Compressed Natural Gas and Liquified Natural Gas Standardized Collection and Enforcement System

Ala. Code tit. 40, ch. 17, art. 3B

in effect

Ala. Code § 40-17-168 Legislative Findings.

40-17-168. Legislative Findings. The Legislature declares that the intent of this article is to establish an efficient, standardized motor fuel tax collection and enforcement system for the collection of the excise tax on compressed natural gas and liquefied natural gas. (Act 2017-229, §2.)

Ala. Code § 40-17-168.1 Definitions.

40-17-168.1. Definitions. For the purposes of this article, the following terms shall have the following meanings: (1) COMMISSIONER. The Commissioner of the Department of Revenue. (2) COMPRESSED NATURAL GAS or CNG. Natural gas compressed to a pressure at or above 200-248 bar (i.e., 2900-3600 pounds per square inch) and stored in high-pressure containers and used as a fuel for natural gas-powered vehicles. (3) DEPARTMENT. The Department of Revenue. (4) DIESEL GALLON EQUIVALENT or DGE or DIESEL-EQUIVALENT GALLON or DEG. The amount of alternative fuel it takes to equal the energy content of one liquid gallon of diesel fuel. The term is a measure for consumers to compare the energy content of competing fuels against diesel fuel and is 6.059 pounds of liquefied natural gas for one gallon of diesel fuel unless the National Conference for Weights and Measures establishes standards for converting liquefied natural gas to a gallon of diesel fuel at which time such standard conversion shall be used. (5) FLEET PRODUCER OF CNG/LNG. Any person, entity, or business producing CNG or LNG for use in one or more vehicles designed to be operated on the public roads and highways that are owned and operated as a unit for commercial purposes. (6) GASOLINE GALLON EQUIVALENT or GGE or GASOLINE-EQUIVALENT GALLON or GEG. The amount of alternative fuel it takes to equal the energy content of one liquid gallon of gasoline. The term is a measure for consumers to compare the energy content of competing fuels against gasoline and is 5.66 pounds of compressed natural gas or 126.67 cubic feet for one gallon of gasoline unless the National Conference for Weights and Measures establishes standards for converting compressed natural gas to a gallon of gasoline at which time such standard conversion shall be used. (7) LIQUEFIED NATURAL GAS or LNG. Natural gas that has been liquefied by reducing its temperature to -260 degrees Fahrenheit at atmospheric pressure. (8) NATURAL GAS. A gaseous mixture of hydrocarbon compounds, the primary one being methane. (9) PERSONAL PRODUCER OF CNG. Any individual producing and using CNG as a fuel in a personal vehicle used for noncommercial purposes. (10) PUBLIC SELLER OF CNG/LNG. Any person operating a service station or other retail outlet engaged in the selling of CNG or LNG to the ultimate consumer for use in a vehicle designed to be operated on public roads and highways. (Act 2017-229, §2.)

Ala. Code § 40-17-168.2 Levy and Collection of Tax; Application and Fee.

40-17-168.2. Levy and Collection of Tax; Application and Fee. (a) There is hereby levied a reduced rate excise tax on compressed natural gas (CNG) and liquefied natural gas (LNG) in an amount of $.08 per GGE or DGE effective October 1, 2018. Effective October 1, 2023, the reduced rate excise tax on compressed natural gas (CNG) and liquefied natural gas (LNG) will increase to $.13 per GGE or DGE. Effective October 1, 2028, the excise tax on compressed natural gas (CNG) will increase to the gasoline excise tax rate as prescribed by subsection (a)(1) of Section 40-17-325 per gasoline gallon equivalent (GGE) and the excise tax on liquefied natural gas (LNG) will increase to the diesel fuel excise tax rate as prescribed by subsection (a)(2) of Section 40-17-325 per diesel gallon equivalent(DGE). Effective October 1, 2028, in the event that an additional gasoline excise tax, which is not referenced in subsection (a)(1) of Section 40-17-325, is levied, the excise tax on compressed natural gas (CNG) will be calculated using the combined gasoline excise tax rates for compressed natural gas (CNG) per gasoline gallon equivalent (GGE). In the event that an additional diesel fuel excise tax, which is not referenced in subsection (a)(2) of Section 40-17-325, is levied, the excise tax on liquefied natural gas (LNG) will be calculated using the combined diesel fuel excise tax rates for liquefied natural gas (LNG) per diesel gallon equivalent (DGE). (1) Every public seller must collect and pay over to the department an excise tax in an amount equal to the excise tax in effect as prescribed by this subsection per GGE on compressed natural gas or per DGE on liquefied natural gas upon the sale of the compressed natural gas or liquefied natural gas for use in a vehicle designed to be operated on the public roads and highways. (2) Fleet producers of compressed natural gas or liquefied natural gas shall remit to the department an excise tax in an amount equal to the excise tax in effect as prescribed by this subsection per GGE on compressed natural gas or per DGE on liquefied natural gas withdrawn for use in a vehicle designed to be operated on the public roads and highways. (b)(1) Personal producers of compressed natural gas who installed a system to compress natural gas, prior to January 1, 2019, that will be used to fuel a motor vehicle must submit an application fee, based upon the number of CNG powered vehicles, to the department no later than January 20, 2019. Beginning January 1, 2019, each personal producer of compressed natural gas must submit an application with the applicable fee per CNG vehicle to the department within 20 calendar days from the completed date of installation of a new system to compress natural gas that will be used to fuel a motor vehicle. (2) There is hereby levied an annual application fee of one hundred ($100) per vehicle for all personal producers of compressed natural gas in lieu of the excise tax levied in subsection (a). The annual application fee is due January 20 of each calendar year beginning with January 1, 2019, and each calendar year thereafter. If a CNG vehicle is purchased, by the personal producer who has installed a system to compress natural gas, after January 1 in any calendar year, the application fee is due to the department within 20 calendar days following purchase or acquisition of the CNG powered vehicle. If any vehicle is acquired, natural gas system installed, or vehicle put in operation after June 30 the fee shall be one-half the flat fee stated in this section, or after September 30, the fee shall be one-fourth of the flat fee stated in this section. The personal producer must include the vehicle identification number of each vehicle that is powered by compressed natural gas, the purchase date of the CNG vehicle, date of installation of system, and any other documentation the department deems necessary on the annual application. The annual fee shall not apply to a fleet producer. A bond will not be required for a personal producer of compressed natural gas who files the annual application fee. A refund will not be granted to the personal producer if the vehicle is sold during the calendar year. The personal producer is required to notify the department within 20 calendar days if he or she ceases to be a personal producer of compressed natural gas for use in a vehicle. (3) Failure to submit an application and required fee shall subject the personal producer to a penalty of not greater than five hundred dollars ($500) per vehicle. (c) If the motor fuel excise tax is collected by the public seller or fleet producer of CNG or LNG or the annual application fee is remitted by the personal producer for compressed natural gas, the compressed natural gas or liquefied natural gas shall not be subject to sales or use tax levied by this state. (Act 2017-229, §2.)

Ala. Code § 40-17-168.3 Application Form.

40-17-168.3. Application Form. Each application for a license under this article must be made upon a form prescribed by the commissioner and furnished by the department. (Act 2017-229, §2.)

Ala. Code § 40-17-168.4 License Requirement.

40-17-168.4. License Requirement. Each person engaged in business in this state as a public seller of CNG/LNG or a fleet producer of CNG/LNG shall first obtain a public seller of CNG/LNG or a fleet producer of CNG/LNG license. The application fee for a public seller of CNG/LNG or a fleet producer of CNG/LNG license is fifty dollars ($50). Only one license is necessary for multiple locations; however, the public seller of CNG/LNG or a fleet producer of CNG/LNG must remit a twenty-five dollar ($25) registration fee for each additional location in existence or upon establishing or acquiring a new location. (Act 2017-229, §2.)

Ala. Code § 40-17-168.5 Surety Bond.

40-17-168.5. Surety Bond. (a) Upon approval of the application by the department, the applicant must file with the department a surety bond. The bond amount for an applicant for a license as a public seller of CNG/LNG or a fleet producer of CNG/LNG shall be a minimum of twenty-five thousand dollars ($25,000) or in the approximate amount of twice the average monthly tax liability, whichever is greater. (b) The department shall review the bond amounts every five years beginning January 2023 to ensure that each public seller of CNG/LNG and each fleet producer of CNG/LNG has posted a surety bond sufficient to cover twice the average monthly tax liability as referenced in subsection (a). Based upon this review, or if at any time that the department determines that the bond amount is insufficient to cover twice the average monthly tax liability, the commissioner may require an additional surety bond from any licensee if: (1) The commissioner determines that the surety on an existing bond is unsatisfactory; (2) A surety notifies the department that it intends to cancel a bond as provided in subsection (d); or (3) The commissioner, after reviewing the payment history of the licensee, determines that the existing bond of the licensee is insufficient in an amount to insure the prompt payment of all excise taxes that are due or may become due to the state by the licensee upon the sale or withdrawal of compressed natural gas or liquefied natural gas. However, in no case shall a new or additional bond be more than two months of average excise tax owed by the licensee. (c)(1) The department shall notify a licensee at his or her last known address by first class U.S. mail or, at the option of the department, certified mail, return receipt requested, that it is requiring such new or additional bond for any reason as provided in subsection (b), and the licensee, within 60 days from the date the notice is mailed by the department, shall either: a. File the new or additional bond as requested by the department; or b. File a notice of appeal with the Alabama Tax Tribunal as allowed in Chapter 2A. (2) The department may immediately cancel the licensee’s license upon the expiration of the 60-day period set out in subdivision (1) if the licensee fails to either provide the new or additional bond requested by the department or timely appeal to the Alabama Tax Tribunal. (d)(1) Any surety on an existing bond furnished by a licensee may notify the department in writing of its intent to cancel the bond. The department shall immediately notify the licensee of the intent of the surety to cancel the surety bond, and the licensee shall have 60 days from the date the notice is mailed by the department to provide a sufficient replacement bond as requested by the department. (2) The department may immediately cancel the licensee’s license upon expiration of the 60-day period set out in subdivision (1) if the licensee fails to either provide a new replacement bond as requested by the department or appeal the proposed revocation to the Alabama Tax Tribunal within the 60 days as allowed by Chapter 2A. (3) The surety requesting to be released shall remain liable for any liability already accrued or which shall accrue during the 60-day period set out in subdivision (1), but shall not be responsible for any liability which accrues after the 60-day period. (e) A surety providing a bond must be authorized to engage in business within this state. The surety bonds are conditioned upon faithful compliance with this article, including the filing of returns and the payment of all taxes prescribed in this article. The commissioner shall approve surety bonds that are sufficient in content and form, and the surety bonds shall indemnify the state against any loss arising from the failure of the licensee to pay, for any cause, the motor fuel excise tax levied by this article. (f) A personal producer of CNG is not required to post a bond. (Act 2017-229, §2; Act 2026-528, §1.)

Ala. Code § 40-17-168.6 Refusal to Issue License; Appeal.

40-17-168.6. Refusal to Issue License; Appeal. (a) The department may refuse to issue a license under this article if the applicant or a principal of the applicant has done any of the following: (1) Had a compressed natural gas or liquefied natural gas license or registration issued by this state or another state cancelled for cause. (2) Been convicted of any offense involving fraud or misrepresentation. (3) Been convicted of any other offense that indicates that the applicant may not comply with this article if issued a license. (b) The department may also refuse to issue a license if the applicant is in arrears to the state for any taxes or for other good cause shown. (c) Any refusal by the department under this section to issue a license may be appealed to the Alabama Tax Tribunal under Chapter 2A. (Act 2017-229, §2.)

Ala. Code § 40-17-168.7 Issuance of License.

40-17-168.7. Issuance of License. Upon approval of the required bond, the department shall issue the license to the applicant. The license is not transferable and remains in effect until surrendered or cancelled. (Act 2017-229, §2.)

Ala. Code § 40-17-168.8 Discontinuance of Licensed Business; Payment of Taxes.

40-17-168.8. Discontinuance of Licensed Business; Payment of Taxes. (a) A licensee who discontinues in its entirety the business for which a license was authorized by this article shall notify the department in writing at least 10 days prior to the time the discontinuance, sale, or transfer takes effect and shall surrender the license to the department. The notice shall state the effective date of the discontinuance and, if the licensee has transferred the business or otherwise relinquished control to another person by sale or other means, the date of the sale or transfer and the name and address of the person to whom the business is transferred or relinquished. The notice shall also include any other information required by the department. (b) All taxes for which the licensee is liable under this article but are not yet payable shall be due on the date of the discontinuance. If the licensee has transferred the business to another person and does not give the notice required herein, the person to whom the business was transferred is jointly and severally liable for the amount of any tax owed by the licensee to this state on the date the business was transferred. The liability of the person to whom the business was transferred may not exceed the value of the property and business acquired from the licensee. (Act 2017-229, §2.)

Ala. Code § 40-17-168.9 Cancellation of License.

40-17-168.9. Cancellation of License. (a) In accordance with Chapter 2A, the department may cancel any license required under this article, upon written notice sent to the licensee’s last known address as it appears in the department’s files, for any of the following reasons: (1) Filing by the licensee of a false report of the data or information required by this article. (2) Failure, refusal, or neglect of the licensee to file a report or to provide any information required by this article. (3) Failure of the licensee to pay the full amount of all excise taxes due or to pay any penalties or interest due. (4) Failure of the licensee to keep accurate records of the quantities of compressed natural gas or liquefied natural gas produced, sold, or used in Alabama. (5) Failure to file a new or additional surety bond upon request of the department pursuant to this article. (6) Conviction of the licensee or a principal of the licensee for any act prohibited under this article. (7) Failure, refusal, or neglect of a licensee to comply with any other provision of this article or any rule promulgated pursuant to this article. (8) Having a compressed natural gas or liquefied natural gas license or registration issued by another state cancelled for cause. (9) Change in the ownership or control of the licensee. (b) The license can be cancelled upon the written request of the licensee. (Act 2017-229, §2.)

Ala. Code § 40-17-168.10 Deduction for Sale or Disbursement to Exempt Entities.

40-17-168.10. Deduction for Sale or Disbursement to Exempt Entities. (a) A licensed public seller of compressed natural gas or liquefied natural gas or the licensed fleet producer of compressed natural gas or liquefied natural gas may deduct the number of gallons of compressed natural gas or liquefied natural gas sold or disbursed to the following entities provided that the exempt entity has a valid exempt entity license issued in accordance with subsection (j) of Section 40-17-332: (1) The United States government or any agency thereof. (2) Any county governing body in this state. (3) The governing body of any incorporated municipality in this state. (4) City and county boards of education in this state. (5) The Alabama Institute for Deaf and Blind, the Department of Youth Services school district, and private and church school systems, as defined in Section 16-28-1, which offer essentially the same curriculum as offered in grades K-12 in the public schools of this state. (b) The exempt entity is not entitled to apply for a refund for any excise tax paid to the licensed public seller or licensed fleet producer. The licensed public seller or licensed fleet producer must take the deduction for all gallons of compressed natural gas or liquefied natural gas sold to the licensed exempt entity on the monthly tax return. The licensed exempt entity must provide the licensed public seller or licensed fleet producer with its exempt entity number prior to the purchase. If the licensed exempt entity is not subject to the excise tax levied under this article on compressed natural gas or liquefied natural gas, the licensed exempt entity will not be subject to the state inspection fee levied under Section 8-17-87. (Act 2017-229, §2.)

Ala. Code § 40-17-168.11 Tax Payments and Returns.

40-17-168.11. Tax Payments and Returns. (a) Each licensed public seller or licensed fleet producer shall file the monthly return required herein, in a format prescribed by the commissioner, on or before the 20th day of each calendar month for the preceding month. (b) The tax levied by this article shall be paid to the department by each taxpayer on or before the 20th day of each calendar month for the preceding month and shall be accompanied by any required returns. The department may require all or certain taxpayers to file tax returns and payments electronically. (c) If the returns or payments are not timely submitted, the taxpayer shall be subject to penalties in accordance with Chapter 2A of this title and interest in accordance with Chapter 1 of this title. (Act 2017-229, §2.)

Ala. Code § 40-17-168.12 Reporting of Information; Single Return for Multiple Locations.

40-17-168.12. Reporting of Information; Single Return for Multiple Locations. (a) Each return required to be filed under this article shall be on forms and by means prescribed by the commissioner and furnished by the department and shall contain any information the department considers necessary for the enforcement of this article. (b) The report must contain all of the following information: (1) A total of all monthly disbursements of compressed natural gas or liquefied natural gas, or both, made by the public seller or fleet producer for use in a motor vehicle for each location. (2) A total of all monthly disbursements of compressed natural gas or liquefied natural gas to licensed exempt entities. (3) The name and exempt entity license number of any exempt agency electing to be licensed under Section 40-17-332. (c) The department may require the reporting of other information it considers reasonably necessary to the enforcement of this article. (d) If the public seller or fleet producer has multiple locations, the public seller or fleet producer should file one monthly return for all locations in Alabama. (Act 2017-229, §2.)

Ala. Code § 40-17-168.13 Receipt and Remission of Taxes; Liability.

40-17-168.13. Receipt and Remission of Taxes; Liability. All tax payments due to this state that are received by a licensed public seller or a licensed fleet producer shall be held by the licensed public seller or the licensed fleet producer as trustee in trust for this state, and the licensed public seller or licensed fleet producer has a fiduciary duty to remit to the department the amount of tax received. A licensed public seller or licensed fleet producer is liable for the taxes paid to it or accrued at the time of the sale. (Act 2017-229, §2.)

Ala. Code § 40-17-168.14 Recordkeeping.

40-17-168.14. Recordkeeping. Each person required to be licensed under this article shall keep and maintain records of all purchases of natural gas, all sales or disbursement records, and other pertinent records and papers required by the department for the reasonable administration of this article for a period of no less than three years. (Act 2017-229, §2.)

Ala. Code § 40-17-168.15 Disposition of Funds.

40-17-168.15. Disposition of Funds. All excise taxes and fees collected under this article, less refunds and administrative fees for costs of collection, shall be paid into the State Treasury and distributed in accordance with Section 40-17-361(a). (Act 2017-229, §2.)

Ala. Code § 40-17-168.16 Civil Penalties.

40-17-168.16. Civil Penalties. (a) Each person who engages in any business activity for which a license is required by this article without having first obtained and subsequently retained a valid license shall be subject to the following civil penalties: (1) Ten thousand dollars ($10,000) for the first violation. (2) For each subsequent violation, the amount shall be increased by the sum of the current violation plus prior violations. (b) Civil penalties prescribed under this section shall be assessed, collected, and paid in the same manner as the compressed natural gas or liquefied natural gas tax. (Act 2017-229, §2.)

Ala. Code § 40-17-168.17 Criminal Penalties.

40-17-168.17. Criminal Penalties. (a) Any person who willfully does any of the following is guilty of a Class A misdemeanor, but shall be fined not less than five thousand dollars ($5,000) nor more than twenty-five thousand dollars ($25,000): (1) Fails to obtain a license as required by this article prior to engaging in an activity for which a license is required. (2) Fails to pay to this state no more than 30 days after the date the tax is due the tax levied by this article. (3) Makes a false statement on an application, return, ticket, invoice, statement, or any other document required under this article. (4) Fails to file no more than 30 days after it is due any return required by this article. (5) Fails to maintain any record required by this article. (6) Makes a false statement in an application for a refund. (7) Fails to make required disclosure of the correct amount of compressed natural gas or liquefied natural gas sold or used in this state. (8) Dispenses into the supply tank of a motor vehicle any compressed natural gas or liquefied natural gas on which tax levied by this article has not been paid. (b) Any person who willfully does any of the following with the intent to either evade or circumvent the tax levied by this article or assists any other person in efforts to evade or circumvent the tax shall be guilty of a Class C felony, but shall be fined not less than twenty-five thousand dollars ($25,000) nor more than fifty thousand dollars ($50,000): (1) Fails to pay compressed natural gas or liquefied natural gas taxes and diverts the tax proceeds for other purposes. (2) As a licensee or the agent or representative of a licensee, converts or attempts to convert compressed natural gas or liquefied natural gas tax proceeds for the use of the licensee or the licensee’s agent or representative, with the intent to defraud the state. (3) Collects compressed natural gas or liquefied natural gas taxes when not authorized or licensed by the department to do so. (4) Conspires with any other person or persons to engage in an act, plan, or scheme to defraud this state of compressed natural gas or liquefied natural gas tax proceeds. (5) Fails to remit to the department any tax levied pursuant to this article if the person has added, or represented that he or she has added, the tax to the sales price for the compressed natural gas or liquefied natural gas and has collected the amount of the tax. (c) Each offense under this section is subject to a separate criminal penalty. (Act 2017-229, §2.)

Ala. Code § 40-17-168.18 Appropriations.

40-17-168.18. Appropriations. There is appropriated from the Road and Bridge Fund to the Department of Revenue, for the fiscal year ending September 30, 2018, the department’s actual cost to implement and administer this article. Every year thereafter as a first charge against the revenues collected under this article, an amount of revenue is hereby appropriated to the Department of Revenue to offset its actual costs in the administration of this article. Such appropriations shall be in addition to any other appropriation. (Act 2017-229, §3.)

Ala. Code § 40-17-168.19 Rulemaking Authority.

40-17-168.19. Rulemaking Authority. The commissioner may adopt rules necessary to effectuate the reporting, collection, administration, and enforcement of the taxes imposed under this article. The commissioner shall prescribe the forms or format for reporting the information required in this article. (Act 2017-229, §3.)

Source: Alabama Legislature (alison.legislature.state.al.us)URL: https://alison.legislature.state.al.us/code-of-alabamaFetched: 10/20/2026