South Dakota bill streamlines ethanol tax payments

By Erin Voegele | March 05, 2009
Web exclusive posted March 12, 2009, at 11:56 a.m. CST

The South Dakota House of Representatives recently passed legislation that aims to streamline the way ethanol and ethanol-blended fuels are taxed within the state. The House voted to pass Senate Bill 21, by a vote of 66-2. The South Dakota Senate already has passed the legislation.

In South Dakota standard gasoline is currently taxed at a rate of $0.22 per gallon. Ethanol-blended fuels, defined as a fuel containing between 10 and 75 percent ethanol, are taxed at $0.20 per gallon. E85, defined as a fuel containing between 75 and 85 percent ethanol, is taxed at $0.10 per gallon.

Under the current system, applicable taxes may need to be collected at both the wholesale and retail levels, said David Wiest, deputy secretary of the South Dakota Department of Revenue and Regulation. In some instances standard gasoline and ethanol may be splash blended at the terminal. In other instances, the fuels could be blended at the retail station through the use of blender pumps. "When blending occurs at the filling station level, those blenders have to file a blender return with the Department of Revenue, indicating what they've done in the blending situation to make sure that the appropriate amount of tax is captured at that point," Wiest said.

SB 21 would streamline the process by taxing gasoline and denatured ethanol on the wholesale level. If the legislation is signed into law by South Dakota Gov. Mike Rounds, the tax rate for standard gasoline would remain at $0.22 per gallon. However, denatured ethanol would be taxed at $0.08 per gallon. Essentially, the legislation slides the point of tax collection back to the wholesale level, Wiest said. The legislation ultimately simplifies the taxation procedure for fuel stations selling midlevel ethanol blends through the use of blender pumps by ensuring all taxes would be paid on the wholesale level.