢ per gallon, and the tax rate for ethanol blended gasoline E-10 is presumed to be 30¢ per gallon. The actual tax rates for the appropriate period are shown in subrule 260.2(1).

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper>:	 	
Blender purchases 7,200 gallons tax-paid gasoline (7,200 ×.30) =	$2,160.00	
Blender purchases 800 gallons tax-paid ethanol (800 ×.24) =	$192.00	
Total tax paid on products	$2,352.00	
Total tax due on 8,000 gallons ethanol blended gasoline E-10
(8,000 ×.30) =	$2,400.00	
Additional Amount Due	$48.00	
	d. 	A blender who purchases ethanol blended gasoline E-10 to E-14 and ethanol blended gasoline E-15 or higher from a supplier must pay tax on both the ethanol blended gasoline E-10 to E-14 purchased and the ethanol blended gasoline E-15 purchased. The blender must obtain a refund permit to receive a refund of the overpayment of tax on the blended product. For purposes of the following example, the tax rate for E-10 to E-14 purchased is presumed to be 30¢ per gallon and the tax rate for ethanol blended gasoline E-15 or higher is presumed to be 24¢ per gallon. The actual tax rates for the appropriate period are shown in subrule 260.2(1).

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper>:	 	
Blender purchases 7,000 gallons tax-paid ethanol blended gasoline E-10 to E-14 (7,000 ×.30) =	$2,100.00	
Blender purchases 3,000 gallons tax-paid ethanol blended gasoline E-15 or higher (3,000 ×.24) =	$720.00	
Total tax paid on products	$2,820.00	
Total tax due on 10,000 gallons ethanol blended gasoline E-15 or higher (10,000 ×.24) =	$2,400.00	
Amount of Refund Allowable	$420.00	
	e. 	Ethanol blended gasoline E-15 or higher—blending errors.
Where a blending error occurs and an insufficient amount of ethanol has been blended with gasoline so that the mixture fails to qualify as ethanol blended gasoline E-15 or higher, a 1 percent tolerance applies in determining the tax on the blended product as described in this paragraph:
	(1)	If the amount of the ethanol erroneously blended with gasoline is at least 14 percent of the total blended product by volume, the ethanol and gasoline blended product is considered ethanol blended gasoline E-15 or higher and there is no penalty or assessment of additional tax.
	(2)	If the amount of ethanol erroneously blended with gasoline is less than 14 percent of the total blended product by volume, the total blend of gasoline and ethanol is subject to tax as ethanol blended gasoline E-10 to E-14 at the prevailing rate of tax.
	(3)	This paragraph applies only if a blender intends to produce ethanol blended gasoline E-15 or higher. If a blender does not intend to produce ethanol blended gasoline when blending ethanol and gasoline, and the mixture contains less than 14 percent ethanol by volume, no error has occurred and the mixture is subject to tax as ethanol blended gasoline E-10 to E-14.
	(4)	The following formulas are used to compute blending errors:
Actual gasoline + actual ethanol = total gallons of blended product
Total gallons of blended product × .14 = required ethanol
	(5)	Examples. The following factors are assumed for all examples:
The blender in each example intends to blend ethanol blended gasoline E-15 or higher. Figures are rounded to the nearest whole gallon; ethanol blended gasoline E-15 or higher is taxed at 24¢ per gallon; gasoline is taxed at 30¢ per gallon. The actual tax rates for the appropriate period are shown in subrule 260.2(1). Penalty and interest charges are not computed in the examples.

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper> 1:	
Actual gasoline	=	8,500	gal.	
Actual ethanol	=	1,500	gal.	
Total blended product	=	10,000	gal.	
10,000 ×.14	=	1,400	gal. required ethanol	
The actual ethanol (1,500 gallons) is more than the required ethanol (1,400 gallons), which means that the tax is applied according to subparagraph 260.4(2)“e”(1) as follows:

10,000 gal. of blended product ×.24	=	$2,400	tax on ethanol blended gasoline E-15 or higher	

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper> 2:	
Actual gasoline	=	9,200	gal.	
Actual ethanol	=	800	gal.	
Total blended product	=	10,000	gal.	
10,000 ×.14	=	1,400	gal. required ethanol	
The actual ethanol (800 gallons) is less than the required ethanol (1,400 gallons), which means that the entire blend is considered gasoline and the tax is applied according to subparagraph 260.4(2)“e”(2) as follows:

10,000 gal. of blended product ×.30	=	$3,000	tax on gasoline	
	260.4(3) Blenders of biodiesel blended fuel.
	a. 	A blender who owns the biodiesel being used to blend with diesel must purchase the diesel from a supplier and pay the appropriate tax to the supplier. The blender must obtain a blender’s license and compute the tax due on the total gallons of blended product and make payment to the department for the additional amount due. For purposes of the following examples, the tax rate for B-11 or higher is presumed to be 30.1¢ per gallon and the tax rate for diesel other than B-11 or higher is presumed to be 32.5¢ per gallon. The actual tax rates for the appropriate period are shown in subrule 260.2(1).

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper> 1.	 	
Blender purchases 7,120 gallons tax-paid petrodiesel (7,120 ×.325) =	$2,314.00	
Blender adds 880 gallons untaxed biodiesel =	$.00	
Total tax paid on products =	$2,314.00	
The blended product is 8,000 gallons of diesel, which includes 880 gallons (11% by volume) of biodiesel. Thus, the product is taxed as B-11 or higher.

Total tax due on 8,000 gallons blended B-11 or higher (8,000 ×.301) =	$2,408.00	
Additional Amount Due =		 $94.00	

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper> 2.	 	
Blender purchases 7,600 gallons tax-paid petrodiesel (7,600 ×.325) =	$2,470.00	
Blender adds 400 gallons untaxed biodiesel =	$.00	
Total tax paid on products =	$2,470.00	
The blended product is 8,000 gallons of diesel, which includes 400 gallons (5% by volume) of biodiesel. Thus, the product is taxed as diesel other than B-11 or higher.

Total tax due on 8,000 gallons diesel other than B-11 or higher (8,000 ×.325) =	$2,600.00	
Additional Amount Due =		$130.00	

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper> 3.	 	
Blender purchases 7,750 gallons tax-paid B-2 (7,750 ×.325) =	$2,518.75	
Blender adds 250 gallons untaxed biodiesel =	$.00	
Total tax paid on products =	$2,518.75	
7,750 gallons of B-2 contains 155 gallons (2%) of biodiesel. The blended product is 8,000 gallons of diesel, which includes 405 gallons (155 + 250, or 5% by volume) of biodiesel. Thus, the product is taxed as diesel other than B-11 or higher.

Total tax due on 8,000 gallons diesel other than B-11 or higher (8,000 ×.325) =	$2,600.00	
Additional Amount Due =		$81.25	
	b. 	A blender who purchases diesel products from a supplier must pay the appropriate tax on all diesel products purchased. The blender must obtain a blender’s license and compute the tax due on the total gallons of blended product and make payment to the department for any additional amount due. The blender must also obtain a refund permit to receive a refund of any overpayment of tax on the blended product. For purposes of the following examples, the tax rate for B-11 or higher is presumed to be 30.1¢ per gallon and the tax rate for diesel fuel other than B-11 or higher is presumed to be 32.5¢ per gallon. The actual tax rates for the appropriate period are shown in subrule 260.2(1).

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper> 1.	 	
Blender purchases 7,120 gallons tax-paid petrodiesel (7,120 ×.325) =	$2,314.00	
Blender purchases 880 gallons tax-paid biodiesel (880 ×.301) =	$264.88	
Total tax paid on products =	$2,578.88	
The blended product is 8,000 gallons of diesel, which includes 880 gallons (11% by volume) of biodiesel. Thus, the product is taxed as B-11 or higher.

Total tax due on 8,000 gallons blended B-11 or higher (8,000 ×.301) =	$2,408.00	
Amount of Refund Allowable =		 $170.88	

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper> 2.	 	
Blender purchases 7,600 gallons tax-paid petrodiesel (7,600 ×.325) =	$2,470.00	
Blender purchases 400 gallons tax-paid biodiesel (400 ×.301) =	$120.40	
Total tax paid on products =	$2,590.40	
The blended product is 8,000 gallons of biodiesel blended fuel, which includes 400 gallons (5% by volume) of biodiesel. Thus, the product is taxed as diesel other than B-11 or higher.

Total tax due on 8,000 gallons blended B-5 (8,000 ×.325) =	$2,600.00	
Additional Amount Due =		 $9.60	

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper> 3.	 	
Blender purchases 4,000 gallons tax-paid B-2 (4,000 ×.325) =	$1,300.00	
Blender purchases 4,000 gallons tax-paid B-20 (4,000 ×.301) =	$1,204.00	
Total tax paid on products =	$2,504.00	
4,000 gallons of B-2 contains 80 gallons (2%) of biodiesel, and 4,000 gallons of B-20 contains 800 gallons (20%) of biodiesel. The blended product is 8,000 gallons of diesel, which includes 880 gallons (80 + 800, or 11% by volume) of biodiesel. Thus, the product is taxed as B-11 or higher.

Total tax due on 8,000 gallons B-11 or higher (8,000 ×.301) =	$2,408.00	
Amount of Refund Allowable =		 $96.00	
	c. 	Blending errors. Where a blending error occurs and an insufficient amount of biodiesel has been blended with petrodiesel so that the mixture fails to qualify as B-11 or higher as defined in rule 701—259.1(452A), a 1 percent tolerance applies in determining the tax on the blended product as described in this paragraph:
	(1)	If the amount of the biodiesel erroneously blended with petrodiesel is at least 10 percent of the total blended product by volume, the biodiesel and petrodiesel blended product is considered B-11 or higher and there is no penalty or assessment of additional tax.
	(2)	If the amount of biodiesel blended with petrodiesel is less than 10 percent of the total blended product by volume, the entire mixture is considered taxable diesel other than B-11 or higher and subject to tax at the prevailing rate.
	(3)	This paragraph applies only if a blender intends to produce B-11 or higher. If a blender does not intend to produce B-11 or higher when blending biodiesel and petrodiesel, and the mixture contains less than 11 percent biodiesel by volume, no error has occurred and the mixture is subject to tax as diesel other than B-11 or higher.
	(4)	The following formulas are used to compute blending errors:
Actual biodiesel + actual petrodiesel = total gallons of blended product
Total gallons of blended product × .1 = required biodiesel
	(5)	Examples. The following factors are assumed for all examples:
The blender in each example intends to blend B-11 or higher. Figures are rounded to the nearest whole gallon; B-11 or higher is taxed at .301¢ per gallon; diesel other than B-11 or higher is taxed at .325¢ per gallon. The actual tax rates for the appropriate period are shown in subrule 260.2(1). Penalty and interest charges are not computed in the examples.

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper> 1.	 	 	 	
Actual petrodiesel	=	8,095	gal.	
Actual biodiesel	=	905	gal.	
Total blended product	=	9,000	gal.	
9,000 ×.1	=	900	gal. required biodiesel	
The actual biodiesel (905 gallons) is more than the required biodiesel (900 gallons). Thus, the tax is applied according to subparagraph 260.4(3)“c”(1) as follows:

9,000 gal. of blended product ×.301	=	$2,709 tax on B-11 or higher	

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper> 2.	
Actual petrodiesel	=	8,105	gal.	
Actual biodiesel	=	895	gal.	
Total blended product	=	9,000	gal.	
9,000 ×.1	=	900	gal. required biodiesel	
The actual biodiesel (895 gallons) is less than the required biodiesel (900 gallons). Thus, the tax is applied according to subparagraph 260.4(3)“c”(2) as follows:

9,000 gal. of blended product ×.325	=	$2,925 tax on diesel other than B-11 or higher	

E<fo:wrapper font-size="8pt">XAMPLE</fo:wrapper> 3.	
A blender erroneously mixes 5,000 gallons of B-2 with 4,500 gallons of B-20 with the intent of creating B-11 or higher. 5,000 gallons of B-2 contains 100 gallons (2%) of biodiesel. 4,500 gallons of B-20 contains 900 gallons (20%) of biodiesel. Thus, the 9,500 gallons (4,500 + 5,000) of blended product includes 1,000 gallons (100 + 900) of biodiesel and 8,500 gallons (9,500 – 1,000) of petrodiesel.	
Actual petrodiesel	=	8,500	gal.	
Actual biodiesel	=	1,000	gal.	
Total blended product	=	9,500	gal.	
9,500 ×.1	=	950	gal. required biodiesel	
The actual biodiesel (1,000 gallons) is greater than the required biodiesel (950 gallons), which means that the entire blend is considered B-11 or higher and the tax is applied according to subparagraph 260.4(3)“c”(1) as follows:

9,500 gal. of blended product ×.301	=	$2,859.50	tax on B-11 or higher	
This rule is intended to implement Iowa Code section 452A.8 as amended by 2015 Iowa Acts, Senate File 257.
[ARC 2247C, IAB 11/25/15, effective 12/30/15; ARC 5842C, IAB 8/11/21, effective 9/15/21; ARC 6508C, IAB 9/7/22, effective 10/12/22; Editorial change: IAC Supplement 10/18/23]