Bulletin FT 2-2001
Published: June 2001
Content last reviewed: September 2009
ISBN: 0-7794-1393-8 (Print), 0-7794-1394-6 (PDF)

The purpose of this tax bulletin is to clarify the rules governing the purchase of clear fuel under Fuel Acquisition Permits (FAPs). The information in this bulletin will be of interest to current and prospective FAP holders and their suppliers. This bulletin replaces previously published Guide Notes entitled Fuel Acquisition Permits - Fuel Suppliers.


Clear fuel is subject to fuel tax.

In general, all clear fuel purchased or used in Ontario is subject to tax under the Fuel Tax Act ("the Act").

Coloured fuel is untaxed.

Coloured fuel may be purchased tax-free for any non-taxable use, such as lighting, heating, or cooking.

Untaxed clear fuel may be acquired under a FAP.

The Minister of Finance is authorized under the Act to issue a FAP to a "registered consumer," for the purpose of acquiring untaxed clear fuel for any one of certain uses prescribed by regulations made under the Act.

Who is a registered consumer?

The Act defines "registered consumer" as the holder of a valid FAP under the Act.

Special conditions may apply.

In addition to general restrictions which apply to all FAP holders, the Act authorizes the Minister of Finance to attach such further limits or conditions to a FAP as the Minister considers appropriate.

Fuel acquired under a FAP may not be used for any purpose other than the purpose stated by the permit.

Purchases of Untaxed Clear Fuel under a FAP

Clear fuel that is to be consumed in the following ways may be acquired by a registered consumer who holds a valid FAP for that purpose, without payment of fuel tax at the time of purchase:

Manner in which clear fuel may be consumed for the purposes of a FAP

  1. In the operation of railway equipment on rails where the railway equipment is operated in connection with and as part of a public transportation system.
  2. In the operation of railway maintenance equipment that is used only on rails for the maintenance of a public transportation system.
  3. As a raw material to be wrought into or become part of goods for sale, provided that the fuel is not used to generate power in a motor vehicle.
  4. In the curing of tobacco.
  5. In the bench testing of an aircraft engine before installation of the engine on an aircraft.
  6. In the testing of a motor vehicle engine before installation of the engine in a motor vehicle.
  7. In the development and quality assurance testing of fuel.
  8. Bulk 1-K kerosene to be packaged in containers of not more than 210 litres each for resale to consumers for unvented lighting, heating or cooking purposes, but not to generate power in a motor vehicle. (See Note below.)

Note: For more detail regarding packaging of kerosene, refer to Ontario Tax Bulletin FT 1-2000, Sales of Kerosene, issued June 2000.

Sales of Untaxed Clear Fuel by a Non-Collector to a FAP Holder

Non-collector must pay tax

A dealer who is not a designated fuel tax collector must pay the tax on clear fuel purchased from his supplier although such clear fuel may in turn be resold, untaxed, to a FAP holder.

Responsibilities of a non-collector

The dealer must ensure that at the time of sale, the registered consumer produces its valid FAP and that all of the permit conditions, within the dealer's control, are met. Invoices must show the purchaser's fuel acquisition permit number and the delivery address.

Refunds on overpayments

A dealer may qualify for a refund of the overpayment of tax, paid by the dealer to its supplier, by application to the Ministry of Finance. Alternatively, the dealer may recover the tax from its supplier, if the supplier is a designated fuel tax collector who is willing to refund the overpayment to the dealer on behalf of the ministry. In the latter case, the collector's responsibilities, in respect of the tax on the sale to the dealer, will be the same as if the sale were made by the collector to the FAP holder directly.

Sales by a Collector to a FAP Holder

What are the collector's responsibilities?

A designated fuel tax collector may sell untaxed clear fuel to FAP holders who are entitled to receive the product without paying tax. The collector must ensure that at the time of sale, the purchaser presents it with a valid fuel acquisition permit issued to the purchaser, and that all of the permit conditions, within the collector's control, are met. Collectors are required to report such sales on their monthly return to the ministry. Additional information required on the invoice delivered to the purchaser includes the collector's registration number, the purchaser's fuel acquisition permit number and the delivery address.

Tax to be collected if valid FAP not produced

If the purchaser does not produce its FAP for inspection by the collector at the time of purchase, the collector must collect from the purchaser the tax required to be paid under the Act as if the purchaser were not a registered consumer.

Due diligence

A collector, as agent of the Minister, is required to exercise due diligence in an effort to ensure that untaxed clear fuel sold is not for a taxable use. The collector will not be held responsible for fuel tax on clear fuel delivered to a holder of, and in accordance with, a valid FAP, where the collector maintains:

  1. a copy of the FAP valid for the period of time in question, and

  2. copies of all bills of lading, uniform manifests, or invoices indicating the volume of fuel delivered to the FAP holder at the authorized location(s) during that time period. Certification of the fuel delivery by the driver(s) is also required.

FAP Holder Requirements and Restrictions


The Act requires that the holder of a FAP post security in an amount equal to the tax that, except for the FAP, would have been payable on the FAP holder's average three months receipts of clear fuel, or $100,000.00, whichever is greater.

General restriction

FAP holder must not use fuel acquired under a Fuel Acquisition Permit for any purpose other than the purpose stated by the permit and ensure that the conditions stated in the permit are met.

Requirement to produce FAP

FAP holder must produce its FAP to the supplier at the time of purchase or pay the tax imposed by the Act.

Reporting requirement

Each FAP holder must, by the 25th of each month, or as otherwise directed, file a fuel tax return (Form FT814), which accounts for all fuel acquired under the FAP. Form FT814 also reports the fuel consumed or disposed of in the preceding calendar month.

FAP not transferable

FAP is not transferable. The FAP holder must immediately notify the Minister of any change of name or nature of the business, or in case of the loss or destruction of the Fuel Acquisition Permit.

Penalties for noncompliance

Failure to comply with the Act or regulations, or failure to abide by a condition, or a limitation under a Fuel Acquisition Permit can result in a fine of up to $10,000. This fine is in addition to the ministry's assessment for fuel tax, penalties and interest, and suspension or cancellation of the permit.

General Information

If this bulletin does not completely address your particular situation, refer to the Fuel Tax Act and related regulations, visit our website at ontario.ca/finance or contact:

Ministry of Finance
Client Services Branch
Fuel Tax Program
33 King Street West
PO Box 625
Oshawa ON  L1H 8H9

  • 1 866 ONT-TAXS (1 866 668-8297)
  • Fax: 905 433-5680
  • 1 800 263-7776 for teletypewriter (TTY)