4.24.15 Excise Fuel Compliance Inspection, Sampling, and Shipping

Manual Transmittal

July 11, 2017

Purpose

(1) Updated IRM 4.24.15, Excise Tax, Excise Fuel Compliance Inspection, Sampling, and Shipping.

Background

The October 16, 2014 IRM 4.24.15 is updated to reflect the changes listed in the table below. This section contains procedural guidance relating to inspection, fuel sampling, and shipping fuel samples.

Material Changes

(1) Updated 4.24.15 material changes are listed in the table below:

IRM Description
4.24.15 Excise Tax, Excise Fuel Compliance Inspection, Sampling, and Shipping Cosmetic changes made throughout this IRM section.
4.24.15.1 through 4.24.15.1.6 New section and subsections added to include information involving internal controls as required by IRM 1.11.2, Internal Management Documents System, Internal Revenue Manual (IRM) Process. New section titles include Program Scope and Objectives, Background, Authority, Responsibilities, Program Management and Review, Program Controls and Definitions/Acronyms.
4.24.15.2 through 4.24.15.17 Entire IRM was re-numbered due to addition of the new internal control sections.
4.24.15.2 (3) Overview of Fuel Tax Inspection Example provided for when to submit a referral, if an examination is warranted. Note added indicating that a referral is submitted for all proposed dyed fuel penalties.
4.24.15.2.1(2) Authority to Inspect Statement added regarding employees requesting and receiving permission to inspect, prior to each inspection.
4.24.15.2.1(4) Authority to Inspect Note added regarding pursuing a writ of entry, if warranted.
4.24.15.2.1.3 (1) Other Inspections Where Consent is Sought New content added to better define other inspections.
4.24.15.2.1.4 Obtaining a Writ of Entry When preparing affidavits, this section now directs readers to a specific format to follow (e.g. Form 14742, Writ of Entry Revenue Officer Declaration, and Form 10404, Consent to Enter Private Premises).
4.24.15.3 Terminal Inspections Rearranged content for better flow. Note previously located in paragraph (3) is now paragraph (2). New content added in paragraph (4) pertaining to the appropriate Taxpayer Identification Number (TIN) number, Activity Code (AC) and Standard Audit Index Number (SAIN) to use in the Issue Management System (IMS).
4.24.15.3.1 Terminal Inspection Procedures Removed paragraph (1), as it is no longer applies. New content added regarding obtaining information pertaining to the security measures in place to deter tampering with the mechanical dye injection system. Note added to paragraphs (10) and (11) referring readers to IRM 4.24.15.20.1 for labeling procedures and procedures for addressing under-dyed terminal samples. Note added to paragraph (16) to better define what constitutes a Facility Control Number (FCN).
4.24.15.3.3 Procedures for Gaining Access to Railroad Terminal Inspections Section title change. Gaining access added to previous title. New content in paragraph (2) directing employees to terminal inspection procedures. New content in paragraph (4) (b) directing employees to group manager for railroad contact information.
4.24.15.4 Wholesaler Inspections Rearranged content for better flow. Note previously located in paragraph (3) is now new paragraph (2). New content in paragraph (3)(b) regarding ensuring diesel and kerosene intended for highway use does not have indications of dye present.
4.24.15.4.1 Wholesaler Inspection Procedures Note added to paragraph (1) stating that wholesalers are not permitted to make a copy of the employee’s credentials. New content in paragraph (3) stating that the employee will secure a field concentration sample if the fuel indicates that the dye may have been altered or is otherwise suspicious. New content in paragraph (12) requiring the employee to document the taxpayer identification number, taxpayer name and taxpayer address.
4.24.15.5 Retailer Inspections Rearranged content for better flow. Note previously located in paragraph (3) is now new paragraph (2).
4.24.15.5.1 Retailer Inspection Procedures Noted added to paragraph (1) stating that retailers are not permitted to make a copy of the employee’s credentials. New content added to paragraph (4) clarifying when dyed fuel samples will be forwarded to the lab for testing. New content in paragraph (10) requiring the employee to document the taxpayer identification number, taxpayer name and taxpayer address.
4.24.15.6 Designated Inspection Site Inspections Deleted paragraph (5) pertaining to inputting the on-road count into the Issue Management System (IMS). This content was moved to the designated inspection site procedures sections.
4.24.15.6.1 Designated Inspection Site Inspection Procedures An example was provided in paragraph (6) b) to clarify fuel not matching the Bill of Lading (BOL). New paragraph (13) pertaining to inputting the on-road count into IMS.
4.24.15.7.1 End-user Inspection Procedures Noted added to paragraph (1) stating that end-users are not permitted to make a copy of the employee’s credentials. New content in paragraph (13) requiring the employee to document the taxpayer identification number, taxpayer name and taxpayer address.
4.24.15.8 Blitz Inspection Procedures Removed paragraph (1)(b) that stated that blitz projects are a part of the fiscal year work plan. Paragraph (1)(a) edited to indicate that a blitz project can be a one to two week project.
4.24.15.8.1 Blitz Inspection Group Manager Responsibilities New content in paragraph (5) pertaining to the group manager providing direction for sample collection activities.
4.24.15.8.4 Completing Blitz Data Sheets New note in paragraph (1) pertaining to marking the product according to what the fuel is supposed to be.
4.24.15.8.5 Packing and Shipping Blitz Samples Paragraph (5) edited to provide direction on shipping samples if the blitz activity is more than one week.
4.24.15.9 Farm Inspections Usage sample type was clarified in paragraph (4).
4.24.15.11(6) Enforcement Activities Conducted by FCAs New paragraph (6) added in this section. This new content incorporates Interim Guidance SBSE 04-0616-0014, Interim Guidance for Reporting Time and Fuel Inspection Activity Related to an Examination or Form 637 Registration Review.
4.24.15.12 Pipette Screening Method The phrase -or if the fuel is a suspicious color, was added to paragraph (1)( i) and (k).
4.24.15.13 Sampling Methods New content added to paragraph (2)(m) and paragraph (3)(h) to emphasize how to properly seal bottle with cap to prevent breakage. New content added to paragraph (3), to allow for nozzle screening. New content in paragraph (3)(f) to explain the nozzle screening process. New note in paragraph (5) directing the employee to secure eight (8) one ounce samples, if the product is gasoline.
4.24.15.14 Investigative Samples New content in paragraph (3), (4) and (5). Content identifies additional samples that are considered investigative samples (e.g. comparison samples, biodiesel/renewable samples and 637 registration samples).
4.24.15.14.1 Requests for Investigative Samples New paragraph (3) to include renewable or registration samples.
4.24.15.14.2 Investigative Sample Procedures New content in paragraph (3) pertaining to securing eight (8) one ounce samples, if the product is gasoline. New content in paragraph (4)(g) that directs employees to enter the type of registration on Form 14403. Note added to paragraph (4)(k) stating that analyzing renewable or problematic investigative samples may require longer than five (5) business days.
4.24.15.19.3 Shipping of Investigative Samples Removed requirement in paragraph (3), to mark shipping boxes with excepted quantity.
4.24.15.15 Sample Bottle Labeling Procedures Note added to paragraph (8) stating that the employee should either not ship or re-bottle any sample received from state agencies if the sample bottle contains more than 30 ml.
4.24.15.15.1 Form 9667 Sample Bottle Sealing and Identification Label Required Information Paragraph (4) edited for clarity. New content in paragraph (4)(c) stating that biodiesel may be checked in addition to investigative, if applicable. Note added to paragraph (5) (a) stating that heating oil, fuel oil, locomotive or marine fuel should be designated in the other field, if applicable. New content added to paragraph (5)(e) stating to indicate the octane rating and percentage of ethanol, if a gasoline sample.
4.24.15.15.2 Sample Labeling Matrix Note added to paragraph (1) stating that the group manager may contact the lab if there are questions regarding sample labeling or reports. Labeling matrix edited to capture all sample types, with an new column to indicate what type of test to mark on Form 9667.
4.24.15.17 Packing and Shipping Samples New content added in paragraph (6) directing employees to sampling methods and sample bottle labeling procedures.
4.24.15.17.1 Packing Instructions New content in paragraph (3)(c) to include transmix samples, when directed by management, or as part of an examination. Added note in paragraph (4)(e) to clarify that only one flat cardboard tier divider is needed per shipping box and to specify where it is placed. Added note in paragraph (4)(f) to state that the bottom level sample tier, the tier divider and the top level sample tier must all be in the shipping box regardless of the number of samples in the box. New content in paragraph (4)(h) to indicate procedures to follow, if the bottle is leaking.
4.24.15.17.2 Shipping Instructions Paragraph (4) was converted to Official Use Only (OUO) content. New content in paragraph (6)(d) directing employees to packing and shipping blitz samples IRM section, if applicable.

Effect on Other Documents

This IRM section incorporates Interim Guidance Memorandum SBSE 04-0616-0014, Interim Guidance for Reporting Time and Fuel Inspection Activity related to an Examination or Form 637 Registration Review, dated 6-16-2016.

Audience

This section is primarily to provide direction to Supervisory Fuel Compliance Officers, Fuel Group Managers, Fuel Compliance Officers (FCO) and Fuel Compliance Agents (FCA). Information in this section may also support coordination with SBSE excise groups.

Effective Date

(10-01-2017)

Alfredo Valdespino
Director, Examination - Specialty Policy
Small Business/Self Employed

Program Scope and Objectives

  1. The Fuel Compliance Program enforces the laws and regulations pertaining to the following:

    1. Proper sale of untaxed, dyed fuel

    2. Sulfur content of taxed, undyed diesel fuel

    3. Requirement to dye fuel by means of a mechanical dye injection system

    4. Reporting requirements for the bulk distribution of fuel through pipeline or barge

    5. Reporting requirements for the distribution of fuel below the terminal rack

  2. During the course of an inspection, the employee conducts interviews, tours the facilities, reviews records, and either obtains or observes the obtainment of fuel from places such as fuel storage tanks and the propulsion tanks of highway vehicles. The employee ships the fuel samples to the Pacific Northwest National Laboratory (PNNL) which will test the samples under an interagency agreement with the IRS.

  3. As a matter of policy, as discussed below, the Service obtains permission to enter premises and absent permission will seek a writ of entry.

  4. Purpose - It is essential for senior-level officials, managers, and employees to understand inspection procedures, based on the type of inspection being conducted. This IRM contains procedures for all inspection types identified in IRM 4.24.15.2, Overview of Fuel Tax Inspection. In addition, it is imperative for the safety of the employees that they follow proper sampling and shipping procedures, which is addressed in this IRM Section.

  5. Audience - The intended audience of this IRM includes the Chief, Excise Tax Examination, Fuel Territory Managers, Group Managers, Fuel Compliance Officers (FCOs) and Fuel Compliance Agents (FCAs).

  6. Policy owner – Director, Examination – Specialty Policy owns the policies contained herein.

  7. Program owner – Program Manager, Excise Fuel Tax Policy is responsible for the administration, procedures, and updates related to the fuel compliance program.

  8. Primary stakeholders - Other areas that are affected by these policies and procedures include Excise Case Selection (ECS), Joint Operations Center (JOC), Workload Selection and Delivery (WSD), Counsel and Disclosure.

Background

  1. The Omnibus Budget Reconciliation Act of 1993 became effective on January 1, 1994. The Federal excise tax imposed by IRC Section 4081 no longer applied to removals of diesel fuel that are indelibly dyed (or dyed and marked) in accordance with IRS regulations. The Fuel Compliance Program rolled out in June of 1994. It’s primary goal was to ensure that all dyed fuel leaving the terminal rack was dyed within the prescribed concentration levels, as well as ensuring that dyed fuel was not being utilized in diesel powered highway vehicles.

Authority

  1. Authority – IRC 4083(d) and Treas. Reg. § 48.4083-1(a) authorize officials (employees) of the Internal Revenue Service, upon presenting appropriate credentials and a written notice to the owner, operator, or agent in charge, to enter any place and to conduct inspections in accordance with paragraphs (a) through (c) of Treas. Reg. § 48.4083-1. IRS officials are authorized to inspect, examine, and/or search:

    • Equipment used or capable of being used for the production, storage, or transportation of fuel, fuel dyes, or fuel markers

    • Equipment used to determine the amount or composition of taxable fuel

    • Equipment used for the dyeing or marking of fuel

    • Containers used or capable of being used for the production, storage or transportation of fuel, fuel dyes, or fuel markers

    • Books and records kept to determine excise tax liability under IRC Section 4081

    • Propulsion tanks of vehicles and trains

    • Fuel cargo storage tanks of vehicles, trains and marine vessels

  2. Employees are authorized to take and remove samples to determine the composition of the fuel.

  3. Employees are authorized to take and remove samples to determine the composition of the fuel.

Responsibilities

  1. Director, Examination - Specialty Policy is responsible for the procedures and policies in this IRM.

  2. Program Manager, Excise Fuel Tax Policy is responsible for ensuring that the procedures are accurate and updated regularly, as needed.

  3. Chief, Excise Tax Examination is responsible for ensuring the procedures within this IRM are adhered to.

  4. Fuel Territory Manager(s) are responsible for ensuring that the group managers are aware and adhere to the procedures in this IRM.

  5. Excise group managers are responsible for ensuring their employees have current copies of this IRM and are adhering to the procedures in this IRM.

  6. The FCOs and FCAs are responsible for following all guidance in this IRM, as it pertains to inspection procedures, sampling methods and shipping procedures. The term employees is used throughout this section and refers to both the FCO and FCA positions.

Program Management and Review

  1. Program Goals - The goal of this IRM is to provide guidance that will enable the employee to properly conduct inspections, properly screen and sample petroleum products, without harm, and to box and ship petroleum products. Following this guidance will not only ensure the employee’s safety, but will also support the Government’s position to propose a penalty in a court of law.

  2. Program Reports - The effectiveness of employees following the procedures outlined in this IRM is evaluated with the use of the following reports:

    • Sample error reports

    • Issue Management System (IMS) reports

    • Year-to-Date (YTD) monitoring reports

  3. Program Effectiveness - The effectiveness of this program is not measured by revenues assessed or collected, but by revenues protected. IRS employees being vigilant and visible in all geographic regions, promotes voluntary taxpayer compliance.

  4. Annual Review - The following reviews are conducted annually:

    • Program Manager, Excise Fuel Tax Policy or designee conducts program reviews

    • Chief, Excise Examination conducts territory operational reviews

    • Territory Managers conduct group operational reviews.

Program Controls

  1. All information management systems that are utilized have safeguard measures in place which address all key components of Information Technology (IT) security to restrict access to sensitive data.

Definitions/Acronyms

  1. The following table contains the definitions of the terms utilized throughout this IRM section.

    Terminology Defined as:
    Blitz Blitz is a streamlined inspection process which allows a high volume of samples to be collected within a specified geographic area in a relatively short period of time. The following instructions establish a standard method for working blitz compliance activities.
    Designated Inspection Site Designated inspection sites are any state highway inspection station, weigh station, agricultural inspection station, mobile station, construction site, park, rest area, any point on a public highway or any other location as designated by the Commissioner to be used as a fuel inspection site.
    Diesel Powered Highway Vehicle A highway vehicle, as defined in Treas. Reg. 48.4061(a)-1(d), is a vehicle propelled by a diesel powered engine.
    End-User A person that purchases diesel fuel in either bulk or non-bulk quantities for use, not resale.
    Pervasively Regulated Industry Pervasively regulated industry sites include refineries, terminals, wholesalers, retailers, certain end-users, and any other location where fuel is or may be produced or stored.
    Retailer Sells product to end-users. May sell motor fuel and/or heating fuel. A typical retailer has bulk storage.
    Terminal A taxable fuel storage and distribution facility supplied by pipeline or vessel and from which taxable fuel may be removed at a rack.
    Wholesaler Fuel dealer who sells to retailers and end-users. Wholesale distributors may or may not have bulk storage. A wholesale distributor may merely buy fuel from a terminal and transport it to the retailer. A wholesaler distributor may also engage in retailing.
  2. The following table contains the acronyms utilized throughout this IRM section.

    Word Acronym
    Bill of Lading BOL
    Code of Federal Regulations CFR
    Employer Identification Number EIN
    Environmental Protection Agency EPA
    Excise Case Selection ECS
    Excise Forensics Laboratory EFL
    Facility Control Number FCN
    Fuel Compliance Agent FCA
    Fuel Compliance Officer FCO
    International Air Transportation Association IATA
    Issue Management System IMS
    Memorandum of Understanding MOU
    Pacific Northwest National Laboratory PNNL
    Post of Duty POD
    Standard Audit Index Number SAIN
    Taxpayer Identification Number TIN
    Terminal Control Number TCN
    Vehicle Identification Number VIN
    Workload Selection & Delivery WSD

Overview of Fuel Tax Inspection

  1. There are a number of inspection types including, but not limited to, the following:

    1. Terminals

    2. Wholesalers

    3. Retailers

    4. Designated inspection sites

    5. End users

    6. Blitzes

    7. Special projects

  2. Specific procedures for each type of inspection are listed below.

  3. If during the course of an inspection an FCA or FCO determines an examination of the taxpayer's return is warranted, the field employee will complete a Form 5346, Examination Information Report, and forward it to the group manager. The group manager will approve and forward Form 5346 to the Joint Operations Center (JOC) for expedited lead development. For example, an FCO is inspecting a propane dealer and the company has propane powered delivery trucks and they are not filing a Form 720 to pay the excise tax on the propane. In this situation, a Form 5346 would be warranted.

    Note:

    Employees must complete a Form 5346 for a potential examination consideration on all dyed fuel penalty proposals.

  4. All inspections must be input into IMS within 4 business days of the inspection. See IRM 4.24.13.5, Issue Management System (IMS), for IMS guidance.

Authority to Inspect

  1. IRC § 4083(d) and Treas. Reg. § 48.4083-1 provide authority to make a warrantless entry onto the commercial premises of wholesalers, distributors, and retailers of taxable fuel to inspect their equipment and sample the fuel. See IRM 4.24.15.1.2 for authority.

  2. The employees must identify themselves by presenting credentials and providing Notice 916 (EN/SP), Taxable Fuel Inspection Notice, to each taxpayer prior to an inspection. The Notice 916 explains the IRS authority to inspect.

  3. The employee must always request and receive permission from the taxpayer prior to each inspection.

  4. Publication 1, Your Rights as a Taxpayer, must be provided to every taxpayer, except at designated inspection sites unless a fuel sample is secured.

  5. This authority applies to three broad categories:

    1. Designated inspection site inspections, see IRM 4.24.15.2.1.1

    2. Pervasively regulated industry inspections, where fuel is stored or may be stored, see IRM 4.24.15.2.1.2, and

    3. Other inspections where consent is granted by the taxpayer, see IRM 4.24.15.2.1.3

      Note:

      If permission is not granted, the employee will need to obtain a writ of entry, after discussing with the group manager. See IRM 4.24.15.2.1.4, Obtaining a Writ of Entry.

Designated Inspection Sites
  1. Designated inspection sites are any state highway inspection station, weigh station, agricultural inspection station, mobile station, construction site, park, rest area, any point on a public highway or any other location as designated by the Commissioner to be used as a fuel inspection site.

  2. A designated inspection site is identified as a fuel inspection site by displaying a free standing and/or magnetized vehicle sign displaying "IRS FUEL INSPECTION SITE" .

  3. A designated inspection site is typically controlled by one agency and has vehicles from multiple entities entering and departing.

Pervasively Regulated Industry Inspections
  1. Pervasively regulated industry sites include refineries, terminals, wholesalers, retailers, end-users, and any other location where taxable fuel is produced or is stored. The presence of fuel production or storage authorizes employees to conduct inspections. Fuel in the propulsion tank of a vehicle is not considered "fuel storage" for purposes of IRC Section 4083(d).

  2. The employee will first seek consent from the owner of the property or an employee empowered to grant consent to conduct the inspection.

  3. If permission is granted, the employee may proceed with the inspection.

  4. If permission to inspect is refused or revoked:

    1. Immediately stop the inspection

    2. Advise the taxpayer that a refusal penalty will be asserted and that a writ of entry may be obtained, and

    3. If the taxpayer still refuses, assert the refusal penalty under IRC Section 6717 and consult with the group manager about obtaining a writ of entry. See IRM 4.24.15.2.1.4, Obtaining a Writ of Entry.

  5. The IRS may impose more than one penalty under IRC Section 6717 on a taxpayer who refuses to admit entry or refuses to permit another action authorized by IRC Section 4083(d)(1). The number of violations is determined by the number of actions allowable under IRC Section 4083(d)(1), that the taxpayer refused to allow the employee to perform. The facts and circumstances of each situation must be considered.

Other Inspections Where Consent is Sought
  1. This category pertains to end-user sites where fuel is neither produced nor stored and consent has been sought. Other inspections include any business that is not a pervasively regulated business, as defined in IRM 4.24.15.2.1.2, Pervasively Regulated Industry Inspections.

  2. The employee will first seek consent from the owner of the property or an employee empowered to grant consent to conduct the inspection.

  3. If permission is granted, the employee may proceed with the inspection.

  4. If permission to inspect is refused or revoked:

    1. Immediately stop the inspection

    2. Advise the taxpayer that a writ of entry may be obtained, and

    3. If the taxpayer still refuses, discuss obtaining a writ of entry with the group manager. See IRM 4.24.15.2.1.4, Obtaining a Writ of Entry.

  5. The refusal penalty does not apply at these sites.

Obtaining a Writ of Entry
  1. The employee must discuss with the group manager whether to obtain a writ of entry to complete an inspection any time consent is denied or revoked, regardless of whether a refusal penalty was applied.

  2. The employee shall prepare a request for a writ of entry and an affidavit that details why the government needs to inspect and, if applicable, why a consent to enter and inspect was refused.

  3. The affidavit must be fully detailed and factual. The format can be extrapolated from Form 14742, Writ of Entry Revenue Officer Declaration. The affidavit should include statements that:

    1. Identify the Service's employee with the duty and authority to conduct inspections under IRC Section 4083(d).

    2. Identify the location and the business at which the taxable fuel to be inspected is produced or stored (or may be stored) or the records pertaining to the fuel are kept.

    3. Describe the purposes of the inspection.

    4. Describe the procedures the Service's employee followed to carry out the inspection.

    5. Describe fully the circumstances under which entry was denied (when, where, why, and by whom).

  4. The request for writ of entry and the related affidavit must be submitted to the local IRS Counsel for review.

  5. Local IRS Counsel will make any necessary changes and prepare a package for presentation to the Assistant U.S. Attorney (AUSA) having jurisdiction.

  6. If the package is approved, the U.S. Magistrate or District Court Judge will issue a writ of entry specific to the circumstances presented in the application package.

  7. The writ of entry is served on the taxpayer by the employee (FCO/FCA).

  8. If the taxpayer still refuses to allow the inspection under the writ of entry, it is a refusal of a court order which may lead to a contempt of court citation and enforcement by the U.S. Marshall Service.

  9. See IRM 5.10.3.6, Seizure and Sale, Conducting the Seizure, Writ Procedures, for Writ of Entry procedures and Form 14742 and Form 10404, Consent to Enter Private Premises, for examples of a writ of entry to effect a levy and the associated affidavit.

Terminal Inspections

  1. Terminal inspections are conducted per the authority granted in IRC Section 4083(d).

  2. The facts and circumstances discovered while conducting the inspection, as well as management instruction, will dictate what actions are taken during the inspection.

  3. Terminal inspections are conducted to:

    1. Verify the terminal is still operating and has not changed ownership.

    2. Determine if taxable products are stored at the facility.

    3. Verify that dyed fuel crossing the rack is dyed to the specifications in Treas. Reg. Section 48.4082-1(b).

    4. Verify the number and locations of the mechanical dye injection systems that are used to dye the fuel crossing the rack.

    5. Determine if the mechanical dye injection system has been tampered with and if the security requirements have been met.

    6. Verify that required records are maintained on site for one year, see Treas. Reg. Section 48.4101-1(h)(3).

    7. Ensure that the appropriate dyed fuel notice "DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE" , is on the bill of lading (BOL), see Treas. Reg. Section 48.4101-1(h)(3)(ii).

    8. Provide samples for certain Blitz projects/activities.

    9. Verify that the sulfur content for highway fuel is within prescribed ranges.

      Note:

      Samples should be obtained for sulfur testing only if information indicates the fuel may exceed the allowable sulfur level. See IRM 4.24.15.10(4) for more information. See the table contained in IRM 4.24.15.10(8) (below) for situations when employees are required to secure a sulfur sample.

    10. Educate taxpayers concerning fuel tax laws.

Terminal Inspection Procedures

  1. The procedures to be followed at each terminal facility will differ depending on:

    1. The terminal's safety procedures

    2. The products stored and sold

    3. The fuel dyeing method

  2. The employee must present credentials and provide the terminal operator or other responsible party with a Notice 916 (EN/SP) and Publication 1 prior to conducting the inspection and explain what fuel samples are needed.

    Note:

    The terminal is not permitted to make a copy of the employee’s credentials.

  3. The employee should tour the facility. The tour should include, but not be limited to, tracing the line from the dye tank to the dye injection point(s). The employee should look for security measures in place to deter and detect tampering with the mechanical dye injection system and indications the security measures were breached. Specific security measures are not required; therefore, the lack of particular security efforts will not result in an IRC Section 6715A(2) penalty.

  4. The employee should obtain information regarding the operation of the terminal including, but not limited to, the terminal's:

    1. Emergency plan

    2. Hours of operation

    3. Layout including location of tanks and racks

    4. Modes of fuel delivery and disbursement

    5. Types of fuel stored and/or sold at this location

    6. Dyeing method

    7. Location and number of dye injectors

    8. Position at the loading rack (loading arm) that each dye injector is directly coupled with

    9. Fuel supplier

    10. Types of records maintained at the terminal

    11. Security and anti-tamper measures in place to deter and detect tampering with the mechanical dye injection system

  5. Employees must inspect the shipping documents to:

    1. Ensure BOLs contain the required notice, see Treas. Reg. Section 48-4101-1(h)(3)(ii)(A).

    2. Ensure that the 12 month record retention requirements are met.

    3. Identify unusual sales of dyed fuel, which may indicate improper use of dyed fuel downstream.

    Note:

    The BOLs may be paper documents or maintained electronically by the terminal.

  6. To ensure the dye concentration requirement under Treas. Reg. Section 48.4082-1(b) is met, employee will obtain a "concentration" sample of dyed fuel from a transport compartment.

    Note:

    See IRM 4.24.15.15.1 for labeling instructions if a "concentration" sample is obtained.

  7. If the terminal has more than one (1) dye injector at the loading rack, the employee should attempt to secure "concentration" samples from each loading arm that has a separate dye injector.

  8. Transport compartment "concentration" samples will be secured utilizing the following procedures:

    1. Present credentials, and issue a Notice 916 (EN/SP), and a Publication 1

    2. Explain the purpose and the method of securing a sample

    3. If necessary, ask the driver to relocate the vehicle out of the normal traffic flow before obtaining the sample

    4. Record the name of the trucking company and license number

    5. Ask the driver which compartments contain dyed fuel

    6. Ask the driver about prior cargo

    7. Wait at least 15 minutes for fuel to settle and dye to mix

    8. Use the sampling pump method described in IRM 4.24.15.13, Sampling Methods, to obtain the sample

    9. Secure a copy of the BOL for the load from which each sample is taken

    10. If more than one dye injector exists, indicate in the case file which dye injectors were used to dye the fuel for each sample secured

    11. If any of the samples appear to be under-dyed, secure additional samples from subsequent transports that used the same dye injector

      Note:

      Follow third-party contact procedures, if warranted.

  9. Some terminal owners require terminal employees to draw the samples. In that instance, the employee must observe the sampling process to ensure a sample is properly obtained.

  10. If after two hours a "concentration" sample can not be obtained and the other inspection duties are complete, the employee will identify the most recent recipients of dyed fuel and travel to those locations to obtain "field concentration" samples. In some instances, the employee may not be able to readily identify the destination of the dyed fuel. If this is the situation, the employee should contact the group manager for further direction. If the employee follows the fuel and secures a sample and the lab results indicate the fuel is not dyed to the required concentration, the employee will determine who is responsible for the under-dyed fuel. Based on the terminal's internal procedures and reporting, the employee may be able to determine that the proper amount of dye was injected into the load in question. In addition, the employee may contact the company who picked up the fuel to determine the destination. If this occurs, follow third-party contact procedures.

    Note:

    The employee should contact the group manager if the most recent recipients of fuel are not close to the terminal.

    Note:

    See IRM 4.24.15.15.1 for labeling information if a "field concentration" sample is taken in lieu of a terminal "concentration" sample; include Terminal Control Number (TCN) and city and state of sampling on sample label.

  11. At a minimum, the case history must document the following:

    1. Name and position within the company of individual that authorized the inspection

    2. Delivery of Publication 1 and Notice 916 (EN/SP)

    3. Any change in ownership of the terminal

    4. Fuel products sold and/or stored at the facility

    5. Comments on the number of dye injectors and which loading arms are associated with each dye injector

    6. Comments regarding fuel storage

    7. Method of fuel receipt and delivery (pipeline, barge or transport)

    8. Comments on the distribution of transmix

    9. Comments on the review of records and sales of dyed products

    10. Review of BOLs for notice requirement

    11. Statement that required records are maintained on site for one year

    12. Comments about the tour and the mechanical dye injection system and security measures the facility takes to secure the injection system

    13. Comments on necessary corrective actions discussed with taxpayer

    14. Results of the screening of company vehicles (if applicable) and fueling practices

    15. Samples taken and sampling procedures

      Note:

      If a "concentration" sample was not obtained at the terminal, explain why and what steps were taken to follow the fuel to obtain a "field concentration" sample.

    16. Statement as to whether samples met the dye concentration minimum requirement

      Note:

      See IRM 4.24.15.3.2, for procedures for addressing an under-dyed fuel sample obtained from a terminal.

    17. Date the sample results were received and the closing letter was issued

  12. If the dye results show the fuel was under-dyed, the FCO will prepare Form 5346, and forward the completed form to the group manager. The group manager will approve Form 5346 and forward it to the JOC for expedite lead development.

  13. If the dye results show the fuel was under-dyed or the FCA determines an examination of the taxpayer's return is warranted, the FCA will complete Form 5346, and forward the completed form to the group manager. The group manager will approve Form 5346 and forward it to the JOC for expedite lead development.

  14. The employee must timely record the inspection in IMS.

    1. Use a substitute Taxpayer Identification Number (TIN) to identify the specific facility. The substitute TIN format is 00-0 plus the 6 digits from the specific facility's Terminal Control Number (TCN). Example: The TCN for ABC Terminal is T-61-KY-1234, therefore, the substitute TIN is 000611234.

    2. Use Activity Code (AC) - 515

    3. Use Standard Audit Index Number (SAIN) - EX515

  15. Follow the procedures in IRM 4.24.16, Excise Fuel Compliance Report Writing, Case Processing and Appeals Procedures, to close the inspection.

  16. The employee should inform the Facility Control Number (FCN) Coordinator if the terminal or refinery (some terminals may also be refineries) has closed, no longer sells taxable products, has an address change, or has changed ownership. See IRM 4.24.17, Excise Summary Terminal Activity Reporting System (ExSTARS) Compliance Examination Procedures, for FCN Coordinator notification procedures.

    Note:

    A FCN designates a storage location within the motor fuel, or renewable fuel production or the bulk transfer / terminal system. Facilities include refineries with assigned Refinery Control Numbers (RCNs) and terminals with assigned TCNs.

  17. Refer to the applicable IRM sections below if the terminal also engages in business activities that would classify it as a fuel wholesaler, retailer, and/or an end-user.

Procedures for Addressing an Under-Dyed Fuel Sample Obtained From a Terminal

  1. When test results from the Excise Forensics Laboratory (EFL) indicate the dye concentration did not meet the requirements (possible infraction), the total number of gallons involved would only include those gallons indicated on the Bill of Lading (BOL). If more than one sample from the same injector has been secured at different time intervals (i.e. follow-up inspection, subsequent transports), the total gallons involved would be all gallons dispensed from the identified dye injector/loading arm from the time the first under dyed sample was secured through the period of time that the second under dyed sample was secured.

  2. The employee will follow the procedures below within 5 business days:

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. Inform the taxpayer of the sample results and provide a copy of Letter 4227, Terminal Samples Below Concentration, to the terminal operator informing them that the fuel is taxable and instruct the terminal to include the fuel on the Form 720, Quarterly Federal Excise Return and Form 720-TO, Terminal Operator Report. The inspection will remain open on IMS until the fuel is dyed to the required concentration.

    2. Obtain from the terminal the position holder's name, Employee Identification Number (EIN) and Form 637 registration number.

    3. Conduct a follow-up inspection at the terminal.

    4. Collect a second sample of dyed fuel from the same source where the original under-dyed sample was taken, e.g., loading rack arm, etc.

    5. Mark the samples distinctively so EFL can identify them for priority handling. The labels should be marked as usual for terminal "concentration" samples except enter the words "SECOND" or "THIRD" (as appropriate) in the blank to the right of "Other" on the sample bottle label.

      Note:

      Use words and not numerals to reduce confusion over fuel types, etc.

    6. After entering the TCN on the label, enter the original sample number from the under-dyed sample to the right of the TCN.

    7. The FCO will generate a referral and include a copy of the BOL or the BOL number with the referral. The BOL information is required for the revenue agent to verify that the under-dyed load was included on the Form 720-TO and to determine if it was included on a Form 720.

    8. The FCA will contact the group manager to discuss pursuing the tax matter.

  3. If the lab result from the follow-up sample indicates the concentration of dye in the fuel is still not in compliance, employee will repeat the procedures outlined above. The second referral should reference the previous referral to ensure the revenue agent is aware of the extent of the issue.

Procedures for Gaining Access to Railroad Terminal Inspections

  1. Railroad terminals have an exception to Excise Summary Terminal Activity Reporting System (ExSTARS) reporting requirements which permits them to make daily summary disbursement reports instead of reporting the individual disbursements. The employee must be aware of this exception when conducting an inspection or, for the FCA, an examination of the Form 720-TO. The meter tickets must contain the dyed fuel notice as required by Treas. Reg. Section 48.4101-1(h)(3).

  2. The purpose of an inspection of a railroad terminal is the same as for other types of terminals. The employee should follow the procedures outlined in IRM 4.24.15.3.1, Terminal Inspection Procedures.

  3. To address safety concerns and the unique nature of railroad terminals, specific procedures have been developed for railroad terminal inspections. The procedures apply only to fuel inspections, not to the examinations conducted by the FCA or excise revenue agents. Unless specifically contradicted in the procedures below, the procedures for inspections of railroad terminals are the same as for other terminals.

  4. To address the safety concerns while maintaining the IRS authority to conduct unannounced inspections, the following arrangement has been agreed to:

    1. The IRS will provide the railroad terminals a list of the employees authorized to conduct inspections. The list will include name, title and a unique identifying number.

    2. Each railroad company will provide contact names and telephone numbers for each terminal. If the employee does not have the contact information, the employee should ask the group manager for assistance in securing the needed contact information.

    3. Upon arrival at the terminal but prior to entering the property, the employee will call one of the contact persons identified by the railroad company. The terminal employee will provide instructions to the employee or an escort.

    4. The employee will provide the terminal with their full name and unique number. The terminal will validate the name and number with the information provided by the IRS.

      Note:

      The railroad terminal is not permitted to make a copy of the employee’s credentials.

    5. After the information is validated, the inspection will proceed.

  5. Typically, railroad terminals do not retain the records required in Treas. Reg. Section 48.4101-1(h)(3)(ii) at the terminal site. Also, the disbursement records do not detail the disbursements into each locomotive.

  6. To address the ability of the railroad terminal companies to comply with the record requirements, railroad terminals must provide the following:

    1. The summary reports covering the last twelve months. Summary reports detail each removal of fuel. The summary reports are prepared on a thirty day cycle. Therefore, records of the most recent disbursements (disbursed since the last summary report was filed) will not be available. For example, if an inspection was conducted in January, the summary report for December would not be available. The railroad terminal would be required to provide the summary reports through November.

    2. Meter tickets must contain the language required in the dyed fuel notice to specify the product is dyed in compliance with Treas. Reg. Section 48.4082-2. In addition the tickets should contain the name of the common carrier who removed the fuel, and the name of the entity which delivered the fuel into the supply tank of the train. If meter tickets for the last twelve months are not maintained at the terminal, the railroad company will provide the records by facsimile upon request by the employee.

Wholesaler Inspections

  1. Fuel wholesalers:

    1. Sell fuel to other wholesalers, retailers, and end-users.

    2. May have storage tanks or may pick up fuel for delivery at terminals or other wholesalers.

    3. May blend and sell biodiesel.

    4. May operate a retail fuel outlet at the location.

    5. May operate diesel powered trucks (thus are also end-users of diesel fuel).

  2. The facts and circumstances discovered while conducting the inspection, as well as management instruction, will dictate what actions are taken during the inspection.

  3. Wholesaler inspections are conducted to:

    1. Ensure the strength or composition of dye has not been altered.

    2. Ensure diesel and kerosene intended for highway use does not contain dye or show indications the fuel was dyed.

    3. Review the wholesaler's records of dyed fuel sales.

    4. Ensure dyed biodiesel blends at the wholesaler meet the requirements of Notice 2005-80 or the governing Treasury regulation.

      Note:

      Biodiesel samples are only secured when directed by management.

    5. Ensure diesel trucks operated by the wholesaler do not have dyed fuel in the propulsion tanks.

    6. Inspect retail pumps operated by the wholesaler for the notice requirement.

    7. Determine the sulfur concentration of diesel fuel intended for use in a diesel powered train or highway vehicle.

      Note:

      Samples should be obtained for sulfur testing only if information indicates the fuel may exceed the allowable sulfur level. See IRM 4.24.15.10(4) for more information. See the table contained in IRM 4.24.15.10(8) (below) for situations when employees are required to secure a sulfur sample.

    8. Determine if gasoline has been adulterated (upon direction by management or during special projects).

    9. Educate taxpayers concerning fuel tax laws.

Wholesaler Inspection Procedures

  1. The employee must present credentials and provide the wholesaler with Notice 916 (EN/SP) and Publication 1 prior to conducting the inspection.

    Note:

    The wholesaler is not permitted to make a copy of the employee’s credentials.

  2. The employee should tour the facility and obtain information from the wholesaler that will help understand the operation of the business, including but not limited to, the following information:

    1. Emergency plan, if any

    2. Hours of operation

    3. Location of tanks and racks

    4. Types of fuel stored and/or sold at the location

    5. Identity of the fuel supplier(s)

    6. Types of records kept of sales and deliveries

    7. Sales of dyed product to end users

    8. Presence of retail pumps

    9. Source of the fuel in the propulsion tanks of the wholesaler's trucks

    10. Verification of correct Form 637 registrations related to the known and observed business operations

  3. The employee will screen the fuel by obtaining a nozzle sample from each tank containing diesel or kerosene, whether or not it is dyed, using the sampling methods described in IRM 4.24.15.13, Sampling Methods. The employee will screen the fuel to:

    1. Determine whether the strength or composition of the dye has been altered. The employee will secure a field concentration sample if the records or appearance of the fuel indicates that the dye concentration of the fuel may have been altered or is otherwise suspicious.

    2. Determine whether fuel identified as highway fuel or intended for use as highway fuel contains dye.

    3. Determine if clear distillates meet the sulfur requirements (e.g. sulfur sample).

      Note:

      Samples should be obtained for sulfur testing only if information indicates the fuel may exceed the allowable sulfur level. See IRM 4.24.15.10(4) for more information. See the table contained in IRM 4.24.15.10(8) (below) for situations when employees are required to secure a sulfur sample.

    Note:

    If the employee cannot obtain a sample independently using approved sampling methods, they may observe an employee of the taxpayer obtaining a sample from the storage tank by valve or fuel thief.

  4. Gasoline samples are only secured as part of a project or at the instruction of management. If EFL results show adulterants, the FCO will generate a referral (Form 5346), and the FCA will discuss how to proceed with the group manager.

  5. The employee shall take photographs to support any penalty determinations.

  6. See IRM 4.24.15.15, Sample Bottle Labeling Procedures, for labeling instructions if a "field concentration" or sulfur sample is obtained.

  7. Refer to the applicable IRM section if the wholesaler also engages in business activity that would classify it as a retailer and/or an end-user.

  8. Refer to IRM 4.24.15.10.1, Documentation Procedures for Samples Obtained for Sulfur Content Testing, for procedures on documenting and developing samples taken for sulfur concentration testing.

  9. Refer to Notice 2005-80, or the governing Treasury regulation when published, for the requirements of a blender of biodiesel at a site other than a terminal.

  10. The wholesaler may be subject to penalties if any of the following is found:

    If the Lab Confirms Then
    The dye concentration of the sample has been altered - A violation under IRC Section 6715(a)(3) or 6715(a)(4) may be applicable. See IRM 20.1.11.6.1.3 for information regarding when a dye alteration penalty is applicable.
    The presence of dye in a sample from a retail pump not labeled with the required notice - A notice violation under IRC Section 6715(a)(1) is applicable.
    The presence of dye in a sample from the propulsion tank of the transport truck - A violation under IRC Section 6715(a)(2) is applicable.
    The sulfur content of diesel fuel transferred for resale, sold for resale, or held out for resale for use in a diesel-powered train or highway vehicle exceeds the allowable level established by the EPA regulations - An IRC Section 6720A penalty may be applicable. See IRM 4.24.15.10 for guidance.
  11. If a potential compliance issue exists, the employee is expected to "follow the fuel" back to its source or to its destination. Any inspections conducted as a result of following fuel for the purposes of IMS is considered a separate inspection.

  12. When proposing a penalty, at a minimum, the case history documentation must include:

    1. Taxpayer identification number (EIN/SSN)

    2. Taxpayer name

    3. Taxpayer address

    4. The name and position within the company of individual that authorized the inspection.

    5. A statement indicating delivery of Publication 1 and Notice 916 (EN/SP).

    6. Comments relating to fuel storage.

    7. The identity of fuel supplier(s).

    8. Comments on review of records and sales of dyed products to end users.

    9. Comments on presence of retail pumps and required notice.

    10. In situations where the required notice was not present, comments on required actions taken to ensure the notice decal was properly affixed prior to the completion of the inspection and appropriate educational/outreach procedures were followed by providing Notice 1420, Sales of Dyed Diesel and Kerosene. In these situations, a penalty is still appropriate.

    11. Photographs, if taken to support a penalty determination.

    12. The results of the screening of company vehicles and fueling practices.

    13. Comments on the number of samples taken and sampling procedures utilized.

    14. Comments on Form 637 registration verification.

    15. Comments on necessary corrective actions discussed with taxpayer.

    16. The sample results and date the lab results were received.

    17. The date the closing letter was issued.

  13. For inspections that result in no adverse action, the case history documentation must include (at a minimum):

    1. Taxpayer identification number (EIN/SSN)

    2. Taxpayer name

    3. Address of the taxpayer

    4. Name and position within the company of the individual that authorized the inspection

    5. Comments as to what actions were taken (i.e. sampling, screening, required notice) to determine that the taxpayer was in compliance, and the results of those actions

    6. Lab results (if applicable)

    7. The date the closing letter was issued

    8. Any additional information, as warranted

  14. Follow the procedures found in IRM 4.24.15.8, Blitz Inspection Procedures, related to a blitz inspection.

Retailer Inspections

  1. Fuel retailers:

    1. Obtain fuel from terminals or wholesalers

    2. Sell dyed and/or undyed fuel to end-users

    3. May operate diesel powered delivery trucks (these are also end-users of diesel fuel)

  2. The facts and circumstances discovered while conducting the inspection, as well as management instruction, will dictate what actions are taken during the inspection.

  3. Retailer inspections, including truck stops, are conducted to:

    1. Verify dyed fuel dispensers contain the required notice.

    2. Verify that the strength or composition of dyed fuel has not been altered. The employee will secure a field concentration sample if the records or appearance of the fuel indicates that the dye concentration of the fuel may have been altered or is otherwise suspicious.

    3. Verify fuel dispensed from undyed diesel and kerosene pumps do not show visible evidence of dye.

    4. Determine the concentration of sulfur in samples obtained from diesel fuel pumps.

      Note:

      Samples should be obtained for sulfur testing only if information indicates the fuel may exceed the allowable sulfur level. See IRM 4.24.15.10(4) for more information. See the table contained in IRM 4.24.15.10(8) (below) for situations when employees are required to secure a sulfur sample.

    5. Verify registered Form 637 Activity Letter UP pumps meet the blocked pump criteria. See IRM 4.24.13.13, Glossary, for a definition of a "blocked pump" .

    6. Obtain blitz samples.

    7. Determine if gasoline has been adulterated (upon direction by management or during special projects).

    8. Educate taxpayers concerning fuel tax laws.

Retailer Inspection Procedures

  1. The employee must present his/her credentials as well as provide the retailer with a Notice 916 (EN/SP) and Publication 1 prior to conducting the inspection.

    Note:

    The retailer is not permitted to make a copy of the employee’s credentials.

  2. The employee will tour the facility and obtain information from the retailer that will help understand the operation of the business, including but not limited to the following:

    1. Hours of operation

    2. Location of all pumps and tanks

    3. Types of fuel stored and/or sold at this location

    4. Identity of the fuel supplier(s)

    5. Types of records kept for sales and deliveries

    6. Sales of dyed products to end users

    7. Source of the fuel in the propulsion tanks of the retailer’s trucks

    8. Form 637 registration information

  3. The employee will obtain a nozzle sample from each tank holding diesel or kerosene, whether dyed or not using the procedures found in IRM 4.24.15.13, Sampling Methods.

  4. Dyed fuel samples will only be forwarded to the lab, if a penalty is being proposed, if securing a field concentration” sample downstream, or if the appearance of the fuel indicates that the dye concentration of the fuel may have been altered or is otherwise suspicious.

  5. Samples should be obtained for sulfur testing only if information indicates the fuel may exceed the allowable sulfur level. See IRM 4.24.15.10(4) for more information. See the table contained in IRM 4.24.15.10(8) (below) for situations when employees are required to secure a sulfur sample.

  6. The employee shall take photographs to support any penalty determinations.

  7. Gasoline samples are only secured as part of a project or at the instruction of management. If EFL results show adulterants, the FCO will generate a referral, and the FCA will discuss how to proceed with the group manager.

  8. Refer to the applicable IRM section below if the retailer also engages in business activity that would classify it as an end-user.

  9. The retailer may be subject to penalties if any of the following is found:

    If the Lab Confirms Then
    The dye concentration of the pump sample has been altered- A violation under IRC Section 6715(a)(3) or 6715(a)(4) may be applicable. See IRM 20.1.11.6.1.3 for information regarding when a dye alteration penalty is applicable.
    The presence of dye in a sample from a retail pump not labeled with the required notice- A notice violation under IRC Section 6715(a)(1) is applicable.
    The presence of dye in a sample from the propulsion tank of the company controlled vehicle- A violation under IRC Section 6715(a)(2) is applicable.
    The sulfur content of the diesel fuel transferred for resale, sold for resale or held out for resale for use in a diesel-powered train or highway vehicle exceeds the allowable level established by the EPA regulations- An IRC Section 6720A penalty may be applicable.
  10. When proposing a penalty, at a minimum, the case history documentation must include the following:

    1. Taxpayer identification number (EIN/SSN)

    2. Taxpayer name

    3. Taxpayer address

    4. Name and position within the company of individual that authorized the inspection

    5. Delivery of Publication 1 and Notice 916 (EN/SP)

    6. Comments on fuel storage

    7. Identity of fuel supplier(s)

    8. Comments on types and number of retail pumps

    9. Results of the screening of company vehicles

    10. Samples taken and sampling procedures utilized

    11. Comments indicating dyed fuel retail pumps were labeled properly with the required notice

    12. In situations where the required notice was not present, comments on required actions taken to ensure the notice decal was properly affixed prior to the completion of the inspection and appropriate educational/outreach procedures were followed by providing Notice 1420, Sales of Dyed Diesel and Kerosene. In these situations, a penalty is still appropriate.

    13. Photographs of the retail pump (before and after notice decal was affixed).

    14. Comments on Form 637 registration verification

    15. Comments on necessary corrective actions discussed with taxpayer

    16. Comments on sample results and date received

    17. Comments on the date the closing letter was issued

  11. For inspections that result in no adverse action, the case history documentation must include (at a minimum):

    1. Taxpayer identification number (EIN/SSN)

    2. Taxpayer name

    3. Address of the taxpayer

    4. Name and position with the company of the individual that authorized the inspection

    5. Comments as to what actions were taken (i.e. sampling, screening, required notice) to determine that the taxpayer was in compliance, and the results of those actions

    6. Lab results (if applicable)

    7. The date the closing letter was issued

    8. Any additional information, as warranted

  12. Complete the Blocked Pump Check sheet found in Exhibit 4.24.15-1, if the retailer is a Form 637 UP registrant. The employee is responsible for sending the completed Blocked Pump Check sheet via secure e-mail to the group manager and to the 637 Registration Group Manager. See IRM 1.10.3.2.1, Secure Messaging & Encryption, for information on sending secured e-mail messages.

  13. For procedures related to a blitz project, see IRM 4.24.15.8.

  14. For procedures relating to sulfur, see IRM 4.24.15.10.

Designated Inspection Site Inspections

  1. Designated inspection site inspections are conducted to:

    1. Ensure on-road diesel vehicles do not have dyed, untaxed fuel in the propulsion tanks.

    2. Ensure fuel carried by fuel transport trucks match the shipping papers.

    3. Educate drivers of diesel vehicles about dyed fuel laws including providing Pub 4941, Trucker Bulletin, as warranted.

  2. The designated inspection site should be identified as a fuel inspection site by displaying a free standing and/or magnetized vehicle sign showing "IRS FUEL INSPECTION SITE" .

  3. When working a site such as a state highway inspection station, weigh station, agricultural inspection station, mobile station or any point along a public highway, the employee must coordinate with state/local law enforcement personnel. The law enforcement personnel must be present and control traffic flow.

  4. When working at other locations as designated by the Commissioner to be used as a fuel inspection site (e.g. construction sites, quarries) and from which vehicles from multiple entities enter and depart, the employee must first coordinate and obtain permission from the agency/official which controls the site.

Designated Inspection Site Procedures

  1. The employee must secure permission from the person or agency that controls the site to establish an IRS fuel inspection site.

  2. The employee must defer to the person in control on traffic flow and safety issues.

  3. The employee must identify the site as an IRS fuel inspection site with the official sign provided.

  4. The employee must convey his/her identity and contact information, and provide a Notice 916 (EN/SP) to every driver prior to conducting the inspection.

  5. If the driver refuses the inspection, see IRM 4.24.15.2.1.3, Other Inspections Where Consent is Sought, for procedures.

  6. If the vehicle is a fuel transport, review BOL to determine:

    1. If the BOL indicates dyed middle distillate fuel, obtain a fuel sample to confirm.

    2. If the sample does not match the BOL (i.e. BOL indicates dyed product, but the fuel is clear), secure a copy of the BOL (if possible). If a copy is not possible, take a photograph of the BOL and document the BOL number and source of fuel. The FCO will make a referral for the appropriate examination fuel group. The FCA should consult with the group manager on how to proceed.

  7. For all other vehicle types, screen the fuel in the propulsion tank using the screening procedures found in IRM 4.24.15.12, Pipette Screening Method.

  8. If no dyed fuel is present and the fuel appears normal, the employee will secure only the tag and state information and release the driver.

  9. If dyed fuel is present or the contents of the fuel are suspicious (i.e. the fuel is dark), the employee will inform the driver, issue a Publication 1, and secure a usage sample. In these situations, the employee will obtain the following information:

    1. Name of driver

    2. Name of company/owner

    3. Address of driver and company

    4. Phone number of driver and company

    5. Position of the driver with the company

    6. Driver's license number

    7. Social security number and/or Federal EIN

    8. Description of vehicle

    9. Size of propulsion tank(s)

    10. Estimated amount of fuel in the propulsion tank(s)

    11. Location of any fuel storage tanks on the vehicle.

    12. Vehicle identification number (VIN)

    13. License plate number

    14. Date of registration

  10. The employee should obtain the following information to establish who is responsible for the presence of dyed fuel in the on-road vehicle:

    1. Who fueled the vehicle

    2. When the truck was fueled last

    3. Where the fuel was obtained

    4. Whether the company has fuel storage tanks at the yard

    5. The location of the company's yard

    6. Fueling practices of the company

    7. How many trucks the company operates

    8. Other information that would establish culpability

  11. The employee will immediately "follow the fuel" , when possible and conduct follow-up inspections to determine the extent of the non-compliance. If it is determined the location is beyond an acceptable distance from which the employee is located, the employee will notify the group manager to have the information referred to another employee in the area for follow-up.

    Note:

    Follow-up inspections conducted as a result of the initial inspection for the purposes of IMS are considered separate inspections.

  12. At a minimum, the case history must document the following:

    1. The delivery of Publication 1 and Notice 916 (EN/SP)

    2. The site location, date, the state/local police running the inspection site, if applicable

    3. Contain all the necessary facts as outlined above

  13. The actual number of vehicles screened during each inspection must be timely recorded in IMS. See IRM 4.24.13.5, Issue Management System (IMS), for IMS procedures.

  14. For case processing procedures, see IRM 4.24.16, Excise Fuel Compliance Report Writing, Case Processing and Appeals Procedures.

End-User Inspections

  1. End-user inspections are conducted to:

    1. Ensure dyed fuel is not being used or held for use in a taxable manner.

    2. Verify that the strength or composition of dyed fuel has not been altered.

    3. Determine if the gasoline or diesel fuel has been adulterated.

    4. Educate taxpayers concerning fuel tax laws.

    Note:

    Other than ensuring dyed fuel is not being used or held for use in a taxable manner, the facts and circumstances discovered while conducting the inspection, as well as management instruction, will dictate what actions are taken during the inspection.

  2. End-user inspections may be conducted at the permanent place of business for a company, such as the company yard, or may be conducted at sites such as construction sites.

End-User Inspection Procedures

  1. The employee must present his/her credentials as well as provide the end-user with a Notice 916 (EN/SP) and Publication 1 prior to conducting the inspection.

    Note:

    The end-user is not permitted to make a copy of the employee’s credentials.

  2. The employee will tour the facility and obtain information from the end-user that would help them understand the operation of the business, including but not limited to the:

    1. Type of business activity

    2. Types of fuel used in vehicles

    3. Types of fuel stored at this location

    4. The number of diesel trucks owned or operated

    5. Location and capacity of fuel storage tanks and the identity of the fuel supplier

    6. Records of deliveries

    7. Truck fueling procedure (i.e. who fuels and what directions are given by employer)

    8. Records for the fueling of the trucks

    9. Types and number of pieces of off-road diesel equipment

    10. Portable diesel tanks used by the company

    11. Safeguards in place to ensure dyed fuel is not used in a taxable manner

  3. The employee will screen the fuel in the on-road diesel vehicles and mobile machinery using the procedures found in IRM 4.24.15.12. If the fuel in a vehicle or mobile machinery appears to be dyed or suspicious in nature then a usage sample is obtained from each propulsion tank and from the storage tank that is the source of the dyed fuel in the vehicle and mobile machinery.

  4. The employee shall take photographs to support any penalty determinations.

  5. All or some of the dyed fuel in the storage tank that is the source of the fuel in the propulsion tank may be considered held for a use other than a nontaxable use and thus subject to a penalty under IRC Section 6715(a)(2). The number of gallons involved in the violation is determined by the evidence the taxpayer provides regarding the past and current use of dyed fuel.

  6. The Service will consider any credible and convincing evidence when calculating the amount of dyed fuel a person held for a use other than a nontaxable use. In accordance with Needsome Farms v. U.S , No. 97-1375-MLB, 1999 WL 131697 (D. Kan. July 16, 1999), in the absence of credible evidence to the contrary, all dyed fuel held in the storage tank may be presumed to be involved in the violation.

  7. The employee should obtain information from the taxpayer on its past and current use of dyed fuel and determine the number of gallons of stored dyed fuel subject to a penalty. The amount of dyed fuel determined to be held for use in a taxable manner should be based solely on the evidence of past and current use by the taxpayer.

  8. The employee should obtain information to determine the culpable parties. Joint and several liability may apply.

  9. The employee should "follow the fuel" to determine the extent of the non-compliance. If geographically necessary, the employee should notify the group manager to have the information referred to another employee in the appropriate area for follow-up.

  10. Follow-up inspections will be conducted to ensure the taxpayer is compliant.

    Note:

    Follow-up inspections to re-check previously penalized propulsion and bulk tanks are considered a separate inspection for the purposes of correctly calculating multiple violations and should be entered into IMS separately.

  11. If directed by management or the circumstances warrant, the employee may obtain sulfur samples of undyed diesel and gasoline to be tested for adulterants.

  12. If directed by management or the circumstances warrant, the employee may obtain samples of dyed fuel to ensure the dye concentration has not been altered. An IRC Section 6715(a)(3) penalty may apply. See IRM 20.1.11.6, Dyed Fuel Sold for Use or Used in Taxable Use, etc. The following apply in this situation:

    1. Employees must identify the supplier(s) of the fuel.

    2. The sample is considered a field "concentration" sample.

  13. When proposing a penalty, at a minimum, the case history documentation must include the following:

    1. Taxpayer identification number (EIN/SSN)

    2. Taxpayer name

    3. Taxpayer address

    4. Identification of the individual that authorized the inspection

    5. Delivery of Publication 1 and Notice 916 (EN/SP)

    6. The site information fueling practices (i.e. who fuels and what directions are given by employer)

    7. If storage tanks are identified (i.e. marked on-road/off-road)

    8. Comments on fuel storage capacity

    9. Identity of fuel supplier(s)

    10. Results of the screening of company vehicles and fueling practices

    11. License plate numbers, when samples are secured

    12. Samples taken and sampling procedures utilized

    13. Photographs, if taken to support a penalty determination

    14. Lab results and date the sample results received

    15. Information obtained from the tour and interview

    16. Date the penalty package was issued

  14. Inspections that result in a no adverse action, at a minimum, the case history documentation must include:

    1. Taxpayer identification number (EIN/SSN)

    2. Taxpayer name

    3. Site address and office address of the taxpayer

    4. Identification of the individual that authorized the inspection

    5. Comments as to what actions the employee took (i.e. sampling, screening, required notice) to determine that the taxpayer was in compliance, and the results of those actions,

    6. Lab results (if applicable)

    7. Date the closing letter was issued

    8. Additional information, as warranted

Blitz Inspection Procedures

  1. Blitz is a streamlined inspection process which allows a high volume of samples to be collected within a specified geographic area in a relatively short period of time. The following instructions establish a standard method for working blitz compliance activities.

    1. A blitz activity is a one to two week project involving employees from more than one group.

    2. The group manager will notify the employee of the geographic location and duration of the activity. Some overnight travel may be required.

    3. There are different types of blitzes. A retail blitz will involve inspections at retailers, wholesalers and some terminals. An end-user blitz will involve inspections of end-users at their permanent places of business and construction sites. Other blitzes, such as M registrants at biodiesel production sites, may also be conducted.

    4. The employee will complete the blitz sample data input sheets. The EFL will provide updated blitz sample data input sheets and instructions prior to any blitz activities, if warranted.

    5. Completed blitz sample data input sheets will accompany the samples. The EFL will extract the data from the input sheets and e-mail an electronic version back to the field personnel within five (5) business days of receipt of the samples at the lab. The electronic version will not include notes written in the margins.

    6. The EFL processes blitz samples and associated data input sheets with the goal to get all abnormal results or requests for additional information to the appropriate group manager within five (5) business days from the date the sample is received at the lab.

    7. Abnormal results will be assigned to either revenue agents or FCAs to develop and determine any tax consequence. See IRM 4.24.4.10, Abnormal Fuel Referrals, for more information regarding abnormal fuel referrals.

    8. Any follow-up inspections conducted to secure samples are considered separate inspections in IMS.

Blitz Inspection Group Manager Responsibilities

  1. The group manager will ensure all necessary supplies are available prior to the beginning of a blitz activity. These supplies include but are not limited to:

    1. Blitz data input sheets

    2. Form 9667, Sample Bottle Seals and Identification Labels

    3. Pre-printed "To/From" labels

    4. Prepared Form 4564, Information Document Request (IDR)

    5. Copies of Letter 3918, Fuel Inspection Letter

    6. Copies of Publication 1, Your Rights as a Taxpayer

    7. Copies of Notice 916 (EN/SP), Taxable Fuel Inspection Notice

  2. A list of terminals and TCNs will be provided at the beginning of the retail blitz activity.

  3. The group manager will appoint a contact person for the blitz activity. The contact person will:

    1. Provide support to the employees

    2. Provide information to the group manager, as requested

    3. Be the contact point for taxpayers responding to an IDR left by the employees

  4. The FCA group manager will evaluate the EFL reports and assign any abnormal sample results to a FCA. The FCO manager will refer the abnormal sample results to a FCA group manager, if warranted.

    Note:

    Group managers will only be informed by the EFL if a sample is deemed abnormal or if more information or another sample is needed.

  5. The group manager will provide direction and information for sample collection if at another location, other than a retailer or end-user.

Collecting Retail Blitz Samples

  1. Samples of undyed diesel and jet fuel are collected from storage tanks at retailers, wholesalers, and selected terminals. Kerosene and gasoline samples may be collected if the fuel is suspicious (i.e. color, smell, location or shipping paperwork).

  2. The taxpayer is provided with a Letter 3918, Notice 916 (EN/SP) and Publication 1.

  3. Only one sample per storage tank is collected. All storage tanks must be sampled.

  4. The group manager will identify terminals to be inspected. A terminal sample must be obtained from each storage tank containing undyed diesel or jet fuel. Samples of other middle distillate products are collected, if warranted. If pulling samples from a terminal:

    1. The TCN is recorded.

    2. Do not obtain samples from transport compartments.

    3. Do not use "retained" samples (i.e. samples previously pulled by the terminal). Ask the terminal to obtain a fresh sample from the storage tank.

Collecting End-User Blitz Samples

  1. Samples of undyed and dyed diesel fuel are collected from storage tanks of end-users.

  2. Screen all available on-road registered diesel vehicles.

  3. Obtain a sample from at least one on-road registered diesel vehicle.

  4. On the Form 9667, record "V" for a sample from a vehicle and "S" for a sample from a storage tank. The notation should be recorded to the right of the "Blitz" space within the "Type of Test" section.

Completing the Blitz Data Sheets

  1. Complete one blitz data sheet for each sample. The blitz data sheets should be completed as follows:

    1. The handwritten data sheets must be legible (block printing is preferred), accurate and timely submitted.

    2. Use abbreviations only for state names.

    3. Submit only the information requested on the sheets.

      Note:

      The product is marked according to what the fuel is supposed to be (i.e., how the fuel is being sold or how the fuel is being used). For example, diesel fuel from an on road storage tank or propulsion tank, that may be dyed is considered to be diesel, not dyed diesel.

  2. Do not record deliveries of fuel that occurred more than 60 days prior to the date of inspection.

  3. Form 4564 should be completed if the taxpayer is not able to provide the required information at the time of the inspection. The employees must inform the designated blitz contact person of the issuance of any IDR(s). The form shall be completed, as follows:

    1. The form should be prepared in duplicate. One copy is given to the person representing the taxpayer during the inspection and the other is sent to the designated blitz contact person.

    2. The form should be directed to the person responsible for providing the information.

    3. The taxpayer should be asked to provide the information within 24 hours to the designated contact person.

    4. The designated contact person will fax information received from the taxpayer to the EFL within 24 hours of receipt.

    5. The employee should notate in the notes section of the blitz data sheet that a Form 4564 was issued.

    6. The designated contact person should follow-up with the taxpayer if the information is not received from the taxpayer within 24 hours.

Packing and Shipping Blitz Samples

  1. See IRM 4.24.15.17, Packing and Shipping Samples, for general guidance on packing and shipping samples.

  2. Verify that the sample numbers on the blitz data sheets match the Form 9667 sample numbers on the bottles.

  3. Place the original blitz data sheets in a sealed envelope marked "To be opened by addressee only" and include it in the box with the samples.

    Note:

    Do not put the chain of custody form in the sealed envelope.

  4. Handwrite "B" on one of the blank sides of the shipping box.

  5. Samples shall be shipped on the last day of the blitz activity, or at the end of each week, if the study is for more that one week.

  6. It is strongly recommended the employee make a copy or scan each blitz data sheet into the laptop prior to enclosing the forms in the box.

Input of Blitz Inspection on IMS

  1. All blitz inspections must be input into IMS within five (5) business days following the end of the sample collection period. The employee is responsible for updating the IMS case file and issuing the appropriate closing letter, depending on the results of the inspection.

  2. See IRM 4.24.13.5, Issue Management System (IMS), for IMS procedures.

  3. Each group is assigned a blitz tracking code. The code must be entered into IMS under the ERCS Data Tab.

  4. For each blitz inspection created on IMS, the SAIN number will reflect the type of inspection; e.g., 515, 516R, 516W, and 518.

Abnormal Lab Results from Blitz Inspections

  1. For samples determined to be abnormal, the group manager will send the test results to the employee who conducted the inspection and the FCA or revenue agent who will follow-up on the result. The group manager or designated employee must send the lab result to the employee within one business day of receiving notification from the lab.

  2. A request from the EFL for additional samples or information should be forwarded by the group manager to the employee. The person following up on the initial sample will not necessarily be the same person who sent the first sample. The manager must send the request for additional samples or information to the employee within one business day of receiving notification from the lab.

  3. Follow-up samples are considered blitz samples. Instructions for labeling and shipping the samples must be followed. See IRM 4.24.15.15, Sample Bottle Labeling Procedures and IRM 4.24.17, Packing and Shipping Samples. The blitz data sheet must indicate the sample is a follow-up and identify the original sample number(s).

  4. If abnormal results are not received within 15 calendar days of shipping the samples, the blitz cases may be moved to closing status in IMS. The Letter 3143, Non-violation IRC 6715 Inspection Letter, must be issued at this time. For certain blitz projects, the 15 day period may be extended. The employee will be notified by the group manager if the time period is extended.

Farm Inspections

  1. Special rules apply to the assertion of IRC Section 6715 penalties during farm inspections.

  2. Farmers who own or operate registered diesel vehicles found with dyed fuel in the propulsion tanks may not be subject to penalties under IRC Section 6715(a)(2), if:

    1. The vehicle found with dyed fuel was located on a farm (See IRC Section 6420(c)(2) for the definition of a "farm" ) at the time of the inspection.

    2. The vehicle is used for farming purposes. See IRC Section 6420(c)(3) for the definition of "farming purposes" .

  3. When employees find dyed fuel in a truck used for farming purposes on a farm, the employee should attempt to establish if the vehicle was used on the highway. The burden of proof is on the government to establish the violation. The employee must fully develop the facts to support the government's position.

  4. A farm vehicle registered or required to be registered and using dyed fuel on the highway is subject to a penalty under IRC Section 6715(a)(2).

    Example:

    A registered flatbed truck being used on the farm is screened properly and dyed fuel is found. The truck is used to move hay from one area of the farm to another. No penalty may be applied. The same truck, carrying hay to another farm, is screened at a weigh station and is found to contain dyed fuel. A penalty would apply. A usage sample is secured and submitted for testing.

Procedures for Developing an IRC 6720A Sulfur Content Penalty

  1. The burden of proof is on the government to establish that a wholesaler, reseller, or retailer knowingly sold or held out for sale a liquid for use in a diesel powered train or highway vehicle that violated the applicable EPA regulations pertaining to sulfur content.

  2. In order to propose an IRC 6720A penalty, the IRS must establish the person transferring, reselling, holding for sale, or selling the fuel had actual knowledge that the fuel:

    1. Will be used in a diesel-powered vehicle or train.

    2. Exceeded the applicable EPA regulations for sulfur content.

      Note:

      Both a) and b) must be met.

  3. Actual knowledge of the sulfur content will be determined by source documents such as a delivery ticket or a BOL informing the seller about the sulfur content of the fuel. Actual knowledge could also be established if the seller adulterated the fuel with a product known to the seller as possessing a concentration of sulfur greater than 15 ppm.

  4. Actual knowledge as it relates to undyed fuel occurs when a person who includes the federal highway tax on the fuel upon sale has actual knowledge that the fuel will be used in a highway vehicle. As such, the focus of the questions, fuel screenings, and review of records will look for indicators that the fuel exceeds the maximum sulfur level. Undyed kerosene dispensed through a blocked pump is the exception to the rule that sellers know the undyed fuel will be sold for use in a highway vehicle.

  5. For dyed fuel:

    1. If there is no indication that the dyed fuel was sold or held for sale for use in a highway vehicle, then an IRC Section 6720A penalty does not apply.

    2. If there is an indication that the seller knowingly sold or held for sale the fuel for use in a highway vehicle, the investigation will focus on establishing knowledge about the sulfur content of the fuel and confirming actual knowledge about the use of the fuel. The knowledge regarding the use of the fuel must be actual knowledge, not presumed. For example, the absence of the dyed fuel notice on a retail pump is not actual knowledge that the fuel will be used in a highway vehicle. Treas. Reg. 48.4082-2, applies to IRC Section 6715, not to IRC Section 6720A.

  6. If the EFL result indicates the fuel does not exceed 15 ppm, then IRC Section 6720A does not apply.

  7. If the EFL result indicates the fuel does exceed 15 ppm then the IRC Section 6720A penalty will apply if the seller knew the fuel exceeded the sulfur limit and knew the dyed fuel was to be used in a highway vehicle. The seller, in this instance, is also subject to an IRC Section 6715(a)1 penalty.

  8. The table below identifies when sulfur samples for sulfur testing will be obtained.

    When at a A sample will be obtained for sulfur testing if: Reasons for obtaining a sample
    Terminal
    • The FCO/FCA has reason to suspect the undyed fuel has been adulterated, or

    • A sample of undyed fuel with a sulfur concentration greater than 15 ppm is found below the terminal rack and the employee is following the fuel to its source

      Note:

      Dyed samples are not generally obtained specifically for sulfur testing.

    • Directed by management.

    Undyed diesel and kerosene leaving the terminal is taxed and therefore is for use in diesel-powered vehicles and trains.

    Note:

    Terminals may have sulfur test results for the fuel involved. Their records could be important when establishing actual knowledge.

    Wholesaler
    • The FCO/FCA has reason to suspect the undyed fuel has been adulterated, or

    • The wholesaler knowingly sold dyed diesel for use in a highway vehicle and knew the fuel exceeded 15 ppm sulfur. The knowledge can not be presumed, but must be actual knowledge of its use (e.g. wholesaler fueled the highway vehicles) and its sulfur content, or

    • Directed by management.

    • Determine whether a product was added resulting in a sulfur concentration <15 ppm. The adulterated fuel may also have tax implications.

    • Wholesaler knowingly selling dyed fuel for use in highway vehicles is subject to an IRC Section 6720A penalty if they also knew the fuel had <15 ppm sulfur.

    Retailer
    • The FCO/FCA has reason to suspect the undyed fuel has been adulterated, or

    • The retailer knowingly sold dyed diesel for use in a highway vehicle and knew the fuel exceeded 15 ppm sulfur. The knowledge can not be presumed (i.e. lack of a dyed notice on the pump), but must be actual knowledge of its use and sulfur content, or

    • Directed by management.

    • Determine whether a product was added resulting in a sulfur concentration <15 ppm. The adulterated fuel may also have tax implications.

    • Retailer knowingly selling or holding for sale dyed fuel for use in highway vehicles is subject to an IRC Section 6720A penalty if they also knew the fuel had <15 ppm sulfur.

  9. Because there are no visual indicators of sulfur content, at the time of the inspection the employee should document and/or copy any taxpayer records that clearly indicate evidence of sulfur content, such as BOLs, or delivery tickets.

  10. If EFL results indicate a potential violation, the employee must conduct an inspection of each taxpayer identified as a source of the fuel. For each inspection, the employee will obtain diesel samples and record the following:

    1. The source(s) of the fuel.

    2. The statement on the shipping documents that indicate the sulfur content.

    3. Whether the location has additional products on site that would account for the increased sulfur content. A sample of the additional product(s) should also be obtained.

  11. If additional sources of fuel are identified, the employee will obtain samples and continue to develop the issue to determine who knowingly transferred for resale, held for resale, or sold for resale the liquid in question.

  12. EFL results indicating a possible IRC Section 6720A violation are reported to the employee and group manager by e-mail. If a lab result is not received within fifteen (15) days from the date the sample was shipped, the employee may assume the sulfur concentration was within the allowable level.

Documentation Procedures for Samples Obtained for Sulfur Content Testing

  1. The employee will record the content of the sulfur notice label on the pump in the IMS case history.

  2. The employee will review BOLs and delivery tickets and obtain the following information pertaining to each of the last three shipments of diesel fuel:

    1. Name and address of the supplier

    2. Date of shipment

    3. The gallons received

    4. The amount of fuel in the tank at the time of delivery

    5. The identification of previous fuel type stored in the tank (if different from the current type)

    6. The name of person who placed the orders for the fuel

    7. Other possible sources of the product in the storage tank (consider possible upstream and downstream sources)

    8. Additives placed in the fuel

    9. The sulfur statement and, if applicable, the biodiesel blend percentage

  3. Only lab results that indicate possible sulfur concentration violations are forwarded. If a lab result is not received within fifteen (15) days from the date the sample was shipped, employees may assume the sulfur concentration was within the allowable level.

Enforcement Activities Conducted by FCAs

  1. To protect the rights of the taxpayer and to reduce confusion, the FCA will clearly explain to the taxpayer whether the purpose of the contact is to conduct an inspection or an examination.

  2. The FCA will follow the standard procedures for initiating examinations and compliance reviews. See IRC 4.24.6, Technical Guidance and Procedures for Excise Issues.

  3. The FCA will not set an appointment to conduct an inspection.

  4. If during the course of an inspection the FCA determines an examination of the taxpayer's return is warranted, the FCA will obtain group manager approval prior to initiating the audit. The inspection will proceed to its conclusion if it will not affect the examination.

  5. If during the course of an examination the FCA determines an inspection is warranted, the FCA may proceed without group manager approval. The inspection will proceed to its conclusion if it will not affect the examination. When this occurs the inspection must be entered into IMS separate from the examination case.

  6. As part of an examination or Form 637 registration review, an FCA may need to obtain fuel samples. The FCA may combine the two activities and use the government vehicle to travel to and from the work site (see IRM 4.24.14.9.2(14)). If the FCA conducts any fuel sampling activity, the employee must input a fuel inspection in IMS. The employee shall input and charge time to the appropriate fuel inspection activity code (e.g. 515-518). For an inspection at a biodiesel producer, the employee shall use activity code 516W. The time charged to activity codes 515-518 is limited to the time spent performing the fuel inspection. The employee should conduct a full inspection appropriate to the type of site. If the employee limits the scope of the inspection, the employee must notate in the inspection case file the specific actions taken.

Screening Methods

  1. The pipette screening method is the approved screening technique to be used when inspecting vehicle propulsion tanks. The employee will:

    1. Wear approved safety glasses with side shields and nitrile gloves. See IRM 4.24.14.6, Personal Protective Equipment (PPE).

    2. Unseal a new pipette. A new pipette is used for each screening.

    3. Bond with the propulsion tank. See IRM 4.24.14.5, Bonding Requirement when Screening or Sampling Fuel.

    4. Open the fuel tank.

    5. Insert the pipette into the tank as far as it will reach.

    6. Place a thumb firmly over the upper end of the pipette, forming a seal to hold the fuel in the pipette.

    7. Pull the pipette up until the fuel inside the pipette can be observed.

    8. If no dye is detected, remove the thumb from the end of the pipette, releasing the fuel back into the tank.

    9. If dye is detected or the fuel is a suspicious color, call the driver's attention to it then fold the pipette so both ends are facing up, then release the fuel into an absorbent pad or container.

    10. Properly dispose of the used pipette.

    11. If dye was detected or the fuel is a suspicious color, obtain a usage sample using the Sampling Pump Method.

  2. The nozzle screening method is used when inspecting fuel storage tanks. The employee will:

    1. Wear approved safety glasses with side shields and nitrile gloves. See IRM 4.24.14.6, Personal Protective Equipment (PPE).

    2. Place a clean two quart glass measuring cup or wide mouth jar into a bucket (to prevent spillage).

    3. Bond with the retail pump.

    4. Turn on the retail fuel pump.

    5. Dispense a sufficient amount of fuel through the nozzle into the cup or jar to make a determination if a sample is needed.

    6. If the fuel is not suspect to a potential penalty, then the fuel should be disposed of properly.

    7. If a sample is required, follow the guidance found in IRM 4.24.15.13(3), Nozzle Sampling Method, below to secure a sample.

Sampling Methods

  1. There are two approved methods of sampling fuel. The sample pump method and the nozzle method. These methods provide safety to employees and other persons and permit verifiable, evidentiary samples to be obtained.

  2. Sampling Pump Method:

    1. Cut a section of new flexible tubing of suitable length to reach the source of the fuel.

      Note:

      To reduce the possibility of cross-contamination, the tubing shall not be cleaned and reused. New tubing shall be used to obtain samples from each distinct source of fuel. For example, if one sample is obtained from each of the two propulsion tanks of a vehicle, a section of new tubing is used to obtain each sample. If two samples are obtained from one tank, the same tubing may be used to obtain both samples.

    2. Wear approved safety glasses with side shields and nitrile gloves. See IRM 4.24.14.6, Personal Protective Equipment (PPE). If the sample comes from a compartment on a transport truck, the employee should put the nitrile gloves on after climbing the truck.

    3. Place the tubing in the sampling pump and attach a clean unused bottle.

    4. Bond with the truck. See IRM 4.24.14.5, Bonding Requirement when Screening or Sampling Fuel.

    5. Open the hatch or cap of the fuel tank.

    6. Lower the tubing into the tank.

    7. Draw fuel into the bottle using the sampling pump.

    8. Stop pumping when the bottle contains 30 ml (approximately 1 ounce) but keep the tubing in the fuel.

    9. Release the pressure by loosening the bottle (but do not remove) or pressing the release button on the pump, if so equipped.

    10. Allow the fuel in the tube to flow back into the tank.

    11. Remove the tubing from the tank and cradle the end of the tubing in an absorbent towel.

    12. Remove the bottle from the pump.

    13. Seal the bottle with a cap (seal firmly, but do not over tighten, as that may cause the cap to crack) and a properly applied Form 9667 (ensure outside surface of the bottle is clean and dry and there is no leakage prior to application. See IRM 4.24.15.15, Sample Bottle Labeling Procedures.

    14. Close and secure the hatch or cap of the tank.

    15. Dispose of liquid and absorbent material waste in accordance with local, state, and federal regulations.

  3. Nozzle Sampling Method:

    1. If the nozzle screening method determined a sample is needed, use the screening procedures found in IRM 4.24.15.12(2) to dispense the required amount of fuel needed for a sample. Bond again, if required.

    2. Use the sample pump method to obtain a 30 ml sample from the jar or cup into the sample bottle.

      Note:

      Alternatively, a disposable, single-use funnel may be placed in the mouth of the sample bottle and the fuel poured from the cup or jar into the sample bottle. The disposable funnels may be plastic or paper but may only be used once.

    3. Seal the bottle with a cap (seal firmly, but do not over tighten, as that may cause the cap to crack) and a properly applied Form 9667 (ensure outside surface of the bottle is clean and dry and there is no leakage prior to application. See IRM 4.24.15.15, Sample Bottle Labeling Procedures.

    4. Dispose of liquid and absorbent material waste in accordance with local, state, and federal regulations.

  4. Gasoline samples are secured to determine each sample is representative of the declared octane level. Gasoline samples are only secured as part of a project or at the instruction of management. The following sampling procedures involve fueling the field compliance vehicles with gasoline:

    1. The employee must explain to the owner of the fuel that the pump’s hose must be flushed to ensure a representative sample is obtained.

    2. The explanation will inform the owner that a gallon of fuel will be dispensed.

  5. For samples of gasoline, follow the sampling procedures outlined below:

    1. Employees must inspect the fuel gauge of the assigned truck to determine whether the tank can hold an additional gallon of fuel.

    2. Select the octane needed for the sample.

    3. Dispense only one (1) gallon of fuel into the vehicle’s fuel tank. The employee will purchase the fuel using the fleet card assigned the truck, unless directed otherwise.

    4. Follow the normal procedures for obtaining a nozzle sample.

      Note:

      For gasoline samples, the sample bottle should be cooled to the fuel temperature prior to obtaining the evidentiary sample. To do this, one ounce of fuel should be added to the sample bottle and carefully swished around, then disposed of properly.

      Note:

      Eight (8) one ounce samples are collected to perform octane measurements. Different sample numbers used for the eight (8) samples must be identified as from the same pump so that they may be combined at the EFL.

Approved Sample Bottles

  1. All samples must be shipped in two ounce glass bottles with one ounce fill lines. Fuel samples secured should be one ounce in volume. See IRM 4.24.15.15.2, Sample Labeling Matrix, for additional guidance pertaining to securing samples.

  2. Ensure there are no cracks or chips in the sample bottles used.

  3. Caps with a plastic, cone-shaped seal inside the cap must be used.

    Note:

    Verify the presence of the cone shaped seal before each bottle is sealed. If the cone shaped seal is not present, discard the bottle cap and replace with a bottle cap that has one present.

Investigative Samples

  1. The employee may encounter fuel held by taxpayers where the nature and composition of the fuel is questionable. Such fuel may raise suspicions because of what it looks like, smells like, what it is called, or where it is found. A sample collected of this fuel is called an "investigative sample" . Investigative samples are "fingerprinted," and subjected to other analytical procedures to determine unusual components and the percentage of each component in the total volume.

  2. Any fuel samples that require comparison (that are not part of a BLITZ study) are considered to be "investigative" samples.

  3. Any biodiesel or renewable fuel that is sent to the lab to determine if it meets the American Society for Testing and Materials (ASTM) standards are considered to be "investigative" samples.

  4. Any 637 registration sample is an "investigative" sample.

Requests for Investigative Samples

  1. The request to collect investigative samples may come from a variety of sources such as:

    1. The employee comes upon an unusual and suspicious fuel product.

    2. IRS Criminal Investigation requests that certain fuel be collected and analyzed for content.

    3. State agencies, acting under a Memorandum of Understanding (MOU).

    4. An excise manager requests that a taxpayer’s product be analyzed to see if it is what the taxpayer says it is, or what the agent and manager suspect it is.

  2. FCOs may work with FCAs and revenue agents in securing samples to determine whether biodiesel registrants and applicants meet the requirements of IRC 40A(d)(1) which defines biodiesel.

  3. FCOs may work with FCAs and revenue agents in securing samples to determine whether renewable registrants and applicants meet the requirements for renewable fuel.

Investigative Sample Procedures

  1. The samples must be obtained using one of the approved sampling methods discussed above.

  2. Four (4) one ounce samples are collected from each source of fuel for which investigative sample testing is requested, including biodiesel and renewable fuels..

  3. Eight (8) one ounce samples are collected from each source for gasoline samples requiring octane measurements.

  4. A completed Form 14403, Investigative Sample Information, must be included with the shipment to alert the EFL chemist of what is suspected and what should be done. This completed form gives the chemist a starting point for the investigation. Form 14403 includes the following information:

    1. Employee's name

    2. Date sampled

    3. IRS sample label number from Form 9667

    4. Type of sample source (i.e. storage tank, saddle tank, wholesaler, etc.)

    5. Expected product (i.e. number 1 diesel, number 2 diesel, biodiesel, renewable etc.)

    6. Reason for sample analysis (why was this sample secured?)

      Note:

      An example of a statement explaining the reason for the sample would be: "Fuel may be mixed with used motor oil, PCBs and other waste products. Test for adulterants to verify. Provide the name of the adulterant(s) and the percentage of each."

    7. All 637 registration samples should indicate the type of registration desired. Annotate this in the section entitled any other pertinent information.

    8. Relationship between samples (if any)

    9. Any other pertinent information

    10. Name, address, secure e-mail address, fax number and phone number of the person(s) to whom the lab analysis will be sent. The results are normally sent to the employee or other individual who requested the investigative sample be obtained.

      Note:

      It is important the contact information for the employee needing the results be provided.

    11. The lab analysis is communicated to the individuals identified on the Form 14403 regardless of the results within five (5) business days of the receipt of the samples at the lab.

      Note:

      Analysis results of renewable or problematic "investigative" samples may require longer than five (5) business days.

  5. See IRM 4.24.15.15, Sample Bottle Labeling Procedures, for the required label information on the Form 9667.

  6. See IRM 4.24.15.16, Chain of Custody Procedures, for information on the chain of custody.

Shipping of Investigative Samples

  1. See IRM 4.24.15.17, Packing and Shipping Samples, for general instructions on packing and shipping samples.

  2. Place the completed Form 14403 into the box.

Referral of Investigative Sample Lab Results

  1. If the results from an IRS initiated sample indicate the need for further development, a referral should be completed within one day of the receipt of the EFL results.

  2. A revenue agent may request the assistance of an FCO or FCA, if additional samples will be collected. The request is routed through the group manager who will assign an employee based on factors including, but not limited to, proximity to the site and availability.

  3. The revenue agent may request an FCO or FCA obtain samples from sources upstream. The FCO or FCA should discuss with his/her manager the need for reassignment if the upstream site is outside of their assigned territory.

Sample Bottle Labeling Procedures

  1. Use only Form 9667 to label the bottles. The forms are pre-printed, sequentially numbered, bar-coded, and tamper resistant adhesive labels. Ensure that all the required information is accurately recorded in the appropriate space on each part of the sample label.

  2. Information on sample bottle labels, including the sample number, has been deemed taxpayer information protected by IRC Section 6103.

  3. Record the required information on the label prior to affixing the label to the bottle.

  4. Ensure the outside of the bottle is clean and dry prior to placing label on bottle.

  5. The completed sample bottle label must be affixed before leaving the inspection site.

  6. The information required on Form 9667 is determined by the type of test to be performed on the sample. See the Sample Labeling Matrix found at IRM 4.24.15.15.2, Sample Labeling Matrix, for the types of tests.

  7. Select "Sulfur" when completing the Type of Test section of Form 9667 if securing undyed diesel and kerosene samples from a terminal, that are not part of a BLITZ study. The samples tested for sulfur content from terminals will also be used as reference samples for other field activities.

  8. Samples obtained from a state employee must include a "Z" on the right side of the sample label number. Also, the FCO or FCA ID number must be recorded on Form 9667. If the state employee ID number is already on the form, the FCO or FCA number must be written above or next to the FCS ID field.

    Note:

    Samples obtained from a state employee that contain more than 30 ml must be re-bottled by either the state representative or the employee, or not be shipped for analysis. If re-bottled (with a new IRS identification number), include all appropriate chain of custody documentation. The actions taken must be notated in the IMS case file.

  9. The sample label has fourteen strips and may be used for up to four samples taken from the same tank. Each strip contains the unique sample reference number and will be placed on the bottle as follows:

    1. Three are placed on the bottle(s)

    2. One is used on Form 13927, Chain of Custody and Shipping Record, and Form 13926, Chain of Custody Control Document, if applicable.

    3. One is available for use if a paper file is created

    4. Nine remaining strips are used if additional fuel is collected from the same source. This will allow the samples to be associated with each other.

  10. Sample Bottle Labeling Procedures:

    1. Crisscross the top two narrow labeling strips over the top of the capped bottle so that four approximately equal lengths come down the outside of the bottle.

      Caution:

      Carefully press these strips against the side of the cap while one end of the strip is still not applied to the bottle. This will reduce the chance that the strips will tear and thus compromise the integrity of the sample.

    2. Wrap the third strip, identified as "Bottle Label" on the Form 9667 around the bottle, covering the bottom ends of the two crisscrossed strips.

    3. If the remaining strips are needed for samples obtained from the same tank, follow steps 1 and 2 above. Instructions on the placement of the strips are included on each strip.

Form 9667 Sample Bottle Sealing and Identification Label Required Information

  1. Unless otherwise notated, these instructions apply to any sample type.

  2. FCS (FCO/As) I.D. - enter the assigned four or five digit FCO/FCA identification number.

  3. Date - enter the date the sample was collected.

  4. Type of Test (Check only one) - select the applicable test. See IRM 4.24.15.15.2, Sample Labeling Matrix, for the correct type of test to select for the tests performed. Checking a single type of test on the label automatically triggers several tests to be performed. The following are required entries for this field:

    1. "637 registration" is checked if the sample is collected at a producer seeking any type of 637 registration.

    2. For blitz samples obtained from an end-user, record a "V" for a sample obtained from a vehicle or a "S" for a sample obtained from a storage tank.

    3. Biodiesel may be checked in addition to "investigative" , if applicable.

  5. Declared Product - mark the space to the right of the declared fuel type. The declared fuel type is the product the paperwork or taxpayer indicates the product to be.

    1. If the product is unknown, or does not fit the types on the label, indicate within the "Other" field what the fuel is alleged to be. This space may also be used to direct the EFL to an enclosed statement that provides more details regarding the sample.

      Note:

      Heating oil, fuel oil, locomotive, or marine fuel should be designated in the "other" field, if applicable.

    2. If the 637 registration test is selected within the "Type of Test" section, for biodiesel input the percentage of biodiesel within the "Bio %" space. For Form 637 biodiesel producer registration testing, the percentage is normally 100%. If the product is a biodiesel or a biodiesel blend, also select the blending product, usually #1 Diesel or #2 Diesel.

    3. No entry is made in the "Bio %" field if no biodiesel is present.

    4. All gasoline samples should have an octane rating and percent of ethanol.

  6. TCN or City/State - For samples obtained from terminals record the TCN. For other samples, record the city and state information.

  7. Number of bottles associated with the sample (record the accurate number). Ensure the correct number of samples are obtained. For example, four one ounce samples are needed for investigative & biodiesel tests. See IRM 4.24.15.15.2, Sample Labeling Matrix.

  8. All information entered in the Chain of Custody and Case File sections must match the corresponding information recorded in the Bottle Label section.

Sample Labeling Matrix

  1. The matrix below identifies the tests performed, sample instructions, required paperwork and the reports generated. Review the "Tests Performed" section of this matrix to select the appropriate type of test on Form 9667.

    Note:

    The group manager may contact the EFL if there are any questions regarding sample labeling or reports.

    If your sample is a: Then mark Form 9667 for this test: Then, the tests performed are: Then, the reports sent are: Then, sample instructions are:

    Note:

    All samples are to be obtained in two ounce bottles. Sample volume must never exceed one ounce.

    Then, the paperwork needed is a:
    Terminal dyed fuel and follow-up terminal dyed fuel samples (should be dyed to specification) Concentration (include TCN number Dye Dye report of analysis, 2 week dye summary spreadsheet One 2-ounce bottle Chain of Custody
    Terminal dyed fuel sample taken down steam (in lieu of a terminal dyed fuel sample, should be dyed to specification) Field concentration (include TCN number and City, State of sampling) Dye Dye report of analysis, 2 week dye summary spreadsheet One 2-ounce bottle Chain of Custody
    Wholesaler or retail pump or storage tank dyed fuel (should be dyed to specification) Field concentration (include City, State) Dye Dye report of analysis, 2 week dye summary spreadsheet One 2-ounce bottle Chain of Custody
    On road propulsion tank (including mobile machinery propulsion tanks) and any storage tank or pump that is designated as clear on-road fuel Usage (include City, State or other desired applicable identification) Dye Dye report or analysis, dye investigative report (if needed), 2 week dye summary spreadsheet One 2-ounce bottles Chain of Custody
    Terminal undyed fuel (including kerosene) not part of a Blitz (should not contain dye, may be biodiesel blends of 0 to 20%) Sulfur (include TCN number and Bio % blending, if applicable) Sulfur, fingerprinting, dye and others, as needed Sulfur report of analysis, if not ULS, lead sulfur report (fingerprinting problem or other problems), dye report of analysis, if not compliant, 2 week sulfur summary spreadsheet One 2-ounce bottles Chain of Custody
    Wholesaler or retailer pump or storage tank holding undyed fuel, not part of a Blitz (may be biodiesel blends of 0 to 20%) Sulfur (include City, State and Bio% blending, if applicable) Sulfur, fingerprinting, dye and others, as needed Sulfur report of analysis, if not ULS, lead sulfur report (fingerprinting problem or other problems), dye report of analysis, if not compliant, 2 week sulfur summary spreadsheet One 2-ounce bottle Chain of Custody
    Biodiesel B-95 to B-100 Investigative (TCN number, if applicable, or City, State) Also select Biodiesel and indicate the biodiesel % (select 637 registration, if applicable) Sulfur, biodiesel (D6751 specifications) Biodiesel report of analysis Four 2-ounce bottles Chain of custody and Form 14403 (include the type of 637 registration, if applicable)
    Renewable Fuel (R-100) Investigative (TCN number, if applicable, or City, State) Select 637 registration, if applicable Sulfur, renewable (D975, D396 specifications) Renewable report of analysis Four 2-ounce bottles Chain of custody and Form 14403 (include the type of 637 registration, if applicable)
    Any 637 registration sample other than biodiesel or renewable Investigative (TCN number, if applicable, or City, State) All available applicable tests for the type of registration Investigative report, any other reports as needed Four 2-ounce bottles Chain of custody and Form 14403 (include the type of registration)
    Suspicious fuel taken at any location for which more than dye and sulfur analysis is desired (may be dyed or undyed) or a fuel sample that does not fit in any category Investigative (TCN number, if applicable or City, State) Everything possible depending on the reasons submitted Investigative report, dye report of analysis, if applicable, sulfur report of analysis (if not ULS), any other reports, as needed Four 2-ounce bottles Chain of custody and Form 14403
    Fuels submitted for comparison or fingerprinting that are not part of a Blitz (such as determination of possible sources of dyed fuel in propulsion tanks) Investigative (TCN number, if applicable or City, State) Everything possible depending on the reasons submitted Investigative report, dye report of analysis, if applicable, sulfur report of analysis (if not ULS), any other reports, as needed Four 2-ounce bottles Chain of custody and Form 14403
    Gasoline samples for octane measurements that are not part of a Blitz Investigative (include TCN number, if applicable or City, State) Include expected octane and ethanol % Sulfur, Octane, Ethanol, Fingerprinting Investigative report Eight 2-ounce bottles (using 2 IRS identification numbers)l Chain of custody and Form 14403 (include which samples are the same so the may be combined)
    Any middle distillate fuel that is part of a Blitz study Blitz (include TCN number, if applicable or City, State) Include Bio% blending, if applicable. Include V or S if an end-user study Sulfur, Fingerprinting, Dye (if colored), Biodiesel (if B6-B20) Pendings, Abnormals, Sulfur report of analysis, Dye report of analysis, B6-B20 Biodiesel report (no reports sent for compliant samples) One 2-ounce bottle Chain of custody and a Blitz Data Sheet, as applicable (mark data sheets with the product it is supposed to be, not what it looks like)
    Any gasoline that is part of a Blitz study Blitz (include TCN number, if applicable, or City, State) Include expected octane and ethanol % Sulfur, Octane, Ethanol, Fingerprinting Pendings, Abnormals, Sulfur report of analysis (if not compliant) Eight 2-ounce bottles (using 2 IRS identification numbers) Chain of custody and a Blitz Data Sheet, as applicable (include which samples are the same so they may be combined)

Chain of Custody Procedures

  1. Samples are evidence and must be documented by an unbroken chain-of-custody.

  2. There are two chain-of-custody forms used by field personnel:

    1. Form 13926, Chain of Custody Control Document

    2. Form 13927, Chain of Custody and Shipping Record

Form 13926 - Chain of Custody Control Document

  1. When custody of a sample is relinquished to another party, Form 13926 is completed to record the sample number, the names of the parties involved, the date each party received the sample, and the date when custody was relinquished.

  2. One control document should be used for each sample and the document should be updated to reflect each transfer of custody. Examples of when this form must be used are:

    1. When a sample is transferred between fuel compliance employees

    2. When a sample is transferred from a state official to an FCO or FCA

  3. The properly completed form must include the:

    1. Sample number

    2. Name of individual with custody of the sample

    3. Agency of the individual with custody of the sample

    4. Signature of the individual with custody of the sample

    5. Date the individual with custody of the sample received and relinquished control of the sample

  4. This form must be placed in the shipping box with the fuel samples to which it pertains.

  5. In addition, Form 13927 must also be completed and accompany the relinquished samples.

Form 13927 - Chain of Custody and Shipping Record

  1. Form 13927 must be completed by employees for every box of samples relinquished to the shipping company and sent to the EFL. If the shipment contains greater than five samples, an additional Form 13927 will be completed and included in the shipping box.

  2. The employee must manually complete this form.

  3. The properly completed form must include the following:

    1. The shipping company tracking number

    2. The name of the individual shipping the samples

    3. The position title and phone number of the individual shipping the samples

    4. The description of the sample (i.e. diesel, kerosene, dyed diesel)

    5. The type (i.e. usage, concentration, biodiesel)

    6. The signature of shipper, shipping company and date shipped

    Note:

    The employees is encouraged to affix the chain of custody section of the sample label, Form 9667 to Form 13927. When properly completed, this section will include the sample reference number, description of the sample, and type of test.

  4. The information on the Form 13927 must match the information on the Form 9667 for the corresponding sample.

  5. This form must be placed in the shipping box with the fuel samples to which it pertains.

Packing and Shipping Samples

  1. All samples must be secured following IRM 4.24.15.13, Sampling Methods and labeled following IRM 4.24.15.15, Sample Bottle Labeling Procedures.

  2. 49 Code of Federal Regulations (CFR) 173.4 (a) and International Air Transport Association (IATA) regulations 2.6 cover the packing and shipping of excepted quantities of Hazard Class 3 liquids.

  3. All taxable fuels, including gasoline, are Hazard Class 3 liquids and are eligible for shipping under 49 CFR 173.4a, as well as IATA 2.6.

  4. The only documentation required on the outer box is the "excepted quantity" marking. The marking is pre-printed on the boxes provided.

  5. Shipments under 49 CFR 173.4 (a) and IATA 2.6 are accepted at shipping locations that ship dangerous goods.

  6. Failure to follow procedures in 49 CFR 173.4 (a) and IATA 2.6 may result in an unsafe shipping situation and may subject the employee to a fine.

Packing Instructions

  1. 49 CFR 173.4 (a) and IATA 2.6 allow a maximum of 30 ml (approximately one fluid ounce) per "inner packaging." An "inner packaging" is defined as one sample bottle.

  2. The approved shipping box has two layers and can hold up 12 bottles per layer for a total of 24 bottles. Only "approved " shipping boxes should be used to ship the two ounce bottles.

  3. The maximum number of sample bottles permitted in each box is dependent on the fuel product(s) to be shipped:

    1. Diesel fuel and kerosene - maximum of 24 bottles

    2. Jet fuel with a flash point less than 73 degrees (Jet B, not typically used) - maximum of 15 bottles

    3. Jet fuel with a flash point greater than 73 degrees and less than 140 degrees (Jet A and Jet A-1) - maximum of 24 bottles

    4. Gasoline - maximum of 15 bottles

      Note:

      Two or more products may be shipped in the same box. If gasoline is one of the products shipped, no more than 15 total samples may be shipped in the box.

    5. Transmix - handle as gasoline - maximum of 15 bottles

      Note:

      Transmix samples are only secured when directed by management, or as part of an examination..

  4. Packing procedures:

    1. Construct an approved shipping box and tape the bottom.

    2. Place the large plastic bag into the box.

    3. Construct the bottom level tier by placing the assembled sample compartment divider into the bag.

    4. If placing sample bottles in the bottom tier, see (g) through (k) below for procedures regarding packing the sample bottles, then return to (e).

    5. Place the flat cardboard tier divider on top of the bottom tier.

      Note:

      Only one flat cardboard tier divider is needed per shipping box and it should be placed between the bottom and top tiers.

    6. Construct the top level sample tier by placing the assembled sample compartment divider directly on top of the flat compartment divider.

      Note:

      The bottom level sample tier, the tier divider, and the top level sample tier must all be in the shipping box, regardless of the number of samples in the box.

    7. Ensure the outside of the bottle is clean and dry.

    8. The bottle should be sealed firmly with a cap, but do not over tighten, as that may cause the cap to crack. Check to ensure no leakage. Re-bottle and create new paperwork if the bottle is leaking. The employee must record all actions taken in the IMS case file.

    9. Wrap each 30 ml sample bottle with one piece of absorbent material prior to placing in the individual plastic bag.

    10. Seal the individual sample bag (do not use tape to seal the bag).

    11. Place each sample into the box, ensuring the sample is listed on the chain of custody document(s).

      Note:

      Samples shall only be placed in the inner compartments of the box.

    12. Seal the large plastic bag with tape or a twist tie supplied with the shipping box.

Shipping Instructions

  1. All samples shall be shipped overnight using the current approved contract carrier and transportation mode.

  2. All air bills must be completed electronically.

  3. No Saturday or Sunday deliveries should be requested. Samples may be shipped on Friday, but do not indicate on the air bill for the package to be delivered during the weekend.

  4. Ship samples to:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  5. Samples must be shipped to the EFL within five (5) business days of being taken. Extensions may be granted by the group manager, if warranted. The employee will follow the agreement in the Memorandum of Understanding (MOU) between the IRS and the state agency for samples obtained by a state employee as part of an MOU.

  6. Include in the box with the samples:

    1. Form 13927 for all shipments

    2. Form 13926, if applicable

      Note:

      The employee must record the shipping company tracking number in the box entitled "air bill number" on the Form 13927.

    3. See IRM 4.24.15.14.3, Shipping of Investigative Samples, for more information on what should be included in the shipping box for Investigative samples.

    4. See IRM 4.24.15.8.5, Packing and Shipping Blitz Samples, for more information on what should be included in the shipping box for Blitz samples.

  7. Prior to sealing the box, the employee must ensure the samples in the box match the samples recorded on the chain-of-custody document(s).

  8. Seal the shipping box with packaging tape.

  9. The shipping box must contain the required excepted quantities marking in red or black. The marking must not be covered by any other labels or written on. The marking for excepted quantities is pre-printed on the box.

  10. The identified shipping account should not be used for any purposes other than to ship fuel.

  11. The shipping box must remain in the custody of the shipper until it is taken to a shipping company location that accepts dangerous goods. The box must not be left in the mail room, hotel front desk, or other location for pick-up. Failure to comply with these instructions will break the chain-of-custody.

Blocked Pump Check Sheet

Data Fields BLOCKED PUMP CHECK SHEET
Taxpayer:
EIN:
Address
City
State and Zip Code
Registration#:
Pump Location:
Contact:
Title:
Phone:
Pass/Fail:
Person conducting the inspection:
Date of Inspection:
Physical Inspection of Blocked Pump: (circle YES or NO) IRC 48.6427-10 requires that a Blocked Pump meet the following criteria:
YES or NO It is used to dispense undyed kerosene that is sold at retail for use by the buyer in any nontaxable use.
YES or NO It is at a fixed location.
YES or NO It is identified with a legible and conspicuous notice stating: "Undyed Untaxed Kerosene, Nontaxable Use Only" .
YES or NO It cannot reasonably be used to dispense fuel directly into the fuel supply tank of a diesel powered highway vehicle, OR
YES or NO Is locked by the vendor after each sale and unlocked by the vendor only at the request of a buyer for use other than as a fuel in a diesel powered highway vehicle.
Reason for Pump Failure Comments