Oct 02 ,2025

The Federal LUST Tax - Complete Guide

What is Federal LUST Tax?

The Federal LUST (Leaking Underground Storage Tank) Tax is an excise tax imposed on specific fuels, falling under the Fuel Excise Tax category. It is designed to fund the cleanup of leaking underground storage tanks that contaminate the environment. This tax is administered by the IRS and is meant to ensure that those responsible for the fuel’s use contribute to the remediation of contamination caused by leaks. The LUST tax is applied to various types of fuel, including gasoline, diesel, and kerosene.

What is the LUST Trust Fund?

The LUST Trust Fund is a federal fund established by the EPA to finance the cleanup of leaking underground storage tanks that pose a risk to human health and the environment. The fund is primarily used to clean up contamination resulting from petroleum products leaking from underground storage tanks. The fund is replenished through revenue from the LUST tax collected on certain fuels.

Who Pays the LUST Tax?

The LUST tax applies to the manufacturers, distributors, and importers of certain fuels. These entities are responsible for collecting and paying the tax to the IRS. Additionally, businesses that use fuel types subject to the tax, such as dyed diesel or kerosene for aviation, may also be required to comply with the LUST tax regulations. The LUST tax is ultimately passed on to the end consumer in the form of higher fuel prices, but the filing and payment responsibilities lie with the fuel producers and suppliers.

How Much is the LUST Tax?

The LUST tax rate varies depending on the type of fuel. Below is a detailed breakdown of the LUST tax rates associated with specific IRS numbers:
IRS Number 105 - Dyed Diesel, LUST Tax: This tax applies to dyed diesel fuel, primarily used for non-road equipment or agricultural purposes. The LUST tax rate on dyed diesel is 0.1 cent per gallon.
IRS Number 107 - Dyed Kerosene, LUST Tax: Similar to dyed diesel, dyed kerosene is subject to the LUST tax when it is used for off-road purposes. The LUST tax rate on dyed kerosene is 0.1 cent per gallon.
IRS Number 119 - LUST Tax, Other Exempt Removals: This tax applies to exempt removals such as gasoline blendstocks, kerosene used for feedstock, and fuel used or sold in Alaska. The rate varies but is typically 0.1 cent per gallon.
IRS Number 111 - Kerosene for Use in Aviation, LUST Tax on Nontaxable Uses: This applies to kerosene used in aviation that is not taxable under other provisions. The LUST tax rate for this is 0.1 cent per gallon.
IRS Number 125 - LUST Tax on Inland Waterways Fuel Use: This tax is imposed on fuel used on inland waterways, which is not subject to other LUST tax regulations. The rate is 0.1 cent per gallon.
Each of these IRS numbers helps track specific types of fuel and their corresponding LUST tax obligations, ensuring that fuel use across various industries contributes to the environmental cleanup fund.
Apart from IRS Number 125, LUST taxes are categorized under the Fuel Excise Tax, which applies to certain fuel-related activities.

Is There Any Exemption Available for LUST Tax?

Yes, there are some exemptions available for LUST Tax. Exemptions apply to certain uses of fuel, including fuels used for aviation, fuels used in non-taxable activities, and fuels that are removed for export. Additionally, kerosene used in the production of non-taxable goods may also be exempt. However, it's important to note that the LUST tax is non-refundable.
This means that even if the fuel is later found to be exempt from the tax, the tax paid cannot be reclaimed.

How to Pay Federal LUST Tax?

There are two primary methods to file and pay the Federal LUST Tax:
Manual Filing Method: The traditional method involves filling out paper forms and submitting them directly to the IRS. This method requires filing Form 720, which is used to report and pay the LUST tax on the fuel used or imported.
Online Filing Method: The IRS requires the use of an online portal for filing LUST taxes. This method is faster and more efficient. Online filing services like Simple720 are IRS-authorized platforms that allow you to easily file Form 720 electronically, ensuring that your payment is processed in compliance with federal regulations.

It is highly recommended to thoroughly review the Form 720 instructions page before submitting your federal excise tax filing to ensure compliance with all requirements and avoid potential errors or penalties.

Conclusion
The Federal LUST Tax is an essential part of the U.S. tax structure, aimed at protecting the environment from the harmful effects of leaking underground storage tanks. Understanding the various IRS numbers and their corresponding tax rates is critical for businesses that deal with fuel products.
By staying compliant with LUST tax filing and payment requirements, businesses help contribute to the ongoing cleanup efforts while avoiding penalties. Utilizing online filing methods like Simple720 makes the process easier and more efficient.
File your Fuel Excise Tax Online Today!

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