b'Member NewsIRS DYED FUEL ENFORCEMENT INSPECTIONS Your Rights and ResponsibilitiesWashington - D.C.I am often asked what Vcriteria the IRS uses when they stop by retail erify that dyed fuel dispensers con-gasoline stations to check for compliance with tain the required notice.federal tax regulations. IRS field agents are Verify that the strength or composi-deployed nationwide, every day for this purpose,tion of dyed fuel has not been altered.primarily enforcing diesel fuel and kerosene point of sale requirements under Internal Revenue CodeVerify that fuel dispensed from undyed 6702. It is never pleasant to have an IRS field agentdiesel and undyed kerosene pumps does not poking around your facility. However, complianceshow visible evidence of dye.Mark S. Morgan, Esqenforcement benefits all retailers by levelling the Determine the concentration of sulfur in samples EMA Regulatory Counsel competitive marketplace. On the other hand, unan- obtained from diesel fuel pumps.nounced enforcement inspections can feel intrusive. We thank Mark Morgan Under federal law (IRC4083(d)), IRS field agentsVerify registered IRS Form 637 UP Activityfor his last article are given the authority to make a warrantless entryLetter meets the IRS blocked pump criteriafor WPMA onto the commercial premises of wholesalers,for the sale of tax-free clear kerosene from a distributors, and retailers of taxable fuel. IRS fieldretail dispenser.agents arrive unannounced, and are authorized toDetermine if gasoline has been adulterated.examine business records, inspect equipment and sample fuel. This isnt to say retailers dont haveEducate taxpayers concerning fuel tax laws. any rights during an onsite enforcement inspection.Inspecting the FacilityAn IRS field agent must present his/her credentialsNext, the field agent will tour the re-before the inspection begins and inform retail- tail facility and request information ers of their rights in writing. Retailer rights haveneeded to understand the opera-their limit. Retailers do not have the right to copytion of the business including; the a field agents credentials, although it is often at- hours of operation, location of all tempted but never successful. Dont get off on thepumps and tanks, the types of fuel wrong foot. Once the field agent arrives, the pathstored and/or sold at this location, of least resistance is to cooperate fully.identity of the fuel supplier(s), types of records kept IRS field agents follow a tightly scripted processfor sales and deliveries, sales of dyed products to when conducting a retail enforcement inspec- end users, source of the fuel in the propulsion tanks tion. The process is set down in an IRS practiceof the retailers trucks and IRS 637 registration in-manual that all field inspectors carry. While someformation. This information must be provided by the discretion is allowed, field agents pretty much go byretailer upon request, there are no exceptions.the book. Here is what to expect when an IRS fieldFuel Samplingagent visits your retail site:Field Agent Identification After inspecting the retail facility, the field agent will obtain a nozzle When an IRS agent visits a taxpayer, they will alwayssample from each tank holding diesel provide two forms of official credentials, called afuel and kerosene if warranted. Dyed pocket commission and a HSPD-12 Card. Both formsfuel samples will be forwarded to a include a serial number and photo of the IRS em- testing laboratory if any anomalies are ployee. Taxpayers have the right to see each of theseidentified during the field inspection. Testing will credentials and can verify information on the agentsidentify if there is visible evidence of dye in clear HSPD-12 card by calling a dedicated IRS telephonefuel or if dyed fuel lacks the required concentration number, provided by the agent for verifying theof red dye. Samples obtained for sulfur testing will information and confirming his or her identity. likely be taken if information in retailer records Inspecting Retailer Records indicates the fuel may exceed the allowable sulfur Retailer inspections, including truck stops, are con- level. Gasoline sample and testing for adulterants ducted to look primarily for motor fuel excise taxare less common and are taken only during special evasion. The inspecting field agent will: IRS enforcement projects or under orders by IRS field office management. 20 www.wpma.com /Winter 2024'