Fuel distributors pay excise tax. Retailers collect and remit sales tax. But what happens when a company has to include excise and sales tax on a single invoice? Suddenly an already-challenging equation becomes a profoundly complicated process.

Fuel tax analysts accustomed to calculating excise taxes based on volume must also determine sales tax percentages based on nal purchase prices. Even more confusing: In many jurisdictions, those sales taxes must be calculated after excise tax has been determined and added to the invoice—a process often referred to as ‘tax on tax’ or ‘gross receipts tax.’ This puts an extra burden on the tax calculation process since excise and sales taxes can’t be calculated independently.

And if alternative fuels like ethanol or biodiesel are involved, additional determinations must be made. After identifying where the fuel is in the supply chain for excise tax calculation purposes, tax analysts may need to assess how it will be used by the customer to determine sales tax in some states.

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