BUYING AND SELLING FUEL OIL

Fuel oil grades, Numbers 1 – 4, are subject to motor fuel taxes and usually the PPD fee (see Note below and definition of "motor fuel" in Tax Code Section 162.001 [42]).

• Number 1, very light oils
  • Product examples – Jet fuels, kerosene, gasoline, no. 1 diesel, petroleum ether, petroleum spirit and petroleum naphtha.
• Number 2, most light crude oils
  • Product examples – No. 2 diesel, no. 2 fuel oil (e.g., a distillate home heating oil).
• Number 3, most crude oils
  • Product examples – Marine diesel oil, no. 3 distillate and no. 3 diesel fuel.
  • No. 3 fuel oil was a distillate fuel oil for burners requiring low-viscosity fuel. American Society for Testing Materials (ASTM) merged fuel grade no. 3 with no. 2. This term has rarely been used since the mid-20th century.
• Number 4, intermediate to heavy crude oils
  • Product examples – Commercial heating oils, bunker A fuel oil (bunker A fuel oil consists of gasoil range bunker fuel, typically called marine diesel or marine gasoil).

Note – The four grades above include product examples that are not subject to the PPD Fee. These include naphtha-type and kerosene-type jet fuel, and a petroleum product destined for use in chemical manufacturing or for use in the feedstock of that manufacturing.

Two fuel oil grades, Numbers 5 and 6, are subject to sales and use tax if the invoice clearly identifies the purchased product as bunker fuel B or C. See Tax Code Section 151.009 and Section 151.308 (a)(2).

• Number 5, bunker fuel B
  • Product examples – Bunker B fuel oil
  • Description – Bunker fuel oil has a higher British Thermal unit (BTU) content and requires preheating to between 170 and 220 degrees Fahrenheit (between 77 and 104 degrees Celsius). This type of fuel oil is not capable of being used in a motor vehicle on the public highway and, therefore, does not meet our definition of a motor fuel. See definition of "motor fuel" in Tax Code Section 162.001 (42).
• Number 6, bunker fuel C
  • Product Examples – Heavy fuel oil or residual fuel oil, bunker C fuel oil (i.e., vessel bunkering), furnace or heating fuel oil, no. 6 diesel fuel and no. 6 fuel oil, and are used in producing electricity, in various industries and vessel fuel bunkering.
  • Description – Bunker fuel oil requires preheating to between 220 and 260 degrees Fahrenheit (between 104 and 127 degrees Celsius). No. 6 fuel oil is what remains once gasoline and fuel oil distillate are extracted from crude oil through distillation. This type of fuel oil is not capable of being used in a motor vehicle on the public highway and, therefore, does not meet our definition of a motor fuel. See definition of "motor fuel" in Tax Code Section 162.001 (42).