Reminder: Superfund Tax on Crude Oil Begins January 1, 2023

Reminder: Superfund Tax on Crude Oil Begins January 1, 2023
What the 16.4 Cents Per Barrel Tax Means for Downstream Energy Marketers and Tax-Exempt Purchasers

The Inflation Reduction Act of 2022 reimposes the long-expired Superfund excise tax on crude oil at the rate of 16.4 cents per barrel beginning January 1, 2023. EMA is receiving inquiries about how the Superfund tax will affect downstream energy marketers and tax-exempt purchasers (state and local governments, etc.).

First and foremost, refiners are the only parties liable for payment of the Superfund tax. It is important for energy marketers to understand that once crude is refined, the tax becomes a manufacturing cost refiners include in the price per gallon of finished product. No other party downstream of the refinery gate is liable for the Superfund tax because it is passed down as a cost not a tax.

Some suppliers break out the additional per gallon cost associated with the tax on supply invoices and identify it as the “Superfund Tax.” However, this practice is not legally required for downstream parties and often creates confusion for both energy marketers and tax-exempt purchasers. Therefore, to avoid confusion, energy marketers are advised not to break out the Superfund tax as a separate line item on invoices or supply contract bids because tax exempt purchasers will object to any charge identified as a “tax”. There are no downstream exemptions from the Superfund tax.

Finally, the Superfund tax is only imposed on the crude portion of blended product. As a result, downstream blenders of ethanol, biodiesel or any other non-crude renewable fuels are not liable for the tax. Finally, the Superfund tax is indexed annually to the rate of inflation and expires on December 31, 2032, unless extended by Congress.

Got Questions? Contact Mark S. Morgan, EMA Regulatory Counsel mmorgan@emamerica.org