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Ext. PublicationMotor Fuels Tax Minute, Episode 97: Understanding 637 Registration
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In this episode of Motor Fuels Tax Minute, our hosts discuss recent trends surrounding 637 registrations.
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Detailed Description of Weaver’s Motor Fuels Tax Minute, Episode 97
00:00:00
Kelly: Welcome to this week’s Motor Fuels Tax Minute, where we talk all things motor fuels. Leanne and I are actually in Houston together this week, so we get to do one live, which is rather unusual. On this episode, we’re going to talk about 637 registrations.
We all know they can be a nightmare with the IRS. It’s always a handful, but Leanne, what can you tell us about them?
00:00:22
Leanne: So, what I wanted to talk about today is a trend that we’re seeing when it comes to the IRS cancelling these registrations. As everybody knows, it takes a Herculean effort to get them, and the IRS can snap them away super fast. And a trend that we’re seeing is an uptick in 637 compliance reviews generally.
They used to be very periodic. We have clients that almost never had them. Now we’re seeing them across the board kind of every 18 months or so, and sometimes they come in tandem with a 720 audit, which is sort of interesting. The IRS is actually auditing the excise tax, and then while they’re there, using the opportunity to get at the 637.
But what I’m noticing a lot is that they are being really stringent on the activity test. If you are not using that activity letter in that moment, and you don’t plan to be using it for three to four months, they are sending these letters out saying: Sign this to say that you accept the cancellation. And it’s really hard because they’re being really strict.
If I could give anybody advice, apply for what you need, make sure you’re using it, and if you’re not using it at the time that you get notice of a 637 audit, really think about what is your business going to be for the next six months. And if you’re going to need it, get those contracts signed so that you can show the IRS, yes, I am using this, yes, I am still in this business.
00:01:50
Kelly: What happens if their license or their activity gets removed? I’m guessing it’s not easy getting it right back.
00:01:56
Leanne: Right. Once the activity letter is cancelled, it’s cancelled and you have to reapply, and it’s that three, six, nine, depending what year it is, month process. You cannot just get it back.
And that’s why people really hate to lose them. And we hate to see people lose them because a lot of times it is just the ebbs and flows of the business. I’m not importing biodiesel right now because it’s not economically viable to do so. In six months, it could be.
00:02:21
Kelly: Absolutely. Well, that was great information, Leanne. And to your point, yes, in the beginning of my career, I didn’t see as many. And now we’re seeing them happen a lot more often.
This is this week’s Motor Fuels Tax Minute. Thank you for joining us.
