The Wisconsin Department of Revenue recently issued guidance regarding the taxability of vegetable oil and animal fat converted to motor fuel (Wisconsin News for Tax Practitioners: Sales and Use Tax Exemption for Vegetable Oil or Animal Fat Converted to Motor Vehicle Fuel Effective September 1, 2011 (Mar. 23, 2012)). Generally, the sale of motor fuel is exempt from Wisconsin sales and use tax because it is subject to a separate motor vehicle fuel excise tax. If the fuel is not subject to the motor vehicle fuel tax, it will be subject to the sales or use tax.
As of September 1, 2011, a special exemption was created for the first 1,000 gallons of motor fuel created by an individual by converting vegetable oil or animal fat into fuel. This exemption from state sales tax applies even if the fuel is also exempt from the motor vehicle fuel excise tax. The exemption only applies to individuals converting vegetable oil or animal fat into motor fuel for personal use in their personal vehicles. The exemption will not apply to vegetable oil or animal fat that is converted into motor fuel for use in company-owned vehicles.