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Diesel-water fuel emulsion tax

What is the Diesel-Water Fuel Emulsion Tax (IRS No. 104)?

The Diesel-Water Fuel Emulsion Tax is a federal excise tax imposed under Internal Revenue Code Section 4081 on diesel-water fuel emulsion which is categorized under Fuel Excise Taxes in Form 720. For federal excise tax purposes, qualifying diesel-water fuel emulsion is treated as taxable diesel fuel.

Key Points

Tax rate: The excise tax rate for qualifying diesel-water fuel emulsion is $0.198 per gallon , as listed on Form 720 under IRS No. 104.

Qualification requirement: To be taxed at $0.198 per gallon, the fuel must meet IRS requirements, including:

  • It must contain at least 10 percent water.
  • It must include an emulsifier additive registered by a United States manufacturer under the Clean Air Act.
  • The producer must be properly registered with the IRS.
 

Higher rate if not qualified: If these requirements are not met, the fuel is taxed at the standard diesel fuel rate of $0.244 per gallon .

When tax applies:The tax is generally imposed when the fuel is removed from a refinery or terminal rack, entered into the United States, or sold or used in a taxable manner.

Credits and refunds: Credits or refunds may be available if the fuel is later used in a nontaxable manner, subject to IRS rules.

Who Is Responsible for Paying the Diesel-Water Fuel Emulsion Tax(IRS No. 104)?

The responsibility for paying the tax generally falls on:

  • Position holders when the fuel is removed from a terminal rack.
  • Importers when the fuel is entered into the United States.
  • Other liable parties as defined under IRC Section 4081, depending on the transaction.
    The liable party must report and remit the tax by filing Form 720 for the quarter in which the tax liability arises.

Why Choose Electronic Filing for Your Diesel-Water
Fuel Emulsion Tax (IRS No. 104)?

Faster IRS Processing
Electronic filing allows your Form 720 to reach the IRS immediately, reducing processing time compared to paper submissions and helping you meet quarterly deadlines more efficiently.
Reduced Errors and Rejections
E-filing systems include built-in validations that help detect missing or incorrect entries before submission. This reduces the risk of calculation errors in per-gallon tax reporting under IRS No. 104.
Instant Confirmation of Receipt
When you file electronically, you receive acknowledgment from the IRS once your return is accepted. This provides documented proof of timely filing and greater peace of mind compared to mailing paper returns.

Steps to Complete Your Diesel-Water Fuel Emulsion
Tax (IRS No. 104) Filing with Simple720

STEP 1
Enter Business Details
Provide your business name, address, EIN, and contact information.
Filing Steps Image 1
Filing Steps Image 2
STEP 2
Tax Information
Select “Diesel water fuel emulsion (104)” under the Fuel Taxes category.
Enter
  • Tax Date
  • Number of gallons
STEP 3
Payment Information
Review the auto calculated tax amount and select your preferred payment method to finalize the filing.
Filing Steps Image 3
File Form 720 Online

Why Choose Simple720 for Filing Your Diesel-Water Fuel
Emulsion Tax (IRS No. 104)?

Trusted IRS-Authorized E-Filing Provider
Simple720 is an IRS-authorized e-file provider, ensuring your Diesel-Water Fuel Emulsion Tax is submitted securely and in full compliance with IRS regulations. Your Form 720 filing is transmitted directly to the IRS for efficient and reliable processing.
Enterprise-Grade Security Standards
Our platform follows AICPA SOC-compliant security practices, using advanced encryption and strict data protection protocols. Your sensitive fuel tax and business information remains safeguarded throughout the entire filing process.
Cost-Effective and Transparent Pricing
Simple720 offers affordable pricing with no hidden charges, making it easy for fuel businesses to file IRS No. 104 without unnecessary overhead. Pay only for what you need while ensuring accurate and compliant quarterly reporting.

Simple720 Vs Others

IRS Authorized e-Filer Brand X Brand Y Brand Z
Cloud-Based Yes No No No
Software Download None Yes-PC Only Yes Yes
License None Required Required Required
Annual Contract No Required Required Required
All Excise Taxes Yes Fuel Taxes Only No No
Cost $50/return $1,000+/yr. $1,500+/yr. $5,000+/yr.
CHECK PRICING
Testimonial
What Clients Are Saying
— Michael Thompson, Texas

Seamless and Efficient Filing
Filing IRS No. 104 was straightforward and stress-free. Simple720 helped us complete our quarterly return quickly and without errors.

— Sandra Lee, California

Accurate and Reliable Support
The platform’s guided process ensured our diesel-water fuel emulsion tax was reported correctly. Support was helpful every step of the way.

— Robert Hernandez, Florida

Great Value for Money
Simple720 made the Diesel-Water Fuel Emulsion Tax filing affordable and clear. No surprises and excellent results each quarter.

File Form 720 Online

Frequently Asked Questions

The tax rate for Diesel-Water Fuel Emulsion (IRS No. 104) is $0.198 per gallon when the fuel qualifies for the reduced rate. If qualification requirements are not met, it is generally taxed as standard diesel fuel instead.

To qualify for the reduced rate of $0.198 per gallon, the diesel-water fuel emulsion must meet specific water content, additive registration, and IRS registration requirements. Otherwise, standard diesel tax rules apply.

This tax is imposed at the point the fuel is removed from a terminal rack, imported into the U.S., or otherwise sold or used in a taxable manner.

The liability generally falls on the position holder at the terminal rack or the importer of the fuel, who must report and remit the tax on Form 720, Quarterly Federal Excise Tax Return for the appropriate quarter.

Fuel excise taxes on Form 720 include the following IRS numbers, each for specific fuel types and rates:
  • 60 – Diesel fuel (tax on removal at terminal rack and other taxable events)
  • 104 – Diesel-Water Fuel Emulsion
  • 105 – Dyed diesel, LUST tax
  • 107 – Dyed kerosene, LUST tax
  • 119 – LUST tax, other exempt removals
  • 35 – Kerosene (terminal rack and other taxable events)
  • 69 – Kerosene for use in aviation
  • 77 – Kerosene for use in commercial aviation
  • 111 – Kerosene for aviation, LUST tax on nontaxable uses
  • 79 – Other fuels (see instructions)
  • 62 – Gasoline (terminal rack and other taxable events)
  • 13 – Liquid fuel used in fractional aircraft ownership programs
  • 14 – Aviation gasoline
  • 112 – Liquefied petroleum gas (LPG)
  • 118 – “P Series” fuels
  • 120 – Compressed natural gas (CNG)
  • 121 – Liquefied hydrogen
  • 122 – Fischer-Tropsch process liquid fuels from coal
  • 123 – Liquid fuel derived from biomass
  • 124 – Liquefied natural gas (LNG)

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