Veggie Oil Vehicles and the Law

Excited about the idea of running your car on veggie oil? Maybe even free waste oil? Before you get too excited, carefully consider this problem: It’s technically illegal, although that may be changing soon.

How could something so simple and well-intentioned cause legal problems? Here’s the skinny:

• Fuel taxes on “traditional” fuels (gasoline, petroleum diesel) help fund the building and maintenance of roads used by veggie oil cars. Using vegetable oil as a fuel without paying fuel tax on it is considered tax evasion.
• The U.S. Environmental Protection Agency (EPA) frowns on using vegetable oil in engines designed to burn diesel fuel because the emissions are not the same. If, for example, someone were to develop an unusual chemical concoction to burn in gas or diesel engines, it could cause toxic air pollution if it weren’t tested and approved prior to use.

All states have a fuel tax of some kind and the federal government also taxes fuel, but enforcement of tax laws regarding vegetable oil as a fuel are inconsistent. When it comes to biodiesel, which is basically chemically processed vegetable oil that mimics petroleum diesel fuel, federal tax laws are straightforward: You’ve got to pay taxes on it no matter where it comes from.

While enforcement of these laws has traditionally been lax, a few recent cases have received attention and may signal a new level of concern:

• In May 2007 in Charlotte, N.C., Robert Teixeira was fined $1,000 for failing to pay taxes on the vegetable oil he burns in his 1981 Mercedes.
• Two months before that David and Eileen Wetzel, of Decatur, Ill., were told they needed to be licensed as a special fuel supplier if they wanted to keep driving their veggie car or face possible felony fines for not paying fuel taxes.

If you buy veggie oil that is intended to be used as fuel, the taxes have already been paid by your supplier. Dave Dunham, owner of Smarter Fuel in Bethlehem, Pa., is paying a lot of taxes on the used vegetable oil he gathers for free. He collects hundreds of thousands of gallons of oil from about 1,000 restaurants stretched across five states. Then he cleans it up and resells it for about $1.95 per gallon, depending on state taxes. Since the taxes are already accounted for, consumers don’t need to report and pay the fuel tax individually.

The federal government does require you to fill out the necessary registration forms to make biodiesel for your car but it does not charge a fee for doing so, according to Enesta Jones, a spokesperson for the EPA.

There is also a concern that vegetable oil cars might violate the federal Clean Air Act. The Act bans tinkering with auto emissions by anyone who doesn’t have EPA certification to do so, according to spokesperson John Millett. Using vegetable oil instead of diesel fuel could quite likely affect the emissions from your car, Millett says.

“Also, a vehicle has to be modified to run on vegetable oil.” Jones says. “Such a modification is not legal unless it has been through an emissions certification procedure — this is different than just registering the fuel — to ensure that the modified vehicle itself meets emission standards.”

With some state laws still very much up in the air, there are ways to play it safe if you’re not sure if you should be paying taxes or not. On his Web site, Graydon Blair, owner of Utah Biodiesel Supply, a parts distributor for home biodiesel brewers, suggests you keep a log of the gallons of biodiesel or veggie oil you burn. Then if you do get into trouble with the state tax authorities you can produce the log and tell them you plan on paying at tax time. State and federal income tax forms have provisions for paying fuel taxes, Blair says. (Consult your tax advisor for details on how to best handle taxes in your state.  Mother)

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