August 21, 2007

Does Tennessee Tax Home-Brewed Biodiesel?

The Charlotte Observer has the story of a man who ran afoul of the North Carolina tax authorities when he converted his 1981 diesel Mercedes to run on biodiesel made from soybean oil.

Bob Teixeira decided it was time to take a stand against U.S. dependence on foreign oil. So last fall the Charlotte musician and guitar instructor spent $1,200 to convert his 1981 diesel Mercedes to run on vegetable oil. He bought soybean oil in 5-gallon jugs at Costco, spending about 30 percent more than diesel would cost.

His reward, from a state that heavily promotes alternative fuels: a $1,000 fine last month for not paying motor fuel taxes. He has been told to expect another $1,000 fine from the federal government. To legally use veggie oil, state officials told him, he would have to first post a $2,500 bond.

Teixeira is one of a growing number of fuel-it-yourselfers - backyard brewers who recycle restaurant grease or make moonshine for their car tanks. They do it to save money, reduce pollution or thumb their noses at oil sheiks. They're also caught in a web of little-known state laws that can stifle energy independence.

I have inquired of the Tennessee Department of Revenue whether it, too, would levy the state's existing motor fuels tax on home-brewed biodiesel. The department's website says Tennessee's diesel fuel tax "is imposed on diesel fuel when it crosses the terminal rack or upon import from a facility below the terminal bulk system." Obviously, home-brewed biodiesel does not fit that description, thought the one-line description on the website may not reflect some intricacy of state law that I don't know about.

I'll let you know what the Tennessee Department of Revenue says. If they say users of home-brewed diesel should pay the state's 17-cents-per-gallon fuel tax, I'd urge some lawmakers to draft legislation to exempt home-brewed fuels from state motor fuels taxes.